CDT Equity Inc. 10-Q

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 unaudited condensed consolidated 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, 2025 that was filed with the SEC on April 15, 2026. 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. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated. Overview On September 22, 2023, a merger transaction (the “Business Combination”) 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 pursuant to the Agreement and Plan of Merger, dated November 8, 2022, as amended, (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, at the closing, (i) Merger Sub merged with and into Old Conduit, with Old Conduit surviving the Business Combination as a wholly-owned subsidiary of MURF, and (ii) MURF changed its name from Murphy Canyon Acquisition Corp. to Conduit Pharmaceuticals Inc. Effective August 5, 2025, the Company changed its name from Conduit Pharmaceuticals Inc. to CDT Equity Inc. Our change to CDT Equity Inc. reflects the evolution of our strategy as a data-driven biotech development company focused on identifying, enhancing, and advancing high-potential therapeutic assets through scientific innovation and strategic partnerships. CDT Equity is a data-driven pharmaceutical development company, focused on identifying, enhancing, and advancing high-potential therapeutic assets through scientific innovation and strategic partnerships. The Company has evolved into a broader, more agile platform that leverages artificial intelligence, solid-form chemistry, and efficient asset repositioning to accelerate the development of novel treatments. CDT Equity’s strategy is centered on unlocking the untapped value of clinical-stage compounds, particularly those deprioritized by larger pharmaceutical companies with strong, supporting Phase I safety data. Through advanced co-crystallization and solid-form technologies developed at our Cambridge facilities, the Company improves drug properties and extends patent life by up to 20 years. In partnership with Sarborg Limited (“Sarborg”), the Company also applies AI-powered signature analysis to rapidly identify new therapeutic applications and combinations for existing compounds. Our pipeline includes candidates that target autoimmune disorders, as well as idiopathic male infertility, oncology, dermatology, rare disease and animal health. Ongoing in vitro and in vivo studies, guided by AI insights, are designed to support licensing and commercialization partnerships. The Company will seek an exit through third-party license deals following successful in vitro and in vivo pre-clinical trials, by entering into agreements with third-parties to pursue further development, FDA approval, commercialization and marketing of the Company’s assets. On December 12, 2024, Sarborg and the Company entered into an agreement (the “Sarborg Agreement”) designed to address longstanding challenges in the pharmaceutical sector, in particular by reducing human error in critical decision-making processes in both clinical development and asset identification. By integrating Sarborg’s signature intelligence technology, the Company aims to enhance efficiency, lower costs, and accelerate timelines by minimizing human intervention, ultimately optimizing the drug development cycle and giving the Company a competitive advantage in the sector. Through this relationship, the Company will gain access to cutting-edge predictive models and dashboards, enabling the Company to evaluate drug candidates, streamline clinical trials, and optimize asset management with real-time data. These tools will drive faster, more accurate decisions, improving efficiency and reducing costs. By leveraging these insights, the Company can differentiate itself in a competitive sector and gain unique data-driven insights that position the Company for success across both its current and future asset portfolio. Our collaboration with Sarborg enables us to apply proprietary algorithms utilizing AI-powered disease mapping to identify novel re-purposing opportunities across a database of more than 3,000 disease signatures. Sarborg’s insights have directly informed two new combination patent filings, strengthening our intellectual property portfolio. In addition, the Company has initiated pre-clinical in-vitro models to explore new indications, guided by AI-insights without human intervention. We will seek an exit through third-party license deals following successful in vitro and in vivo pre-clinical trials, entering into agreements with third parties to pursue further development, FDA approval, commercialization, and marketing of our assets. We continue to evaluate novel artificial intelligence and cybernetics approaches to drug re-purposing, intellectual property, and asset selection to give the Company a competitive advantage. Sarborg is considered to be a related party of CDT, as Dr. Andrew Regan, Chief Executive Officer of CDT, also sits on the board of directors of Sarborg, and Chele Chiavacci Farley, a director of CDT is also a shareholder of Sarborg. 