美國
證券交易委員會
華盛頓，特區。20549
表格
（標記 一）
截至季度結束
或者
對於從 到 的過渡期
佣金
文件號
（公司章程中指定的準確公司名稱）
（住所的州或其他司法轄區 文件號碼） |
（國稅局僱主 (主要 執行人員之地址) | |
| （總部地址） | (郵政編碼) |
| （註冊人電話號碼，包括區號） |
| N/A |
| （如果自上次報告以來已更改）股份、每單位包括一股面值爲0.0001美元的A類普通股和一個權利，在初次業務組合完成後獲得1/8股票。 |
根據法案第12(b)節註冊的證券:
| 每一類別的名稱 | 交易符號 | 在每個交易所註冊的名稱 | ||
| 股票 股票市場 有限責任公司 | ||||
| 股票 股票市場 有限責任公司 |
請勾選標記以指示註冊者是否（1）在過去12個月內（或註冊者需要提交這些報告的更短時間內）已提交證券交易所法案第13或15（d）節要求提交的所有報告，及 （2）是否已被提交要求過去90天的提交要求所制約。
通過勾選圓圈表明註冊者是否在過去12個月內(或註冊者需要提交這些文件的較短期限內)已經遞交規章S-T(本章第232.405條)規定的每個交互式數據文件。
在勾選標記處表示註冊人是大型加速提交人、加速提交人、非加速提交人、小型報告公司還是新興增長公司。請參閱證券交易法120億條規則中「大型加速提交人」、「加速提交人」、「小型報告公司」和「新興增長公司」的定義。
| ☐ 大型加速文件提交者 | ☐ 加速歸檔者 |
| ☒
|
|
如果是新興成長公司，請勾選，如果註冊人已選擇不使用根據交易所法案第13(a)條提供的任何新的或修改的財務會計準則的延長過渡期，請勾選。
請在複選框中放置標記，指示註冊者是否是外殼公司（根據交易所法案規則12b-2定義）: 是 ☐ 否
截至2024年11月12日，共有 普通股股票，$ 發行和流通的註冊人的面值。
藥品交易所
表格 10-Q
目錄
| 頁面 | |||
| 第一部分-基本信息。 | |||
| 項目 1. | 基本報表。 | 1 | |
| 截至2024年9月30日（未經審計）和2023年12月31日（經過審計）的簡單合併資產負債表。 | 1 | ||
| 截至2024年和2023年9月30日的三個月和九個月的未經審計簡單合併經營及綜合收益（損失）表。 | 2 | ||
| 截至2024年和2023年9月30日的三個月和九個月的未經審計簡單合併股東權益變動表。 | 3 | ||
| 截至2024年和2023年9月30日的九個月的未經審計簡單合併現金流量表。 | 6 | ||
| 未經審計的財務報表註釋。 | 7 | ||
| 條款 2. | 管理財務狀況和運營結果的討論和分析。 | 27 | |
| 項目 3. | 關於市場風險的定量和定性披露。 | 35 | |
| 項目 4. | 控制和程序。 | 35 | |
| 第二部分-其他信息。 | |||
| 項目 1. | 法律訴訟。 | 36 | |
| Interest expense, net | 風險因素。 | 36 | |
| 項目 2. | 未經註冊的股票出售和使用得到的收益。 | 36 | |
| 項目 3. | 違反優先證券的行爲。 | 36 | |
| 項目 4. | 礦山安全披露。 | 36 | |
| 項目5。 | 其他信息。 | 36 | |
| 項目 6. | 附件。 | 37 | |
| 第三部分-簽名。 | 38 | ||
| i |
關於前瞻性聲明的警示性聲明
根據2024年9月30日結束的季度期末編制的《10-Q表格季度報告》（以下簡稱「季度報告」）包含前瞻性聲明。前瞻性聲明既不是歷史事實，也不是未來績效的保證。相反，它們僅基於我們對業務未來、未來計劃和策略、預測、預期事件和趨勢、經濟以及其他未來狀況的當前信念、期望和假設。這些包括但不限於關於財務狀況、管理層對未來業務運營的計劃和目標的聲明。這些聲明可以通過它們不嚴格涉及歷史或當前事實來識別。在本季度報告中使用時，諸如「預期」、「相信」、「繼續」、「可能」、「估計」、「期望」、「打算」、「可能」、「可能」、「計劃」、「可能」、「潛在」、「預測」、「項目」、「應該」、「努力」、「將要」等表達方式可能識別出前瞻性聲明，但缺乏這些詞並不意味着一項聲明不是前瞻性的。可能會對我們的業務運營和財務表現和狀況產生重大影響的因素包括但不限於，在本季度報告「項目1A.風險因素」下描述的風險和不確定性，在我們針對截至2023年12月31日的年度10-K表格的年度報告中描述的，以及在U.S.證券交易委員會（「SEC」）提交的「項目1A.風險因素」下描述的那些風險。您被敦促在評估前瞻性聲明時認真考慮這些因素，並注意不要過度依賴前瞻性聲明。前瞻性聲明基於我們在提交本季度報告的日期獲得的信息。除非法律要求，我們不打算公開更新或修訂任何前瞻性聲明以反映新信息或未來事件或其他情況。然而，您應該在查閱本季度報告日期之後我們將不時向SEC提交的報告中描述的風險因素。
此季度報告可能還包含與我們業務和行業相關的市場數據。這些市場數據包括基於多個假設的預測。如果這些假設被證明是不正確的，實際結果可能與基於這些假設的預測有所不同。因此，我們的市場可能無法按照這些數據預測的速度增長，甚至根本不增長。這些市場未能按照預期速度增長可能會損害我們的業務、營運結果、財務狀況和我們普通股的市場價格。
| ii |
第一部分-財務信息
項目 1. 基本報表。
CONDUIT PHARMACEUTICALS INC.
簡明合併資產負債表
（以千為單位，除股份和每股金額外）
| 2024年9月30日 | 2023年12月31日 | |||||||
| (未經查核) | (已核准) | |||||||
| 資產 | ||||||||
| 流動資產合計 | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 可上市投資 | ||||||||
| 預付費用及其他流動資產 | ||||||||
| 流動資產總額 | ||||||||
| 營運租賃權利資產，淨額 | ||||||||
| 不動產、廠房及設備，扣除折舊及攤銷後淨值 | ||||||||
| 預付費用及其他長期資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債及股東權益不足 | ||||||||
| 流動負債 | ||||||||
| 應付帳款 | $ | $ | ||||||
| 應計費用及其他流動負債 | ||||||||
| 銀行透支 | ||||||||
| 可轉換票據應付款 | ||||||||
| 營運租賃負債，流動部分 | ||||||||
| 應付貸款 | ||||||||
| 遞延佣金應付 | ||||||||
| 流動負債總額 | ||||||||
| 衍生性權證負債 | ||||||||
| 非流動租賃負債 | ||||||||
| 遞延佣金負債 | ||||||||
| 總負債 | ||||||||
| 承諾及或有事項（見第16註釋） | ||||||||
| 股東赤字 | ||||||||
| 普通股，面額 $; 截至2024年9月30日及2023年12月31日，授權的股份數量， 和 2024年9月30日和2023年12月31日分別發行並流通的股份 | ||||||||
| 優先股，面額 $; 截至2024年9月30日和2023年12月31日，授權股份為； 截至2024年9月30日及2023年12月31日發行及流通的股份 | ||||||||
| 資本公積額額外增資 | ||||||||
| 累積虧損 | ( | ) | ( | ) | ||||
| 其他綜合收益累積額 | ||||||||
| 股東權益的赤字為 | ( | ) | ( | ) | ||||
| 總負債及股東權益赤字 | $ | $ | ||||||
附註是這些簡明綜合財務報表的不可分割部分。
| 1 |
CONDUIT PHARMACEUTICALS INC.
簡化 合併營運及全面收入（虧損）報表
(未經查核)
（以千為單位，除股份和每股金額外）
| 截至9月30日止三個月， | 截至9月30日止九個月， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 營運費用： | ||||||||||||||||
| 研究與發展費用 | $ | $ | ||||||||||||||
| 一般及行政費用 | ||||||||||||||||
| 營業費用總額 | ||||||||||||||||
| 營運虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收入（費用）： | ||||||||||||||||
| 其他收入（費用），淨額 | ( | ) | ( | ) | ||||||||||||
| 利息收入 | ||||||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他合計（費用）收益，淨額 | ( | ) | ( | ) | ||||||||||||
| 淨（損失）收入 | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 每股基本盈利/(淨虧損) | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 每股稀釋盈利/(淨虧損) | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 基本加權平均普通股份流通量 | ||||||||||||||||
| 稀釋加權平均普通股股份 | ||||||||||||||||
| 綜合損益： | ||||||||||||||||
| 外幣翻譯調整 | ( | ) | ( | ) | ||||||||||||
| 總綜合損益 | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
附註是這些精簡合併財務報表的一部分。
| 2 |
藥品交易所
簡明 合併股東權益變動表
(未經審計)
(以千爲單位，除了分享金額)
| 普通股 | 額外的 實繳 | 累計 | 累計 其他 綜合 | 總計 股東權益 | ||||||||||||||||||||
| 股份 | 金額 | 資本 | 赤字 | 淨利潤 | 赤字 | |||||||||||||||||||
| 2024年7月1日的餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 爲應付票據發行普通股 | ||||||||||||||||||||||||
| 爲許可權發行普通股 | ||||||||||||||||||||||||
| 基於股票的補償 | - | |||||||||||||||||||||||
| 外幣兌換調整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 淨虧損 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的結餘 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 普通股 | 額外的 實繳 | 累計 | 累計 其他 綜合 | 總計 股東權益 | ||||||||||||||||||||
| 股份 | 金額 | 資本 | 赤字 | 淨利潤 | 赤字 | |||||||||||||||||||
| 2024年1月1日的餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 爲服務發行普通股 | ||||||||||||||||||||||||
| 在限制性股票單位歸屬時發行普通股 | ||||||||||||||||||||||||
| 爲應付票據發行普通股 | ||||||||||||||||||||||||
| 爲許可權發行普通股 | ||||||||||||||||||||||||
| 認股權證發行 | - | |||||||||||||||||||||||
| 基於股票的補償 | - | |||||||||||||||||||||||
| 外幣兌換調整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 淨虧損 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的結餘 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 3 |
| 普通股 | 額外的 實繳 | 累計 | 累計 其他 綜合 | 總計 股東權益 | ||||||||||||||||||||
| 股份 | 金額 | 資本 | 赤字 | 淨利潤 | 赤字 | |||||||||||||||||||
| 2023年7月1日的餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 合併的追溯適用 | ( | ) | ||||||||||||||||||||||
| 額外實收資本的重新分類 | - | ( | ) | |||||||||||||||||||||
| 調整後的餘額，期初 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 額外實收資本的重新分類 | - | ( | ) | |||||||||||||||||||||
| 在交割日向Conduit Pharmaceuticals Limited可轉換債券持有人發行Conduit Pharmaceuticals Inc.普通股（注3） | ||||||||||||||||||||||||
| 合併，扣除贖回（注3） | ( | ) | ( | ) | ||||||||||||||||||||
| 與PIPE融資相關的Conduit Pharmaceuticals Inc.普通股的發行（注3） | ||||||||||||||||||||||||
| 向Cizzle 生物技術控股PLC發行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 因與合併相關的服務而向顧問發行Conduit Pharmaceuticals Inc.普通股（注3） | ||||||||||||||||||||||||
| 因合併而減少的消費稅負債（注3） | - | |||||||||||||||||||||||
| 資本貢獻 - 關聯方 | - | |||||||||||||||||||||||
| 基於股票的補償 | - | |||||||||||||||||||||||
| 外幣兌換調整 | - | |||||||||||||||||||||||
| 淨利潤 | - | |||||||||||||||||||||||
| 2023年9月30日的餘額 | $ | ( | ) | ( | ) | |||||||||||||||||||
| 4 |
| 普通股 | 額外的 實繳 | 累計 | 累計 其他 綜合 | 總計 股東權益 | ||||||||||||||||||||
| 股份 | 金額 | 資本 | 赤字 | 淨利潤 | 赤字 | |||||||||||||||||||
| 2023年1月1日的餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 併購的追溯性應用 | ( | ) | ||||||||||||||||||||||
| 額外撥入資本的再分類 | - | ( | ) | |||||||||||||||||||||
| 期初調整後餘額 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 額外撥入資本的再分類 | - | ( | ) | |||||||||||||||||||||
| 在收盤日期向Conduit Pharmaceuticals Limited可轉換票據持有人發行Conduit Pharmaceuticals Inc.普通股（附註3） | ||||||||||||||||||||||||
| 合併，扣除贖回（附註3） | ( | ) | ( | ) | ||||||||||||||||||||
| 與PIPE融資相關的Conduit Pharmaceuticals Inc.普通股發行（附註3） | ||||||||||||||||||||||||
| 向Cizzle生物技術控股PLC發行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 向Merger（注3）直接相關服務的顧問發行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 減少與Merger（注3）相關的消費稅責任 | - | |||||||||||||||||||||||
| 資本貢獻-關聯方 | - | |||||||||||||||||||||||
| 基於股票的補償 | - | |||||||||||||||||||||||
| 外幣兌換調整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 淨虧損 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2023年9月30日的餘額 | $ | | ( | ) | ( | ) | ||||||||||||||||||
附註是這些精簡合併財務報表的一部分。
| 5 |
藥品交易所
簡明綜合現金流量表
(未經審計)
(以千爲單位)
| 截至9月30日的9個月 | ||||||||
| 2024 | 2023 | |||||||
| 經營活動現金流量淨額： | ||||||||
| 淨虧損 | $ | ( | ) | $ | ( | ) | ||
| 調整爲淨損失到經營活動現金流量淨使用： | ||||||||
| Cizzle期權公允價值變動收益 | ( | ) | ||||||
| Vela期權公允價值變動收益 | ( | ) | ||||||
| Vela期權發行損失 | ||||||||
| 關聯方無法收回貸款準備金變動 | ( | ) | ||||||
| 可轉換票據應付款公允價值變動損失 | ||||||||
| 關聯方貸款免除損失 | ||||||||
