Item 1A. Risk Factors 21
Item 1B. Unresolved Staff Comments 56
Item 2. Properties 56
Item 3. Legal Proceedings 56
Item 4. Mine Safety Disclosures 56
PART II
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63
Item 8. Financial Statements and Supplementary Data 63
Item 9A. Controls and Procedures 64
Item 9B. Other Information 64
PART III
Item 10. Directors, Executive Officers and Corporate Governance 65
Item 11. Executive Compensation 70
Item 14. Principal Accountant Fees and Services 74
PART IV
Item 15. Exhibits and Financial Statement Schedules 75
Item 16. Form 10-K Summary. Signatures. 76
i
CERTAIN
TERMS
Unless
otherwise stated in this annual report on Form 10-K, or the context otherwise requires, references to:
●
“A.G.P” are to A.G.P./Alliance Global Partners;
●
“common stock” are to our shares of Class A common stock and our Class B common stock;
●
“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior
to our initial public offering;
●
“initial public offering” are to our offering of units that was consummated on February 7, 2022, with each unit consisting
of one share of Class A common stock and one public warrant for total gross proceeds of $132.25 million,
●
“initial stockholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering
(or their permitted transferees);
●
“management” or our “management team” are to our officers and directors;
●
“placement units” are to the units purchased by our sponsor in the private placement;
●
“private placement” are to the private placement of 754,000 placement units at a price of $10.00 per unit, for an aggregate
purchase price of $7,540,000, which occurred immediately prior to our initial public offering;
●
“public shares” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether
they were purchased in our initial public offering or thereafter in the open market);
●
“public stockholders” are to the holders of our public shares, including our initial stockholders and management team to
the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s
and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;
●
“public warrants” are to our redeemable warrants sold as part of the units in our initial public offering (whether they are
purchased in our initial public offering or thereafter in the open market, including warrants that may be acquired by our sponsor or
its affiliates in our initial public offering or thereafter in the open market);
●
“representative” are to A.G.P./Alliance Global Partners, which was the representative of the underwriters in our initial
public offering;
●
“sponsor” are to Murphy Canyon Acquisition Sponsor, LLC., a Delaware limited liability company and a wholly owned subsidiary
of Presidio Property Trust, Inc., a Maryland corporation whose securities are publicly traded on the Nasdaq Stock Market, LLC under the
trading symbols “SQFT”, “SQFTP” and “SQFTW”;
●
“underwriters” are to the underwriters of our initial public offering, for which A.G.P. acted as representative;
●
“warrants” are to our redeemable warrants, which includes the public warrants as well as the warrants included in the placement
units and any warrants issued upon conversion of working capital loans to the extent they are no longer held by the initial holders or
their permitted transferees; and
●
“we,” “us,” “company” or “our company” are to Murphy Canyon Acquisition Corp.
ii
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this Annual Report on Form 10-K may constitute “forward-looking statements” for purposes of the federal securities
laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations,
hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify forward-looking statements, but
the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Annual Report may
include, for example, statements about:
iii
Summary
of Risk Factors
Our
business is subject to numerous risks and uncertainties, including those described below in Part I, Item 1A “Risk Factors”
in this Annual Report on Form 10-K that represent challenges that we face in connection with the successful implementation of our strategy.
The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in
combination with other events or circumstances, may adversely affect our ability to effect a business combination, and may have an adverse
effect on our business, cash flows, financial condition and results of operations. Such risks include, but are not limited to:
● dependence on key personnel;
● the delisting of our securities by Nasdaq;
● conflicts of interest between us, our sponsor and our officers and directors;
● lack of protections afforded to investors of blank check companies;
● shares being redeemed and warrants becoming worthless;
● our competitors with advantages over us in seeking business combinations;
● ability to obtain additional financing;
● our initial stockholders controlling a substantial interest in us;
● disadvantageous timing for redeeming warrants;
● adverse effect of registration rights on the market price of our common stock;
● the impact of COVID-19 and related risks;
● business combination with a company located in a foreign jurisdiction;
● changes in laws or regulations; tax consequences to business combinations; and
iv
PART
I
Item
1. Business
Introduction
We
are a recently organized blank check company incorporated on October 19, 2021 as a Delaware corporation formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or
more businesses, which we refer to throughout this report as our initial business combination.
