Company: CDT
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001246
Chunk: 68

Company: CDT Equity Inc.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 68
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 and (ix) the estimated recovery upon default.
Any change to the unobservable inputs to estimate fair value could produce significantly higher or lower fair value measurements and
result in a material change within the financial statements.

The
convertible debt will subsequently be remeasured at fair value each reporting date until settled or converted. 

Fair
Value of Warrants

The
Company has issued warrants to investors in our debt and equity offerings. The Company has also issued warrants to service providers
in relation to our financing offerings. We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC
815. 

For
warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid
in capital. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date.

For
the Company’s liability classified warrants, we estimate fair value using the Black-Scholes model. The significant inputs and assumptions
used to estimate the fair value include: (i) the Company’s stock price, (ii) the risk-free rate, (iii) the expected volatility,
and (iv) the dividend yield. The use of these valuation models requires the input of highly subjective assumptions. Any change to these
inputs could produce significantly higher or lower fair value measurements and result in a material change within the financial statements.

67

Contingencies

In
the ordinary course of business, we are involved in various legal proceedings that are complex in nature and have outcomes that are difficult
to predict. We describe our legal proceedings and other matters that are significant or that we believe could become significant in Note
15 to the consolidated financial statements. We record accruals for loss contingencies to the extent that we conclude it is probable
that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis,
developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has
been accrued previously or modifications to contingency disclosures that are considered material.

Stock-Based
Compensation

We
record stock compensation expense related to our 2023 Plan in accordance with ASC 718, Compensation-Stock Compensation
which requires our stock-based awards, including restricted stock units (“RSUs”) and stock options to be measured at
fair value.

The
fair value of stock options is estimated on the grant date using the Black-S