Company: CDAQF
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001641172-25-023544
Chunk: 104

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 8
Chunk 104
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 Promissory Note. The
Company determined that the conversion option embedded in its 2024 Promissory Note should be bifurcated and accounted for as a derivative
in accordance with ASC 815.

    14

COMPASS
DIGITAL ACQUISITION CORP.

NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE
30, 2025

However,
the exercise price of the underlying 2024 Note Warrants was greater than the closing price of the Private Placement Warrants as of June
30, 2025, and when the 2024 Promissory Notes were drawn on. The Company believes that the likelihood of the Sponsor’s exercise
of the option to convert to 2024 Note Warrants is de minimis. As a result, the Company recorded zero liability related to the conversion
option on the 2024 Promissory Note.

Polar
Capital Investment Payable – related party

On
September 6, 2023, the Company entered into a subscription agreement (the “Polar Subscription Agreement”) with the Sponsor
and Polar Multi-Strategy Master Fund (“Polar”), pursuant to which Polar agreed to fund up to $1,500,000 to Company, subject
to certain funding milestones. Once the Company has reached a defined milestone, upon on at least five (5) calendar days’ prior
written notice, the Sponsor may require a drawdown against the capital commitment in order to meet the Sponsor’s commitment to
the Company under a drawdown request (such funded amounts, the “Polar Capital Investment”). The Polar Capital Investment
will be repaid to Polar by the Company upon the closing of an initial Business Combination. Polar may elect to receive such repayment
(i) in cash or (ii) in Class A Ordinary Shares at a rate of one Class A Ordinary Share for each ten dollars of the Polar Capital Investment.
The Company must (i) to the extent feasible and in compliance with all applicable laws and regulations, register the shares issued to
Polar as part of any registration statement issuing shares before or in connection with the closing of a Business Combination or (ii)
if no such registration statement is filed in connection with the closing of a Business Combination, promptly register such shares pursuant
to the first registration statement filed by the Company or the surviving entity following a Business Combination, which shall be filed
no later than 30 days after the closing of a Business Combination and declared effective no later than 90 days