24 During the first quarter of 2026, the Company and Sarborg furthered our partnership through a strategic investment by the Company in Sarborg. See Note 4, Note 13 and Note 16 for further detail. A further partnership with Manoira enables CDT Equity to expand the scope of its drug portfolio into the animal health market in a cost-efficient manner. This collaboration allows us to accelerate the understanding of the mechanism of action, safety, and potential efficacy of its portfolio across multiple species, while retaining 100% ownership of all data and intellectual property generated relating to human applications. This is expected to enhance the core human therapeutic pipeline but also opens potential new revenue streams in the high-growth veterinary market. Repositioning the Company enables us to explore multiple opportunities in the healthcare, biotech and broader technology innovation. Operating with a lean disease-agnostic model, the Company prioritizes speed, adaptability, and capital efficiency. We avoid the cost burden of late-stage clinical trials, focusing instead on high-leverage development strategies. Led by highly experienced executives: Dr. Andrew Regan, CEO and James Bligh, CFO; our management team includes active senior executives who also have an extensive understanding of the pharmaceutical market, supporting our strategy of developing clinical assets in a cost-efficient manner focused on therapeutic efficacy. Furthermore, CDT Equity is well positioned to pursue, and intends to pursue, additional relationships and/or partnerships with third parties to license assets which are currently deprioritized. We plan to focus our efforts on developing clinical assets to address disorders that impact large populations where there is no present treatment or the existing treatments carry significant unwanted side effects. Reverse Stock Split The Company effected four reverse stock splits of its common stock pursuant to amendments to the Company’s Second Amended and Restated Certificate of Incorporation that were previously approved by the Company’s stockholders and authorized by the Board of Directors. The reverse stock splits were implemented as follows: a 1-for-100 reverse stock split effective January 24, 2025, a 1-for-15 reverse stock split effective May 19, 2025, a 1-for-8 reverse stock split effective October 10, 2025 and a 1-for-25 reverse stock split effective March 26, 2026. No fractional shares were issued in connection with the reverse stock splits. Stockholders who otherwise would have been entitled to receive fractional shares received cash in lieu of fractional shares based on the applicable post-split trading price of the Company’s common stock. All references to numbers of shares of common stock and per-share information in this Interim Report on Form 10-Q have been adjusted retroactively, as appropriate, to reflect the reverse stock split. Reverse stock splits were applied sequentially at their respective effective dates (resulting in a cumulative effect equivalent to an approximate 1-for-300,000 reverse stock split). The reverse stock splits automatically combined the Company’s issued and outstanding shares of common stock at the applicable ratios without affecting the number of authorized shares of common stock or the par value of $0.0001 per share. No fractional shares were issued in connection with the reverse stock splits. Stockholders who otherwise would have been entitled to receive fractional shares received cash in lieu of fractional shares based on the applicable post-split trading price of the Company’s common stock. As a result of the aggregate of the reverse stock splits, every 300,000 shares of our common stock issued or outstanding were automatically reclassified into and became one new share of common stock. The number of our issued and outstanding shares of common stock, when accounting for the reverse stock splits, was 4,722,457 and 92,140 shares as of March 31, 2026 and December 31, 2025, respectively. In accordance with ASC 260, Earnings Per Share, all historical share and per-share amounts presented in the accompanying consolidated financial statements and related notes have been retroactively adjusted to reflect the effect of the reverse stock splits for all periods presented. Accordingly, all references to common stock share amounts and per-share information in this Interim Report on Form 10-Q have been retroactively adjusted, as applicable, to reflect the reverse stock splits. 25 Key Components of Results of Operations Operating Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for 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 research and development expenses. We expense research and development costs with no alternative future use 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 $0.8 million and $0.9 million on research and development activities during the three months ended March 31, 2026 and March 31, 2025, respectively. Our research and development activities have been focused on developing co-crystals of AZD1656 to increase patent life as well as purchasing technology to help us determine the feasibility that AZD1656, and potentially other de-prioritized assets, may reach commercialization. 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. Following our equity method investment in Sarborg, we note that revenue generated by Sarborg is not consolidated and the loss upon our equity method investment in Sarborg is discussed below. 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. 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. 