Company: CDAQF
Filing Date: 2025-11-12
Form Type: 10-Q
Source: 0001493152-25-021994
Chunk: 28

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-11-12
Form: 10-Q
Item: Part I, Item 1
Chunk 28
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Company accounts for the conversion features in the Working Capital Loans under ASC 815. The conversion features were classified as a
derivative liability and the Company has determined that the fair value was immaterial at September 30, 2025 and December 31, 2024.

Concentration
of Credit Risk

Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access
to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

Fair
Value of Financial Instruments

The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair
Value Measurement” (“ASC 820”), approximates the carrying amounts represented in the accompanying condensed balance
sheets, primarily due to their short-term nature, except for the derivative warrant liabilities (see Note 10).

The
Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that
framework. ASC 820 defines “fair value” as an exit price, which is the price that would be received for an asset or paid
to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants
on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants
would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting
entity. Unobservable inputs reflect the entity’ own assumptions based on market data and the entity’s judgments about the
assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information
available in the circumstances.

Level
1-Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable
inputs, such as quoted prices in active markets for identical assets or liabilities.

Level
2-Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying
terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted
int