Company: CDAQF
Filing Date: 2025-03-25
Form Type: 10-K
Source: 0001641172-25-000421
Chunk: 132

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-03-25
Form: 10-K
Item: Item 1
Chunk 132
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 with ASC 815. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value
reported in the accompanying statements of operations. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are accounted
in the accompanying balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument
could be required within 12 months of the balance sheet date.

The
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 December 31, 2024 and 2023.

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 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