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Common Stock, Stock Options and Warrants

12 Months Ended

Sep. 30, 2024

Common Stock, Stock Options and Warrants [Abstract]

COMMON STOCK, STOCK OPTIONS AND WARRANTS

5. COMMON STOCK, STOCK OPTIONS AND WARRANTS

Common Stock Issued for Services

On October 10, 2023, the Company issued 4,351 shares of common stock for media, and public and investor relations services and expensed the $76,146 fair value of the common stock issued.

On January 17, 2024, the Company issued 5,128 shares of common stock for general and business development advisory services and expensed the $98,079 fair value of the common stock issued.

On April 25, 2024, the Company issued 6,000 shares of common stock for financial, general and business development advisory services and expensed the $109,950 fair value of the common stock issued.

Common Stock Offering

On April 30, 2024, the Company closed a registered direct offering of 857,143 common shares and warrants to purchase up to 857,143 common shares, at a purchase price of $17.50 per share and accompanying warrant for gross proceeds of $15,000,002. The warrants have an exercise price of $18.75 per share, are exercisable six months from the date of issuance, and expire on October 30, 2029. The estimated fair value of the warrants issued to the investors was approximately $11,206,000.

Net proceeds were $13,718,951 after deducting the placement agent fee of $1,050,000, placement agent expenses of $135,000, legal fees of $80,101, and other offering expenses of $15,950. The Company also issued 60,000 warrants to the placement agent at an exercise price of $21.875 per share, that are exercisable six months from the date of issuance and expire on April 25, 2029. The estimated fair value of the warrants issued to the placement agent was approximately $756,000.

At the Market Offering Agreement

On August 12, 2024, the Company entered into an agreement with HC Wainwright, (the “Manager’) to issue and sell through or to the Manager, as sales agent and/or principal, from time to time during the term of this Agreement the Company’s common shares. The Company completed the following sales of its common shares through the Manager in September.

										Gross				Net
Date		Shares				Price				Proceeds				Proceeds ¹
9/23/2024			14,295			$	14.22			$	203,240			$	195,815
9/27/2024			3,254			$	12.65				41,148				41,358
9/30/2024			619			$	12.52				7,752				7,223
Total			18,168							$	252,140			$	247,396

1)	Net proceeds after deducting the broker fee and trading expenses but before offering expenses.

There were additional offering expenses of approximately $162,000 in placement agent expenses and legal fees for net proceeds after expenses of $84,735.

Stock Option Plans

Pursuant to our 2014 Stock Incentive Plan, we reserved 34,667 shares of common stock. As of September 30, 2024, there were options to purchase 18,484 shares outstanding, options to purchase 2,318 shares were exercised, options to purchase 13,865 shares expired or were forfeited, and no shares were available for future grants.

Pursuant to our 2018 Omnibus Stock Incentive Plan, we reserved 80,000 shares of common stock. As of September 30, 2024, there were options to purchase 67,200 shares outstanding, options to purchase 4,667 shares were exercised, options to purchase 3,733 shares expired or were forfeited, and the remaining 4,400 shares were transferred to the 2020 Omnibus Stock Incentive Plan (“2020 Plan”).

Pursuant to our 2020 Plan, we reserved 124,400 shares of common stock. As of September 30, 2024, there were options to purchase 66,000 shares outstanding, options to purchase 8,800 shares expired or were forfeited, and the remaining 49,600 shares were transferred to the 2021 Omnibus Stock Incentive Plan (“2021 Stock Plan”).

Pursuant to our 2021 Stock Plan, we reserved 349,600 shares of common stock. As of September 30, 2024, options to purchase 330,000 shares were outstanding, options to purchase 18,200 shares expired or were forfeited, and the remaining 1,400 shares were transferred to the 2023 Omnibus Stock Incentive Plan (“2023 Stock Plan”).

In November 2022, our Board approved the 2023 Stock Plan, subject to stockholder approval, which was received on February 7, 2023. The 2023 Stock Plan has reserved for issuance 481,400 shares of common stock. As of September 30, 2024, options to purchase 174,400 shares were outstanding, 4,000 shares were expired or forfeited 303,000 shares remain available for future grants.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is estimated using the trading activity of our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term.

The following assumptions were used in determining the fair value of stock option grants for the years ended September 30, 2024 and 2023:

		2024		2023
Risk-free interest rate		4.62 – 4.66%		1.05 – 2.94%
Expected dividend yield		0.00%		0.00%
Expected term		5.50 – 10 years		6.50 – 10 years
Expected volatility		85 – 86%		94 – 110%

A summary of option activity under the Citius Pharma plans (excluding the NoveCite and Citius Oncology Stock Plans) is presented below:

		Option Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term				Aggregate Intrinsic Value
Outstanding at September 30, 2023			532,207			$	44.75				7.41 years			$	56,203
Granted			166,400			$	17.50				9.04 years			$	0.00
Exercised			(2,125	)		$	0.38							$	39,068
Forfeited or expired			(40,398	)		$	68.50
Outstanding at September 30, 2024			656,084			$	36.41				7.26 years			$	0.00

Exercisable at September 30, 2024			347,618			$	44.40				6.27 years			$	0.00

The weighted average grant date fair value of the options granted during the year ended September 30, 2023 was estimated at $24.44 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

The weighted average grant date fair value of the options granted during the year ended September 30, 2024 was estimated at $13.38 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

At September 30, 2024, unrecognized total compensation cost related to unvested awards under the Citius stock plans of $ 2,678,274 is expected to be recognized over a weighted average period of 1.44 years.

