Company: CDT
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001246
Chunk: 286

Company: CDT Equity Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 2
Chunk 286
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 available in an active market, valuation of these instruments does not entail a significant degree
    of judgment.

    ●
    Level
    2— Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for either similar
    instruments in active markets, identical or similar instruments in markets that are not active, or model-derived valuations whose
    inputs or significant value drivers are observable or can be corroborated by observable market data.

    ●
    Level
    3—Valuations based on inputs that are unobservable. These valuations require significant judgment.

The
Company’s Level 1 assets consist of cash and cash equivalents, including money market funds, in the accompanying balance sheets
and the value of accrued expenses and other current liabilities approximate fair value due to the short-term nature of these assets and
liabilities.

As
of December 31, 2024, the Company has two financial liabilities, warrant liabilities for which the fair value is determined based on
Level 2 and Level 3 inputs, and convertible debt carried at fair value for which the fair value is
determined based on Level 3 input. The Level 2 inputs are valued based on observable inputs other than quoted
prices included in Level 1, such as quoted prices for similar instruments in active markets. The level 3 inputs as such inputs are based
on unobservable inputs and require significant judgement. As of December 31 2023, the Company has one financial liability, a warrant liability for which the fair value is determined
based on Level 2 inputs as such inputs are valued based on observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar instruments in active markets.  See Note 3 for further information on the Company’s
financial liabilities carried at fair value.

    F-10

Fair
Value Option

The
Company has elected the fair value measurement option for convertible debt with embedded derivatives that would otherwise require bifurcation
and has recorded the entire hybrid financial instrument at fair value under the guidance in ASC 825, Financial Instruments. As a result,
the August 2024 Nirland Note was recorded at fair value subsequent to the Second Amendment and the A.G.P. Convertible Note was recorded
at fair value upon issuance. The notes will subsequently be remeasured at fair value each reporting date until settled or converted.
The Company reports interest expense, including accrued interest, related to the convertible debt under the fair value option,