Initial
Public Offering
On
February 7, 2022, we consummated our initial public offering of an aggregate of 13,225,000 units, including full exercise of the underwriters’
over-allotment option, at $10.00 per unit. The gross proceeds of the offering were $132.25 million. Simultaneously with the consummation
of the initial public offering, we consummated the private placement of 754,000 units to the sponsor, which amount included 69,000 private
placement units purchased by the sponsor in connection with the underwriters’ exercise of their overallotment option in full, at
a price of $10.00 per private placement unit, generating gross proceeds of approximately $7.54 million.
Following
the closing of the Initial Public Offering on February 7, 2022, an amount of $139,790,000 from the net proceeds of the sale of the Units
in the Initial Public Offering and the Private Placement was placed in the Trust Account. This resulted in an overfunding of the Trust
Account of $4,895,000. As such, subsequent to the initial funding of the Trust Account, $2,000,000 was transferred to the Company’s
operating cash account and $2,895,000 was used to pay offering costs. Except with respect to interest earned on the funds held in the
Trust Account that may be released to us to pay our taxes (less up to $100,000 interest to pay dissolution expenses), the funds held
in the Trust Account will not be released from the Trust Account until the earliest of (a) the completion of our initial business combination,
(b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our certificate of incorporation
(A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain
amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination
within 12 months from the consummation of our initial public offering or up to February 7, 2024 if we extend the period of time to consummate
a business combination, at our election by separate one month extensions, subject to satisfaction of certain conditions, including the
deposit of approximately $77,000 for each one month extension, into the Trust Account or (ii) with respect to any other provision relating
to stockholders’ rights or pre-initial business combination activity, and (c) the redemption of our public shares if we are unable
to complete our initial business combination within 12 months from the consummation of our initial public offering or up to February
7, 2024 if we extend the period of time to consummate a business combination, at our election by separate one month extensions, subject
to satisfaction of certain conditions, including the deposit of approximately $77,000 for each one month extension, into the Trust Account,
subject to applicable law.
Merger
Agreement with Conduit Pharmaceuticals Limited
The
following description of the Merger Agreement and related agreements does not purport to describe all of the terms thereof and is qualified
in its entirety by reference to the complete text of the Merger Agreement and related agreements. Our stockholders and other interested
parties are urged to read such agreements in their entirety.
On
November 8, 2022, we entered into an agreement and plan of merger (together with an amendment entered into on January 27, 2023, the “Merger
Agreement”) with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”) and Conduit Merger
Sub, Inc., a Cayman Islands exempted company and our wholly owned subsidiary. If the Merger Agreement is approved by our stockholders
and the transactions under the Merger Agreement are consummated, Merger Sub will merge with and into Conduit, with Conduit surviving
the merger as our wholly owned subsidiary (the “Merger”). Upon the closing of the Merger, it is anticipated that we will
change our name to “Conduit Pharmaceuticals Inc.” Our board of directors has (i) approved and declared advisable the Merger
Agreement, the related ancillary agreements thereto and the transactions contemplated thereby and (ii) resolved to recommend approval
of the Merger Agreement and related transactions by our stockholders.
Pursuant
to the Merger Agreement, the outstanding ordinary shares (including the shares issued upon conversion of all outstanding convertible
debt, which conversion shall have occurred prior to the consummation of the Merger Agreement) of Conduit will be converted into an aggregate
of 65,000,000 shares of our newly issued common stock, with each such outstanding Conduit ordinary share (including the ordinary shares
issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the Merger
Agreement) converted into newly issued shares of our common stock on a pro rata basis.
In
connection with the transactions contemplated by the Merger Agreement, we entered into a subscription agreement (the “Subscription
Agreement”) with an investor. Pursuant to the Subscription Agreement, the investor has agreed to purchase $27 million (the “Private
Placement”) units of our securities, with each unit consisting of (i) one share of common stock and (ii) one warrant to purchase
one share of common stock, for a purchase price of $10.00 per unit. The Subscription Agreement contains registration rights, pursuant
to which within 15 business days after the closing, we will use reasonable best efforts to file with the U.S. Securities and Exchange
Commission (the “SEC”) a registration statement registering the resale of the shares of common stock included in the units
and issued and issuable upon exercise of the warrants. The closing of the Private Placement is conditioned on, among other things, the
closing of the Conduit Business Combination.