26 Other Income (Expenses) Other income (expenses), net Other income (expenses), net consists of change in the fair value of options, change in fair value of convertible notes, change in fair value of digital assets and expense incurred upon the issuance of warrants during the three months ended March 31, 2026. Loss on equity method investment Loss on equity method investment consists of our pro rata portion of losses incurred through our 20% equity method investment in Sarborg. See Note 4, Note 13 and Note 16 for further discussion of our relationship with Sarborg. Interest expense, net Interest expense, net consists primarily of interest expense on convertible notes, 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 sets forth our results of operations for the periods indicated: Three Months Ended March 31, (Dollar amounts in thousands) 2026 2025 Operating expenses: Research and development expenses $ 778 $ 916 General and administrative expenses 2,878 2,700 Total operating costs and expenses 3,656 3,616 Operating loss (3,656 ) (3,616 ) Other expenses: Other expense, net (290 ) (969 ) Loss on equity method investment (68 ) - Interest income - 8 Interest expense, net (49 ) (176 ) Total other expense, net (407 ) (1,137 ) Net loss $ (4,063 ) $ (4,753 ) Comparison of the Three Months Ended March 31, 2026 and 2025 Research and Development Expenses Three Months ended March 31, Change (Dollar amounts in thousands) 2026 2025 Amount % Research and development expenses $ 778 $ 916 $ (138 ) (15 )% Research and development expenses decreased by $0.1 million, or 15%, to $0.8 million for the three months ended March 31, 2026, as compared to $0.9 million for the three months ended March 31, 2025. The decrease was primarily attributable to a $0.2 million decrease in expense related to our transactions with Sarborg and a $0.1 million decrease related to Charles River activity. The decrease was partially offset by an increase of $0.1 million related to the Thesprogen agreement entered into during 2026 and an increase of $48 thousand related to a third-party consultant’s research and development activity. General and Administrative Expenses Three Months ended March 31, Change (Dollar amounts in thousands) 2026 2025 Amount % General and administrative expenses $ 2,878 $ 2,700 $ 178 7 % General and administrative expenses increased by $0.2 million, or 7%, to $2.9 million for the three months ended March 31, 2026, compared to $2.7 million for the three months ended March 31, 2025. The increase was primarily driven by a $0.2 million increase in audit and accounting fees and a $0.2 million increase in travel expense, partially offset by a $0.2 million decrease in salaries and stock based compensation, a $0.1 million decrease in insurance expense and a $47 thousand decrease in legal expense. 27 Other Expense, Net Three Months ended March 31, Change (Dollar amounts in thousands) 2026 2025 Amount % Other expense, net $ (290 ) $ (969 ) $ (679 ) (70 )% Other expense, net decreased by $0.7 million or 70%, to $0.3 million for the three months ended March 31, 2026, compared to a $1.0 million for the three months ended March 31, 2025. The decrease was primarily driven by a decrease of $1.6 million of expense for the net changes in fair value of convertible notes payable, partially offset by $0.4 million change in the gain upon a waiver of accrued interest, $0.3 million change in gain upon debt extinguishment, $0.1 million change on the gain on change in the fair value of warrants, and a $0.1 million change on the gain on the issuance of shares for services. For further details refer to Note 14 in the unaudited condensed consolidated financial statements for the three months ended March 31, 2026 and March 31, 2025 included elsewhere in this document. Loss on Investment Three Months ended March 31, Change (Dollar amounts in thousands) 2026 2025 Amount % Loss on investment $ (68 ) $ - $ (68 ) 100 % Loss on equity method investments was $0.1 million for the three months ended March 31, 2026. The loss was driven by a loss on the change in the carrying value of our investment in Sarborg with no comparable activity during the three months ended March 31, 2025. Interest Expense, Net Three Months ended March 31, Change (Dollar amounts in thousands) 2026 2025 Amount % Interest expense, net $ (49 ) $ (176 ) $ 127 (72 )% Interest expense, net decreased by $0.1 million, or 72%, to $0.1 million for the three months ended March 31, 2026, as compared to $0.2 million for the three months ended March 31, 2025. The decrease was driven by a decrease of the principal outstanding on the A.G.P. Convertible Note as a result of conversions, decrease of the principal outstanding on the August 2024 Nirland Note and October 2025 Nirland Note as a result of conversions and repayment in full during the three months ended March 31, 2025, and a decrease of $65 thousand of debt issuance cost amortization related to the Convertible Promissory Note Payable , partially offset by $23 thousand of interest expense related to the Ascent Note which was entered into during the three months ended March 31, 2026. 