CDT Equity Inc. 10-K

Item 7. 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 together with the other sections of this Annual Report on Form 10-K, including our audited financial statements for the year ended December 31, 2024, together with related notes thereto, included elsewhere in this Annual Report. 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 Annual Report and our other filings with the SEC. 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, 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. 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. 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 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. We continue to evaluate novel artificial intelligence and cybernetics approaches to drug re-purposing, intellectual property and asset selection to give Conduit a competitive advantage. 58 We are led by highly experienced pharmaceutical 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. Our management team includes active senior scientists who have an extensive understanding of the pharmaceuticals market, which supports our strategy of developing clinical assets in a cost-efficient manner while focusing on therapeutic efficacy and patient safety. Simultaneously, Conduit leverages 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 pending patent applications in several international jurisdictions describing a solid-form compound, including the AZD1656 Cocrystal (a HK-4 Glucokinase Activator), targeting a wide range of autoimmune disorders. 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 expect to evaluate and select the specific molecules to be developed and collaborate with external 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 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 Licensed Products under the related License Agreement. The Company is required to use commercially reasonable efforts to develop and commercialize the Licensed Products. 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 APIs that were manufactured by AstraZeneca (prior to conducting its clinical trials) available to Conduit. 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. In collaboration with SARBORG Limited (“Sarborg”), a related party, Conduit intends to leverage an advanced AI and cybernetics platform to evaluate key deliverables across multiple areas of the Company’s operations, including drug repurposing, drug discovery, solid-form identification, and clinical trial monitoring. The Sarborg Agreement is 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 algorithmic AI/cybernetics technology, Conduit aims to enhance efficiency, lower costs, and accelerate timelines by minimizing human intervention, ultimately optimizing the drug development cycle and giving Conduit a competitive advantage in the sector. Through this relationship, Conduit 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, Conduit 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. In addition, Conduit will retain a perpetual, non-exclusive, royalty-free, and assignable right to use any platform or technology developed by Sarborg in association with the deliverables. Ongoing support from Sarborg will ensure these systems evolve with Conduit’s needs, driving long-term innovation in areas like IP creation, regulatory strategy, and clinical trial monitoring. This partnership reinforces Conduit’s commitment to leveraging AI-driven solutions to accelerate growth, deliver value to shareholders, and maintain a competitive edge in the pharmaceutical sector. This strategic move reaffirms Conduit’s commitment to adopting forward-thinking solutions to stay at the forefront of innovation in the pharmaceutical industry. By reducing reliance on traditional, labor-intensive methods and harnessing the power of AI-driven technology, Conduit is well-positioned to lead in areas such as drug repurposing, clinical trial monitoring, and IP creation, ensuring the Company’s long-term growth and market leadership. 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 disorders that impact a large population where there is no present treatment or the present treatment, carries significant unwanted side effects. 59 Reverse Stock Split On January 22, 2025, we filed a certificate of amendment to the Company’s Second Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effectuate a 1-for-100 reverse stock split (the “Reverse Stock Split”) of the outstanding shares of our common stock. Our stockholders previously approved the Reverse Stock Split and granted the board of directors the authority to determine the exact split ratio and when to proceed with the Reverse Stock Split at our annual meeting of stockholders held on December 18, 2024. The Reverse Stock Split became effective on January 24, 2025, and the common stock begin trading on The Nasdaq Global Market on a Reverse Stock Split-adjusted basis on January 27, 2025. The par value and other terms of the common stock were not affected by the Reverse Stock Split. As a result of the reverse stock split, every 100 shares of our common stock issued or outstanding were automatically reclassified into and became one new share of