Annual report pursuant to Section 13 and 15(d)

Nature of Operations and Basis of Presentation

v3.20.4
Nature of Operations and Basis of Presentation
12 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
NATURE OF OPERATIONS AND BASIS OF PRESENTATION

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Business

 

Citius Pharmaceuticals, Inc. ("Citius" or the "Company") is a specialty pharmaceutical company dedicated to the development and commercialization of critical care products targeting unmet needs with a focus on anti-infectives, cancer care and unique prescription products.

 

On March 30, 2016, Citius acquired Leonard-Meron Biosciences, Inc. ("LMB") as a wholly-owned subsidiary. The Company acquired all of the outstanding stock of LMB by issuing shares of its common stock. The net assets acquired included identifiable intangible assets of $19,400,000 related to in-process research and development. The Company recorded goodwill of $9,346,796 for the excess of the purchase price over the net assets acquired.

 

On September 11, 2020, we formed NoveCite, Inc. ("NoveCite"), a Delaware corporation, of which we own 75% of the issued and outstanding capital stock.

 

In-process research and development represents the value of LMB's leading drug candidate (Mino-Lok), which is an antibiotic solution used to treat catheter-related bloodstream infections and is expected to be amortized on a straight-line basis over a period of eight years commencing upon revenue generation. Goodwill represents the value of LMB's industry relationships and its assembled workforce. Goodwill will not be amortized but will be tested at least annually for impairment.

 

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage products, market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company's ability to obtain additional financing and the Company's compliance with governmental and other regulations.

 

Basis of Presentation

 

The accompanying consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiaries, Citius Pharmaceuticals, LLC and LMB, and its recently formed majority-owned subsidiary NoveCite. NoveCite, was inactive until October 2020. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Restatement of Previously Issued Financial Statements

 

Our consolidated balance sheet as of September 30, 2019 and the beginning balances in the consolidated statements of changes in stockholders' equity for the year ended September 30, 2019, have been restated for an error made with regard to a deferred tax liability, goodwill and accumulated deficit.

 

We determined that a deferred tax liability should have been recorded in the amount of $7,760,000 related to the in-process research and development intangible asset recorded in connection with the acquisition of LMB in March 2016, which would have resulted in additional goodwill of $7,760,000. Had the deferred tax liability been recorded upon acquisition of LMB, we would have also recognized an income tax benefit of $2,774,200 in 2018 as a result of the Tax Cuts and Jobs Act enacted into law on December 21, 2017, which lowered the U.S. corporate tax rate from 35% to 21%.

 

The table below indicates the impact of the restatement at September 30, 2019:

 

    Previously Recorded     Adjustment     As Restated  
ASSETS                        
Goodwill   $ 1,586,796     $ 7,760,000     $ 9,346,796  
Total Assets   $ 28,986,394     $ 7,760,000     $ 36,746,394  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Deferred Tax Liability   $ -     $ 4,985,800     $ 4,985,800  
Total Liabilities   $ 4,607,722     $ 4,985,800     $ 9,593,522  
                         
Stockholders' Equity:                        
Accumulated deficit   $ (55,819,982 )   $ 2,774,200     $ (53,045,782 )
Total Stockholders' Equity   $ 24,378,672     $ 2,774,200     $ 27,152,872  
Total Liabilities and Stockholders' Equity   $ 28,986,394     $ 7,760,000     $ 36,746,394