| 未實現外匯匯率期貨收益 | ( | ) | ||||||
| 未實現匯率損失 | ||||||||
| 發行warrants以進行鎖定 | ||||||||
| 可轉換本票的利息支出 | ||||||||
| 行使期權負債時非現金遞延收入減少 | ( | ) | ||||||
| 衍生warrant負債公允價值變動收益 | ( | ) | ( | ) | ||||
| 基於股票的薪酬費用 | ||||||||
| 非現金利息費用 | ||||||||
| 營運租賃義務 | ( | ) | ||||||
| 融資的董事和高管保險的攤銷 | ||||||||
| 債務發行成本的攤銷 | ||||||||
| 折舊費用 | ||||||||
| 爲服務和許可權而發行普通股 | ||||||||
| 運營資產和負債的變化： | ||||||||
| 預付費用及其他流動資產 | ( | ) | ( | ) | ||||
| 應付賬款 | ||||||||
| 應計費用及其他負債 | ||||||||
| 經營活動產生的淨現金流量 | ( | ) | ( | ) | ||||
| 投資活動中使用的現金流量: | ||||||||
| 發行貸款 - 關聯方 | ( | ) | ||||||
| 購買物業和設備 | ( | ) | ||||||
| 短期投資的購買 | ( | ) | ||||||
| 短期投資出售所得 | ||||||||
| 期權發行所得 | ||||||||
| 投資活動產生的淨現金流量 | ( | ) | ||||||
| 融資活動產生的現金流量： | ||||||||
| 合併及相關PIPE融資所得，扣除交易成本 | ||||||||
| 應付票據發行的淨收益 | ||||||||
| 資本投入 - 相關方 | ||||||||
| 可轉換應付票據的發行所得，以公允價值計 | ||||||||
| 可轉換債權票據支付的利息，按成本計價 | ( | ) | ||||||
| 鎖定期內發行warrants的收益 | ||||||||
| 銀行透支 | ||||||||
| 可轉換債權票據發行的收益，按成本計價 | ||||||||
| 融資活動提供的淨現金流量 | ||||||||
| 在匯率變動影響之前，現金及現金等價物的淨變化 | ( | ) | ||||||
| 匯率變動對現金及現金等價物的影響 | ( | ) | ( | ) | ||||
| 現金淨變動 | ( | ) | ||||||
| 期初現金及現金等價物餘額 | ||||||||
| 期末現金及現金等價物 | $ | $ | ||||||
| 補充現金流量信息： | ||||||||
| 支付的利息現金 | $ | $ | ||||||
| 非現金投融資活動 | ||||||||
| 在交換運營租賃負債獲得的使用權資產 | $ | $ | ||||||
| 因發行warrants鎖定而產生的應收款 | ||||||||
| 因發行應付票據而產生的應收款 | ||||||||
| 在行使期權時，Cizzle 生物技術控股有限公司獲得 Conduit Pharmaceuticals Inc. 的普通股。 | ||||||||
| 在合併過程中，將 Conduit Pharmaceuticals Limited 的可轉換票據兌換爲 Conduit Pharmaceuticals Inc. 的普通股。 | ||||||||
| 應計交易費用 | ||||||||
| 非現金董事和高級職員的保險。 | ||||||||
| 將遞延發行費用重新分類爲減少額外實收資本。 | ||||||||
| 在合併中承擔的淨負債。 | ||||||||
| 在 PIPE 融資和合並完成過程中發行的認股權證負債的初始價值。 | ||||||||
附註是這些精簡合併財務報表的一部分。
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藥品交易所
簡明合併財務報表附註
1. 業務性質、財務報表基礎及重要會計政策摘要
Conduit 藥品公司，成立於德拉瓦州（「Conduit」或「公司」），是一家臨床階段的專業生物藥品公司，旨在促進臨床資產的開發和商業化。公司開發了一種獨特的業務模式，使其能夠作爲一個渠道，幫助藥品公司將臨床資產轉化爲新治療方案，以滿足患者需求。我們的創新方法解決了未滿足的醫療需求，並通過尖端的固體技術延長我們的現有資產的知識產權，期待與生命科學公司共同商業化這些產品。
合併協議
2023年9月22日（"交割日期"），Conduit Pharmaceuticals Limited（"舊Conduit"），Murphy Canyon Acquisition Corp（"MURF"）和Conduit Merger Sub, Inc.（一家開曼群島豁免公司，MURF的全資子公司）之間的合併交易已完成（"合併"，見註釋3），根據2022年11月8日的初始合併協議及2023年1月27日和2023年5月11日對合並協議的後續修訂（統稱爲"合併協議"）。根據合併協議的條款，在交割日期，（i）合併子公司與舊Conduit合併，舊Conduit作爲MURF的全資子公司存續，(ii) MURF將其名稱從Murphy Canyon Acquisition Corp.更改爲Conduit Pharmaceuticals Inc.。公司的普通股（"普通股"）於2023年9月25日在納斯達克全球市場以「CDT」爲標的開始交易，公司warrants於2023年9月25日在納斯達克資本市場以「CDTTW」爲標的開始交易。
該合併交易按照美國通用會計原則的反向再資本化處理。根據反向再資本化方法，MURF被視爲財務報告目的上的被收購公司，而會計收購方被假定爲以股票發行MURF的淨資產，沒有商譽或其他無形資產記錄。
表述基礎
隨附的未經審計的簡明合併基本報表是由公司根據美國通用會計準則（U.S. GAAP）編制的，符合財務會計準則委員會（「FASB」）的規定，以及美國證券交易委員會（「SEC」）的規則和法規。在這些隨附的未經審計的簡明合併基本報表的附註中提到的FASB發佈的美國通用會計準則是指FASB會計標準公告（「ASC」）和會計標準更新（「ASUs」）。
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這份季度報告包括的附表未經審計的簡明綜合基本報表是根據美國通用會計準則編制的，並在公司意見下進行了所有調整，僅包括必要的正常循環調整，以便公平陳述截至2024年9月30日的財務狀況，以及截至2024年9月30日與2023年的三個月和九個月的運營結果，以及截至2024年9月30日與2023年9月30日的九個月現金流量。2023年12月31日的簡明綜合資產負債表是從年度審計基本報表導出的，但不包括年度基本報表中的所有附註披露。
合併原則
附帶的未經審計的簡明合併基本報表包括本公司及其全資子公司Conduit Uk Management Ltd.（英國）和Conduit Pharmaceuticals, Ltd.（開曼群島）的帳戶。此處所提到的「公司」包括Conduit Pharmaceuticals Inc.及其子公司。所有的公司間餘額及交易在合併中已被消除。
流動性和繼續經營
根據ASC 205-40，持續經營，公司評估了是否存在在財務報表發佈日期後一年內，並綜合考慮，增加公司持續經營能力的重大懷疑的條件和事件。自公司成立以來，公司產生了重大虧損，截至2024年9月30日，公司累計虧損爲$
公司的預期是在未來產生營運虧損和負的經營現金流，並需要額外資金支持其當前的業務計劃。管理層爲緩解引發對其存在實質疑義的條件而制定的計劃，包括通過公開或私人股權或債務融資獲得額外的現金資源。然而，並不能保證在需要時將有這樣的資金可用或具備可接受的條件。如果在需要時無法獲得額外的資金，公司將需要延遲或削減其業務和研發活動，直至獲得此類資金，所有這些都可能對公司及其財務狀況產生重大不利影響。
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截至目前，管理層已執行以下計劃（見註釋17）。然而，至今執行的計劃並未減輕對公司持續經營能力的重大懷疑：
| ● | 2024年10月23日，我們與Global Partners（「AGP」）簽訂了一份銷售協議，涉及我們的普通股的股份。根據銷售協議的條款，我們可以提供並出售總共高達$的普通股， | |
| ● | 2024年10月28日，公司向Nirland Limited（「Nirland」）發行了一份期票（「2024年10月期票」），原始本金爲$，用以交換同等金額的資金。2024年10月期票的利率爲每年%，應半年結息支付，於2025年10月31日到期。 | |
| ● | 2024年10月29日，公司與A.G.P.簽署了一份橋接貸款協議（「A.G.P.橋接協議」），根據該協議，A.G.P.向公司提供了不超過$的預付款（「預付款」）。 |
這些基本報表是在假定公司將繼續作爲持續經營單位的基礎上編制的，並不包括調整以反映資產的回收性和分類，或可能由於這種不確定性結果可能導致的責任金額和分類的影響。
其他 風險和不確定性
公司面臨着藥品行業普遍存在的風險，包括但不限於與競爭對手產品的商業化相關的不確定性、監管批准、對關鍵產品、關鍵客戶和供應商的依賴，以及知識產權的保護。目前正在開發的臨床資產將需要進行重大額外的研究和開發工作，包括廣泛的臨床前和臨床測試以及商業化前的監管批准。這些工作將需要大量的額外資本、充足的人員、基礎設施和廣泛的合規和報告能力。即使公司的努力取得成功，公司何時能夠從版稅或產品銷售中獲得顯著的營業收入仍然存在不確定性。
公司從阿斯利康獲得臨床資產的許可。請參見注釋13。如果發生違反或其他終止此類協議的情況，可能會對公司的業務、財務狀況、運營結果和前景產生重大不利影響。
納斯達克 上市違規
除牌公告或未能滿足持續上市規則或標準
在 2024年5月28日，公司收到了來自納斯達克證券市場有限責任公司（「納斯達克」）上市資格部門（「工作人員」）的通知。該通知告知公司，由於此前披露的詹妮弗·麥克尼利（Ms. Jennifer McNealey）辭去公司董事會（「董事會」）以及她所服務的所有委員會的職務，自其辭職之日起，公司未能符合納斯達克根據上市規則5605所規定的獨立審計委員會要求，因爲審計委員會僅由兩名獨立董事組成。公司必須在下一個股東年度會議之前或者在2025年5月13日之前提供合規證明。該通知對公司在納斯達克的證券上市沒有即時效果。公司打算在納斯達克上市規則5605(c)(4)提供的補救期到期之前，重新符合審計委員會必須由至少三名獨立董事組成的要求。
未能滿足持續上市規則的通知
2024年8月12日，公司收到了納斯達克工作人員的一封缺陷通知函，通知公司最近30個連續的工作日，公司普通股的收盤買盤價格低於最低$的情況。每股要求，根據納斯達克的上市規則5450(a)(1)（「買盤價格規則」）在納斯達克全球市場上繼續列入的最低要求。 缺陷函並不會立即導致公司的普通股從納斯達克全球市場除牌。
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根據納斯達克上市規則5810(c)(3)(A)（「合規期限規則」），公司獲得了180天的初始合規期，直至2025年2月10日（「合規日期」），以恢復對買盤價格規則的合規。如果在合規日期之前的任何時間，公司普通股的收盤買盤價格達到或超過$ 或更多，且連續滿足至少10個工作日的合規期限規則要求，工作人員將以書面通知公司其符合買盤價格規則，除非工作人員根據納斯達克上市規則5810(c)(3)(H)行使其延長此10天期限的權利。
如果公司在2025年2月10日前未恢復合規，且申請將其普通股上市從納斯達克資本市場轉至納斯達克，公司可能有資格獲得額外的180天日曆寬限期。爲了符合資格，公司需要滿足其公開持有股票的市值和所有其他納斯達克資本市場的初始上市標準，但無需符合最低買盤價格要求，並且在第二合規期間提供關於打算治癒最低買盤價格缺陷的書面通知。如果納斯達克工作人員確定公司無法治癒缺陷，或者公司不符合獲得此類額外合規期的資格，納斯達克將通知公司的普通股可能會被除牌。公司有權對決定將其普通股除牌提出上訴，且普通股將繼續在納斯達克全球市場上市，直至上訴流程完成。不能保證如果公司對工作人員對納斯達克上市資格小組的除牌決定提出上訴，該上訴將會成功。
公司打算監控其普通股的收盤買盤價格，並且在適當情況下，可能會考慮可用的期權以重新符合買盤價格規則，這可能包括進行反向拆股。然而，不能保證公司將能夠重新符合買盤價格規則。
所有板塊 公開持股市值要求
在2024年8月15日，公司收到來自工作人員的通知，告知公司基於前30個連續業務日的公開持股市場價值，公司普通股的上市不符合納斯達克上市規則5450(b)(2)(C)，即維持至少$的公開持股最低市場價值。百萬（「公開持股最低市場價值要求」）。
根據納斯達克規定，公司有180個日曆日的時間（或直至2025年2月11日）恢復MVPHS要求的合規性。在這180天的合規期間內，公開持有股份的最低市值必須連續關閉至$ 萬美元或更高，持續至少10個連續工作日。此通知不會立即影響公司證券在納斯達克的上市。
如果公司在180天的合規期屆滿前未恢復符合MVPHS要求，則納斯達克將向公司發出書面通知，稱公司的證券將面臨退市。或者，公司可以申請將其證券上市轉至納斯達克資本市場，前提是公司只有在符合納斯達克資本市場的持續上市要求時，才能轉移上市至納斯達克資本市場。
市場 上市證券價值要求
2024年8月15日，公司收到了一封來自工作人員的額外缺陷通知函，通知公司，根據前30個連續工作日內所列證券的市場價值，公司普通股的上市未符合納斯達克上市規則5450(b)(2)(A)的最低市場價值要求，至少爲$
根據納斯達克規則，公司有180天的時間（或直到2025年2月11日）來重新獲得符合MVLS要求的資格。爲了在這180天的合規期內重新獲得合規，上市證券的最低市場價值必須
如果公司在180天的合規期滿前未恢復MVLS要求的合規性，公司將收到納斯達克的書面通知，公司的證券將被實施除牌。另外，公司也可以將其證券在納斯達克資本市場上市，前提是公司只有在滿足納斯達克資本市場上的持續上市要求時才能轉讓上市。
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重要會計政策摘要
現金及現金等價物
現金
現金等價物主要由英國和瑞士的主要金融機構維持.該公司認爲
現金等價物應爲短期、高流動性的投資，(a) 可輕鬆兌換成已知金額的現金，(b) 可以交易
並出於現金管理目的而持有，並且 (c) 購買時的原始到期日爲三個月或更短。該公司的
持有非物質現金餘額的瑞士銀行帳戶沒有保險，公司的英國銀行帳戶有餘額
2024 年 9 月 30 日爲英鎊
Marketable Investments
Short-term investments include marketable debt and equity securities with maturities of less than one year or where management’s intent is to use the investments to fund current operations or to make them available for current operations. All investments in marketable securities are classified as available-for-sale and are reported at fair value on the consolidated balance sheets. Investments with remaining maturities or that are due within one year from the balance sheet date are classified as current. The Company reviews its short-term investments for other-than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a short-term investment’s carrying amount is not recoverable within a reasonable period of time.
Property, Plant and Equipment
Property, plant and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, the life of the lease, if shorter. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other income or expense for the period. As of September 30, 2024, property, plant and equipment primarily consisted of leasehold improvements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates are based on several factors including the facts and circumstances available at the time the estimates are made, historical experience, risk of loss, general economic conditions and trends, and the assessment of the probable future outcome. Actual results could differ materially from such estimates. Estimates and assumptions are reviewed periodically by management and changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. The effects of changes are reflected in the financial statements in the period that they are determined.
