美国
证券交易委员会
华盛顿，特区。20549
表格
(马克 一)
截至季度结束
或者
对于从 到 的过渡期
佣金
文件号
（公司章程中指定的准确公司名称）
（住所的州或其他司法辖区 文件号码） |
（国税局雇主 (主要 执行人员之地址) | |
| （总部地址） | (邮政编码) |
| （注册人电话号码，包括区号） |
| N/A |
| （如果自上次报告以来已更改）股份、每单位包括一股面值为0.0001美元的A类普通股和一个权利，在初次业务组合完成后获得1/8股票。 |
根据法案第12(b)节注册的证券:
| 每一类别的名称 | 交易符号 | 在每个交易所注册的名称 | ||
| 股票 股票市场 有限责任公司 | ||||
| 股票 股票市场 有限责任公司 |
请勾选标记以指示注册者是否（1）在过去12个月内（或注册者需要提交这些报告的更短时间内）已提交证券交易所法案第13或15（d）节要求提交的所有报告，及 （2）是否已被提交要求过去90天的提交要求所制约。
通过勾选圆圈表明注册者是否在过去12个月内(或注册者需要提交这些文件的较短期限内)已经递交规章S-T(本章第232.405条)规定的每个交互式数据文件。
在勾选标记处表示注册人是大型加速提交人、加速提交人、非加速提交人、小型报告公司还是新兴增长公司。请参阅证券交易法120亿条规则中“大型加速提交人”、“加速提交人”、“小型报告公司”和“新兴增长公司”的定义。
| ☐ 大型加速文件提交者 | ☐ 加速归档者 |
| ☒
|
|
如果是新兴成长公司，请勾选，如果注册人已选择不使用根据交易所法案第13(a)条提供的任何新的或修改的财务会计准则的延长过渡期，请勾选。
请在复选框中放置标记，指示注册者是否是外壳公司（根据交易所法案规则12b-2定义）: 是 ☐ 否
截至2024年11月12日，共有 普通股股票，$ 发行和流通的注册人的面值。
药品交易所
表格 10-Q
目录
| 页面 | |||
| 第一部分-基本信息。 | |||
| 项目 1. | 基本报表。 | 1 | |
| 截至2024年9月30日（未经审计）和2023年12月31日（经过审计）的简单合并资产负债表。 | 1 | ||
| 截至2024年和2023年9月30日的三个月和九个月的未经审计简单合并经营及综合收益（损失）表。 | 2 | ||
| 截至2024年和2023年9月30日的三个月和九个月的未经审计简单合并股东权益变动表。 | 3 | ||
| 截至2024年和2023年9月30日的九个月的未经审计简单合并现金流量表。 | 6 | ||
| 未经审计的财务报表注释。 | 7 | ||
| 条款 2. | 管理财务状况和运营结果的讨论和分析。 | 27 | |
| 项目 3. | 关于市场风险的定量和定性披露。 | 35 | |
| 项目 4. | 控制和程序。 | 35 | |
| 第二部分-其他信息。 | |||
| 项目 1. | 法律诉讼。 | 36 | |
| Interest expense, net | 风险因素。 | 36 | |
| 项目 2. | 未经注册的股票出售和使用得到的收益。 | 36 | |
| 项目 3. | 违反优先证券的行为。 | 36 | |
| 项目 4. | 矿山安全披露。 | 36 | |
| 项目5。 | 其他信息。 | 36 | |
| 项目 6. | 附件。 | 37 | |
| 第三部分-签名。 | 38 | ||
| i |
关于前瞻性声明的警示性声明