NoveCite Stock Plan – Under the NoveCite Stock Plan, we reserved 2,000,000 common shares of NoveCite. As of September 30, 2024, there were options outstanding to purchase 1,911,500 common shares of NoveCite and 88,500 common shares of NoveCite available for future grants.

During the year ended September 30, 2021, NoveCite granted options to purchase 2,000,000 common shares to employees at a weighted average exercise price of $0.24 per share, of which options to purchase 88,500 common shares were forfeited, and options to purchase 1,911,500 common shares were exercisable as of September 30, 2024. These options vest over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 6.39 years. No options were issued in fiscal years 20243 and 2023. At September 30, 2024, there is no remaining unrecognized total compensation cost related to unvested awards under the NoveCite Stock Plan.

Citius Oncology Stock Plan - Under the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares of Citius Oncology. The Citius Oncology Stock Plan provides incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights.

The following assumptions were used in determining the fair value of the Citius Oncology stock option grants for the year ended September 30, 2024 and 2023:

		2024		2023
Risk-free interest rate		4.66%		4.11%
Expected dividend yield		0.00%		0.00%
Expected term		6.50 years		5.96 years
Expected volatility		87%		91%

Volatility is estimated using the trading activity of Citius Pharmaceuticals common stock. until such time as Citius Oncology has sufficient history. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term.

A summary of option activity under the Citius Oncology plan is presented below:

		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term				Aggregate Intrinsic Value
Outstanding at September 30, 2023			12,600,000			$	2.15				9.77 years			$	—
Granted			150,000				2.15
Forfeited			—
Outstanding at September 30, 2024			12,750,000			$	2.15				8.78 years			$	—
Exercisable at September 30, 2024			3,937,500			$	2.15				8.77 years			$	—

The weighted average grant date fair value of the Citius Oncology options granted during the year ended September 30, 2024 was estimated at $1.66 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years. At September 30, 2024, unrecognized total compensation cost related to unvested awards under the Citius Oncology stock plan of $11,592,383 is expected to be recognized over a weighted average period of 1.77 years.

Stock-based compensation expense under all plans for the years ended September 30, 2024 and 2023 was $11,839,678 (including $47,574 for the NoveCite plan and $7,498,817 for the Citius Oncology plan) and $6,616,705 (including $130,382 for the NoveCite plan and $1,965,500 for the Citius Oncology plan), respectively.

Warrants

The Company has reserved 2,945,337 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2024:

		Exercise price				Number				Expiration Dates
August 2018 Offering Investors			28.75				156,863			August 14, 2024
August 2018 Offering Agent			39.84				7,576			August 8, 2024
April 2019 Registered Direct/Private Placement Investors			35.50				51,780			April 5, 2024
April 2019 Registered Direct/Private Placement Agent			48.28				9,605			April 5, 2024
September 2019 Offering Investors			19.25				111,732			September 27, 2024
September 2019 Offering Underwriter			27.97				7,774			September 27, 2024
February 2020 Exercise Agreement Placement Agent			31.88				5,555			August 19, 2025
May 2020 Registered Direct Offering Investors			25.00				66,824			November 18, 2025
May 2020 Registered Direct Offering Placement Agent			33.20				6,226			May 14, 2025
August 2020 Underwriter			32.81				8,079			August 10, 2025
January 2021 Registered Direct Offering Investors			30.78				123,648			July 27, 2026
January 2021 Registered Direct Offering Agent			40.44				14,065			July 27, 2026
February 2021 Offering Investors			42.50				823,211			February 19, 2026
February 2021 Offering Agent			47.03				100,256			February 19, 2026
May 2023 Registered Direct Offering Investors			37.50				500,000			May 8, 2028
May 2023 Registered Direct Offering Agent			37.50				35,000			May 3, 2028
April 2024 Registered Direct Offering Investors			18.75				857,143			October 30, 2029
April 2024 Registered Direct Offering Agent			21.875				60,000			April 25, 2029
							2,945,337

On April 2, 2024, we extended the term by one year to April 5, 2025, for 51,780 warrants for common stock with an exercise price of $35.50 per share and extended the term by one year to April 5, 2025, for 9,605 warrants with an exercise price of $48.28 per share. We recorded a deemed dividend of $321,559 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the year ended September 30, 2024.

On August 7, 2024, we extended the term by one year to August 14, 2025, for 156,863 warrants for common stock with an exercise price of $28.75 per share and extended the term by one year to August 8, 2025, for 7,576 warrants with an exercise price of $39.84 per share. We recorded a deemed dividend of $375,511 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the year ended September 30, 2024.

On September 25, 2024, we extended the term by one year to September 27, 2025, for 111,732 warrants for common stock with an exercise price of $19.25 per share and extended the term by one year to September 27, 2025, for 7,774 warrants with an exercise price of $27.97 per share. We recorded a deemed dividend of $350,241 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification, the effect of which was an increase in the net loss attributable to common shareholders in the statement of operations for the year ended September 30, 2025.

At September 30, 2024, the weighted average remaining life of the outstanding warrants is 2.88 years, all warrants are exercisable, and there was no aggregate intrinsic value for the warrants outstanding.

Common Stock Reserved

A summary of common stock reserved for future issuances by the Company excluding all subsidiaries as of September 30, 2024 is as follows:

Stock plan options outstanding			656,084
Stock plan shares available for future grants			303,000
Warrants outstanding			2,945,337
Total			3,904,421