Fair Value Measurements
ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. In determining fair value, the Company used various valuation approaches. A fair value hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.
Unobservable inputs reflect the Company’s assumption about the inputs that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels, based on the inputs, as follows:
| ● | Level 1-Valuations based on quoted prices for identical instruments in active markets. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment. | |
| ● | Level 2- Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for either similar instruments in active markets, identical or similar instruments in markets that are not active, or model-derived valuations whose inputs or significant value drivers are observable or can be corroborated by observable market data. | |
| ● | Level 3-Valuations based on inputs that are unobservable. These valuations require significant judgment. |
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The Company’s Level 1 assets consist of cash and cash equivalents in the accompanying balance sheets, convertible notes payable and the value of accrued expenses and other current liabilities approximate fair value due to the short-term nature of these assets and liabilities.
Warrants
The Company determines the accounting classification of warrants as either liability or equity by first assessing whether the Warrants meet liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Under ASC 480, a financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares must be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. If financial instruments, such as the warrants, are not required to be classified as liabilities under ASC 480, the Company assesses whether such instruments are indexed to the Company’s own stock under ASC 815-40. In order for an instrument to be considered indexed to an entity’s own stock, its settlement amount must always equal the difference between the following: (a) the fair value of a fixed number of the Company’s equity shares, and (b) a fixed monetary amount or a fixed amount of a debt instrument issued by the Company.
Equity classified warrants are recorded in stockholders’ deficit and liability classified warrants are recorded as liabilities within the Consolidated Balance Sheets. The liability classified warrants are remeasured each period with changes recorded in the Consolidated Statements of Operations and Comprehensive Loss.
As of September 30, 2024, the Company had outstanding warrants that are classified as a liability within the condensed consolidated balance sheets. The fair value of the warrant liability is determined each balance sheet date based on Level 2 inputs as such inputs are based on observable inputs other than quoted prices. The warrant liability is valued using an observable market quote for the Company’s publicly traded warrants, which are considered to be a similar asset in an active market. See Note 5 for further information on the Company’s financial liabilities carried at fair value.
During the nine months ended September 30, 2024, the Company issued warrants that met the criteria to be classified within stockholders’ deficit within the condensed consolidated balance sheets. The fair value of the warrants was determined by using a Black-Scholes model, with the most judgmental non-observable input being the volatility measure. Changes in the assumptions around the volatility could have caused significant changes in the estimated fair value of the warrants. See Note 15 for further information on the warrants classified within stockholders’ deficit.
The Company accounts for share based compensation arrangements granted to employees in accordance with ASC 718, Compensation: Stock Compensation, by measuring the grant date fair value of the award and recognizing the resulting expense over the period during which the employee is required to perform service in exchange for the award. The grant date fair value of stock options is determined using a Black-Scholes model, with the most judgmental non-observable input being the volatility measure. Changes in the assumptions around the volatility can cause significant changes in the grant date fair value of stock options. The Company accounts for forfeitures when they occur.
Research and Development and Funding
Research and development expenses consist primarily of costs incurred in connection with the research and development of our clinical assets and programs. The Company expenses research and development costs and intangible assets acquired that have no alternative future use as incurred. These expenses include:
| ● | expenses incurred under agreements with organizations that support the Company’s drug discovery and development activities; | |
| ● | expenses incurred in connection with the preclinical and clinical development of the Company’s clinical assets and programs, including under agreements with contract research organizations, or CROs; | |
| ● | costs related to contract manufacturing organizations, or CMOs, that are primarily engaged to provide drug substance and product for our clinical trials, research and development programs, as well as investigative sites and consultants that conduct the Company’s clinical trials, nonclinical studies and other scientific development services; | |
| ● | the costs of acquiring and manufacturing nonclinical and clinical trial materials, including manufacturing registration and validation batches; | |
| ● | employee-related expenses, including salaries, related benefits and equity-based compensation expense, for employees engaged in research and development functions; | |
| ● | costs related to compliance with quality and regulatory requirements; | |
| ● | payments made under third-party licensing agreements; and | |
| ● | direct and allocated costs related to facilities, information technology, personnel and other overhead. |
Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or consumed or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.
| 12 |
Income Taxes
ASC Topic 740, Income Taxes, sets forth standards for financial presentation and disclosure of income tax liabilities and expense. Interest and penalties recognized have been classified in the unaudited condensed consolidated statements of operations and Comprehensive Loss as income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the unaudited condensed consolidated statements of operations and Comprehensive Loss in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits of which future realization is uncertain.
In December 2023, the FASB issued ASU 2023-09, which introduces new income tax disclosure requirements. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. After reviewing the provisions of the new standard, the Company has determined that these changes will not materially affect our financial condition, results of operations, or cash flows as presented in our financial statements.
The Company calculates basic and diluted earnings/(net loss) per share under ASC Topic 260, Earnings Per Share. Basic earnings/(net loss) per share is computed by dividing the net income/(loss) by the number of weighted-average common shares outstanding for the period. Diluted earnings/(net loss) is computed by adjusting net income/(loss) based on the impact of any dilutive instruments. Diluted earnings/(net loss) per share is computed by dividing the diluted net income/(loss) by the number of weighted-average common shares outstanding for the period including the effect, if dilutive, of any instruments that can be settled in common shares. When computing diluted net income/(loss) per share, the numerator is adjusted to eliminate the effects that have been recorded in net income/(loss) (net of tax, if any) attributable to any liability-classified dilutive instruments.
