| 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 with the expectation of commercializing these products with life science companies. 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 (together, 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 (the “Common Stock”) 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. 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 September 30, 2024, and its results of operations for the three and nine months
ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024 and September 30, 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 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 September 30,
2024, the Company had an accumulated deficit of $ 26.7 34,000 4.2 11.9 2.8 5.9 2.9 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. However, 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. To date, management has executed
on the following plans (see Note 17). However, the plans executed to date do not alleviate
the substantial doubt about the Company’s ability to continue as a going concern:
● On October 23, 2024, we entered into a sales agreement, with A.G.P./Alliance Global Partners (“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 $ 3,556,586
● On October 28, 2024, the Company issued a promissory note (the “October 2024 Nirland Note”)
to Nirland Limited (“Nirland”) in the original principal amount of $ 600,000
12
● 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 $ 600,000
2,862,596
50 0.1048
600,000 4.21 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 licenses clinical assets from AstraZeneca. See Note 13. 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. Nasdaq
Listing Deficiencies Notice
of Delisting or Failure to Satisfy a Continued Listing Rule or Standard On
May 28, 2024, the Company received a notice it was expecting from the Listing Qualifications Department (the
“Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, due to the previously disclosed
resignation of Ms. Jennifer McNealey from the Company’s Board of Directors (the “Board”) and from all committees on
which she served, the Company, effective as of such date of resignation, was not in compliance with Nasdaq’s independent audit
committee requirements as set forth in Listing Rule 5605 as a result of the audit committee being comprised of only two independent directors.
The Company has until the earlier of its next annual meeting of stockholders or May 13, 2025 to evidence compliance. The notice has no immediate
effect on the listing of the Company’s securities on Nasdaq. The Company intends to regain compliance with the requirement that
the audit committee be comprised of at least three independent directors prior to the expiration of the cure period provided pursuant
to Nasdaq Listing Rule 5605(c)(4). Notice
of Failure to Satisfy a Continued Listing Rule On
August 12, 2024, the Company received a deficiency letter from the Staff of Nasdaq notifying the Company that for the last 30
consecutive business days the closing bid price for the Company’s Common Stock had closed below the minimum $ 1.00 In
accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company has been provided an initial
period of 180 calendar days, or until February 10, 2025 (the “Compliance Date”), to regain compliance with the Bid Price
Rule. If, at any time before the Compliance Date, the closing bid price for the Company’s Common Stock closes at $ 1.00 If
the Company does not regain compliance by February 10, 2025, the Company may be eligible for an additional 180 calendar day grace
period if it applies to transfer the listing of its Common Stock to The Nasdaq Capital Market. To qualify, the Company would be
required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing
standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and provide written notice of its
intention to cure the minimum bid price deficiency during the second compliance period. If the Nasdaq staff determines that the
Company will not be able to cure the deficiency, or if the Company is otherwise not eligible for such additional compliance period,
Nasdaq will provide notice that the Company’s Common Stock will be subject to delisting. The Company would have the right to
appeal a determination to delist its Common Stock, and the Common Stock would remain listed on The Nasdaq Global Market until the
appeal process is complete. There can be no assurance that, if the Company does appeal the delisting determination by the Staff to
The NASDAQ Listing Qualifications Panel, that such appeal would be successful. The
Company intends to monitor the closing bid price of its Common Stock and may, if appropriate, consider available options to regain compliance
with the Bid Price Rule, which could include effecting a reverse stock split. However, there can be no assurance that the Company will
be able to regain compliance with the Bid Price Rule. Market
Value of Publicly Held Shares Requirement On
August 15, 2024, the Company received a notice from the Staff notifying the Company that, based on the market value of publicly held
shares for the previous 30 consecutive business days, the listing of the Company’s common stock was not in compliance with Nasdaq
Listing Rule 5450(b)(2)(C) to maintain a minimum market value of publicly held shares of at least $ 15 In
accordance with Nasdaq rules, the Company has a period of 180 calendar days (or until February 11, 2025) to regain compliance with the
MVPHS Requirement. To regain compliance during this 180-day compliance period, the minimum market value of publicly held shares must
close at $ 15 In
the event that the Company does not regain compliance with the MVPHS Requirement prior to the expiration of the 180-day compliance period,
the Company will receive written notification from Nasdaq that the Company’s securities are subject to delisting. Alternatively,
the Company may apply to transfer the listing of its securities to The Nasdaq Capital Market, provided the Company will only be able
to transfer the listing to The Nasdaq Capital Market if the Company then meets the continued listing requirements on The Nasdaq Capital
Market. Market
Value of Listed Securities Requirement On
August 15, 2024, the Company received an additional deficiency letter from the Staff notifying the Company that,
based on the market value of listed securities for the previous 30 consecutive business days, the listing of the Company’s
Common Stock was not in compliance with Nasdaq Listing Rule 5450(b)(2)(A) to maintain a minimum market value of listed securities of
at least $ 50 In
accordance with Nasdaq rules, the Company has a period of 180 calendar days (or until February 11, 2025) to regain compliance with
the MVLS Requirement. To regain compliance during this 180-day compliance period, the minimum market value of listed securities must
close at $ 50 In
the event that the Company does not regain compliance with the MVLS Requirement prior to the expiration of the 180-day compliance period,
the Company will receive written notification from Nasdaq that the Company’s securities are subject to delisting. Alternatively,
the Company may transfer the listing of its securities to The Nasdaq Capital Market, provided the Company will only be able to transfer
the listing to The Nasdaq Capital Market if the Company then meets the continued listing requirements on The Nasdaq Capital Market. 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 September 30, 2024 of £ 0 0 85,000 108,000 10
250,000 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 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. 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. 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. 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. 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 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). |