January
2023 Extension
Initially,
we were required to complete our initial business combination transaction by 12 months from the consummation of our initial public
offering or up to 18 months if we extended the period of time to consummate a business combination in accordance with our
Certificate of Incorporation (“Business Combination Period”). On January 26, 2023, at a special meeting of our stockholders, our stockholders approved a proposal
to amend our certificate of incorporation to allow us to extend, at our election, the date by which we have to consummate a business
combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024. Our
stockholders also approved a related proposal to amend the trust agreement allowing us to deposit into the Trust Account, for each
one-month extension, one-third of 1% of the funds remaining in the Trust Account following the redemptions made in connection with
the approval of the extension proposal at the special meeting. At the special meeting our stockholders also approved a proposal to
amend our certificate of incorporation to expand the methods that we may employ to not become subject to the “penny
stock” rules of the SEC.
In
connection with such proposals, our public stockholders had the right to redeem their shares for cash equal to their pro rata share of
the aggregate amount on deposit in the Trust Account as of two days prior to such stockholder vote. Our public stockholders holding 11,037,272
shares of Class A common stock (out of a total of 13,979,000 shares of Class A common stock) exercised their right to redeem such shares
at a redemption price of approximately $10.33 per share. Approximately $114 million in cash was removed from the Trust Account to pay
such stockholders and, accordingly, after giving effect to such redemptions, the balance in the Trust Account was approximately $23 million.
As
a result of the approval of such proposals, we agreed to deposit into the trust account one-third of 1% of the funds then on deposit
in the trust account for each month of the extension period, resulting in a monthly contribution of approximately $0.035 per share that
was not redeemed in connection with the Special Meeting (approximately $77,000 in the aggregate per month), or an aggregate of $924,000
(the “Maximum Contribution”) if the date we have to consummate a business combination is extended 12 times, each assuming
no interest is earned on the funds in the trust account.
Investment
Thesis and Strategy
To
date, our efforts have been limited to organizational activities, as well as activities related to our initial public offering and investigating
potential business combinations. As of the date of this report, we anticipate that we will consummate the Merger Agreement. While we
have entered into the Merger Agreement with Conduit, in the event we are unable to consummate the Conduit Business Combination, we will
continue to pursue another business combination. While we may pursue an initial business combination target in any stage of our corporate
evolution or in any industry or sector, we intend to focus our search on identifying businesses in the real estate industry, including
construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate,
and adjacent businesses and technologies targeting the real estate space, which we may refer to as “Proptech” businesses.
We define Proptech businesses broadly as those applying innovative digital technologies and technology-enhanced services and solutions
to the identification, design, development, construction, operation, underwriting, acquisition, leasing, financing, management and disposition
of real estate properties. Leveraging our sponsor’s management team and directors’ deep and global real estate expertise
and extensive network of relationships, we intend to identify innovative companies that have the potential to disrupt different aspects
of the real estate industry or related industries and to transform how stakeholders relate to real estate in the future. These stakeholders
include brokers, investors, lenders, operators, municipalities, service providers, owners, residents and tenants. Our sponsor and management
team have a proven track record in identifying opportunities in the real estate industry that have generated attractive risk-adjusted
returns.
Our
business strategy is to identify and complete our initial business combination with a company that complements the experience of our
management team and that can benefit from their and our sponsor’s operational expertise. Our selection process will leverage our
management teams’ broad and deep relationship network, unique industry experiences and proven deal sourcing capabilities to access
a broad spectrum of differentiated opportunities. The businesses we seek to acquire offer innovative software, hardware, products, operations
or services that are technologically equipped to improve property ownership; property financing; property transactions; property valuation;
property operations; property management; leasing; property insurance; real estate asset management and investment management; and design,
construction and development. Our management team will seek to leverage their access to proprietary deal flow, sourcing capabilities
and network of industry contacts to generate business combination opportunities.
Consistent
with this strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective
targets. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial
business combination with a target business that does not meet these criteria and guidelines.
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management
may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet
the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications
related to our initial business combination, which would be in the form of tender offer documents or proxy solicitation materials that
we would file with the SEC.
Competitive
Strengths
In
the event the Conduit Business Combination is not consummated, we intend to capitalize on the following competitive advantages in our
pursuit of a target company or companies:
Our
management team is led by our Chief Executive Officer (“CEO”) Jack K. Heilbron, who has over 40 years of experience in real
estate due diligence, mergers and acquisitions, and real estate management. He has previously served as a director of an investment company
registered under the Investment Company Act of 1940. We believe that his business acumen and experience, which demonstrate his ability
to identify opportunities and enhance value, will help facilitate our business acquisition strategy.