Foreign Currency Translation
The Company translated the assets and liabilities of foreign subsidiaries from their respective functional currency, the British pound, to United States dollars at the appropriate spot rates as of the balance sheet date. Income and expenses of operations are translated to United States dollars using weighted average exchange rates during the year. The foreign subsidiaries use the local currency as their functional currency. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the accompanying consolidated statements of changes in stockholders’ deficit. Non-monetary items in the subsidiaries’ functional currency are re-measured into the reporting currency at the historical exchange rate (i.e., the rate of exchange at the date of the transaction).
| 13 |
2. Revision of Previously Issued Financial Statements
In connection with the preparation of the Company’s financial statements as of and for the year ended December 31, 2023, the Company’s management identified errors in its previously issued unaudited financial statements as of and for the three months and nine months ended September 30, 2023 with respect to how certain expenses relating to the Merger were previously expensed and that as part of the Company’s annual audit it was determined that such expenses should have been capitalized and subsequently recorded against equity and restated such quarterly period in the December 31, 2023 Form 10-K. The accounting for legal costs was deemed to be specific incremental costs directly attributable to the Merger and concurrent PIPE financing (See Note 3). Management has evaluated this correction to the accounting treatment of such costs, which overstated net loss, additional paid in capital, and accumulated deficit and understated prepaid expense, and concluded it was material to the prior quarterly periods, individually and in the aggregate.
The impact of the errors described above on the condensed consolidated balance sheets as of September 30, 2023, is as follows:
| As of September 30, 2023 (Unaudited) | ||||||||||||
| (Dollar amounts in thousands) | As Previously Reported | Adjustment | As Revised | |||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| Stockholders’ deficit | ||||||||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
The impact of the errors described above on the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended September 30, 2023, is as follows:
| For the Three Months ended September 30, 2023 (Unaudited) | ||||||||||||
| (Dollar amounts in thousands, except per share amounts) | As Previously Reported | Adjustment | As Revised | |||||||||
| Statements of Operations and Comprehensive Loss | ||||||||||||
| Operating expenses: | ||||||||||||
| General and administrative expenses | $ | $ | ( | ) | $ | |||||||
| Total operating costs and expenses | ( | ) | ||||||||||
| Operating loss | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | $ | |||||||||
| Basic earnings/(net loss) per share | $ | $ | $ | |||||||||
| Diluted earnings/(net loss) per share | $ | $ | $ | |||||||||
| Total comprehensive income (loss) | $ | $ | $ | |||||||||
The impact of the errors described above on the condensed consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2023, is as follows:
| For the Nine Months ended September 30, 2023 (Unaudited) | ||||||||||||
| (Dollar amounts in thousands, except per share price amounts) | As Previously Reported | Adjustment | As Revised | |||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | ||||||||||||
| Operating expenses: | ||||||||||||
| General and administrative expenses | $ | $ | ( | ) | $ | |||||||
| Total operating costs and expenses | ( | ) | ||||||||||
| Operating loss | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic earnings/(net loss) per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Diluted earnings/(net loss) per share | $ | ( | ) | $ | $ | ( | ) | |||||
| Total comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | |||||
The impact of the errors described above on the condensed consolidated statements of changes in stockholders’ deficit as of September 30, 2023, is as follows:
| As of September 30, 2023 (Unaudited) | ||||||||||||
| (Dollar amounts in thousands) | As Previously Reported | Adjustment | As Revised | |||||||||
| Statements of Changes in Shareholders’ Deficit | ||||||||||||
| Stockholders’ deficit | ||||||||||||
| Additional paid-in capital | $ | ( | ) | $ | ||||||||
| Accumulated deficit | $ | ( | ) | ( | ) | |||||||
The impact of the errors described above on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023, is as follows:
| For the Nine Months ended September 30, 2023 (Unaudited) | ||||||||||||
| (Dollar amounts in thousands) | As Previously Reported | Adjustment | As Revised | |||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | $ | ( | ) | ( | ) | |||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid expenses and other current assets | $ | ( | ) | ( | ) | |||||||
| Non-cash investing and financing activities | ||||||||||||
| Reclassification of deferred offering costs to reduction of additional paid-in capital | ||||||||||||
| 14 |
3. Merger
As discussed in Note 1, on September 22, 2023, the Company and MURF completed the Merger. Upon the closing of the Merger, the following occurred:
| ● | Each share of Old Conduit common stock issued and outstanding immediately prior to the closing of the Merger, which totaled shares, was exchanged for the right to receive shares of the Company’s Common Stock resulting in the issuance of shares of the Company’s Common Stock. | |
| ● | In addition to the shares issued to legacy Conduit shareholders noted above, an additional shares of Common Stock were issued to Conduit convertible note holders, resulting in a total of shares of Common Stock being issued to Conduit shareholders and holders of Conduit convertible notes payable. | |
| ● | In
connection with the Merger, share of MURF Class A common stock held by Murphy Canyon Acquisition Sponsor, LLC (the “MURF Sponsor”) was transferred to MURF Directors.
Each share was exchanged on a | |
| ● | Each share of MURF Class A common stock held by the MURF Sponsor prior to the closing of the Merger, which totaled shares, was exchanged for, on a one-for-one basis for shares of Common Stock. | |
| ● | Each share of MURF common stock subject to possible redemption that was not redeemed prior to the closing of the Merger, which totaled shares, was exchanged for, on a one-for-one basis, for shares of Common Stock. | |
| ● | In connection with the Merger, shares of MURF Class B common stock held by the MURF Sponsor was automatically converted into shares of MURF Class A common stock and then subsequently converted into shares of Common Stock on a one-for-one basis. | |
| ● | In
connection with the Merger, A.G.P./Alliance Global Partners (“A.G.P.”), whom acted as a financial advisor to both MURF
and Conduit, was due to receive (i) a cash fee of $ | |
| ● | In
connection with the Merger, MURF entered into subscription agreements (the “Subscription Agreements”) with certain accredited
investors (the “PIPE Investors”) for an aggregate of units, with each
unit consisting of one share of Common Stock (the “PIPE Shares”), together with one warrant exercisable into one share
of Common Stock (the “PIPE Warrants”), at a purchase price of $ per unit, for an aggregate purchase price of $ | |
| ● | The
proceeds received by the Company from the Merger and PIPE Financing, net of transaction costs, totaled $ |
The following table presents the total Common Stock outstanding immediately after the closing of the Merger:
| Number of Shares | ||||
| Exchange of MURF common stock subject to possible redemption for Conduit Pharmaceuticals Inc. common stock | ||||
| Exchange of MURF Class A common stock held by MURF Directors for Conduit Pharmaceuticals Inc. common stock | ||||
| Exchange of MURF Class A common stock held by MURF Sponsor for Conduit Pharmaceuticals Inc. common stock | ||||
| Subtotal - Merger, net of redemptions | ||||
| Issuance of Conduit Pharmaceuticals Inc. common stock in connection with PIPE Financing | ||||
| Exchange of Conduit Pharmaceuticals Limited ordinary shares for Conduit Pharmaceuticals Inc. common stock on the Closing Date | ||||
| Issuance of Conduit Pharmaceuticals Inc. common stock to holders of Conduit Pharmaceuticals Limited convertible notes on the Closing Date | ||||
| Issuance of Conduit Pharmaceuticals Inc. common stock to an advisor for services directly related to the Merger | ||||
| Total - Conduit Pharmaceuticals Inc. common stock outstanding as a result of the Merger, PIPE Financing, exchange of Conduit Pharmaceuticals Limited shares for shares of Conduit Pharmaceuticals Inc., issuance of Conduit Pharmaceuticals Inc. common stock to holders of Conduit Pharmaceuticals Limited convertible notes, and advisors. | ||||
| 15 |
4. Marketable Investments
The following table summarizes the Company’s investments accounted for as available-for-sale securities as of September 30, 2024 (in thousands):
| As of September 30, 2024 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized Cost | Unrealized Gain | Unrealized Loss | Fair Value | |||||||||||||
| Available-for-sale, short-term investments: | ||||||||||||||||
| Investment in trading securities | $ | $ | $ | $ | ||||||||||||
| Total available-for-sale, short-term investments | $ | $ | $ | $ | ||||||||||||
The Company had no short-term investments as of December 31, 2023.
Unrealized losses on available-for-sale securities as of September 30, 2024, were not significant. There were no significant realized gains or losses recognized on the sale or maturity of available-for-sale investments for the nine months ended September 30, 2024.
5. Fair Value
The following table presents as of September 30, 2024 the Company’s assets subject to measurement at fair value on a recurring basis (in thousands):
| Fair Value Measurements as of September 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Investment in trading securities | $ | $ | $ | $ | ||||||||||||
| Total Assets | $ | $ | $ | $ | ||||||||||||
The following table presents as of September 30, 2024 the Company’s liabilities subject to measurement at fair value on a recurring basis (in thousands):
| Fair Value Measurements as of September 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative warrant Liability | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
The following table presents as of December 31, 2023 the Company’s liabilities subject to measurement at fair value on a recurring basis (in thousands):
| Fair Value Measurements as of December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative warrant liability | $ | $ | $ | $ | ||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
The fair value of the investment in trading securities is the purchase price of the investments plus the unrealized gains and has therefore been classified as a Level 3 fair value measurement. The Company had no investment in trading securities as of December 31, 2023. There were no significant gains or losses recognized on the sale of investments in trading securities for the nine months ended September 30, 2024.
The warrants issued to the PIPE Investors and an advisor in connection with the Merger are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the consolidated balance sheets. See Note 16. The measurements of the liability classified warrants are classified as Level 2 fair value measurements due to the use of an observable market quote for the Company’s publicly traded warrants, which are considered to be a similar asset in an active market.
The warrant liabilities are calculated by multiplying the quoted market price of the Company’s publicly traded warrants by the number of liability classified warrants.