common stock, and the number of our issued and outstanding shares of common stock was reduced to 1,384,801 and 738,295 as of December 31, 2024 and December 31, 2023, respectively. All references to numbers of shares of common stock and per-share information in this Annual Report on Form 10-K have been adjusted retroactively, as appropriate, to reflect the reverse stock split. Nasdaq Stock Market Correspondence and Subsequent Nasdaq Capital Market Listing We are compliant with the MVPHS continued listing standard of Nasdaq Capital Market being greater than $1.0 million. The current MVPHS is $5,166,785 based on the closing price of the common stock on March 27, 2025. On a pro-forma basis at March 31, 2025, we expect to satisfy compliance with the Nasdaq Capital Market Equity Standard of Stockholder’s Equity greater than $2.5 million, after anticipating all Q1 2025 expected losses. Through the date of the consolidated financial statements, Stockholder’s Equity has increased significantly, through (i) fundraising of an additional $8.332 million from the Sales Agreement with AGP, (ii) conversion of $1.785 million from the Nirland Notes into 924,200 shares of common stock, and (iii) capitalization of certain invoices and fees. We expect to maintain continued compliance with the Equity Standard through additional issuance under its Sales Agreement, additional conversions of outstanding debt and capitalization of fees and a tight control of expenditure, although no such assurance can be given. 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. 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. 60 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. 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 year. 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: Years ended December 31, Change (Dollar amounts in thousands) 2024 2023 Amount % Research and development expenses $ 3,378 $ 90 $ 3,288 3,653 % 61 Research and development expenses increased by approximately $3.3 million, or 3,653%, to approximately $3.4 million for the year ended December 31, 2024, as compared to approximately $90 thousand for the year ended December 31, 2023. The increase was primarily driven by a $3.1 million upfront payment to AstraZeneca in connection with the license agreement, comprised of $1.5 million cash and $1.6 million of our common shares issued to AstraZeneca with no comparable activity in 2023. General and administrative expenses Years ended December 31, Change (Dollar amounts in thousands) 2024 2023 Amount % General and administrative expenses $ 12,041 $ 5,173 $ 6,868 133 % General and administrative expenses increased by $6.9 million, or 133%, to approximately $12.0 million for the year ended December 31, 2024, as compared to approximately $5.2 million for the year ended December 31, 2023. The increase was primarily driven by a $3.4 million increase in salaries, stock-based compensation and payroll, a $1.3 million increase in other G&A expenses, a $1.1 million increase in D&O insurance, a $0.5 million increase in professional fees including: legal fees, accounting and tax expense, listing fees and consulting fees and a $0.5 million increase in travel expenses. Other income (expense), net Years ended December 31, Change (Dollar amounts in thousands) 2024 2023 Amount % Other income (expense), net $ (890 ) $ 4,923 $ (5,813 ) (118 )% Other income (expense), net changed by $5.8 million, or 118%, to other expense of approximately $0.9 million for the year ended December 31, 2024, as compared to other income of $4.9 million for the year ended December 31, 2023. In 2024, other expense was driven by a $2.7 million loss on the issuance of warrants, and a $0.7 million expense related to a net loss on extinguishments, offset by a $2.0 million gain on the change in fair value of convertible notes payable, a $0.3 million increase from an income tax refund and a $0.2 million increase in the gain on change in fair value of warrants. In 2023, other income was driven by a $1.5 million gain on the derecognition of the Cizzle option in 2023, a $1.3 million gain on the change in fair value of the Cizzle option, a $2.8 million gain on the derecognition of the deferred revenue for the Vela option prior to the exercise of the Vela option, and a $1.0 million gain on the change in fair value of the Vela option. This was offset by a $1.0 million loss on issuance related to the Vela option, $0.4 million change in the fair value of convertible notes payable and $0.3 million realized foreign currency transaction loss. For further details refer to Note 17 in the consolidated financial statements as of December 31, 2024 and 2023 included elsewhere in this Annual Report. 62 Interest expense, net Years ended December 31, Change (Dollar amounts in thousands) 2024 2023 Amount % Interest expense, net $ (1,506 ) $ (211 ) $ (1,295 ) 614 % Interest expense, net changed by $1.3 million or 614%, to $1.5 million for the year ended December 31, 2024, from $0.2 million for the year ended December 31, 2023. The change was driven by a $0.9 million increase in the amortization of debt issuance costs and debt discounts and a $0.4 million increase in interest expense incurred on interest-bearing convertible promissory notes. 