Our
Chief Financial Officer (“CFO”), Adam Sragovicz, has over 25 years of experience in treasury and investment analysis, equity
and debt management, strategic risk and reward analysis as well as portfolio management. We believe that Mr. Sragovicz brings a unique
background to oversee the Company’s accounting and financial reporting matters through a wealth of experience in SEC reporting,
finance, accounting, and building and integrating internal control structures in high growth environments which will provide accurate
and reliable financial and operations reporting and internal control structures for successfully acquired domestic and international
acquisition targets.
Ed
Bentzen, our Chief Accounting Officer (“CAO”), brings over 18 years of professional experience in accounting and finance
for both public and private companies, including seven years of experience in SEC reporting, control processing experience at publicly
traded companies]. We believe that Mr. Bentzen’s expertise in financial reporting will prove invaluable in evaluating acquisition
targets and ensuring a smooth business combination process.
Industry
Opportunity
While
we may acquire a business or businesses in any industry, in the event the Conduit Business Combination is not consummated, our focus
will be on companies in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of
financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space, which
we may refer to as “Proptech” businesses. We believe that our target industry is attractive for a number of reasons, including
the following:
Large
Addressable Market. Real estate investment represents a significant segment of the global economy. Global real estate was worth over
$280 trillion (by asset value), larger than equity, debt, or gold (combined), and more than 3.5 times the total global gross domestic
product in 2017, according to Savills Inc. According to Forbes, real estate contributed $3.5 trillion to the U.S. gross domestic product
in 2018. Within the real estate industry, Proptech businesses have a large addressable market targeting landlords, tenants, developers,
operators, managers, brokers, investors, lenders, architects, engineers, and general contractors. We believe the acquisition of one or
more Proptech businesses can serve as a platform for expansion, both organically and through further acquisitions.
Innovative
Technology Trends. Real estate has traditionally been a human capital and resource-intensive sector, but technology has become a
strategic imperative as owners seek ways to increase the efficiency of their assets. We believe new technologies that create efficiencies
in the value chain will reduce transaction costs and improve information flow. Innovation is being driven by increased rates of technology
adoption, provided by both incumbent firms and disruptive new entrants that are building vertical solutions and new consumer-facing technologies
for the real estate industry. Examples of innovative technology trends driving technological transformation in the real estate sector
include: artificial intelligence and machine learning, data and analytics, cloud technologies, the Internet of Things, virtual and augmented
reality, financial and mortgage technologies, 5G, automation and robotics, 3D printing, and modular construction. Digital transformation
has also enabled new business models including iBuying, co-working, flexible warehousing, and crowdfunding.
Accelerating
Market Growth. Over the last two decades, Proptech has evolved from tools and platforms that facilitated enhanced information transparency
to more robust and innovative technologies that can drive meaningful operational efficiencies and safety enhancements. The total global
investment in Proptech businesses has grown at a pace substantially above the rate of inflation in the recent past, with approximately
$66 billion invested in Proptech since 2010, of which approximately $63 billion has been invested since 2015 and approximately $43 billion
since 2018. We expect this growth to continue over the years to come, given the increased rates of technology adoption we are seeing
in the real estate industry.
Broad
Universe of Potential Targets. We currently intend to focus our investment effort broadly across Proptech businesses, although we
may pursue an acquisition opportunity in any industry or geographic region. We believe that our investment and operating expertise in
the real estate industry and across multiple asset classes and geographies will offer us a large, addressable universe of potential targets.
The diversity of the target universe and the number of largely uncorrelated sub-sectors maximizes the likelihood that our management
team will identify and execute an attractive transaction.
Acquisition
Criteria
Consistent
with our strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective
target businesses. In the event that the Conduit Business Combination is not consummated, we will use these criteria and guidelines in
evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does
not meet these criteria and guidelines. We intend to focus on companies that provide value-added services that we believe:
● have market leadership positions in their respective products and services;
● would benefit from a relationship with a public company; and
● offer an attractive risk-adjusted return for our stockholders.
We
intend to seek targets with an aggregate combined enterprise value of approximately $300 million to $1.2 billion, based upon widely accepted
valuation standards and methodologies. We believe targeting companies in this “middle market” will provide the greatest number
of opportunities for investment.
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that from time to time
our management may deem relevant. In evaluating a prospective target business, we expect to conduct a thorough due diligence review that
will encompass, among other things, meetings with incumbent management and employees, document reviews and inspection of facilities,
as applicable, as well as a review of financial and other information that will be made available to us.