根据2024年9月30日结束的季度期末编制的《10-Q表格季度报告》（以下简称“季度报告”）包含前瞻性声明。前瞻性声明既不是历史事实，也不是未来绩效的保证。相反，它们仅基于我们对业务未来、未来计划和策略、预测、预期事件和趋势、经济以及其他未来状况的当前信念、期望和假设。这些包括但不限于关于财务状况、管理层对未来业务运营的计划和目标的声明。这些声明可以通过它们不严格涉及历史或当前事实来识别。在本季度报告中使用时，诸如“预期”、“相信”、“继续”、“可能”、“估计”、“期望”、“打算”、“可能”、“可能”、“计划”、“可能”、“潜在”、“预测”、“项目”、“应该”、“努力”、“将要”等表达方式可能识别出前瞻性声明，但缺乏这些词并不意味着一项声明不是前瞻性的。可能会对我们的业务运营和财务表现和状况产生重大影响的因素包括但不限于，在本季度报告“项目1A.风险因素”下描述的风险和不确定性，在我们针对截至2023年12月31日的年度10-K表格的年度报告中描述的，以及在U.S.证券交易委员会（“SEC”）提交的“项目1A.风险因素”下描述的那些风险。您被敦促在评估前瞻性声明时认真考虑这些因素，并注意不要过度依赖前瞻性声明。前瞻性声明基于我们在提交本季度报告的日期获得的信息。除非法律要求，我们不打算公开更新或修订任何前瞻性声明以反映新信息或未来事件或其他情况。然而，您应该在查阅本季度报告日期之后我们将不时向SEC提交的报告中描述的风险因素。
此季度报告可能还包含与我们业务和行业相关的市场数据。这些市场数据包括基于多个假设的预测。如果这些假设被证明是不正确的，实际结果可能与基于这些假设的预测有所不同。因此，我们的市场可能无法按照这些数据预测的速度增长，甚至根本不增长。这些市场未能按照预期速度增长可能会损害我们的业务、营运结果、财务状况和我们普通股的市场价格。
| ii |
第一部分-财务信息
项目 1. 基本报表。
CONDUIT PHARMACEUTICALS INC.
简明合并资产负债表
（以千为单位，除股份和每股金额外）
| 2024年9月30日 | 2023年12月31日 | |||||||
| (未经查核) | (已核准) | |||||||
| 资产 | ||||||||
| 流动资产合计 | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 可上市投资 | ||||||||
| 预付费用及其他流动资产 | ||||||||
| 流动资产总额 | ||||||||
| 营运租赁权利资产，净额 | ||||||||
| 不动产、厂房及设备，扣除折旧及摊销后净值 | ||||||||
| 预付费用及其他长期资产 | ||||||||
| 总资产 | $ | $ | ||||||
| 负债及股东权益不足 | ||||||||
| 流动负债 | ||||||||
| 应付帐款 | $ | $ | ||||||
| 应计费用及其他流动负债 | ||||||||
| 银行透支 | ||||||||
| 可转换票据应付款 | ||||||||
| 营运租赁负债，流动部分 | ||||||||
| 应付贷款 | ||||||||
| 递延佣金应付 | ||||||||
| 流动负债总额 | ||||||||
| 衍生性权证负债 | ||||||||
| 非流动租赁负债 | ||||||||
| 递延佣金负债 | ||||||||
| 总负债 | ||||||||
| 承诺及或有事项（见第16注释） | ||||||||
| 股东赤字 | ||||||||
| 普通股，面额 $; 截至2024年9月30日及2023年12月31日，授权的股份数量， 和 2024年9月30日和2023年12月31日分别发行并流通的股份 | ||||||||
| 优先股，面额 $; 截至2024年9月30日和2023年12月31日，授权股份为； 截至2024年9月30日及2023年12月31日发行及流通的股份 | ||||||||
| 资本公积额额外增资 | ||||||||
| 累积亏损 | ( | ) | ( | ) | ||||
| 其他综合收益累积额 | ||||||||
| 股东权益的赤字为 | ( | ) | ( | ) | ||||
| 总负债及股东权益赤字 | $ | $ | ||||||
附注是这些简明综合财务报表的不可分割部分。
| 1 |
CONDUIT PHARMACEUTICALS INC.
