Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 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, 2024 that was filed with the SEC on March 28, 2025. 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 biotech development and digital asset treasury management 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 therapeutic 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 facility, we aim to improve drug properties and have successfully extended the patent life of certain drugs by up to 20 years.

Our current pipeline includes candidates targeting inflammatory and autoimmune disorders, as well as idiopathic male infertility, dermatology, and animal health. The 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). 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 potential opportunities to develop further intellectual property positions through solid-form technology.

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 800 disease signatures. Sarborg's insights have directly informed two new combination patent filings, strengthening our intellectual property portfolio. In addition, CDT Equity 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 CDT a competitive advantage.

The Sarborg Agreement entered into between the Company and Sarborg on December 12, 2024 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, CDT Equity aims to enhance efficiency, lower costs, and accelerate timelines by minimizing human intervention, ultimately optimizing the drug development cycle and giving CDT Equity a competitive advantage in the sector.

Through this relationship, CDT Equity 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, CDT Equity 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.

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 CDT Equity enables the Company to explore multiple opportunities in the healthcare, biotech and broader technology innovation. The Board continues to evaluate a cryptocurrency treasury reserve strategy, collaborating with consultants to best advise a novel market which has seen significant recent activity and success for respective stakeholders. Long-term exposure to digital assets can present both strategic and financial benefits as part of a diversified capital management approach.

Operating with a lean disease-agnostic model, CDT Equity 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. Freda Lewis-Hall, former Chief Medical Officer of Pfizer Inc., the Chair of the Company's Board; Dr. Andrew Regan, CEO and James Bligh, CFO. Our management team includes active senior scientists who have an extensive understanding of the pharmaceuticals market, supporting our strategy of developing clinical assets in a cost-efficient manner focused on therapeutic efficacy.

In 2024, AstraZeneca granted 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 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 re-purpose.

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.

Key Component of Result 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 $1.5 million and $3.1 million on research and development activities during the three months ended September 30, 2025, and September 30, 2024, respectively. We incurred approximately $4.3 million and $3.2 million on research and development activities during the nine months ended September 30, 2025, and September 30, 2024, 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, 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.

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 (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 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 sets forth our results of operations for the periods indicated:

		Three Months ended September 30,								Nine Months ended September 30,
(Dollar amounts in thousands)		2025				2024				2025				2024
Operating expenses:
Research and development expenses		$	1,532			$	3,093			$	4,308			$	3,246
General and administrative expenses			5,501				2,718				11,293				8,660
Total operating costs and expenses			7,033				5,811				15,601				11,906
Operating loss			(7,033	)			(5,811	)			(15,601	)			(11,906	)
Other income (expenses):
Other income (expense), net			(44	)			(341	)			(2,036	)			(2,954	)
Interest Income			7				-				19				11
Interest expense, net			(48	)			(309	)			(281	)			(547	)
Total other (expense) income, net			(85	)			(650	)			(2,298	)			(3,490	)
Net loss		$	(7,118	)		$	(6,461	)		$	(17,899	)			(15,396	)

Comparison of the Three Months Ended September 30, 2025 and 2024

Research and Development Expenses

		Three Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Research and development expenses		$	1,532			$	3,093			$	(1,561	)			(50	)%

Research and development expenses decreased by $1.6 million, or 50%, to $1.6 million for the three months ended September 30, 2025, as compared to $3.1 million for the three months ended September 30, 2024. The decrease was primarily attributable to a $3.1 million decrease in expense related to the August 2024 License Agreement in 2024 with no comparable activity during the three months ended September 30, 2025. The decrease was partially offset by an increase of $1.2 million, $0.1 million, and $0.1 million related to the Sarborg, Thesprogen, and Manoira agreements activity in 2025, respectively.

General and Administrative Expenses

		Three Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
General and administrative expenses		$	5,501			$	2,718			$	2,783				102	%

General and administrative expenses increased by $2.8 million, or 102%, to $5.7 million for the three months ended September 30, 2025, compared to $2.7 million for the three months ended September 30, 2024. The increase was primarily driven by a $1.0 million increase in payroll and stock-based compensation expense, $1.4 million increase in legal fees and a $0.3 million increase in travel expense.