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 convertible debt, private placements of equity securities and the Sales Agreement with A.G.P., dated October 23, 2024, as amended. During the three months ended March 31, 2026 and 2025, we incurred operating losses of $3.7 million and $3.6 million, respectively. Sources and Uses of Liquidity Our primary use of cash is to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations. Until such time we can generate significant revenue from the successful approval and commercialization of a product candidate, 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. We have also considered exploring strategic alternative paths to fund raising through a shift in our fundamental operations as a pharmaceutical development company to a digital asset treasury management company. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, or substantially reduce research and development efforts all of which could have a material adverse effect on the Company and its financial results. 28 While the Company believes in the viability of its ability to raise additional funds, there can be no assurances to that effect. We have based our estimates on assumptions of operating costs that may prove to be wrong. As a result, we could deplete our capital resources sooner than we currently expect. If, for any reason, our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis we may be required to revise our business plan and strategy, which may result in significantly curtailing, delaying or discontinuing one or more of our research or development programs or the commercialization of any product candidates or may result in our being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially affected. Management has concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12 months from the date of the filing of this Quarterly Report. This is based on our analysis under applicable accounting principles. These unaudited condensed consolidated 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. Cash Requirements Our material cash requirements include the following contractual and other obligations. Investment in Sarborg On February 19, 2026, the Company entered into a Securities Purchase Agreement with all of the stockholders of Sarborg. The investors of Sarborg agreed to sell to the Company, and the Company agreed to acquire from the investors, an aggregate of 1,020 shares of Sarborg, representing approximately 20% of the outstanding common stock of Sarborg. As consideration for the purchase, the Company has agreed to issue to the investors, in the aggregate: (i) 23,920 shares of the Company’s Common Stock, exercise price of $0.0025 per share and (ii) pre-funded warrants (the to purchase up to 4,399,156 shares of Common. In addition, the Company has agreed to pay Sarborg cash consideration of $8 million, with the cash portion of the consideration deferred until such time as the Company raises no less than $20 million through the use of an at-the-market facility program. As of March 31, 2026, the $8 million cash portion of consideration for our investment in Sarborg was still outstanding. We expect to raise the funds through an at-the-market facility program and repay the $8 million within 12 months of the issuance of the financial statements. Refer to Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. A.G.P Convertible Note On November 25, 2024, the Company issued to A.G.P. a convertible promissory note (the “A.G.P. Convertible Note”) in the principal amount of $5.7 million to evidence A.G.P.’s currently owed deferred commission payable. Unless earlier converted as specified in the A.G.P. Convertible Note, the principal amount plus all accrued but unpaid interest is due on November 25, 2025 (the “Maturity Date”). The A.G.P. Convertible Note accrues interest at 5.5% per annum. At any time prior to the full payment of the A.G.P. Convertible Note, provided that A.G.P. has given at least three business days written notice to the Company, A.G.P., in its sole discretion, may elect to have all or any portion of the outstanding principal amount and all interest accrued converted into shares of the Company’s Common Stock, at the lower of the Reverse Split price and the market price per share at the time of the conversion date, but in no event less than $1.00, subject to adjustment as provided therein and to take into account any future share splits or reverse splits. However, the conversion of the A.G.P. Convertible Note may not occur prior to the Company having sufficiently authorized shares of Common Stock to permit the entire conversion of the convertible promissory note. Refer to Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. During the three months ended March 31, 2026, the holder of the A.G.P. Convertible Note converted $0.7 million of principal and interest into 25,760 shares of the Company’s Common Stock, respectively. As of March 31, 2026, there was approximately $1.9 million in outstanding principal and interest remaining. J.J. Astor Note Senior Secured Promissory Note with J.J. Astor On June 11, 2026, the Company issued a senior secured convertible promissory note (the “Note”) to J.J. Astor & Co. (the “Lender”), in the principal amount of $2.0 million. The Company will receive net proceeds of $1.5 million, before deduction of closing fees and was funded in two tranches. The Note is payable to the Lender over twenty-four equal weekly installments of $82 thousand commencing on June 18, 2026, which may be paid in cash or, at the option of the