简化 合并营运及全面收入（亏损）报表
(未经查核)
（以千为单位，除股份和每股金额外）
| 截至9月30日止三个月， | 截至9月30日止九个月， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 营运费用： | ||||||||||||||||
| 研究与发展费用 | $ | $ | ||||||||||||||
| 一般及行政费用 | ||||||||||||||||
| 营业费用总额 | ||||||||||||||||
| 营运亏损 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收入（费用）： | ||||||||||||||||
| 其他收入（费用），净额 | ( | ) | ( | ) | ||||||||||||
| 利息收入 | ||||||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他合计（费用）收益，净额 | ( | ) | ( | ) | ||||||||||||
| 净（损失）收入 | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 每股基本盈利/(净亏损) | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 每股稀释盈利/(净亏损) | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
| 基本加权平均普通股份流通量 | ||||||||||||||||
| 稀释加权平均普通股股份 | ||||||||||||||||
| 综合损益： | ||||||||||||||||
| 外币翻译调整 | ( | ) | ( | ) | ||||||||||||
| 总综合损益 | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||
附注是这些精简合并财务报表的一部分。
| 2 |
药品交易所
简明 合并股东权益变动表
(未经审计)
(以千为单位，除了分享金额)
| 普通股 | 额外的 实缴 | 累计 | 累计 其他 综合 | 总计 股东权益 | ||||||||||||||||||||
| 股份 | 金额 | 资本 | 赤字 | 净利润 | 赤字 | |||||||||||||||||||
| 2024年7月1日的余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 为应付票据发行普通股 | ||||||||||||||||||||||||
| 为许可权发行普通股 | ||||||||||||||||||||||||
| 基于股票的补偿 | - | |||||||||||||||||||||||
| 外币兑换调整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的结余 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 普通股 | 额外的 实缴 | 累计 | 累计 其他 综合 | 总计 股东权益 | ||||||||||||||||||||
| 股份 | 金额 | 资本 | 赤字 | 净利润 | 赤字 | |||||||||||||||||||
| 2024年1月1日的余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 为服务发行普通股 | ||||||||||||||||||||||||
| 在限制性股票单位归属时发行普通股 | ||||||||||||||||||||||||
| 为应付票据发行普通股 | ||||||||||||||||||||||||
| 为许可权发行普通股 | ||||||||||||||||||||||||
| 认股权证发行 | - | |||||||||||||||||||||||
| 基于股票的补偿 | - | |||||||||||||||||||||||
| 外币兑换调整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的结余 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 3 |
| 普通股 | 额外的 实缴 | 累计 | 累计 其他 综合 | 总计 股东权益 | ||||||||||||||||||||
| 股份 | 金额 | 资本 | 赤字 | 净利润 | 赤字 | |||||||||||||||||||
| 2023年7月1日的余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 合并的追溯适用 | ( | ) | ||||||||||||||||||||||
| 额外实收资本的重新分类 | - | ( | ) | |||||||||||||||||||||
| 调整后的余额，期初 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 额外实收资本的重新分类 | - | ( | ) | |||||||||||||||||||||
| 在交割日向Conduit Pharmaceuticals Limited可转换债券持有人发行Conduit Pharmaceuticals Inc.普通股（注3） | ||||||||||||||||||||||||
| 合并，扣除赎回（注3） | ( | ) | ( | ) | ||||||||||||||||||||
| 与PIPE融资相关的Conduit Pharmaceuticals Inc.普通股的发行（注3） | ||||||||||||||||||||||||
| 向Cizzle 生物技术控股PLC发行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 因与合并相关的服务而向顾问发行Conduit Pharmaceuticals Inc.普通股（注3） | ||||||||||||||||||||||||
| 因合并而减少的消费税负债（注3） | - | |||||||||||||||||||||||
| 资本贡献 - 关联方 | - | |||||||||||||||||||||||
| 基于股票的补偿 | - | |||||||||||||||||||||||
| 外币兑换调整 | - | |||||||||||||||||||||||
| 净利润 | - | |||||||||||||||||||||||
| 2023年9月30日的余额 | $ | ( | ) | ( | ) | |||||||||||||||||||
| 4 |
| 普通股 | 额外的 实缴 | 累计 | 累计 其他 综合 | 总计 股东权益 | ||||||||||||||||||||
| 股份 | 金额 | 资本 | 赤字 | 净利润 | 赤字 | |||||||||||||||||||
| 2023年1月1日的余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 并购的追溯性应用 | ( | ) | ||||||||||||||||||||||
| 额外拨入资本的再分类 | - | ( | ) | |||||||||||||||||||||
| 期初调整后余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| 额外拨入资本的再分类 | - | ( | ) | |||||||||||||||||||||
| 在收盘日期向Conduit Pharmaceuticals Limited可转换票据持有人发行Conduit Pharmaceuticals Inc.普通股（附注3） | ||||||||||||||||||||||||
| 合并，扣除赎回（附注3） | ( | ) | ( | ) | ||||||||||||||||||||
| 与PIPE融资相关的Conduit Pharmaceuticals Inc.普通股发行（附注3） | ||||||||||||||||||||||||
| 向Cizzle生物技术控股PLC发行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 向Merger（注3）直接相关服务的顾问发行Conduit Pharmaceuticals Inc.普通股 | ||||||||||||||||||||||||
| 减少与Merger（注3）相关的消费税责任 | - | |||||||||||||||||||||||
| 资本贡献-关联方 | - | |||||||||||||||||||||||
| 基于股票的补偿 | - | |||||||||||||||||||||||
| 外币兑换调整 | - | ( | ) | ( | ) | |||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | |||||||||||||||||||
| 2023年9月30日的余额 | $ | | ( | ) | ( | ) | ||||||||||||||||||
附注是这些精简合并财务报表的一部分。
| 5 |
药品交易所
简明综合现金流量表
(未经审计)
(以千为单位)
| 截至9月30日的9个月 | ||||||||
| 2024 | 2023 | |||||||
| 经营活动现金流量净额： | ||||||||
| 净亏损 | $ | ( | ) | $ | ( | ) | ||
| 调整为净损失到经营活动现金流量净使用： | ||||||||
| Cizzle期权公允价值变动收益 | ( | ) | ||||||
| Vela期权公允价值变动收益 | ( | ) | ||||||
| Vela期权发行损失 | ||||||||
| 关联方无法收回贷款准备金变动 | ( | ) | ||||||
| 可转换票据应付款公允价值变动损失 | ||||||||
| 关联方贷款免除损失 | ||||||||
| 未实现外汇汇率期货收益 | ( | ) | ||||||
| 未实现汇率损失 | ||||||||
| 发行warrants以进行锁定 | ||||||||
| 可转换本票的利息支出 | ||||||||
| 行使期权负债时非现金递延收入减少 | ( | ) | ||||||
| 衍生warrant负债公允价值变动收益 | ( | ) | ( | ) | ||||
| 基于股票的薪酬费用 | ||||||||
| 非现金利息费用 | ||||||||
| 营运租赁义务 | ( | ) | ||||||
| 融资的董事和高管保险的摊销 | ||||||||
| 债务发行成本的摊销 | ||||||||
| 折旧费用 | ||||||||
| 为服务和许可权而发行普通股 | ||||||||
| 运营资产和负债的变化： | ||||||||
| 预付费用及其他流动资产 | ( | ) | ( | ) | ||||
| 应付账款 | ||||||||
| 应计费用及其他负债 | ||||||||
| 经营活动产生的净现金流量 | ( | ) | ( | ) | ||||
| 投资活动中使用的现金流量: | ||||||||
| 发行贷款 - 关联方 | ( | ) | ||||||
| 购买物业和设备 | ( | ) | ||||||
| 短期投资的购买 | ( | ) | ||||||
| 短期投资出售所得 | ||||||||
| 期权发行所得 | ||||||||
| 投资活动产生的净现金流量 | ( | ) | ||||||
| 融资活动产生的现金流量： | ||||||||
| 合并及相关PIPE融资所得，扣除交易成本 | ||||||||
| 应付票据发行的净收益 | ||||||||
| 资本投入 - 相关方 | ||||||||
| 可转换应付票据的发行所得，以公允价值计 | ||||||||
| 可转换债权票据支付的利息，按成本计价 | ( | ) | ||||||
| 锁定期内发行warrants的收益 | ||||||||
| 银行透支 | ||||||||
| 可转换债权票据发行的收益，按成本计价 | ||||||||
| 融资活动提供的净现金流量 | ||||||||
| 在汇率变动影响之前，现金及现金等价物的净变化 | ( | ) | ||||||
| 汇率变动对现金及现金等价物的影响 | ( | ) | ( | ) | ||||
| 现金净变动 | ( | ) | ||||||
| 期初现金及现金等价物余额 | ||||||||
| 期末现金及现金等价物 | $ | $ | ||||||
| 补充现金流量信息： | ||||||||
| 支付的利息现金 | $ | $ | ||||||
| 非现金投融资活动 | ||||||||
| 在交换运营租赁负债获得的使用权资产 | $ | $ | ||||||
| 因发行warrants锁定而产生的应收款 | ||||||||
| 因发行应付票据而产生的应收款 | ||||||||
| 在行使期权时，Cizzle 生物技术控股有限公司获得 Conduit Pharmaceuticals Inc. 的普通股。 | ||||||||
| 在合并过程中，将 Conduit Pharmaceuticals Limited 的可转换票据兑换为 Conduit Pharmaceuticals Inc. 的普通股。 | ||||||||
| 应计交易费用 | ||||||||
| 非现金董事和高级职员的保险。 | ||||||||
| 将递延发行费用重新分类为减少额外实收资本。 | ||||||||
| 在合并中承担的净负债。 | ||||||||
| 在 PIPE 融资和合并完成过程中发行的认股权证负债的初始价值。 | ||||||||
附注是这些精简合并财务报表的一部分。
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药品交易所
简明合并财务报表附注
1. 业务性质、财务报表基础及重要会计政策摘要
Conduit 药品公司，成立于德拉瓦州（“Conduit”或“公司”），是一家临床阶段的专业生物药品公司，旨在促进临床资产的开发和商业化。公司开发了一种独特的业务模式，使其能够作为一个渠道，帮助药品公司将临床资产转化为新治疗方案，以满足患者需求。我们的创新方法解决了未满足的医疗需求，并通过尖端的固体技术延长我们的现有资产的知识产权，期待与生命科学公司共同商业化这些产品。
合并协议
2023年9月22日（"交割日期"），Conduit Pharmaceuticals Limited（"旧Conduit"），Murphy Canyon Acquisition Corp（"MURF"）和Conduit Merger Sub, Inc.（一家开曼群岛豁免公司，MURF的全资子公司）之间的合并交易已完成（"合并"，见注释3），根据2022年11月8日的初始合并协议及2023年1月27日和2023年5月11日对合并协议的后续修订（统称为"合并协议"）。根据合并协议的条款，在交割日期，（i）合并子公司与旧Conduit合并，旧Conduit作为MURF的全资子公司存续，(ii) MURF将其名称从Murphy Canyon Acquisition Corp.更改为Conduit Pharmaceuticals Inc.。公司的普通股（"普通股"）于2023年9月25日在纳斯达克全球市场以“CDT”为标的开始交易，公司warrants于2023年9月25日在纳斯达克资本市场以“CDTTW”为标的开始交易。
该合并交易按照美国通用会计原则的反向再资本化处理。根据反向再资本化方法，MURF被视为财务报告目的上的被收购公司，而会计收购方被假定为以股票发行MURF的净资产，没有商誉或其他无形资产记录。
表述基础
随附的未经审计的简明合并基本报表是由公司根据美国通用会计准则（U.S. GAAP）编制的，符合财务会计准则委员会（“FASB”）的规定，以及美国证券交易委员会（“SEC”）的规则和法规。在这些随附的未经审计的简明合并基本报表的附注中提到的FASB发布的美国通用会计准则是指FASB会计标准公告（“ASC”）和会计标准更新（“ASUs”）。
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这份季度报告包括的附表未经审计的简明综合基本报表是根据美国通用会计准则编制的，并在公司意见下进行了所有调整，仅包括必要的正常循环调整，以便公平陈述截至2024年9月30日的财务状况，以及截至2024年9月30日与2023年的三个月和九个月的运营结果，以及截至2024年9月30日与2023年9月30日的九个月现金流量。2023年12月31日的简明综合资产负债表是从年度审计基本报表导出的，但不包括年度基本报表中的所有附注披露。
合并原则
附带的未经审计的简明合并基本报表包括本公司及其全资子公司Conduit Uk Management Ltd.（英国）和Conduit Pharmaceuticals, Ltd.（开曼群岛）的账户。此处所提到的“公司”包括Conduit Pharmaceuticals Inc.及其子公司。所有的公司间余额及交易在合并中已被消除。
流动性和继续经营
根据ASC 205-40，持续经营，公司评估了是否存在在财务报表发布日期后一年内，并综合考虑，增加公司持续经营能力的重大怀疑的条件和事件。自公司成立以来，公司产生了重大亏损，截至2024年9月30日，公司累计亏损为$
公司的预期是在未来产生营运亏损和负的经营现金流，并需要额外资金支持其当前的业务计划。管理层为缓解引发对其存在实质疑义的条件而制定的计划，包括通过公开或私人股权或债务融资获得额外的现金资源。然而，并不能保证在需要时将有这样的资金可用或具备可接受的条件。如果在需要时无法获得额外的资金，公司将需要延迟或削减其业务和研发活动，直至获得此类资金，所有这些都可能对公司及其财务状况产生重大不利影响。
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截至目前，管理层已执行以下计划（见注释17）。然而，至今执行的计划并未减轻对公司持续经营能力的重大怀疑：
| ● | 2024年10月23日，我们与Global Partners（“AGP”）签订了一份销售协议，涉及我们的普通股的股份。根据销售协议的条款，我们可以提供并出售总共高达$的普通股， | |
| ● | 2024年10月28日，公司向Nirland Limited（“Nirland”）发行了一份期票（“2024年10月期票”），原始本金为$，用以交换同等金额的资金。2024年10月期票的利率为每年%，应半年结息支付，于2025年10月31日到期。 | |
| ● | 2024年10月29日，公司与A.G.P.签署了一份桥接贷款协议（“A.G.P.桥接协议”），根据该协议，A.G.P.向公司提供了不超过$的预付款（“预付款”）。 |
这些基本报表是在假定公司将继续作为持续经营单位的基础上编制的，并不包括调整以反映资产的回收性和分类，或可能由于这种不确定性结果可能导致的责任金额和分类的影响。
其他 风险和不确定性
公司面临着药品行业普遍存在的风险，包括但不限于与竞争对手产品的商业化相关的不确定性、监管批准、对关键产品、关键客户和供应商的依赖，以及知识产权的保护。目前正在开发的临床资产将需要进行重大额外的研究和开发工作，包括广泛的临床前和临床测试以及商业化前的监管批准。这些工作将需要大量的额外资本、充足的人员、基础设施和广泛的合规和报告能力。即使公司的努力取得成功，公司何时能够从版税或产品销售中获得显著的营业收入仍然存在不确定性。
公司从阿斯利康获得临床资产的许可。请参见注释13。如果发生违反或其他终止此类协议的情况，可能会对公司的业务、财务状况、运营结果和前景产生重大不利影响。
纳斯达克 上市违规
摘牌公告或未能满足持续上市规则或标准
在 2024年5月28日，公司收到了来自纳斯达克证券市场有限责任公司（“纳斯达克”）上市资格部门（“工作人员”）的通知。该通知告知公司，由于此前披露的詹妮弗·麦克尼利（Ms. Jennifer McNealey）辞去公司董事会（“董事会”）以及她所服务的所有委员会的职务，自其辞职之日起，公司未能符合纳斯达克根据上市规则5605所规定的独立审计委员会要求，因为审计委员会仅由两名独立董事组成。公司必须在下一个股东年度会议之前或者在2025年5月13日之前提供合规证明。该通知对公司在纳斯达克的证券上市没有即时效果。公司打算在纳斯达克上市规则5605(c)(4)提供的补救期到期之前，重新符合审计委员会必须由至少三名独立董事组成的要求。
未能满足持续上市规则的通知
2024年8月12日，公司收到了纳斯达克工作人员的一封缺陷通知函，通知公司最近30个连续的工作日，公司普通股的收盘买盘价格低于最低$的情况。每股要求，根据纳斯达克的上市规则5450(a)(1)（“买盘价格规则”）在纳斯达克全球市场上继续列入的最低要求。 缺陷函并不会立即导致公司的普通股从纳斯达克全球市场摘牌。
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根据纳斯达克上市规则5810(c)(3)(A)（“合规期限规则”），公司获得了180天的初始合规期，直至2025年2月10日（“合规日期”），以恢复对买盘价格规则的合规。如果在合规日期之前的任何时间，公司普通股的收盘买盘价格达到或超过$ 或更多，且连续满足至少10个工作日的合规期限规则要求，工作人员将以书面通知公司其符合买盘价格规则，除非工作人员根据纳斯达克上市规则5810(c)(3)(H)行使其延长此10天期限的权利。
如果公司在2025年2月10日前未恢复合规，且申请将其普通股上市从纳斯达克资本市场转至纳斯达克，公司可能有资格获得额外的180天日历宽限期。为了符合资格，公司需要满足其公开持有股票的市值和所有其他纳斯达克资本市场的初始上市标准，但无需符合最低买盘价格要求，并且在第二合规期间提供关于打算治愈最低买盘价格缺陷的书面通知。如果纳斯达克工作人员确定公司无法治愈缺陷，或者公司不符合获得此类额外合规期的资格，纳斯达克将通知公司的普通股可能会被摘牌。公司有权对决定将其普通股摘牌提出上诉，且普通股将继续在纳斯达克全球市场上市，直至上诉流程完成。不能保证如果公司对工作人员对纳斯达克上市资格小组的摘牌决定提出上诉，该上诉将会成功。
公司打算监控其普通股的收盘买盘价格，并且在适当情况下，可能会考虑可用的期权以重新符合买盘价格规则，这可能包括进行反向拆股。然而，不能保证公司将能够重新符合买盘价格规则。
所有板块 公开持股市值要求
在2024年8月15日，公司收到来自工作人员的通知，告知公司基于前30个连续业务日的公开持股市场价值，公司普通股的上市不符合纳斯达克上市规则5450(b)(2)(C)，即维持至少$的公开持股最低市场价值。百万（“公开持股最低市场价值要求”）。
根据纳斯达克规定，公司有180个日历日的时间（或直至2025年2月11日）恢复MVPHS要求的合规性。在这180天的合规期间内，公开持有股份的最低市值必须连续关闭至$ 万美元或更高，持续至少10个连续工作日。此通知不会立即影响公司证券在纳斯达克的上市。
如果公司在180天的合规期届满前未恢复符合MVPHS要求，则纳斯达克将向公司发出书面通知，称公司的证券将面临退市。或者，公司可以申请将其证券上市转至纳斯达克资本市场，前提是公司只有在符合纳斯达克资本市场的持续上市要求时，才能转移上市至纳斯达克资本市场。
市场 上市证券价值要求
2024年8月15日，公司收到了一封来自工作人员的额外缺陷通知函，通知公司，根据前30个连续工作日内所列证券的市场价值，公司普通股的上市未符合纳斯达克上市规则5450(b)(2)(A)的最低市场价值要求，至少为$
根据纳斯达克规则，公司有180天的时间（或直到2025年2月11日）来重新获得符合MVLS要求的资格。为了在这180天的合规期内重新获得合规，上市证券的最低市场价值必须
如果公司在180天的合规期满前未恢复MVLS要求的合规性，公司将收到纳斯达克的书面通知，公司的证券将被实施摘牌。另外，公司也可以将其证券在纳斯达克资本市场上市，前提是公司只有在满足纳斯达克资本市场上的持续上市要求时才能转让上市。
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重要会计政策摘要
现金及现金等价物
现金
现金等价物主要由英国和瑞士的主要金融机构维持.该公司认为
现金等价物应为短期、高流动性的投资，(a) 可轻松兑换成已知金额的现金，(b) 可以交易
并出于现金管理目的而持有，并且 (c) 购买时的原始到期日为三个月或更短。该公司的
持有非物质现金余额的瑞士银行账户没有保险，公司的英国银行账户有余额
2024 年 9 月 30 日为英镑
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.
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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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