During the period ended September 30, 2024, there were no transfers between Level 1 and Level 2, nor into or out of Level 3.
| 16 |
6. Balance Sheet Details
Current assets consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
| As of | As of | |||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Prepaid directors and officers insurance | $ | $ | ||||||
| Prepaid Expenses | ||||||||
Loan Receivable* | ||||||||
| Other Receivables | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| * |
Accrued Expenses and other current liabilities consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
As of September 30, 2024 | As of December 31, 2023 | |||||||
| Accrued Professional Fees | $ | $ | ||||||
| Accrued Payroll | ||||||||
| Accrued Contingency** | ||||||||
| Accrued Interest | ||||||||
| Accrued Expenses | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
| ** |
7. Convertible Notes Payable
On
November 1, 2022, the Company approved a master Convertible Loan Note Instrument (the “2022 Convertible Loan Note Instrument”),
permitting the Company to issue convertible notes payable for a maximum aggregate principal amount of up to $
During
January and February 2023, under the terms of the 2022 Convertible Loan Note Instrument, the Company issued convertible notes
payable with an aggregate principal amount of $
million (£
million) to non-related third parties. As discussed in Note 13, “Related Party Transactions,” during January and
February 2023, under the terms of the 2022 Convertible Loan Note Instrument, the Company issued convertible notes payable with an
aggregate principal amount of $
| 17 |
For
the three and nine months ended September 30, 2023, the Company recorded a $
Convertible Promissory Notes Payable
During
March 2023, the Company issued a convertible promissory note payable (the “March 2023 Convertible Note”) with an
aggregate principal amount of $
On
October 9, 2024, the Company and the loan holder signed an extension for the March 2023 Convertible Note to extend the maturity date
from September 20, 2024 to October 20, 2024 with the option for the Company to further extend the maturity date two times, each by
an additional 30-day period. The Company exercised the first option to extend the maturity date and the maturity date is currently
November 19, 2024. In consideration for extending the maturity date, the Company amended the form of the repayment of the remaining
interest due on the loan. As payment for the interest, the Company issued the loan holder, (i) $
8. Loans Payable
On
May 1, 2022, the Company entered into Loan Agreements (the “Loans”) with two lenders, totaling $
On October 9, 2024, the Company and the Loan holders signed agreements to extend the maturity date for each Loan to
On
August 6, 2024, the Company entered into a Senior Secured Promissory Note (the “August 2024 Nirland Note”) with Nirland,
a related party of the Company, pursuant to which the Company issued and sold to Nirland the August 2024 Note in the original
principal amount of $
As
noted above, the Company issued to Nirland shares
of the Company’s Common Stock on August 6, 2024. The Company determined that loan agreement and share issuance should were
part of a basket transaction and allocated the net proceeds on a relative fair value basis. Of the total $
As
of September 30, the Company has $
On October 31, 2024, the Company and Nirland amended the August 2024 Nirland Note, whereby the August 2024 Nirland Note was amended to (i) provide for the conversion of the August 2024 Nirland Note into shares of Common Stock, at Nirland’s discretion, in a multiple of any unpaid amounts, if not otherwise previously paid, pursuant to the conversion rate contained therein, (ii) remove Nirland’s mandatory prepayment right, and (iii) remove Nirland’s right of first refusal to participate in any future equity or debt offerings of the Company.
9. Deferred Commission Payable
As
discussed in Note 3, A.G.P was a financial advisor to both MURF and Old Conduit in connection with the Merger transaction. Upon the
completion of the Merger, A.G.P.: (i) received a cash fee of $
Pursuant
to the Bridge Agreement with A.G.P entered into on October 29, 2024, the Company and A.G.P. also agreed to amend a fee letter agreement
entered into between the Company and A.G.P., effective September 22, 2023, suspending the provision that the Company was required to
pay A.G.P.
| 18 |
10. Research and Development License Agreement
On August 7, 2024, the Company and AstraZeneca AB (PUBL) (“AstraZeneca”) entered into a License Agreement, dated August 7, 2024 (the “August 2024 License Agreement”). Pursuant to the August 2024 License Agreement, AstraZeneca agreed to grant a license to the Company under certain intellectual property rights controlled by AstraZeneca related to HK-4 Glucokinase activators AZD1656 and AZD5658 in all indications and myeloperoxidase inhibitor AZD5904 for the treatment, prevention, and prophylaxis of idiopathic male infertility. The Company will be responsible for the development and commercialization of relevant products licensed under the August 2024 License Agreement (the “Licensed Products”).
As
consideration for the grant of the license, the Company (i) granted AstraZeneca Common Stock pursuant to a stock issuance agreement (the
“Issuance Agreement”), (ii) paid AstraZeneca an up-front payment of $
AstraZeneca has been granted a right of first negotiation to develop, manufacture, and commercialize a Licensed Product if the Company receives an offer for, or solicits, a transaction where a third party would obtain the right to develop, manufacture, or commercialize a Licensed Product. If AstraZeneca exercises such right, the parties would negotiate in good faith for an agreed period of time on an exclusive basis.
Either party may terminate the August 2024 License Agreement for material breach (subject to a cure period) or insolvency of the other party. The Company may terminate the August 2024 License Agreement for convenience (in its entirety or on a Licensed Product-by-Licensed Product basis). In addition, AstraZeneca may terminate the August 2024 License Agreement in certain circumstances, including (but not limited to) the Company ceasing development of all Licensed Products (subject to certain exceptions for normal pauses or gaps between clinical studies).
As a result of the above, the Company will no longer fund the development of AZD1656 or AZD5904 under the terms of the Exclusive Funding Agreement, dated March 26, 2021 with St George Street Capital (the “Funding Agreement”). In this regard, the Company previously entered into a deed of amendment amending such Funding Agreement. The parties agreed that the project funding provisions of such Funding Agreement whereby the Company had the right to fund a project or refer other funders to St George Street Capital, were amended to provide that St George Street Capital must still include the Company in any project funding opportunities and requests but may now seek other third party project funders in addition to the Company. See Note 13, Related Party Transactions.
On September 22, 2023, in connection with the Merger, the Company adopted the Conduit Pharmaceuticals Inc. 2023 Stock Incentive Plan (the “2023 Plan”). The 2023 Plan became effective upon the closing of the Merger. The 2023 Plan initially provides for the issuance of up to shares of Common Stock. Pursuant to the 2023 Plan’s “evergreen” provision, the number of shares of Common Stock available for issuance under the 2023 Plan was increased by shares of common stock effective January 1, 2024. The number of authorized shares will automatically increase on January 1, 2025 and continuing annually on each anniversary thereof through (and including) January 1, 2033, equal to the lesser of (i) % of the shares of Common Stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of Common Stock as determined by the Board or the applicable committee of the Board. The 2023 Plan allows for awards to be issued to employees and non-employee directors in the form of options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock units, dividend equivalents, other stock-based, or other cash-based awards. As of September 30, 2024, there were shares of Common Stock available for issuance under the 2023 Plan.
For the three months ended September 30, 2024 and 2023, there was a total of $ million and $, respectively in stock-based compensation expense recognized within General and Administrative expenses on the consolidated statements of operations and Comprehensive Loss, respectively, related to the RSUs and stock options granted since the Merger.
For the nine months ended September 30, 2024 and 2023, there was a total of $ million and $, respectively in stock-based compensation expense recognized within General and Administrative expenses on the consolidated statements of operations and Comprehensive Loss, respectively, related to the RSUs and stock options granted since the Merger.
On June 24, 2024, in connection with a services agreement with an unrelated third party to provide marketing services from July to December 2024, the Company issued shares of its Common Stock (the “Service Shares”). The Company valued the Service Shares at $ per share, the closing price of the Company’s Common Stock on June 21, 2024. The total compensation for these shares is $ million which will recognized within General and Administrative expenses over the service period of the agreement.
On or around August 14, 2024, the Company was first made aware that one of its directors, through a wholly owned subsidiary, had previously entered into certain collateral pledge agreements that resulted in the disposition of a substantial amount of shares in the Company pursuant to those agreements without the Company’s knowledge. In addition, the Company also became aware that approximately million shares (or % of outstanding Common Stock as of August 14, 2024) are currently subject to a further third-party pledge arrangement with a significant stockholder of the Company. Upon learning of these transactions, the Board has appointed an independent committee of the Board (the “Special Committee”) and delegated to the Special Committee the authority to review these matters and determine action(s), if any, to be taken by the Company in response thereto. Additionally, the Company formed another committee of the Board (the “Trading Review Committee”) and delegated to the Trading Review Committee the authority to investigate and review the trading patterns of certain of the Company’s stockholders and determine action(s), if any, to be taken by the Company in response thereto.
| 19 |
Restricted Stock
In connection with the Merger, as discussed in Notes 1 and 3, and by Unanimous Written Consent of the Board, the then Chief Financial Officer of the Company was granted RSUs on December 1, 2023 at a weighted average grant date fair value of $. The RSUs were to vest in equal annual instalments on the first three anniversaries of the closing of the Merger. Upon the then Chief Financial Officer’s resignation, effective May 15, 2024, all such RSUs were forfeited. On June 7, 2024 by Unanimous Written Consent of the Board, the Interim Chief Financial Officer of the Company and a Board member were each granted shares of immediately vested restricted stock at a weighted average grant date fair value of $. The shares of restricted stock were fully vested as of the grant date. additional RSU’s or shares of restricted Common Stock were granted during the three and nine months ended September 30, 2024.There were shares of restricted Common Stock vested as of September 30, 2024 and RSUs vested as of December 31, 2023.
| Number of Awards | Weighted Average Grant Date Fair Value Per Unit | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Cancelled/forfeited | ( | ) | $ | |||||
| Vested | ( | ) | $ | |||||
| Outstanding at September 30, 2024 | $ | |||||||
Stock Options
The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company then recognizes the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:
| ● | Expected volatility – the Company estimates the volatility of the share price of their peer companies at the date of grant using a “look-back” period which coincides with the expected term, defined below. The Company believes using a “look-back” period which coincides with the expected term is the most appropriate measure for determining expected volatility. | |
| ● | Expected term – the Company estimates the expected term using the “simplified” method outlined in SEC Staff Accounting Bulletin No. 107, “Share-Based Payment.” | |
| ● | Risk-free interest rate – the Company estimates the risk- free interest rate using the U.S. Treasury Yield curve for periods equal to the expected term of the options in effect at the time of grant. | |
| ● | Dividends – the Company uses an expected dividend yield of zero because the Company has not declared nor paid a cash dividend, nor are there any plans to declare a dividend. |
The Company did not grant stock options during the three and nine months ended September 30, 2024 or September 30, 2023.
The Company accounts for forfeitures as they occur, which may result in the reversal of compensation costs in subsequent periods as the forfeitures arise.
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | - | $ | - | ||||||||||||
| Cancelled/forfeited | $ | - | $ | - | ||||||||||||
| Exercised | $ | - | $ | - | ||||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable | $ | $ | ||||||||||||||
| Unvested | $ | $ | ||||||||||||||
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s Common Stock for those options that had exercise prices lower than the fair value of the Company’s Common Stock. As of September 30, 2024, the total compensation cost related to non-vested option awards not yet recognized was $ million with a weighted average remaining vesting period of years.
| 20 |
For the three months ended
September 30, | For the nine months ended
September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss - basic | $ | ( | ) | $ | $ | ( | ) | ( | ) | |||||||
| Less: Change in fair value and income impact of Cizzle option liability | ( | ) | ( | ) | ||||||||||||
| Less: Change in fair value and income impact of Vela option liability | ( | ) | ( | ) | ||||||||||||
| Net loss - diluted | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average Common Stock outstanding, basic | ||||||||||||||||
| Add: Cizzle option liability shares | ||||||||||||||||
| Add: Vela option liability shares | ||||||||||||||||
| Weighted average shares used in computing net loss per share - diluted | ||||||||||||||||
| Net loss per share attributable to common stockholders, basic | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| Net income loss per share attributable to common stockholders, diluted | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| As of | As of | |||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Equity classified warrants | ||||||||
| Liability classified warrants | ||||||||
| Restricted Stock Options | ||||||||
| Stock options | ||||||||
| Convertible promissory notes payable | ||||||||
| Antidilutive Securities | ||||||||
| 21 |
13. Related Party Transactions
Corvus Capital Limited
Corvus is a significant investor in the Company and the Chief Executive Officer of Corvus is the chairman of Conduit’s Board. In addition, the Company’s interim Chief Financial Officer is a partner at Corvus. In conjunction with the execution of the Subscription Agreements, Corvus and its affiliates entered into a participation and inducement agreement with the PIPE Investors whereby Corvus agreed to provide certain payments and economic benefits to such investor in the event Corvus sold or pledged in a debt transaction any of the shares it was receiving in the Merger. In certain circumstances, such investor may have a right to cause Corvus to transfer certain of its shares to such investor. No share transfers have been made to date. On July 31, 2024, Corvus pledged shares of common stock to Nirland Limited, a related party of the Company discussed below. Refer to Note 11 for additional information.