Company once an applicable resale registration statement is declared effective by the Securities and Exchange Commission covering the resale of any shares of the Company’s common stock, par value $0.0001 per share that may be received on such conversion. Additionally, the Company issued the Lender, common stock purchase warrants to purchase 912,500 shares of the Company’s Common Stock at an exercise price of $0.72 per share. The Warrants will become exercisable beginning on the effective date of stockholder approval of the issuance of the Warrant Shares (such date, the “Stockholder Approval Date”) and will expire five years after the Stockholder Approval Date. Ascent Note On March 3, 2026, the Company entered into a Securities Purchase Agreement with Ascent Partners Fund LLC (“Ascent”) and issued a senior secured convertible promissory note (the “Ascent Note”) with a principal amount of approximately $0.6 million. Unless earlier repaid or converted in accordance with its terms, the Ascent Note was due to mature on July 3, 2026. The Company and Ascent may mutually agree to extend the maturity date by up to two months. The Ascent Note bears interest at 10% per annum and is secured by a first-priority security interest in the collateral pledged pursuant to the related security agreement and other transaction documents. At any time following issuance, subject to the terms of the Ascent Note and receipt of the requisite stockholder approval under Nasdaq rules, Ascent may elect to convert all or any portion of the outstanding principal and accrued interest into shares of the Company’s common stock. Refer to Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. As of March 31, 2026, approximately $0.6 million of principal and accrued interest remained outstanding but was subsequently repaid during the second quarter of 2026 and prior to the issuance of our March 31, 2026 unaudited condensed consolidated financial statements. 29 Working Capital We currently anticipate that cash required for working capital for the next 12 months is approximately $19.5 million, which includes forecasted research and development costs of $0.1 million, forecasted general and administrative costs of $6.2 million, current liabilities of $11.2 million and convertible promissory notes payable, if not converted prior to maturity of $2.0 million. We do not anticipate being able to fund required working capital for the next 12 months with cash and cash equivalents on hand and current borrowings. Management believes that we will be able to fund cash required for the next 12 months through borrowings and equity raises. We have historically been able to access funds through the issuance of debt, and more recently our at the market offering program through the Sales Agreement and believe we can continue to obtain funding through such debt financing agreements and Sales agreement as needed to meet cash requirements for the next 12 months. Cash Flows The following table sets forth our cash flows for the period indicated (in thousands): Three Months ended March 31, 2026 2025 Net cash provided (used in) by: Operating Activities $ (1,894 ) $ (3,929 ) Investing Activities - (404 ) Financing Activities 487 5,927 Effect of exchange rate changes on cash and cash equivalents (5 ) (18 ) Net (decrease) increase in cash and cash equivalents $ (1,412 ) $ 1,576 Cash Flows Used in Operating Activities Net cash used in operating activities for the three months ended March 31, 2026, was $1.9 million, resulting primarily from a net loss of $4.1 million, adjusted for non-cash items including: a $0.3 million loss on the change in fair value of convertible notes payable, $0.5 million of amortization expense, $0.5 million issuance of common stock for services, $0.3 million of amortization of directors and officers insurance, $0.2 million of stock-based compensation, a $0.1 million loss on equity method investment, $0.1 million of non-cash lease expense and depreciation expense. The net cash inflow from changes in operating assets and liabilities amounted to $0.1 million. Net cash used in operating activities for the three months ended March 31, 2025, was $3.9 million, resulting primarily from a net loss of $4.8 million, adjusted for non-cash items including a $1.8 million loss on the change in fair value of convertible notes payable, a $0.3 million gain on debt extinguishment, $0.3 million gain on waiver of accrued interest, a $0.1 million gain on change in fair value of warrant liability, $0.2 million of stock-based compensation expense, $0.2 million of non-cash interest expense, $0.2 million of amortization expense, $0.4 million of prepaid directors and officers insurance amortization and a $1.6 million cash outflow from operating assets and liabilities. The $1.6 million cash outflow from operating assets and liabilities is primarily due to a $0.7 million cash outflow from accounts payable, a $0.2 million cash outflow from accrued expenses and other current liabilities, and a $0.3 million cash outflow from prepaid expenses and other current assets. Cash Flows Used in Investing Activities No cash was used in investing activities for the three months ended March 31, 2026. Net cash used in investing activities for the three months ended March 31, 2025 was $0.4 million, resulting from purchases of property, plant and equipment totaling $0.4 million. 