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 and the Sales Agreement with A.G.P. During the years ended December 31, 2024 and 2023, we incurred operating losses of $15.4 million and $5.3 million, respectively. Our primary uses of cash are 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. 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 all of which could have a material adverse effect on the Company and its financial results. 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 Annual Report. This is based on our analysis under applicable accounting principles. 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. Cash Requirements Our material cash requirements include the following contractual and other obligations. Loans Payable In May 2022, we entered into two loan agreements (the “Loans”), with an aggregate principal amount of $0.2 million, with two lenders. The Loans 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. As of December 31, 2024, the Loans are still outstanding and considered to be in default. The Company repaid the lenders in full during February 2025. Refer to Note 8 to our financial statements included elsewhere in this Annual Report. 63 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 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 both options to extend the maturity date to December 19, 2024. As of December 31, 2024, the March 2023 Convertible Note is still outstanding and considered to be in default. On March 6, 2025, the Company reached an agreement with the loan holder to pay $0.7 million in order to settle the March 2023 Convertible Note in full. The Company repaid the loan holder the settlement amount $0.7 million on March 13, 2025. Refer to Note 7 to our financial statements included elsewhere in this Annual Report. 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 the A.G.P.’s currently owed deferred commission payable. Unless earlier converted as specified in the 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 the 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 8 to our financial statements included elsewhere in this Annual Report. Per the terms outlined in the agreement, we are required to undertake capital raises to paydown the A.G.P. Convertible Note. August 2024 Nirland Note 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 $2,650,000, inclusive of a $500,000 original issuance discount. Refer to Note 8 to our financial statements included elsewhere in this Annual Report. 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. 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, $10, subject to adjustment as provided within the amended agreement. Note 7 to our financial statements included elsewhere in this Annual Report. On November 22, 2024, the Company and Nirland entered into a Second Amendment to the August 2024 Nirland Note (the “Second Amendment”). Pursuant to the Second Amendment, the Nirland Note may not be converted (other than partial conversions that may be permitted pursuant to the rules and regulations of NASDAQ (or any successor entity)) prior to receipt of stockholder approval to provide for such conversion of the Nirland Note, and subsequent issuance of the Company’s Common Stock, pursuant to the stockholder approval rules under the rules and regulations of The Nasdaq Stock Market. If the Company has not held a special meeting of the stockholders to approve the full conversion of the August 2024 Nirland Note on or before January 9, 2025, then the Company shall be obligated to pay Nirland a penalty of $100,000 per day until the special meeting is held. The special meeting was held on January 9, 2025, in which stockholder approval was obtained. In addition, the existing conversion rate was amended to be two and one half times the sum of (x) the 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 (including default interest) with respect to such portion of the principal amount, if any divided by $0.10, pre-split in January 2025 (or following any reverse splits that may occur in a ratio greater than 10 to 1, the lower of such 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. On January 24, 2025, the Reverse Stock Split became effective, resulting in every 100 shares of our common stock issued or outstanding becoming one new share of our common stock, resulting in the conversion price increasing to $6.86 as of December 31, 2024. On December 9, 2024, Nirland exercised their conversion option and converted $0.1 million of principal for 23,000 shares of common stock pursuant to the rules and regulations of the NASDAQ. As of December 31, 2024, $2.6 million of principal and accrued interest remains outstanding. October 2024 Nirland Note On October 28, 2024, the Company issued a promissory note (the “October 2024 Nirland Note”) to Nirland in the original principal amount of $0.6 million in exchange for funds in such amount. The October 2024 Nirland Note bears interest at a rate of 12% per annum, is due and payable semi-annually in arrears, and matures on October 31, 2025. If an event of default under and as defined in the Nirland Note occurs, the interest