CDT — Q2 2026 Financial Report Analysis

A smaller loss, $0.7M of cash, and a balance sheet that rests on one related-party stake

CDT Equity (formerly Conduit Pharmaceuticals; renamed in August 2025) has no products on sale and no revenue. It says it is a "data-driven pharmaceutical development company." It takes drug candidates that larger drugmakers have shelved, such as AZD1656, reformulates them using solid-form chemistry (co-crystals), and uses AI analysis from its partner Sarborg Limited to look for new uses. It then aims to license them to other companies rather than run late-stage trials itself. In the second quarter of 2026 its net loss narrowed to $4.6 million from $6.0 million, mainly because it cut research spending. The more important story is the balance sheet. Total assets went from $5.7 million to $126.7 million in six months. Almost all of that is a 20% stake in Sarborg, a company linked to CDT's own CEO and two of its directors, which CDT paid for with its own shares. Cash at quarter-end was $747,000, and the company states there is substantial doubt it can continue operating for the next 12 months.

At a glance

• Net loss: $4.6M, down from $6.0M. Research and development spending fell 84% to $0.3 million. Spending dropped; nothing new came in.
• Cash: $0.7M against $23.4M of current liabilities. Operating cash burn was $2.4 million in the first half. Current liabilities are bills due within a year. They include $8 million still owed to the people who sold CDT its Sarborg stake.
• Sarborg stake: $122.8M, 97% of total assets. This is what turned shareholders' equity from -$7.2 million to +$103.1 million. On August 31 the stock market valued the whole company at about $23 million.

The numbers

*The 10-Q restates per-share figures for five reverse stock splits through July 20, 2026: 1-for-100, 1-for-15, 1-for-8, 1-for-25 and 1-for-10. A reverse split merges many old shares into one new share. Together these equal about a 1-for-3,000,000 split. Weighted shares outstanding were 551 in Q2 2025 and 532,999 in Q2 2026 on that basis, so the year-on-year per-share change reflects share issuance, not performance. A sixth reverse split (1-for-25) took effect on September 28, 2026, after the 10-Q, and is not reflected in the -$8.71.

For context, the first quarter of 2026 (filed late, on July 15) had a net loss of about $4.1 million on $3.7 million of operating costs. Operating spending fell again in Q2, but the net loss grew because of losses on convertible notes. Convertible notes are loans the lender can turn into shares, usually at a discount.

Why the loss shrank

• R&D fell $1.6 million. The 10-Q says this was "primarily attributable to a $1.5 million decrease in expense related to our transactions with Sarborg." Since February CDT has owned 20% of Sarborg, and it now records its share of Sarborg's results ($86,000 loss this quarter) as an investment loss, below operating loss. Less spending on drug work also means less progress on the assets it hopes to license.
• G&A fell $0.4 million. Legal and professional fees fell $0.6 million and salaries and stock compensation fell $0.3 million. Audit and accounting fees rose $0.3 million.
• Financing costs rose. "Other expense, net" grew to $1.5 million, driven by changes in the value of convertible notes and a $0.3 million larger loss on settling debt. Funding the company is now a sizeable cost in its own right.

What the headline numbers hide

• The $123 million Sarborg stake comes from a related party, and its value rests on management's judgment. On February 19, 2026, CDT agreed to buy 20% of Sarborg for total consideration of $123 million: 2,392 shares, pre-funded warrants that were exercised in March into 439,821 shares, and $8 million in cash. A pre-funded warrant is a right to shares that is almost fully paid upfront. The 10-Q discloses that CEO Dr. Andrew Regan sits on Sarborg's board and owns Sarborg shares through his company Corvus, and that directors Chele Chiavacci Farley and Ulrik Olsen are also Sarborg shareholders. The $8 million cash part is unpaid. It is deferred until CDT raises at least $20 million through its at-the-market program (selling new shares into the market over time).
• Management saw an impairment warning sign and recorded no write-down. The 10-Q says the fall in CDT's own share price was an impairment indicator, meaning a sign the asset may be worth less than its book value. Management concluded no write-down was needed, citing no problems at Sarborg itself and a sale of Sarborg shares to an outside investor above CDT's cost. After discussions with its auditors, the company also decided it must file Sarborg's historical financial statements with the SEC.
• Book value and market value are far apart. CDT's own September 1 filing put its market capitalization at about $23.0 million on August 31, against $103 million of stated shareholders' equity. The same filing says the reported equity cleared its Nasdaq listing deficiencies.
• Shareholders have been heavily diluted since quarter-end. On July 30 CDT agreed to buy another 4.76% of Sarborg for pre-funded warrants over 12,131,770 shares. These were exercised after shareholders approved them in late August. Shares outstanding went from 631,080 at June 30 to 13,693,866 by August 31, about 22 times as many, before the September reverse split. For comparison, about 442,000 shares (2,392 shares plus 439,821 from the warrants, adjusted for splits) bought the first 20%.
• There is a $9.6 million court judgment on the balance sheet. An English court awarded Strand Hanson, a former adviser, about $7 million plus interest and costs, totaling $9.6 million, against CDT's former subsidiary Conduit Pharmaceuticals Limited (CPL). CDT sold CPL in December 2025 to Corvus, the CEO's company. The accounting rules required CDT to keep the liability on its own balance sheet because the sale did not separate CDT from it. Strand has written to CDT seeking payment. CDT denies liability.
• Cash flow is better than the loss, but only because bills are being paid later. First-half operating cash outflow was $2.4 million against an $8.7 million net loss. Most of the gap is non-cash items (note revaluations, debt-extinguishment losses, share-based payments) plus $1.8 million of higher unpaid supplier bills (accounts payable). Share sales under the at-the-market program raised only $355,000 in the half, against $11.9 million a year earlier.

Funding outlook

CDT does not give financial guidance. Its plan is to fund itself through the at-the-market share program, which it says has about $73.6 million of capacity left, and through convertible loans. On October 6 it issued a senior secured convertible note to J.J. Astor & Co. with $6.75 million of principal. The first tranche delivered $3.0 million of cash for $4.05 million of principal, so CDT owes about $1.35 more for each $1 received. The note is repaid in 24 weekly installments of $168,750 starting October 14, and 80% of net proceeds from future at-the-market share sales must go first to repaying it. The 10-Q also says management has "considered exploring" turning the company into a "digital asset treasury management company," which would mean holding crypto assets as its main business instead of drug development.

Takeaway: The smaller Q2 loss came from spending cuts, not progress. The $103 million of shareholders' equity rests almost entirely on a stake bought with CDT shares from a company tied to its own CEO and directors. The market valued the whole company at about $23 million, and with $0.7 million of cash and weekly loan repayments, staying funded depends on selling more shares and further diluting holders.

What to watch: the Sarborg historical financial statements CDT has committed to file, which are the first outside check on what the stake is worth; whether the auditors require a write-down at year-end; any move to enforce the $9.6 million Strand judgment against CDT; and whether any drug asset reaches a licensing deal, the company's only stated route to revenue.