CDT / Conduit Pharmaceuticals Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The filing identifies the registrant as Conduit Pharmaceuticals Inc. (Nasdaq: CDT), a clinical-stage biopharmaceutical company. Unless stated otherwise, financial amounts below are in U.S. dollars and in thousands.
Business context and operating outlook
Conduit develops and seeks to license clinical-stage pharmaceutical assets, including AZD1656 (a glucokinase activator) and AZD5904 (an MPO inhibitor), and is developing proprietary AZD1656 co-crystal intellectual property. The company reported no revenue for the quarter and has not recognized revenue under its agreements with St George Street Capital.
Management expects operating losses and negative operating cash flows to continue and anticipates higher expenses as it advances development programs and operates as a public company. The filing gives no revenue, earnings, or clinical-development guidance.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $128 | $0 |
| General and administrative expense | $2,827 | $1,515 |
| Total operating expenses / operating loss | $2,955 / ($2,955) | $1,515 / ($1,515) |
| Other expense, net | ($597) | ($157) |
| Net loss | ($3,552) | ($1,672) |
| Net loss per share, basic and diluted | ($0.05) | ($0.03) |
| Net cash used in operating activities | ($2,357) | ($1,970) |
There is no meaningful revenue or gross-margin measure reported. G&A increased 87%, primarily due to higher salaries and stock compensation, insurance expense, and public-company costs. Other expense included a $502 noncash charge for warrants issued in exchange for a lock-up agreement. The 2023 comparative figures are restated: merger-related legal costs were reclassified from expense to prepaid costs and subsequently charged against equity; restated Q1 2023 net loss was $1,672, versus $2,165 previously reported.
At March 31, 2024, cash and cash equivalents were $1,844, down from $4,228 at December 31, 2023. Current assets were $3,156 and current liabilities $1,984; total liabilities were $8,016, total assets $4,917, and stockholders’ deficit $3,099. The balance sheet included an $800 convertible promissory note, $183 of notes payable, and $5,738 of deferred commission payable. The deferred fee bears 5.5% annual interest and is due no later than March 21, 2025. The $800 convertible note bears 20% interest and was not converted at quarter-end.
Management estimates $14,400 of working-capital requirements over the next 12 months, including the deferred financing fee and other stated obligations. Operating cash use was $2,357; there were no investing or financing cash flows in Q1 2024. The filing reports no operating margin or other margin measure.
Liquidity, risks, and unusual items
- Going concern: Management concluded that substantial doubt exists about the company’s ability to continue as a going concern for at least 12 months after issuance of the financial statements. The company says it lacks sufficient cash and other available liquidity for its current plans and needs additional financing. It is pursuing equity or debt funding and spending reductions, but states that success is less than probable; failure to obtain funding could force delays or reductions in operations and R&D.
- Potential financing: A March 4 commitment letter from major shareholder and related party Corvus Capital provides for up to $5 million, subject to definitive documentation, with limited draw sizes and 9.5% annual interest. No proceeds had been received by March 31, 2024.
- Litigation: Strand Hanson claims $2 million in advisory fees and 6.5 million common shares in litigation in England and Wales. The company disputes the claims and intends to defend them. No loss accrual was recorded because the contingency was not considered probable or reasonably estimable.
- Related-party and licensing exposure: The pipeline depends in part on arrangements with St George Street, which licenses assets from AstraZeneca; Conduit is not party to the AstraZeneca license agreements. Termination or breach could materially disrupt development or commercialization.
- Post-quarter developments: In April, the company issued warrants for up to 1,447,725 shares in connection with lock-up agreements; 907,725 were issued to directors, related parties, and management. On May 10, the CFO gave notice of resignation effective May 15, and the company appointed its SVP–Strategy as interim CFO. A director also resigned effective May 13.
- Controls: Management concluded disclosure controls and procedures were ineffective because previously identified material weaknesses had not been remediated. No material change in internal control over financial reporting was reported during the quarter.
Most important facts for investors to verify
- Whether the company obtains additional financing, including definitive documentation and actual draws under the Corvus commitment, and whether available funds cover the stated $14.4 million working-capital requirement.
- The cash runway, spending plans, and any resulting changes to clinical and R&D programs given the going-concern warning.
- The status and potential financial or share-dilution impact of the Strand Hanson claim for $2 million and 6.5 million shares.
- Progress on remediating material weaknesses in disclosure controls and the transition to a permanent CFO.
- The terms, accounting treatment, and potential dilution from the March and April lock-up warrants, as well as the timing and terms of the $5.738 million deferred commission payment.