30 Cash Flows Provided by Financing Activities Net cash provided by financing activities for the three months ended March 31, 2026, was $0.5 million, resulting from proceeds from the issuance of convertible notes payable. Net cash provided by financing activities for the three months ended March 31, 2025 was $5.9 million, resulting from proceeds from the issuance of common shares related to the ATM program of $8.1 million. This was offset by repayments of convertible notes payable of $1.6 million, and repayments of notes payable of $0.6 million. Contractual Obligations and Other Commitments Laboratory Lease We are the lessee under a laboratory space lease. The remaining annual rent payments are $0.1 million for the year ending December 31, 2026. The laboratory space lease has a remaining lease term of approximately 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 unaudited condensed 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: Fair Value of Convertible Notes The Company has elected the fair value measurement option for convertible debt with embedded derivatives that would otherwise require bifurcation and has recorded the entire hybrid financial instrument at fair value under the guidance in ASC Topic 825, Financial Instruments . To value the convertible debt, the Company utilizes Binomial Lattice Pricing Models. The Binomial Lattice Pricing Models involve the construction of various intermediate lattices: stock price tree, conversion value tree, conversion probability tree, and discount rate tree. In doing so, we assume the holders act rationally to maximize return and minimize cost at each decision point. We computed the notes payoff at maturity and at intermediate decision nodes based upon the better of (i) conversion or (ii) repayment of principal and interest. The significant inputs and assumptions used to estimate the fair value include: (i) the Company’s stock price; (ii) the term of the convertible debt; (iii) the sum of the notes’ principal and unpaid accrued interest; (iv) expected volatility; (v) risk-free interest rate; (vi) the corporate bond yield; (vii) the credit spread; (viii) probability of default; and (ix) the estimated recovery upon default. Any change to the unobservable inputs to estimate fair value could produce significantly higher or lower fair value measurements and result in a material change within the unaudited condensed consolidated financial statements. The convertible debt will subsequently be remeasured at fair value each reporting date until settled or converted. 31 Investments Management evaluates investments in unconsolidated entities to determine whether the Company has the ability to exercise significant influence over the investee’s operating and financial policies in accordance with ASC 323, Investments—Equity Method and Joint Ventures. This assessment requires significant judgment and consideration of both qualitative and quantitative factors, including, but not limited to, ownership interest, board representation, participation in policy-making processes, material intercompany transactions, commercial relationships, contractual rights, and the relative concentration of ownership among other shareholders. Investments in which the Company does not have the ability to exercise significant influence are accounted for in accordance with ASC 321, Investments – Equity Securities (“ASC 321”). Investments are accounted for under the cost or equity method of accounting, under which the Company records its proportionate share of the investee’s earnings and losses within earnings and evaluates the investment for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The determination of whether a decline in value is other-than-temporary requires significant judgment regarding the investee’s financial condition, operating performance, business prospects, market conditions, and estimated recoverable value. Changes in facts and circumstances, including changes in governance rights, ownership structure, commercial arrangements, financing activities, or the investee’s operating performance, could result in changes to management’s conclusions regarding significant influence or impairment and may materially impact the Company’s unaudited condensed consolidated financial statements in future periods. Contingencies In the ordinary course of business, we are involved in various legal proceedings that are complex in nature and have outcomes that are difficult to predict. We describe our legal proceedings and other matters that are significant or that we believe could become significant in Note 15 to the unaudited condensed consolidated financial statements. We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred, and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of liability that has been accrued previously or modifications to contingency disclosures that are considered material. 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. In addition, CDT Equity is a smaller reporting company as defined in the Securities Exchange Act of 1934 (as amended, 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) CDT Equity’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) CDT Equity’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. 32 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.