rate will be increased to 18% per annum or to the maximum rate permitted by law. In connection with the Nirland Note, the Company has agreed to pay Nirland a 1% arrangement fee, which will be included with the principal and interest owed under the Nirland Note. The Company paid down $0.2 million of the October 2024 Nirland Note on December 11, 2024 and as of the date of filing this Annual Report, such note has been repaid in full. Refer to Note 8 and Note 20 to our financial statements included elsewhere in this Annual Report. Working Capital We currently anticipate that cash required for working capital for the next 12 months is approximately $22.9 million, which includes forecasted research and development costs of $6.0 million, forecasted operating expenses of $6.2 million, accrued expenses and other current liabilities of $3.4 million, a convertible promissory note payable, if not converted prior to maturity of $6.0 million, a convertible promissory note, if not converted prior to maturity, of $0.8 million and loans payable due within the next 12 months of $0.5 million. We do 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 the at the market offering program 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. As of December 31, 2024, we have raised $3.3 million (net of fees) out of the $23.9 million available to us through the Sales agreement and expect to raise the additional $20.4 million over the next 12 months. Through the date of the issuance of the consolidated financial statements, we have raised an additional $8.1 million, net of fees due to A.G.P., through the Sales Agreement. After considering the issuances subsequent to December 31, 2024, we have $12.0 million available to us through the Sales Agreement. 64 Cash Flows The following table set forth our cash flows for the period indicated (in thousands): Years ended December 31, 2024 2023 Net cash (used in) provided by: Operating Activities $ (9,682 ) $ (7,725 ) Investing Activities (43 ) 725 Financing Activities 6,067 10,929 Effect of exchange rate changes on cash and cash equivalents (16 ) 299 Net (decrease) increase in cash and cash equivalents $ (3,674 ) $ 4,228 Cash Flows Used in Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was $9.7 million, resulting primarily from a net loss of $17.8 million, a gain on the change in fair value of convertible notes payable of $2.0 million, a gain on change in fair value of warrant liabilities of $0.2 million and a $0.1 million cash outflow from operating assets and liabilities. This was partially offset by a $2.7 million loss on the issuance of warrants, $1.7 million of amortization of directors and officers insurance, a $1.6 million outflow attributable to the purchase of licensing rights, $1.6 million of stock-based compensation, $0.9 million of debt discount amortization, a $0.7 million loss on debt extinguishment, $0.5 million of non-cash interest expense, $0.4 million of amortization expense, a $0.2 million share issuance for services and a $0.1 million of non-cash lease expense. The $0.1 million cash outflow from operating assets and liabilities is primarily due to a $2.3 million cash outflow from prepaid expenses and other current assets and a $0.1 million cash outflow from lease liabilities, partially offset by a cash inflow of $1.2 million from accounts payable and a cash inflow of $1.2 million from accrued expenses and other current liabilities. Net cash used in operating activities for the year ended December 31, 2023 was $7.7 million, resulting primarily from a net loss of $0.5 million, adjusted for non-cash items including a $4.3 million reduction of deferred income upon exercise of the Cizzle and Vela option, a $2.5 million change in operating assets and liabilities, a $2.3 million gain on the change in fair value of the Vela and Cizzle options, a $0.2 million change in the reserve for uncollectible loans and a $0.1 million gain on warrant remeasurement, partially offset by a $1.0 million loss upon the issuance of the Vela option, a $0.5 million change in amortization on directors & officers insurance, a $0.4 million loss on change in fair value of convertible notes and a $0.2 million increase in stock based compensation expense. The $2.5 million cash outflow from operating assets and liabilities is primarily due to a $1.0 million cash outflow from prepaid expenses and a $1.7 million cash outflow from accrued expenses and other current liabilities partially offset by a $0.2 million cash inflow from accounts payable. 