For
the nine months ended September 30, 2024, the Company incurred travel expenses on behalf of the CEO of Corvus of approximately $
St George Street Capital
St George Street Capital (“SGSC”) is a stockholder and the Company has a Funding Agreement (as defined below) with SGSC. Following the execution of the License Agreement with AstraZeneca (See Note 1), the Company will no longer fund the development of AZD1656 or AZD5904 under the terms of the Funding Agreement, dated March 26, 2021 (the “Funding Agreement”).
In this regard, the Company previously entered into a deed of amendment in May 2024 amending the Funding Agreement. The parties agreed that the project funding provisions of the Funding Agreement whereby the Company had the right to fund a project or refer other funders to SGSC, but not the obligation to fund any project, would be amended to provide that SGSC must still include the Company in any project funding opportunities and requests but may now seek other third party project funders in addition to the Company.
For the three and nine months ended September 30, 2024 and 2023, the Company did not incur expenses to SGSC and, as of September 30, 2024 and December 31, 2023, the Company did not owe any amounts to SGSC.
Nirland Limited
On August 6, 2024, the Company entered into the August 2024 Nirland Note with Nirland, a related party of the Company. Refer to Note 8 above for additional information. Additionally, on October 28, 2024, the Company issued the October 2024 Nirland Note to Nirland, and on October 31, 2024, the Company and Nirland amended the August 2024 Nirland Note. Refer to Note 17 below for additional information.
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14. Other Income (Expense), Net
The following table presents other income (expense), net, for the three and nine months ended September 30, 2024 and 2023 (in thousands):
For the Three Months ended
September 30, | For the Nine Months ended
September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Other income: | ||||||||||||||||
| Change in fair value of Cizzle option | $ | $ | $ | $ | ||||||||||||
| Change in fair value of Cizzle option | ||||||||||||||||
| Change in fair value of Vela option liability | ||||||||||||||||
| Unrealized foreign Currency gain | ||||||||||||||||
| Gain on change in fair value of derivative warrant liability | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Other | ||||||||||||||||
| Total other income: | ||||||||||||||||
| Other expense: | ||||||||||||||||
| Loss on issuance of Cizzle option | ||||||||||||||||
| Change in fair value of convertible notes payable | ||||||||||||||||
| Interest Expense on Deferred Commission payable | ||||||||||||||||
| Interest expense on convertible promissory note payable | ||||||||||||||||
| Amortization of Debt Issuance costs | ||||||||||||||||
| Interest Expense on Note payable | ||||||||||||||||
| Loss on contingent liability | ||||||||||||||||
| Realized foreign currency transaction loss | ||||||||||||||||
| Unrealized Foreign currency Loss | ||||||||||||||||
| Issuance of Warrants for lock up | ||||||||||||||||
| Other | ||||||||||||||||
| Total other expense | ||||||||||||||||
| Total other expense, net | $ | ( | ) | $ | ( | ) | ||||||||||
15. Warrants
Upon the closing of the Merger, the Company assumed (i) the warrants initially included in the MURF units issued in MURF’s initial public offering (the “Publicly Traded Warrants”), and (ii) the warrants that were included in the private placement units issued to the MURF Sponsor simultaneously with the closing of MURF’s initial public offering (the “Private Placement Warrants”). In connection with the Merger, the Company also issued warrants to the PIPE Investors (the “PIPE Warrants”) pursuant to the Subscription Agreements and to an advisor (the “A.G.P. Warrants,” and together with the PIPE Warrants, the “Liability Classified Warrants”) pursuant to the Company’s engagement agreement with the advisor.
The Company determined that the settlement amount of the Publicly Traded Warrants and the Private Placement Warrants would equal the difference between the fair value of a fixed number of shares and a fixed monetary amount (or a fixed amount of a debt instrument) and must be classified as equity, while the settlement amount of the Liability Classified Warrants would not equal the difference between the fair value of a fixed number of shares and a fixed monetary amount (or a fixed amount of a debt instrument) and must be classified as a liability.
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Equity Classified Warrants
On
March 20, 2024, the Company issued in a private placement equity classified common stock purchase warrants to an unrelated third
party to purchase up to an aggregate
| March 20, 2024 | ||||
| Closing stock price | $ | |||
| Contractual exercise price | $ | |||
| Risk-free rate | % | |||
| Estimated volatility | % | |||
| Time period to expiration | Years | |||
On
April 20, 2024, the Company issued in a private placement equity classified common stock purchase warrants to stockholders of the
Company to purchase up to an aggregate
| April 20, 2024 | ||||
| Closing stock price | $ | |||
| Contractual exercise price | $ | |||
| Risk-free rate | % | |||
| Estimated volatility | % | |||
| Time period to expiration | Years | |||
Pursuant
to MURF’s initial public offering, the Company sold
Simultaneously
with the closing of its initial public offering, MURF consummated the private sale to the MURF Sponsor of
In connection with the closing of the Merger on September 22, 2023, the Equity Classified Warrants were amended to entitle each holder to purchase one share of the Company’s Common Stock.
The Equity Classified Warrants became exercisable 30 days after the Closing Date of the Merger. The Equity Classified Warrants will expire five years after the Closing Date of the Merger or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Common Stock pursuant to the exercise of an Equity Classified Warrant and will have no obligation to settle such exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No Equity Classified Warrant will be exercisable and we will not be obligated to issue shares of Common Stock upon exercise unless the Common Stock issuable upon such exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Equity Classified Warrant. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to an Equity Classified Warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any Equity Classified Warrant. In the event that a registration statement is not effective for the exercised Equity Classified Warrant, the purchaser of a unit containing such Equity Classified Warrant will have paid the full purchase price for the unit solely for the share of Common Stock underlying such unit.
Conduit
may call the Publicly Traded Warrants in whole and not in part, at a price of $
| ● | upon not less than 30 days’ prior written notice of redemption to each Publicly Traded Warrant holder; and | |
| ● | if, and only if, the reported last sale price of the Common Stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the Publicly Traded Warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders. |
If and when the Publicly Traded Warrants become redeemable by Conduit, Conduit may not exercise its redemption right if the issuance of shares of Common Stock upon exercise of the Publicly Traded Warrants is not exempt from registration or qualification under applicable state blue sky laws or Conduit are unable to effect such registration or qualification. Conduit will use its best efforts to register or qualify such shares of Common Stock under the blue sky laws of the state of residence in those states in which the Publicly Traded Warrants were offered by Conduit in the offering.
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The Private Placement Warrants are identical to the Publicly Traded Warrants, except that such warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and will not be redeemable by Conduit, in each case so long as they are still held by the MURF Sponsor or its permitted transferees.
The March 2024 Warrants are not exercisable until one year after their date of
issuance. Each March 2024 Warrant is exercisable into one share of the Company’s Common Stock at a price per share of $
(as adjusted from time to time in accordance with the terms thereof) for a two-year period after the date of exercisability.
The April 2024 Warrants are not exercisable until one year after their date of issuance.
Each April 2024 Warrant is exercisable into one share of the Company’s Common Stock at a price per share of $
(as adjusted from time to time in accordance with the terms thereof) for a two-year period after the date of exercisability.
Liability Classified Warrants
As
discussed in Note 3, warrants were issued to the PIPE Investors as of the closing of the Merger pursuant to subscription agreements.
The warrants provide the PIPE Investors the right to purchase up to
The Liability Classified Warrants contain materially the same terms and are exercisable for a period of five years, beginning on October 22, 2023.
The PIPE Warrants are exercisable for cash or on a cashless basis, at the holder’s option. The PIPE Warrants are not redeemable by the Company.
The
A.G.P. Warrants are exercisable for cash or on a cashless basis, at the holder’s option. The Company may call the A.G.P. Warrants
for redemption, in whole and not in part, at any time after the A.G.P. Warrants become exercisable and prior to their expiration, at
a price of $
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; | |
| ● | if, and only if, the reported last sale price of the Common Stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, recapitalizations and other similar events) for any 20 trading days within a 30 trading day period commencing once the A.G.P. Warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders; and | |
| ● | provided there is a current registration statement in effect with respect to the shares of Common Stock underlying the A.G.P. Warrants for each day in the 30 trading day period and continuing each thereafter until the redemption date. |
These warrants are classified as derivative liabilities because they do not meet the criteria in ASC 815-40 to be considered indexed to the entity’s own stock as the warrants could be settled for an amount that is not equal to the difference between the fair value of a fixed number of the entity’s shares and a fixed monetary amount. The Liability Classified Warrants are initially measured at fair value based on the price of the Publicly Traded Warrants and are remeasured at fair value at subsequent financial reporting period end dates and upon exercise (see Note 6 for additional information regarding fair value).
As
September 30, 2024 and December 31, 2023, the consolidated balance sheets contained derivative warrant liabilities of $
16. Commitments and Contingencies
Legal Proceedings
The Company is subject to certain claims and contingent liabilities that arise in the normal course of business. While we do not expect that the ultimate resolution of any of these pending actions will have a material effect on our consolidated results of operations, financial position or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which we currently believe to be immaterial, does not become material in the future.
In
August 2023, prior to the Business Combination, our now wholly-owned subsidiary, Conduit Pharmaceuticals Limited, received a letter
from Strand Hanson Limited (“Strand”) claiming it was owed advisory fees pursuant to a previously executed letter.
Conduit rejected and disputed the substance of the letter in full. Following such rejection, on September 7, 2023, Strand filed a
claim in the Business and Property Courts of England and Wales claiming it is entitled to be paid the sum of $
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Leases
On
March 7, 2024, the Company entered into a lease agreement with respect to approximately
17. Subsequent Events
On
October 9, 2024,
On
October 9, 2024, the Company entered into two separate agreements with each of the Loan holders of the notes payable (see Note 8) to
extend the maturity date for each Loan to
On October 23, 2024, we entered into a sales agreement,
with A.G.P. relating to shares of our common stock. In accordance with the terms of the sales agreement, we may offer and sell shares
of our common stock having an aggregate offering price of up to $
On October 29, 2024, the
Company entered into a Bridge Loan Agreement (the “A.G.P. Bridge Agreement”), with A.G.P., pursuant to which A.G.P. made
an advance (the “Advance”) to the Company in an amount not to exceed $
On October 28, 2024, the
Company issued a promissory note (the “October 2024 Nirland Note”) to Nirland in the original principal amount of $
On October 31, 2024, the Company
and Nirland amended the August 2024 Nirland Note (See Note 8), whereby the August 2024 Nirland Note was amended to (i) provide for the
conversion of the August 2024 Nirland Note into shares of Common Stock, at Nirland’s discretion, in a multiple of any unpaid amounts,
if not otherwise previously paid, pursuant to the conversion rate contained therein, (ii) remove Nirland’s Mandatory Prepayment
Right, and (iii) remove Nirland’s right of first refusal to participate in any future equity or debt offerings of the Company.
The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to shall be determined by dividing
(x) such conversion amount by (y) the conversion price. Conversion amount means two and one quarter times the sum of (x) portion of the
principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid
interest with respect to such portion of the principal amount, if any. Conversion price means, as of any conversion date or other date
of determination, $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) as well as the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on April 16, 2024. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. The following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Quarterly Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Conduit Pharmaceuticals Limited entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Murphy Canyon Acquisition Corp. (“MURF”) on November 8, 2022. The transaction contemplated by the terms of the Merger Agreement was completed on September 22, 2023 (the “Merger”), in conjunction with which MURF changed its name to Conduit Pharmaceuticals Inc. (hereafter referred to, collectively with is subsidiaries as “Conduit”, the “Company”, “we”, “us” or “our”, unless the context otherwise requires).
