Citius Pharmaceuticals, Inc. Commitments Disclosure

9. COMMITMENTS AND CONTINGENCIES

 

Operating Lease

 

Effective July 1, 2019, we entered into a 76-month lease for office space in Cranford, NJ. On February 28, 2025 we extended the lease to February 28, 2030. A right-of-use asset of $786,697 was recognized as a non-cash asset and liability on the amendment date. We pay our proportionate share of real estate taxes and operating expenses in excess of the base year expenses. These costs are variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability.

 

We identified and assessed the following significant assumptions in recognizing our right-of-use assets and corresponding lease liabilities:

 

●

As the Cranford lease does not provide an implicit rate, we estimated the incremental borrowing rate in calculating the present value of the lease payments. We estimated the incremental borrowing rate based on the remaining lease term as of the amendment date.

 

	●	Since we elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component.
	●	The expected lease terms include noncancelable lease periods.

 

The elements of lease expense are as follows:  

 

Lease cost		Year Ended September 30, 2025				Year Ended September 30, 2024
Operating lease cost		$	269,143			$	238,823
Variable lease cost			32,692				25,809
Total lease cost		$	301,835			$	264,632
Other information
Weighted-average remaining lease term - operating leases			4.42  Years				1.1 Years
Weighted-average discount rate - operating leases			8.0	%			8.0	%

 

Maturities of lease liabilities due under the Company’s non-cancellable leases are as follows:

 

Year Ending September 30,
2026		$	171,280
2027			232,827
2028			237,686
2029			242,545
2030			102,849
Total lease payments			987,187
Less: interest			(173,914	)
Present value of lease liabilities		$	813,273

 

Leases		Classification		September 30, 2025				September 30, 2024
Assets
Lease asset		Operating		$	818,694			$	246,247
Total lease assets				$	818,694			$	246,247
Liabilities
Current		Operating		$	88,348			$	241,547
Non-current		Operating			724,925				21,318
Total lease liabilities				$	813,273			$	262,865

 

Interest expense on the lease liability was $39,054 and $30,644 for the years ended September 30, 2025 and 2024, respectively. This amount is classified within general & administrative expense.

Commercial Manufacturing Contracts

 

We entered into an agreement with a Contract Manufacturing Organization for the manufacture and supply of drug substance. The agreement runs through calendar 2026, with an automatic renewal for a subsequent 4-year term. Under this agreement, we are obligated to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases. Additionally, we are required to pay an annual service fee of $250,000. The agreement also includes provisions for potential price increases based on increases in the manufacturer’s operating expenses or industry indices, as well as significant termination fees and obligations. As of September 30, 2025, the total minimum purchase commitment under this agreement was approximately $16.2 million consisting of payments of $8.5 million and $5.3 million for 2025 and 2026 respectively and approximately $2.4 million for 2026 pass-throughs and consumable manufacturing components.

 

As of September 30, 2025, we also have commercial supply agreements with two other vendors for the completion and packaging of finished drug products. Minimum purchase commitments under these two agreements amount to approximately $4.9 million consisting of purchase commitment obligations of $1.2 million in 2025 and $1.9 million in 2026 and $1.8 million in 2027.

 

Legal Proceedings

 

We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting us or our officers or directors in their capacities as such.