65 Cash Flows (Used) Provided by Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $43 thousand, resulting from purchases of short-term investments of $0.5 million and purchases of property, plant and equipment of $0.1 million, partially offset by sales of short-term investments of $0.5 million. Net cash provided by investing activities for the year ended December 31, 2023 was $0.7 million, resulting from $0.5 million in proceeds from an option fee received from Vela and $0.6 million proceeds from the repayment of a loan from a related party, partially offset by an 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 year ended December 31, 2024 was $6.1 million, resulting from proceeds from the Sales Agreement of $3.3 million, proceeds from the issuance of notes payable of $3.2 million, proceeds from the exercise of warrants of $0.2 million and proceeds from the exercise of warrants of $0.1 million, partially offset by repayments of notes payable of $0.8 million. Net cash provided by financing activities during the year ended December 31, 2023 was $11.0 million. resulting from the proceeds from the Merger and related PIPE financing, net of transaction costs of $8.5 million, $2.3 million from issuance of convertible notes payable, and $0.2 million capital contribution from a related party. Contractual Obligations and Other Commitments Laboratory Lease As of December 31, 2024, we are the lessee under one laboratory space lease for a term of two years. The annual rent payments are $0.1 million for the years ending December 31, 2025 and December 31, 2026. The laboratory space lease has a remaining lease term of approximately 1.2 years. 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: 66 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 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 financial statements. The convertible debt will subsequently be remeasured at fair value each reporting date until settled or converted. Fair Value of Warrants The Company has issued warrants to investors in our debt and equity offerings. The Company has also issued warrants to service providers in relation to our financing offerings. We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC 815. For warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid in capital. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date. For the Company’s liability classified warrants, we estimate fair value using the Black-Scholes model. The significant inputs and assumptions used to estimate the fair value include: (i) the Company’s stock price, (ii) the risk-free rate, (iii) the expected volatility, and (iv) the dividend yield. The use of these valuation models requires the input of highly subjective assumptions. Any change to these inputs could produce significantly higher or lower fair value measurements and result in a material change within the financial statements. 67 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 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 the liability that has been accrued previously or modifications to contingency disclosures that are considered material. Stock-Based Compensation We record stock compensation expense related to our 2023 Plan in accordance with ASC 718, Compensation - Stock Compensation which requires our stock-based awards, including restricted stock units (“RSUs”) and stock options to be measured at fair value. The fair value of stock options is estimated on the grant date using the Black-Scholes option-valuation model. The calculation of stock-based compensation expense requires that we make assumptions and judgments about the variables used in the Black- Scholes option-valuation model, including the fair value of our common stock, expected term, expected volatility of the underlying common stock, and risk-free interest rate. The assumption inputs subject to significant estimation include: Expected Term. The expected term represents the period that the Company’s stock options are expected to be outstanding. Due to limitations on the sale or transfer of the Company’s common stock under the lock-up agreements and market standoff components of the stock option agreements, the Company does not believe its historical exercise pattern is indicative of the pattern it will experience after restricted periods expire. The Company uses the simplified method to calculate the expected term, which is the average of the contractual term and vesting period. Volatility. We determine the price volatility based on the historical volatilities of industry peers as we have limited trading history for our common stock price. We intend to continue to consistently apply this process using the same or a similar peer group of public companies, until a sufficient amount of historical information regarding the volatility of our own common stock price becomes available, or unless circumstances change such that the identified peer companies are no longer similar, in which case other suitable peer companies whose common stock prices are publicly available would be utilized in the calculation. 68 Recent Accounting Pronouncements A discussion of recent accounting pronouncements is included in Note 1 - Nature of the Business and Basis of Presentation and Summary of Significant Accounting Policies to our financial statements included elsewhere in this Annual Report. 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 Jumpstart Our Business Startups act of 2012, 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, 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. 69 Item 7A. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide the information required by this item. Item 8. Financial Statements and Supplementary Data This information appears following Item 15 of this Annual Report and is included herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.