CDT Equity Inc. quarterly report, Q1 FY2023

Business context and reporting period

Registrant: Murphy Canyon Acquisition Corp. (the filing is not for CDT Equity Inc., as indicated in the request metadata). This unaudited Form 10-Q covers the quarter ended March 31, 2023. Murphy Canyon is a shell company formed to pursue a business combination and had not commenced operating activities or generated operating revenue.

The company is pursuing a merger with Conduit Pharmaceuticals Limited. The filing reports a proposed $650 million share consideration for Conduit shareholders and a $27 million private placement, contingent on closing. The May 11, 2023 amendment, disclosed after quarter-end, extended the merger outside date to February 7, 2024 and added closing conditions.

Financial performance and position

At March 31, 2023, cash was $90,606, prepaid expenses were $219,417, and investments in the trust account were $23.66 million. Total current liabilities were $1.96 million; total liabilities were $6.59 million, including a $4.63 million deferred underwriting commission payable only if a business combination closes. The company also had a $300,000 sponsor note payable. The trust account is principally reserved for redemptions and the transaction, rather than ordinary operating liquidity.

Cash decreased by $255,171 during the quarter. Operating activities used $599,818; investing activities provided $113.88 million, largely reflecting trust withdrawals for redemptions; and financing activities used $113.53 million, principally reflecting the corresponding redemption payments, partly offset by $300,000 borrowed from the sponsor. The filing does not present meaningful operating margins because the company has no operating revenue.

Material changes versus the prior comparable period

• Net income improved from a $253,536 loss to $120,269 income, mainly because trust interest rose to $664,232 from $10,182. The company cautioned that substantially lower trust assets mean it does not expect the same level of interest income in 2023 as in 2022.
• Total expenses increased to $507,406 from $263,718. Management attributed the increase mainly to directors’ and officers’ insurance and legal and accounting costs associated with the January 2023 special meeting.
• In January 2023, holders redeemed 11,037,272 public shares for approximately $114.1 million, about $10.33 per share. The trust balance fell from $136.9 million at December 31, 2022 to $23.7 million at March 31, 2023.
• The company recorded a $1.14 million estimated excise-tax liability related to the redemptions. It was recorded outside the statement of operations, as an offset to equity/deficit, and may be affected by later share issuances.

Outlook, risks, contingencies, and unusual items

• Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern for the twelve months following issuance, citing the limited time to complete a business combination and continuing costs. The financial statements include no adjustments for the outcome of this uncertainty.
• Combination deadline and funding: Stockholders approved up to 12 one-month extensions, through February 7, 2024, with monthly trust deposits. The company deposited $155,403 for extensions during the quarter. A sponsor note of up to $1.5 million is available to fund trust deposits and operating expenses; $300,000 had been advanced by March 31 and another $200,000 on April 5.
• Transaction uncertainty and dilution: Completion of the Conduit merger and the $27 million private placement is not assured and depends on conditions and stockholder approval. The proposed share issuance and financing could materially dilute existing holders. The merger consideration and financing remain proposed, not completed.
• Nasdaq listing: On April 10, 2023, Nasdaq notified the company that it was below the $50 million minimum market value of listed securities requirement. The stated deadline to regain compliance was October 9, 2023; failure could lead to delisting and reduced liquidity.
• Other risks: Public shares are redeemable, while warrants may expire worthless if no business combination is completed. The company also disclosed risks from potential delisting, the excise tax, and the possibility that a business combination will not be completed within the permitted period. No legal proceedings were reported.
• Controls: Management concluded disclosure controls and procedures were effective at quarter-end and reported no material change in internal control over financial reporting during the quarter.

Most important facts for investors to verify

• Confirm the filing identity: the document is Murphy Canyon Acquisition Corp.’s 10-Q, not a filing identified as CDT Equity Inc.
• Check the current status and terms of the Conduit merger, required approvals, closing conditions, and the proposed $27 million private placement.
• Verify actual trust-account balances, extension deposits, redemptions, and remaining time to complete a business combination.
• Track sponsor-note advances and repayment terms, available operating cash, and the company’s ability to fund ongoing costs.
• Monitor Nasdaq compliance and any subsequent listing or delisting notices.
• Review the ultimate treatment of the $1.14 million excise-tax accrual and any effect of subsequent share issuances or liquidation.