8-K: Citius Pharmaceuticals Secures $1 Million High-Interest Loan with CEO's Personal Guarantee

Citius Pharmaceuticals, Inc. has entered into a material definitive agreement for a $1 million unsecured promissory note with PAGODA RESOURCES, INC., bearing a 15.00% annual interest rate and personally guaranteed by its Chairman and CEO, Leonard Mazur.

Summary

• Citius Pharmaceuticals, Inc. (the "Company") issued an unsecured promissory note for $1 million to PAGODA RESOURCES, INC. on June 2, 2025.
• The note accrues interest at a rate of 15.00% per year, compounded monthly.
• The full principal and accrued interest are due on December 2, 2025.
• The Company has the absolute right to prepay the note in whole or in part at any time without prepayment premium or penalty.
• Repayment of the note is personally guaranteed by Leonard Mazur, Chairman and Chief Executive Officer of the Company.
• The note contains customary events of default, which, if uncured, can lead to acceleration of outstanding obligations.
• The note is not convertible into any equity securities of the Company.

Sentiment

Score: 3

Explanation: The high interest rate (15.00%) and the requirement for a personal guarantee from the CEO, along with the aggressive 'confession of judgment' clause, indicate a challenging financing environment and potential financial strain for the company. While securing $1 million provides liquidity, the terms suggest a less favorable financial position.

Positives

• The Company retains the absolute right to prepay the note in whole or in part at any time without prepayment premium or penalty.
• The note is unsecured, meaning no specific assets are pledged as collateral.
• The note is not convertible into equity, avoiding immediate dilution for existing shareholders.

Negatives

• The note carries a very high annual interest rate of 15.00%, compounded monthly, indicating a high cost of capital for the Company.
• The Chairman and CEO, Leonard Mazur, has personally guaranteed the repayment of the note, which exposes him to significant personal financial risk and suggests potential difficulty in securing financing on more favorable terms.
• The short maturity period (due December 2, 2025) implies a near-term need for repayment or refinancing.
• The note includes a "confession of judgment" clause, allowing the lender to obtain a judgment against the Company (and the guarantor) without prior notice or hearing upon default, which is a very aggressive creditor right.

Risks

• **High Interest Burden**: The 15.00% annual interest rate will significantly increase the Company's financing costs.
• **Default Risk**: Failure to pay any amount when due or failure to observe non-payment obligations can trigger an Event of Default, leading to immediate acceleration of the entire unpaid principal and accrued interest.
• **Personal Liability for CEO**: Leonard Mazur's personal guarantee creates significant personal financial exposure for the Chairman and Chief Executive Officer.
• **Confession of Judgment**: The inclusion of a confession of judgment clause allows the lender to bypass traditional legal proceedings to obtain a judgment, potentially leading to rapid asset seizure or enforcement actions upon default without the Company or guarantor having a prior opportunity for a hearing.
• **Refinancing Risk**: Given the short maturity, the Company will need to repay or refinance this debt by December 2, 2025, potentially under similar or worse terms if financial conditions do not improve.
• **Bankruptcy/Insolvency**: Commencement of bankruptcy or insolvency proceedings against the Company automatically makes all amounts due under the note immediately payable.

Future Outlook

NA

Management Comments

• Leonard Mazur, Chairman and Chief Executive Officer of the Company, has personally guaranteed the repayment of the Note through the execution and delivery of an Unconditional Personal Guaranty.

Industry Context

NA

Corporate Governance

Related Party Transactions

• The repayment of the Note has been personally guaranteed by Leonard Mazur, Chairman and Chief Executive Officer of the Company, through the execution and delivery of an Unconditional Personal Guaranty.

Stakeholder Impact

• **Shareholders**: High interest expense could impact profitability and future earnings. The terms of the loan (high interest, personal guarantee) might be perceived negatively, potentially affecting share price. Avoidance of equity conversion prevents immediate dilution but the high cost of debt could necessitate future dilutive equity raises if repayment is challenging.
• **CEO (Leonard Mazur)**: Bears significant personal financial risk due to the unconditional personal guarantee for the entire $1 million principal plus interest and collection costs.
• **Creditors**: The lender (PAGODA RESOURCES, INC.) benefits from a high interest rate, a personal guarantee, and aggressive default remedies including a confession of judgment clause, enhancing their security despite the note being unsecured.

Next Steps

• Repayment of the $1 million principal plus accrued interest by December 2, 2025.
• Potential refinancing efforts if the Company cannot repay the note by the due date.

Key Dates

Recommendation

Keywords

Citius Pharmaceuticals, CTXR, Promissory Note, Unsecured Debt, High-Interest Loan, Corporate Finance, Debt Financing, SEC Filing, 8-K, Leonard Mazur, Personal Guarantee, PAGODA RESOURCES, INC., Corporate Governance, Risk Management, Confession of Judgment