Overview
Conduit has developed a unique business model that allows it to act as a “conduit” to bring clinical assets from pharmaceutical companies and develop new treatments for patients. Our novel approach addresses unmet medical need and lengthens the intellectual property for our existing assets through cutting-edge solid-form technology and then commercialize these products with life science companies.
We are led by highly experienced pharma executives, Dr. Freda Lewis-Hall, former Chief Medical Officer of Pfizer Inc., the Chair of our Board of Directors, and Dr. David Tapolczay, former Chief Executive Officer of the United Kingdom-based medical research charity LifeArc, our Chief Executive Officer.
While simultaneously leveraging the capabilities of our Cambridge laboratory facility and highly experienced team of solid-form experts to extend or develop proprietary solid-form intellectual property for our existing and future clinical assets. Our own intellectual property portfolio comprises a 20-year patent pending (in certain remaining jurisdictions) solid-form compound, the AZD1656 Cocrystal (a HK-4 Glucokinase Activator), targeting a wide range of autoimmune diseases. Our pipeline research includes a number of compounds that serve as promising alternatives to existing clinical assets currently marketed and sold by large pharmaceutical companies, which we have identified as having an opportunity to develop further intellectual property positions through solid-form technology.
In connection with the funding and development of clinical assets, we evaluate and select the specific molecules to be developed and collaborate with external contract research organizations (“CROs”) and Key Opinion Leaders (“KOLs”) to run clinical trials that are managed, funded, and overseen by us. We intend to leverage our comprehensive clinical and scientific expertise in order to facilitate development of clinical assets through Phase II trials in an efficient manner by using CROs and third-party service providers. We will also collaborate closely with disease specific KOLs to collectively assess and determine the most appropriate indications for all our current and forthcoming assets.
We believe that successful Phase II trials of the clinical assets in our pipeline will increase the value of our assets. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful, however, following a successful Phase II clinical trial, we would look to licensing opportunities with large biotech or pharmaceutical companies, typically for up-front milestone payments and royalty income streams for the life of the asset patent. We anticipate using any future royalty income stream to develop our asset portfolio in combination with other potential sources of financing, including debt or equity financing.
Outside of our proprietary owned patented clinical assets, AstraZeneca AB (PUBL) (“AstraZeneca”) agreed to grant a license to the Company under certain intellectual property rights controlled by AstraZeneca related to HK-4 Glucokinase activators AZD1656 and AZD5658 in all indications and myeloperoxidase inhibitor AZD5904 for the treatment, prevention, and prophylaxis of idiopathic male infertility. The Company will be responsible for the development and commercialization of the relevant products licensed under the related License Agreement (the “Licensed Products”). The Company is required to use commercially reasonable efforts to develop and commercialize the Licensed Products.
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AstraZeneca has conducted initial pre-clinical and, in some instances, clinical trials on these assets, but has decided to license them for further development.
As the clinical assets have undergone initial pre-clinical and clinical testing conducted by AstraZeneca, we are able to use the safety data generated in these clinical trials to assess which clinical assets to further develop and for which indications.
Through this relationship, there are considerable active pharmaceutical ingredients (“APIs”) that were manufactured by AstraZeneca in conducting its clinical trials available. As a result, Conduit may not have to develop the APIs, which is often a time consuming and expensive process, and the APIs already produced were subject to rigorous quality control measures.
Furthermore, Conduit is well positioned to pursue, and intends, to pursue additional relationships and/or partnerships with third parties for the licensing of further assets which are currently deprioritized. We plan to focus our efforts on developing clinical assets to address diseases that impact a large population where there is no present treatment or the present treatment, carries significant unwanted side effects.
Key Component of Result of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of our candidates and programs. We expense research and development costs and intangible assets acquired that have no alternative future use as incurred. These expenses include:
| ● | personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation for employees engaged in research and development functions; | |
| ● | expenses incurred in connection with the clinical development and regulatory approval of our clinical assets, including under agreements with third parties, such as consultants, contractors and CROs; | |
| ● | license fees with no alternative use; and | |
| ● | other expenses related to research and development. |
We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.
We incurred approximately $3.1 million and $3.2 million on research and development activities during the three and nine months ended September 30, 2024, respectively. There was no comparable research and development funding during the three and nine months ended September 30, 2023. Of the costs incurred in 2024, $1.5 million was due to the upfront payment to AstraZeneca in connection with the license agreement and $1.6 million was related to the shares issued to AstraZeneca. Our research and development activities have been wholly focused on developing co-crystals of AZD1656 to increase patent life. Some of this work was completed by third-party CROs but all intellectual property is retained by us. We currently have one pending international patent application and two pending national patent applications. The successful completion of clinical trials increases the value of clinical assets and may lead to the commercialization and/or licensing of such assets to other pharmaceutical companies. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful.
General and Administrative Expenses
General and administrative expenses consist of salaries and other related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, and other operating costs.
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We anticipate that our general and administrative expenses will increase substantially for the foreseeable future as we increase our administrative headcount to operate as a public company and as we advance clinical assets through clinical development. We also will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the Nasdaq listing rules, additional insurance expenses, investor relations activities and other administrative and professional services. In addition, if regulatory approval is obtained for clinical assets, we expect to incur expenses associated with building a sales and marketing team.
Other Income (Expenses)
Other income (expenses), net
Other income (expense), net consists of change in the fair value of options, change in fair value of convertible notes, and expense incurred upon the issuance of warrants during the quarter. Other income (expense), net consists of change in the fair value of options, change in fair value of convertible notes, and expense incurred upon the issuance of warrants during the quarter.
Interest expense, net
Interest expense, net consists primarily of interest expense on convertible loan notes and promissory notes and interest expense on deferred commissions payable to an advisor for fees related to the Merger, as well as a small amount of interest income on cash and cash equivalents held by the Company.
Results of Operations
The following table set forth our results of operations for the periods indicated:
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expenses | $ | 3,093 | $ | - | 3,246 | - | ||||||||||
| General and administrative expenses | 2,718 | 430 | 8,660 | 2,833 | ||||||||||||
| Total operating costs and expenses | 5,811 | 430 | 11,906 | 2,833 | ||||||||||||
| Operating loss | (5,811 | ) | (430 | ) | (11,906 | ) | (2,833 | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Other income (expense), net | (341 | ) | 3,102 | (2,954 | ) | 2,145 | ||||||||||
| Interest Income | - | - | 11 | - | ||||||||||||
| Interest expense, net | (309 | ) | (47 | ) | (547 | ) | (92 | ) | ||||||||
| Total other (expense) income, net | (650 | ) | 3,055 | (3,490 | ) | 2,053 | ||||||||||
| Net loss | $ | (6,461 | ) | $ | 2,625 | (15,396 | ) | (780 | ) | |||||||
Comparison of the Three Months Ended September 30, 2024 and 2023
Research and Development Expenses
| Three Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Research and development expenses | $ | 3,093 | $ | - | $ | 3,093 | 100 | % | ||||||||
Research and development expenses increased by $3.1 million, or 100%, for the three months ended September 30, 2024, as compared to $0 for the three months ended September 30, 2023. The increase was driven by the upfront payment made and shares issued to AstraZeneca in the third quarter of 2024 in connection with the license agreement and issuance agreement, respectively.
General and Administrative Expenses
| Three Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| General and administrative expenses | $ | 2,718 | $ | 430 | $ | 2,288 | 532 | % | ||||||||
General and administrative expenses increased by $2.3 million, or 532%, to $2.7 million for the three months ended September 30, 2024, as compared to $0.4 million for the three months ended September 30, 2023. The increase was primarily driven by a $0.8 million increase in salaries and stock compensation expense, a $0.4 million increase in insurance related the amortization of D&O insurance, and $1.0 million in professional fees and other general and administrative expenses.
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Other Income (Expense), Net
| Three Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Other income (expense), net | $ | (341 | ) | $ | 3,102 | $ | (3,443 | ) | (111 | )% | ||||||
Other income (expense), net changed by $(3.4) million, or (111)%, to $0.3 million of expense for the three months ended September 30, 2024, as compared to $3.1 million of net income for the three months ended September 30, 2023. The decrease was primarily driven a $0.4 million contingent liability incurred in the third quarter of 2024, a change in the fair value of the Cizzle option of $1.0 million, a fair value change for the Vela option of $0.7 million and $1.5 million derecognition of the Cizzle deferred revenue in 2023.
For further details refer to Note 14, “Other income (expense), net,” in the unaudited financial statements as of September 30, 2024 and September 30, 2023 included elsewhere in this document.
Interest Expense, Net
| Three Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Interest expense, net | $ | (309 | ) | $ | (47 | ) | $ | (262 | ) | 557 | % | |||||
Interest expense, net increased by $(0.3) million, or 557%, to $0.3 million of interest expense for the three months ended September 30, 2024, as compared to $47,000 of interest expense for the three months ended September 30, 2023. The increase was driven by $0.1 million of interest expense related to the amortization of debt discount, $0.1 million of interest expense on the deferred commission payable to an advisor for fees related to the Merger and $0.1 million of interest expense for interest on convertible note and note payables for the three months ended September 30, 2024.
Comparison of the Nine Months Ended September 30, 2024 and 2023
Research and Development Expenses
| Nine Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Research and development expenses | $ | 3,246 | $ | - | $ | 3,246 | 100 | % | ||||||||
Research and development expenses increased by $3.2 million, or 100%, for the nine months ended September 30, 2024, as compared to $0 for the nine months ended September 30, 2023. The increase was driven by the upfront payment made to and shares issued to AstraZeneca in the third quarter of 2024 in connection with the license agreement and issuance agreement, respectively. The remaining increase was due to the development of certain co-crystals of AZD1656 (AZD1656 Co-Crystal PCT/IB2022/00075 - Patent Expires 02/09/2042) during the nine months ended September 30, 2024. There was no comparative activity during the nine months ended September 30, 2023.
General and Administrative Expenses
| Nine Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| General and administrative expenses | $ | 8,660 | $ | 2,833 | $ | 5,827 | 206 | % | ||||||||
General and administrative expenses increased by $5.8 million, or 206%, to $8.6 million for the nine months ended September 30, 2024, as compared to $2.8 million for the nine months ended September 30, 2023. The increase was primarily driven by a $2.9 million increase in salaries and stock compensation expense, $1.3 million increase in insurance related the amortization of D&O insurance, $0.3 million of advertising and marketing expenses, $0.2 million of board of directors’ fees, $0.2 million increases in rent expenses, a $0.5 million other general and administrative expenses, and $0.5 million increase in professional fees and travel expense.
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Other Income (Expense), Net
| Nine Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Other income (expense), net | $ | (2,954 | ) | $ | 2,145 | $ | (5,099 | ) | (238 | )% | ||||||
Other income (expense), net changed by $(5.1) million, or (238)%, to $2.9 million of net expense for the nine months ended September 30, 2024, as compared to $2.1 million of net income for the nine months ended September 30, 2023. The increase was primarily driven by an increase of $2.7 million related to the issuance of warrants in exchange for stockholders entering into lock-up agreements and a $0.4 million contingent liability incurred during the nine months ended September 30, 2024. The $2.1 million income for the nine months ended September 30, 2023 was driven by a change in the fair value of the Cizzle option of $1.3 million, a fair value change for the Vela option of $0.7 million and $1.5 million derecognition of the Cizzle deferred revenue in 2023, offset by a loss on the issuance of the Vela option of $1.0 million.
For further details refer to Note 14, “Other income (expense), net,” in the unaudited financial statements as of September 30, 2024 and September 30, 2023 included elsewhere in this document.
