Company: CDT
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001641172-25-024140
Chunk: 84

Company: CDT Equity Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 8
Chunk 84
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 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.

    8

The
Company’s Level 1 assets consist of cash and cash equivalents in the accompanying balance sheets, convertible notes payable 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 June 30, 2025, 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.

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, separately
from within the change in fair value of the convertible debt in the accompanying condensed consolidated statement of operations and comprehensive
loss. Any changes in fair value caused by instrument-specific credit risk are presented separately in other comprehensive income.

Research
and Development

Research
and development expenses consist primarily of costs incurred in connection with the research and development of our clinical assets and
programs, see Note 6 for further discussion of research and development expense. CDT licenses its assets from a large