Initial
Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the Trust Account at the time of our signing a definitive agreement in connection with our initial business combination.
Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors
is not able to independently determine the fair market value of our initial business combination, or if we are considering an initial
business combination with an entity that is affiliated with A.G.P., our sponsor, directors or officers, we will obtain an opinion from
an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction
of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of
the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business
of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally,
pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We
are not prohibited from consummating an initial business combination with an entity that is affiliated with A.G.P., our sponsor, officers
or directors, provided, however, that, pursuant to our certificate of incorporation, if we do, we, or a committee of our independent
directors, must obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation
opinions that our initial business combination is fair to our company from a financial point of view.
We
anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares
will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target
business in order to meet certain objectives of the prior owners of the target business, the target management team or stockholders or
for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of
the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the
business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the
target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number
of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a target. In this case, we would
acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders
immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent
to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned
or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued
for purposes of the 80% fair market value test. If the business combination involves more than one target business, the 80% fair market
value test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as our
initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
To
the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor
to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant
risk factors.
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things,
meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational,
legal and other information which will be made available to us.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in
our incurring losses and will reduce the funds we can use to complete another business combination. Further, our sponsor’s corporate
parent, Presidio Property Trust, Inc., is not formally constrained in any way from pursuing acquisitions or business combinations that
could be suitable transactions for us. While we do not believe it is likely that Presidio Property Trust, Inc., will compete against
us for suitable acquisition targets based upon our management’s understanding of Presidio Property Trust, Inc.’s current
business model, it is possible that a potential business combination could arise that would be suitable for us and Presidio Property
Trust, Inc., giving rise to a conflict of interest. If such a circumstance were to occur, we anticipate that our board of directors would
recuse any conflicted members of our management from taking any role in the consideration of such a transaction and, to the extent necessary,
retain appropriate qualified, non-conflicted personnel to advise us in accordance with the provisions of our certificate of incorporation
relating to transactions with affiliates. Such an eventuality could increase the costs associated with evaluating a target business.
Our board of directors has established a code of ethics that includes a conflict of interest policy intended to ensure timely disclosure
and avoidance of activities and relationships that conflict with the interests of the Company.
Initial
Business Combination Process
In
evaluating prospective business combinations, we expect to conduct a thorough due diligence review process that will encompass, among
other things, meetings with incumbent management and employees, document reviews and inspection of facilities, as applicable, as well
as a review of financial and other information that will be made available to us.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, Murphy Canyon Acquisition
Sponsor, LLC, its corporate parent, Presidio Property Trust, Inc., or any of our officers or directors. In the event we seek to complete
our initial business combination with a company that is affiliated with our sponsor, its corporate parent, or any of our officers or
directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a
member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point
of view.
Members
of our management team will directly or indirectly own founder shares and/or private placement units and, accordingly, may have a conflict
of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business
combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business
combination if the retention or resignation of any such officers and directors were to be included by a target business as a condition
to any agreement with respect to our initial business combination. However, subject to any pre-existing contractual or fiduciary obligations,
our sponsor and officers and directors will offer all suitable business combination opportunities within the real estate industry (and
other related sectors, as discussed elsewhere in this annual report) to us before any other person or company until we have entered into
a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination by February
7, 2024.
All
of our officers are employed by our sponsor’s corporate parent, Presidio Property Trust, Inc. Our sponsor is continuously made
aware of potential business opportunities, one or more of which we may desire to pursue for an initial business combination.
Murphy
Canyon Acquisition Sponsor, LLC, Presidio Property Trust, Inc., and each of our officers and directors presently have, and any of them
in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director
is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware
of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations,
he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity.
We do not believe, however, that any fiduciary duties or contractual obligations of our sponsor, its corporate parent, and our officers
or directors will materially affect our ability to complete our initial business combination. Our certificate of incorporation provides
that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered
to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually
permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to
refer that opportunity to us without violating another legal obligation.
Sourcing
of Potential Initial Business Combination Targets
We
believe the industry experience and business relationships of our sponsor’s corporate parent, Presidio Property Trust, Inc., will
allow for a wide range of evaluation of targets for our business combination. Our sponsor’s corporate parent, with many decades
of experience in the real estate industry and related industries, should be able to assist with accessing, and the vetting of, quality
targets. While we are an entirely separate company from Presidio Property Trust, Inc., with a fully independent Board except for Jack
K. Heilbron and Adam Sragovicz, (and no overlapping officers aside from our CEO, Jack K. Heilbron, our CFO, Adam Sragovicz, and our CAO,
Ed Bentzen), we expect to benefit from our sponsor’s corporate parent’s position in the industry.
