Company: CDAQF
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001641172-25-023544
Chunk: 95

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 8
Chunk 95
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ISITION CORP.

NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE
30, 2025

Warrant
Liability

The
Company accounts for its Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition
of a liability pursuant to ASC 480, and whether the Warrants meet all of the requirements for equity classification under ASC 815, including
whether the Warrants are indexed to the Company’s own Ordinary Shares, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of Warrant issuance and as of each subsequent quarterly period
end date while the Warrants are outstanding.

For
issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component
of additional paid-in capital at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification,
the Warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the accompanying unaudited condensed
statements of operations.

Derivative
Financial Instruments

The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance 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 unaudited condensed 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 condensed 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