Other Income (Expense), Net

		Three Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Other income (expense), net		$	(44	)		$	(341	)		$	297				(87	)%

Other income (expense), net changed by $0.3 million or 87%, to $44 thousand expense for the three months ended September 30, 2025, compared to a net expense of $0.3 million for the three months ended September 30, 2024. The change was primarily driven by a $0.4 million contingent liability incurred in the third quarter of 2024 and a $0.1 million research and development tax receivable recorded during the third quarter of 2025, partially offset by $0.1 million change in fair value of convertible notes payable.

For further details refer to Note 13, "Other income (expense), net," in the unaudited financial statements as of September 30, 2025 and September 30, 2024 included elsewhere in this document.

Interest Expense, Net

		Three Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Interest expense, net		$	(48	)		$	(309	)		$	261				(84	)%

Interest expense, net decreased by $261 thousand, or 84%, to $48,000 for the three months ended September 30, 2025, as compared to $309 thousand for the three months ended September 30, 2024. The decrease was driven by a decrease of $0.1 million of interest expense related to the amortization of debt discount, decrease of $0.1 million of interest expense on the deferred commission payable to an advisor for fees related to the Merger and a $0.1 decrease of interest expense on convertible notes and notes payable.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Research and Development Expenses

		Nine Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Research and development expenses		$	4,308			$	3,246			$	1,062				33	%

Research and development expenses increased by $1.1 million, or 33%, for the nine months ended September 30, 2025, as compared to $3.2 million for the nine months ended September 30, 2024. The increase was primarily driven by $3.6 million of expense incurred under the Sarborg agreements, $0.3 million of expense incurred under Thesprogen Consulting Agreement, $0.4 million of expense under the Charles River MSA and $0.1 million incurred under the Joint Development Agreement with Manoira, partially offset by a $3.1 million decrease related to the August 2024 License Agreement.

General and Administrative Expenses

		Nine Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
General and administrative expenses		$	11,293			$	8,660			$	2,633				30	%

General and administrative expenses increased by $2.6 million, or 30%, to $11.3 million for the nine months ended September 30, 2025, as compared to $8.7 million for the nine months ended September 30, 2024. The increase was primarily driven by a $2.1 million increase in legal expenses, a $0.3 million increase in salaries and stock compensation expense, a $ 0.3 million increase in travel expense, and a $0.1 million increase in professional fees, partially offset by a $0.2 million decrease in insurance expense.

Other Income (Expense), Net

		Nine Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Other income (expense), net		$	(2,036	)		$	(2,954	)		$	918				(31	)%

Other income (expense), net changed by $0.9 million, or 31%, to $2.0 million of expense for the nine months ended September 30, 2025, as compared to $3.0 million of net expense for the nine months ended September 30, 2024. The change was primarily driven by a $2.7 million decrease related to the issuance of warrants in exchange for stockholders' entering into lock-up agreements during the nine months ended September 30, 2024, a $0.4 million decrease related to a waiver of interest on the A.G.P. Convertible Note, a $0.4 million expense related to a loss contingency recorded during the nine months ended September 30, 2024, a $0.3 million gain on debt extinguishment, a $0.1 million gain on the issuance of shares for services and a $0.1 million research and development tax credit receivable recorded during the nine months ended September 30, 2025, partially offset by a $3.0 million loss on the change in fair value and loss on conversion of convertible notes payable.

For further details refer to Note 13, "Other income (expense), net," in the unaudited financial statements as of September 30, 2025 and September 30, 2024 included elsewhere in this document.

Interest Expense, Net

		Nine Months ended September 30,								Change
(Dollar amounts in thousands)		2025				2024				Amount				%
Interest expense, net		$	(281	)		$	(547	)		$	266				(49	)%

Interest expense, net decreased by $0.3 million, or 49%, during the nine months ended September 30, 2025, as compared to $0.6 million for the three months ended September 30, 2024. The change was primarily driven by a decrease of $0.1 million of interest expense related to the amortization of debt issuance costs and a decrease of $0.2 million of interest expense on the deferred commission payable to an advisor for fees related to the Merger, partially offset by a $0.1 million increase of interest expense for interest on convertible notes and notes payable.

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. During the nine months ended September 30, 2025 and 2024, we incurred operating losses of $17.9 million and $15.4 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.

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 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.

