Company: CDAQF
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001641172-25-010268
Chunk: 92

Company: Compass Digital Acquisition Corp.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 8
Chunk 92
---
 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 intervals.

Level 3-Inputs to the fair value measurement are unobservable
inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

    12

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2025

Recent Accounting Pronouncements

Management does not believe that any recently issued,
but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the