Interest Expense, Net
| Nine Months ended September 30, | Change | |||||||||||||||
| (Dollar amounts in thousands) | 2024 | 2023 | Amount | % | ||||||||||||
| Interest expense, net | $ | (547 | ) | $ | (92 | ) | $ | (455 | ) | 495 | % | |||||
Interest expense increased by $(0.5) million, or 495%, to $0.5 million of net expense for the nine months ended September 30, 2024, as compared to $92,000 of net expense for the nine months ended September 30, 2023. The change was driven by $0.1 million of interest expense related to the amortization of debt issuance costs, $0.2 million of interest expense on the deferred commission payable to an advisor for fees related to the Merger and $0.2 million of interest expense for interest on convertible note and note payables for the three months ended September 30, 2024.
Liquidity and Capital Resources
Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Since our inception, and in line with our growth strategy, we have prepared our financial statements assuming we will continue as a going concern. Since our inception, we have incurred net losses and experienced negative cash flows from operations. To date, our primary sources of capital have been through private placements of equity securities and convertible debt as well as PIPE financing as a result of the Merger. During the nine months ended September 30, 2024 and 2023, we had net losses of $15.4 million and $0.8 million, respectively. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development programs. We have determined that additional financing will be required to fund our operations for the next 12 months and our ability to continue as a going concern is dependent upon obtaining additional capital and financing.
Sources and Uses of Liquidity
Our primary uses of cash are to fund our operations as we continue to develop our product candidates. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations. Until such time as we can generate significant revenue from commercialization or licensing, we expect to finance our cash needs for ongoing research and development and business operations through public or private equity or debt financings or other capital sources, including strategic partnerships. However, we may be unable to raise additional funds or enter into such other arrangements, when needed, on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce research and development efforts. While the Company believes in the viability of its ability to raise additional funds, there can be no assurances to that effect.
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Cash Requirements
Our material cash requirements include the following contractual and other obligations.
Promissory Convertible Note
In March 2023, we issued an aggregate principal amount of $0.8 million convertible promissory note (the “March 2023 Convertible Note”) payable to an investor.
The March 2023 Convertible Note originally was to mature and become payable in full, 18 months from the date of the March 2023 Convertible Note. The March 2023 Convertible Note carries 20% interest per annum and interest is payable every six months from the date of the March 2023 Convertible Note until the maturity date. The March 2023 Convertible Note became convertible into Common Stock following the consummation of the Merger. On October 9, 2024, the Company executed an agreement to extend the maturity date for the March 2023 Convertible Note. The March 2023 Convertible Note’s maturity date is currently November 19, 2024.
For additional information regarding our convertible promissory note, see Note 7 of the notes to the unaudited financial statements.
Loans Payable
In May 2022, we entered into two loan agreements, with an aggregate principal amount of $0.2 million, with two lenders.
The loans payable were to mature and become payable in full two years from the date of the loan agreement and they bear no interest. On October 9, 2024, the Company executed agreements to extend the loan maturity date for each loan to December 19, 2024.
In August 2024, we entered into a senior secured promissory note with an aggregate principal amount of $2.7 million with one lender. The note matures and is payable in full, 12 months from the date of the note. The note bears interest at the rate of 12% per annum and interest is payable monthly in arrears as cash or accrued at the lender’s discretion from the date of the note until the maturity date.
For additional information regarding our loans payable note, see Note 8 of the notes to the unaudited financial statements.
Working Capital
We currently anticipate that cash required for working capital for the next 12 months is approximately $13.7 million, which includes deferred financing fees payable of $5.7 million, accrued expenses and other current liabilities of $3.2 million, a convertible promissory note, if not converted prior to maturity, of $0.8 million, notes payable of $0.2 million, and a note payable of $2.7 million. We do not anticipate being able to fund required capital expenditures for the next 12 months with cash and cash equivalents on hand as we have a history of limited cash on hand. We have historically been able to access funds through the issuance of our convertible notes and believe we can continue to obtain funding through debt and equity financing agreements as needed to meet cash requirements for the next 12 months.
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Cash Flows
The following table set forth our cash flows for the period indicated (in thousands):
| Nine Months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating Activities | $ | (5,869 | ) | $ | (2,922 | ) | ||
| Investing Activities | (128 | ) | 228 | |||||
| Financing Activities | 1,857 | 11,343 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (17 | ) | (5 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | $ | (4,157 | ) | $ | 8,644 | |||
Cash Flows Used in Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2024, was $5.9 million, resulting primarily from a net loss of $15.1 million, net a change in the fair value of warrants of $0.1 million, adjusted for non-cash items including $1.3 million of stock-based compensation, $1.3 million of amortization expense, $2.7 million expense on the issuance of warrants, $0.2 million interest expense of the deferred commission payable, $1.7 million non-cash share issuance and a $1.4 million cash inflow from operating assets and liabilities. The $2.3 million cash inflow from operating assets and liabilities is primarily due to a $2.5 million cash inflow from accounts payable and accrued expenses and other current liabilities and a $0.2 million cash outflow from prepaid expenses.
Net cash used in operating activities for the nine months ended September 30, 2023 was $2.9 million, resulting primarily from a net loss of $0.8 million, adjusted for non-cash items including a $1.5 million reduction of deferred income upon exercise of the Cizzle option, a $2.0 million gain on the change in fair value of the Vela and Cizzle options, a $0.2 million change from the reversal of a reserve for an uncollectible loan that was repaid in September 2023 and a $0.1 million gain on warrant remeasurement, partially offset by a $1.7 million cash inflow from net changes from operating assets and liabilities, a $1.0 million loss on issuance of the Vela option, a $0.4 million loss on change in fair value of convertible notes and a $0.1 million increase in interest expense on a convertible promissory note. The $0.2 million cash inflow from operating assets and liabilities is primarily due to a $1.6 million cash inflow from accrued expense and other current liabilities due to differences in the timing of disbursements and a $1.4 million cash outflow from prepaid expenses.
Cash Flows (Used in) Provided by Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2024, was $0.1 million, resulting from $0.5 million purchases of short term investments offset by $0.4 million in sales of short term investments.
Net cash provided by investing activities for the nine months ended September 30, 2023, was $0.2 million, resulting proceeds on the issuance of an option of $0.6 million offset by the issuance of a loan to a related party of $0.4 million.
Cash Flows Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2024, was $1.9 million, resulting from $1.6 million of proceeds on the issuance of the promissory note to Nirland, $0.1 million of proceeds the issuance of the April 2024 warrants and a $0.1 million bank overdraft.
Net cash provided by financing activities for the nine months ended September 30, 2023, was $11.3 million, resulting from the issuance of a convertible note payable of $1.4 million and from the issuance of a convertible promissory note payable of $0.7 million.
Contractual Obligations and Other Commitments
As of September 30, 2024, we had no non-cancellable commitments for the purchase of clinical materials, contract manufacturing, maintenance and committed funding which we expect to pay within one year.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
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Warrants
The Company determines the accounting classification of warrants as either liability or equity by first assessing whether the warrants meet liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Under ASC 480, a financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares must be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. If financial instruments, such as the warrants, are not required to be classified as liabilities under ASC 480, the Company assesses whether such instruments are indexed to the Company’s own stock under ASC 815-40. In order for an instrument to be considered indexed to an entity’s own stock, its settlement amount must always equal the difference between the following: (a) the fair value of a fixed number of the Company’s equity shares, and (b) a fixed monetary amount or a fixed amount of a debt instrument issued by the Company.
Equity classified warrants are recorded in stockholders’ deficit and liability classified warrants are recorded as liabilities within the Consolidated Balance Sheets. The liability classified warrants are remeasured each period with changes recorded in the Consolidated Statements of Operations and Comprehensive Loss.
As of September 30, 2024, the Company had outstanding warrants that are classified as a liability within the condensed consolidated balance sheets. The fair value of the warrant liability is determined each balance sheet date based on Level 2 inputs as such inputs are based on observable inputs other than quoted prices. The warrant liability is valued using a Black-Scholes model, with the most judgmental non-observable input being the volatility measure. Changes in the assumptions around the volatility can cause significant changes in the estimated fair value of the warrant liability. See Note 4 for further information on the Company’s financial liabilities carried at fair value.
During the nine months ended September 30, 2024, the Company issued warrants that met the criteria to be classified within stockholders’ deficit within the condensed consolidated balance sheets. The fair value of the warrants was determined by using a Black-Scholes model, with the most judgmental non-observable input being the volatility measure. Changes in the assumptions around the volatility could have caused significant changes in the estimated fair value of the warrants. See Note 14 for further information on the warrants classified within stockholders’ deficit.
Share Based Compensation
The Company accounts for share based compensation arrangements granted to employees in accordance with ASC 718, Compensation: Stock Compensation, by measuring the grant date fair value of the award and recognizing the resulting expense over the period during which the employee is required to perform service in exchange for the award. The grant date fair value of stock options is determined using a Black-Scholes model, with the most judgmental non-observable input being the volatility measure. Changes in the assumptions around the volatility can cause significant changes in the grant date fair value of stock options. The Company accounts for forfeitures when they occur.
Emerging Growth Company Status and Smaller Reporting Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that: (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Upon closing of the Merger, the surviving company remained an emerging growth company, as defined by the JOBS Act until the earliest of (i) the last day of the combined entity’s first fiscal year following the fifth anniversary of the completion of MURF’s initial public offering, (ii) the last day of the fiscal year in which the combined entity has total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which the combined entity is deemed to be a large accelerated filer, which means the market value of the combined entity’s common stock that is held by non-affiliates exceeds $700.0 million as of the prior December 31st or (iv) the date on which the combined entity has issued more than $1.0 billion in non-convertible debt securities during the prior three year period.
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In addition, Conduit is a smaller reporting company as defined in the Exchange Act. The Company may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) Conduit’s voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) Conduit’s annual revenue is less than $100.0 million during the most recently completed fiscal year and its voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of its second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide disclosure regarding quantitative and qualitative market risk.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2024 and for the comparison fiscal quarter ended September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the periods covered by this Quarterly Report, our disclosure controls and procedures were not effective, due to material weaknesses previously identified and not yet remediated as of the end of both such periods.
Changes in Internal Control over Financial Reporting
There have been no changes to in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
During the quarter ended September 30, 2024, the potential contingency related to the previously disclosed legal proceeding, became probable and reasonably estimable and as such, the Company accrued an estimated liability of $0.4 million in the accompanying financial statements. There were no other material developments to the legal proceeding previously disclosed, and other than such proceeding, we are not currently party to or aware of being subject to any other material legal proceedings. However, we may from time to time become a party to various legal proceedings arising in the ordinary course of our business, which could have a material adverse effect on our business, financial condition, or results of operations. Regardless of outcome, litigation could impact our business due to defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide disclosure regarding material changes to our previously disclosed risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 11, 2024, in connection with (i) a consulting agreement for services provided, and (ii) the agreements to extend the maturity dates of previously disclosed, outstanding notes payable, as well as the partial repayment of the principal of such notes payable, the Company issued, to unrelated and independent third parties, an aggregate of 1,988,086 shares of Common Stock in consideration for such agreement and the extensions and partial repayment of such notes payables. The issuance of all of such shares of Common Stock were without registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During
the three month period ended September 30, 2024, none of our executive officers or directors (as defined in Section 16 of the Securities
Exchange Act of 1934, as amended),
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
| * | Filed herewith. |
| § | In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto is deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CONDUIT PHARMACEUTICALS INC | ||
| November 14, 2024 | By: | /s/ David Tapolczay |
| Name: | Dr. David Tapolczay | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| November 14, 2024 | By: | /s/ James Bligh |
| Name: | James Bligh | |
| Title: | Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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