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 5 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q.

On March 31, April 11, 2025, April 16, 2025, June 2, 2025, June 17, 2025, June 26, 2025 and September 29, 2025, the holder of the A.G.P. Convertible Note converted $0.4 million, $0.5 million, $0.8 million, $0.1 million, $0.2 million, $0.2 million and $0.3 million of principal and interest into 3,583, 3,583, 8,878, 5,000, 11,250, 12,500 and 60,000 shares of the Company's Common Stock, respectively. As of September 30, 2025, there was approximately $3.4 million in outstanding principal and interest remaining.

Working Capital

We currently anticipate that cash required for working capital for the next 12 months is approximately $11.7 million, which includes forecasted research and development costs of $0.1 million, forecasted general and administrative costs of $5.8 million, current liabilities of $2.4 million and a convertible promissory note payable, if not converted prior to maturity of $3.4 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.

As of September 30, 2025, we had raised $22.1 million out of the $23.9 million available to us through the Sales Agreement and expect to raise an additional $1.8 million over the next 12 months.

Cash Flows

The following table sets forth our cash flows for the period indicated (in thousands):

		Nine Months ended September 30,
		2025				2024
Net cash (used in) provided by:
Operating Activities		$	(10,919	)		$	(5,869	)
Investing Activities			(1,403	)			(128	)
Financing Activities			15,681				1,857
Effect of exchange rate changes on cash and cash equivalents			(75	)			(17	)
Net increase (decrease) in cash and cash equivalents		$	3,284			$	(4,157	)

Cash Flows Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025, was $10.9 million, resulting primarily from a net loss of $17.9 million, adjusted for non-cash items including a $0.4 million gain on waiver of accrued interest, $0.3 million gain on debt extinguishment, $0.1 change in fair value of derivative warrant liability, a $3.0 million change in fair value of convertible notes, $3.0 million of amortization expense, $2.0 million of stock-based compensation, $0.3 million of non-cash interest expense, and a $0.6 million cash outflow from operating assets and liabilities. The $0.6 million cash outflow from operating assets and liabilities is primarily due to a $0.8 million cash outflow from accounts payable, a $0.1 million cash outflow from operating lease liabilities and a $0.2 million cash outflow from prepaid expenses and other current assets, partially offset by a $0.5 million cash inflow from accrued expenses and other current liabilities.

Net cash used in operating activities for the nine months ended September 30, 2024, was $5.9 million, resulting primarily from a net loss of $15.4 million and a change in the fair value of warrants of $0.1 million, adjusted for non-cash items including $1.3 million of stock-based compensation, $1.4 million of amortization expense, $2.7 million expense on the issuance of warrants, $0.2 million interest expense of the deferred commission payable, $1.7 million non-cash share issuance and a $2.3 million cash inflow from operating assets and liabilities. The $2.3 million cash inflow from operating assets and liabilities is primarily due to a $2.5 million cash inflow from accounts payable and accrued expenses and other current liabilities and a $0.2 million cash outflow from prepaid expenses.

Cash Flows Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025, was $1.4 million, resulting from $0.4 million in diagnostic asset purchases and $1.0 million in digital asset purchase as a part of our digital asset treasury strategy.

Net cash used in investing activities for the nine months ended September 30, 2024, was $0.1 million, resulting from $0.5 million purchases of short-term investments offset by the 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 nine months ended September 30, 2025, was $15.7 million, resulting from proceeds from the issuance of common shares related to the ATM program of $18.0 million, partially offset by repayments of notes payable of $0.2 million, repayments of notes payable - related parties of $0.4 million, repayment of convertible notes payable - related parties of $0.9 million, repayment of convertible notes payable of $0.7 million, and treasury stock purchases of $0.1 million.

Net cash provided by financing activities for the nine months ended September 30, 2024, was $1.9 million, resulting from $1.6 million of proceeds on the issuance of the promissory note to Nirland, $0.1 million of proceeds from the issuance of the April 2024 Warrants and a $0.1 million bank overdraft.

Contractual Obligations and Other Commitments

Laboratory Lease

We are the lessee under a laboratory space lease. 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 two 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:

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 financial statements.

The convertible debt will subsequently be remeasured at fair value each reporting date until settled or converted.

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 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.