This
network has provided our management team with a flow of referrals that have resulted in numerous transactions. In the event that the
Conduit Business Combination is not consummated, we believe that the network of contacts and relationships of our management team will
provide us with an important source of acquisition opportunities. In addition, we anticipate that target business candidates will be
brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment
banks, consultants, accounting firms and large business enterprises.
Members
of our management team and our independent directors directly or indirectly own founder shares and/or placement units following our initial
public offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate
business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of
interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors
was included by a target business as a condition to any agreement with respect to our initial business combination.
In
addition, each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual
obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity
to such entity. As discussed above, however, we do not believe that the fiduciary duties or contractual obligations of our officers or
directors will materially affect our ability to complete our initial business combination.
Our
certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless
such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity
is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent
the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Status
as a Public Company
We
believe our structure will make us an attractive business combination partner to target businesses. As a public company, we offer a target
business an alternative to the traditional initial public offering through a merger or other business combination with us. Following
an initial business combination, we believe the target business would have greater access to capital and additional means of creating
management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business
can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In
a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the
target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class
A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although
there are various costs and obligations associated with being a public company, we believe target businesses will find this method a
more expeditious and cost effective method to becoming a public company than the typical initial public offering. The typical initial
public offering process takes a significantly longer period of time than the typical business combination transaction process, and there
are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road
show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore,
once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial
public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions,
which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business
combination, we believe the target business would then have greater access to capital and an additional means of providing management
incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public
company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting
talented employees.
While
we believe that our structure and our management team’s backgrounds make us an attractive business partner, some potential target
businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder
approval of any proposed initial business combination, negatively.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities
Act”, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not
being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the prices of our securities may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of
the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which
we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds
$700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the prior three-year period.
Additionally,
we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held
by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million
during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior
June 30th.
Financial
Position
With
funds available for an initial business combination in the amount of approximately $23 million after payment of $4,628,750 of deferred
underwriting fees, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital
for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because
we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing,
we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target
business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance
it will be available to us.
Effecting
Our Initial Business Combination
We
are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following our initial public
offering. We intend to effectuate our initial business combination using cash from the proceeds of the offering and the sale of the placement
units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we
may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination
of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable
or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If
our initial business combination is paid for using equity or debt securities, or not all of the funds released from the Trust Account
are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A
common stock, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for
maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred
in completing our initial business combination, to fund the purchase of other companies or for working capital.
As
in the case of the Conduit Business Combination, we may seek to raise additional funds through a private offering of debt or equity securities
in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the
proceeds of such offering rather than using the amounts held in the Trust Account. In addition, we intend to target businesses larger
than we could acquire with the net proceeds of our initial public offering and the sale of the placement units, and may as a result be
required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities
laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the
case of an initial business combination funded with assets other than the Trust Account assets, our proxy materials or tender offer documents
disclosing the initial business combination would disclose the terms of the financing and, only if required by applicable law or stock
exchange requirements, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds
privately, or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement
or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.
Selection
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the Trust Account at the time of our signing a definitive agreement in connection with our initial business combination.
The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards
generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable
public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors
is not able to independently determine the fair market value of our initial business combination, or if we are considering an initial
business combination with an entity that is affiliated with A.G.P., our sponsor, directors or officers, we will obtain an opinion from
an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction
of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of
the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business
of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We
do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to
this requirement, our management will virtually have unrestricted flexibility in identifying and selecting one or more prospective target
businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar
company with nominal operations.
In
any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities
of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business
or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be
taken into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for investors to evaluate the possible
merits or risks of any target business with which we may ultimately complete our initial business combination.
To
the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor
to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant
risk factors.
In
evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities,
as well as a review of financial and other information that will be made available to us.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in
our incurring losses and will reduce the funds we can use to complete another business combination.
Lack
of Business Diversification
For
an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely
on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with
multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate
the risks of being in a single line of business. In addition, we intend to focus our search for an initial business combination in a
single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
Limited
Ability to Evaluate the Target’s Management Team
Although
we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial
business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition,
the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future
role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial
business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial
business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge
relating to the operations of the particular target business.
We
cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The
determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business
combination.
Following
an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business.
We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite