| Nature of the Business, Basis of Presentation and Summary of Significant Accounting Policies | 1.
Nature of the Business, Basis of Presentation and Summary of Significant Accounting Policies Conduit
Pharmaceuticals Inc., a Delaware corporation (“Conduit” or the “Company”), is a clinical-stage specialty biopharmaceutical
company that was formed to facilitate the development and commercialization of clinical assets. The Company 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 needs and lengthens the intellectual
property for our existing assets through cutting-edge solid-form technology and then commercializing these products with life science
companies. The
Company’s current development pipeline through a relationship with St George Steet Capital (“St George Street”), a
related party (see Note 12), includes a glucokinase activator, which is Phase II ready in autoimmune diseases including uveitis, Hashimoto’s
Thyroiditis, preterm labor, and renal transplant rejection as well as the Company’s proprietary, patent pending, solid-form compound
targeting a wide range of autoimmune diseases. The Company’s development pipeline also includes a potent, irreversible inhibitor
of human Myeloperoxidase (MPO) that has the potential to treat idiopathic male infertility. Merger
Agreement On
September 22, 2023 (the “Closing Date”), a merger transaction between Conduit Pharmaceuticals Limited (“Old Conduit”),
Murphy Canyon Acquisition Corp (“MURF”) and Conduit Merger Sub, Inc., a Cayman Islands exempted company and a wholly owned
subsidiary of MURF (“Merger Sub”), was completed (the “Merger”, see Note 3) pursuant to the initial merger agreement
dated November 8, 2022 and subsequent amendments to the merger agreement dated January 27, 2023 and May 11, 2023 (the “Merger Agreement”).
Pursuant to the terms of the Merger Agreement, on the Closing Date, (i) Merger Sub merged with and into Old Conduit, with Old Conduit
surviving the merger as a wholly-owned subsidiary of MURF, and (ii) MURF changed its name from Murphy Canyon Acquisition Corp. to Conduit
Pharmaceuticals Inc. The common stock of the Company commenced trading on The Nasdaq Global Market under the symbol “CDT”
on September 25, 2023, and the Company’s warrants commenced trading on The Nasdaq Capital Market under the symbol “CDTTW”
on September 25, 2023. The
Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). Under the reverse recapitalization method, MURF was treated as the acquired company for financial
reporting purposes, and the accounting acquirer was assumed to have issued shares of stock for the net assets of MURF, with no goodwill
or other intangible assets recorded. This determination is primarily based on the following predominant factors: (i) post-closing, the
Old Conduit stockholders have a majority of the voting power of the combined company and ability to elect the members of the combined
company’s Board of Directors (“Board”); (ii) the on-going operations post-merger will comprise those of Old Conduit;
and (iii) all of the senior management of the combined company, except for the Chief Financial Officer, will be members of the management
of Old Conduit. As a result of the Merger, MURF was renamed “Conduit Pharmaceuticals Inc.” The boards of directors of MURF
and Conduit each approved the Merger. Basis
of Presentation The
accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with U.S. GAAP as
set forth by the Financial Accounting Standards Board (“FASB”) and pursuant to the rules and regulations of the United States
Securities and Exchange Commission (“SEC”). References to U.S. GAAP issued by the FASB in these notes to the accompanying
unaudited condensed consolidated financial statements are to the FASB Accounting Standards Codifications (“ASC”) and Accounting
Standards Update (“ASUs”). The
accompanying interim unaudited condensed consolidated financial statements included in this quarterly report have been prepared in
accordance with U.S. GAAP and, in the opinion of the Company, contain all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of its financial position as of March 31, 2024, and its results of operations for the
three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and March 31, 2023. The condensed consolidated
balance sheet at December 31, 2023, was derived from the audited annual financial statements but does not contain all of the
footnote disclosures from the annual financial statements. Principles
of Consolidation The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries
Conduit UK Management Ltd. (United Kingdom) and Conduit Pharmaceuticals, Ltd. (Cayman Islands). As used herein, references to the “Company”
include references to Conduit Pharmaceuticals Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation. Liquidity
and Going Concern In
accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there
are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as
a going concern within one year after the date the financial statements are issued. Since its inception, the Company has generated significant
losses and as of March 31, 2024, the Company had an accumulated deficit of $ 14.9 3.6 1.7 2.4 2.0 The
Company completed the Merger that also included a private placement of an aggregate amount of $ 20.0 8.5 5 500,000 1,000,000 9.5 5.0 5.0 The
Company’s expectation is to generate operating losses and negative operating cash flows in the future and will need additional
funding to support its current business plan. Management’s plans to alleviate the conditions that raise substantial doubt include
the pursuit of additional cash resources through public or private equity or debt financings. There is no assurance that such funding will be available when needed or on acceptable terms. If additional funding
is not available when required, the Company would need to delay or curtail its operations and its research and development activities
until such funding is received, all of which could have a material adverse effect on the Company and its financial condition. These
financial statements have been prepared assuming the Company will continue as a going concern and do not include adjustments to reflect
the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result
from the outcome of this uncertainty. Other
Risks and Uncertainties The
Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to
commercialization of competitor products, regulatory approvals, dependence on key products, dependence on key customers and suppliers,
and protection of intellectual property rights. Clinical assets currently under development will require significant additional research
and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These
efforts will require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance and reporting
capabilities. Even if the Company’s efforts are successful, it is uncertain when, if ever, the Company will realize significant
revenue from royalties or product sales. The
Company relies on agreements with related parties and third parties for the purpose of developing and licensing clinical assets from
St George Street and, in turn, St George Street licenses such assets from AstraZeneca. See Note 12. If there is a breach or other termination
of such agreements, there could be a material adverse effect on the Company’s business, financial condition, operating results,
and prospects. In addition, the Company is not a party to the license agreements between St George Street and AstraZeneca. The termination
of such third-party agreements could have a material impact on or materially disrupt operations. While the Company holds its own intellectual
property outside of the scope of these agreements, termination of such agreements could adversely affect the business and ability to
commercialize our clinical assets. Summary
of Significant Accounting Policies Cash
and Cash Equivalents Cash
and cash equivalents are primarily maintained with major financial institutions in the United Kingdom and Switzerland. The Company considers
cash equivalents to be short-term, highly liquid investments that (a) are readily convertible into known amounts of cash, (b) are traded
and held for cash management purposes, and (c) have original maturities of three months or less at the time of purchase. The Company’s
Switzerland bank accounts, which hold immaterial cash balances, are uninsured, and the Company’s U.K. bank account, with a balance
at March 31, 2024 of approximately £ 78,585 (or approximately $ 99,266 )
does not exceed the country’s deposit limit of £ 85,000
(approximately $ 108,000 ).
The Company’s U.S. depository bank participates in the Demand Deposit Marketplace program, insuring deposits up to $ 10
million by sweeping amounts in excess of the
$ 250,000 deposit
insurance limit among participating banks. The Company has not experienced any losses on any accounts through the three months ended
March 31, 2024. 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 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. 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. As
of March 31, 2024, the Company has one financial liability, a warrant liability for which the fair value is determined based on Level
2 inputs as such inputs are valued based on observable inputs other than quoted prices included in Level 1, such as quoted prices for
either similar instrument in active markets. See Note 4 for further information on the Company’s financial liabilities carried
at fair value. 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. Funding expenses consist primarily of costs incurred in connection with the Company providing funding to St George Street to carry out its research and development activities. SGSC holds all licenses to conduct clinical research through
third party pharmaceutical companies. 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. General
and Administrative Expenses General
and administrative expenses consist primarily of salaries and related costs for personnel in executive management, finance, corporate
and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent
and corporate matters; professional fees for accounting, auditing, tax, and administrative consulting services; insurance costs;
administrative travel expenses and other operating costs. Income
Taxes ASC
Topic 740, Income Taxes 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. Earnings/(Net
Loss) per Share Attributable to Common Stockholders The
Company calculates basic and diluted earnings/(net loss) per share under ASC Topic 260, Earnings Per Share 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.
The Company determined that the warrants should not be classified as liabilities under ASC 480. 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. 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). |
