pass Digital Acquisition (CDAQ) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial information of Compass Digital Acquisition Corp., including financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements. This section presents the unaudited condensed financial statements of Compass Digital Acquisition Corp. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with comprehensive notes detailing the company's organization, accounting policies, and financial instruments Condensed Balance Sheets This section provides the unaudited condensed balance sheets for Compass Digital Acquisition Corp. as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' deficit | ASSETS | June 30, 2025 (unaudited) | December 31, 2024 | | :------------------------------ | :------------------------ | :---------------- | | Cash | $1,521 | $27,720 | | Prepaid expenses | $6,181 | $24,898 | | Due from sponsor | $111,692 | - | | Total current assets | $119,394 | $52,618 | | Cash held in Trust Account | $1,272,260 | $27,637,300 | | Total assets | $1,391,654 | $27,689,918 | | LIABILITIES | | | | Accounts payable | $323,709 | $165,912 | | Accrued expenses | $610,633 | $501,314 | | Polar Capital Investment payable| $227,273 | $227,273 | | Non-redemption liability | $4,155,022 | $4,028,008 |\n| Working Capital Loans | $1,657,122 | $1,240,000 | | Total current liabilities | $6,973,759 | $6,162,507 | | Derivative warrant liabilities | $595,611 | $119,123 | | Total liabilities | $7,569,370 | $6,281,630 | | Class A Ordinary Shares subject to possible redemption | $1,272,260 | $27,637,300 | | Shareholders' Deficit | | | | Accumulated deficit | $(7,450,507) | $(6,229,543) | | Total shareholders' deficit | $(7,449,976) | $(6,229,012) | | Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption, and Shareholders' Deficit | $1,391,654 | $27,689,918 | Unaudited Condensed Statements of Operations This section presents the unaudited condensed statements of operations for the three and six months ended June 30, 2025, and 2024, detailing the company's net loss or income | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expense | $97,120 | $516,106 | $557,462 | $723,802 | | Administrative expenses - related party | $30,000 | $30,000 | $60,000 | $60,000 | | Loss from operations | $(127,120) | $(546,106) | $(617,462) | $(783,802) | | Change in fair value of non-redemption liability| $(15,640) | — | $(127,014) | — | | Change in fair value of derivative warrant liabilities | $(352,602) | $382,382 | $(476,488) | $(125,079) | | Interest earned on cash or investments held in Trust Account | $81,044 | $639,184 | $323,575 | $1,271,151 | | Net (loss) income | $(414,318) | $475,460 | $(897,389) | $362,270 | | Basic and diluted net (loss) income per share Class A Ordinary Shares subject to possible redemption | $(0.07) | $0.05 | $(0.13) | $0.03 | | Basic and diluted net (loss) income per share non-redeemable Class A Ordinary Shares | $(0.07) | $0.05 | $(0.13) | $0.03 | | Basic and diluted net (loss) income per share non-redeemable Class B Ordinary Shares | $(0.07) | $0.05 | $(0.13) | $0.03 | Unaudited Condensed Statements of Changes in Shareholders' Deficit This section outlines the unaudited condensed statements of changes in shareholders' deficit for various periods, reflecting movements in equity components | Item | Balance as of January 1, 2025 | Balance as of March 31, 2025 | Balance as of June 30, 2025 | | :---------------------------------------------- | :---------------------------- | :--------------------------- | :-------------------------- | | Total Shareholders' Deficit | $(6,229,012) | $(6,954,614) | $(7,449,976) | | Accretion of Class A Ordinary Shares to redemption amount | $(242,531) | $(81,044) | | | Net loss | $(483,071) | $(414,318) | | | Item | Balance as of January 1, 2024 | Balance as of March 31, 2024 | Balance as of June 30, 2024 | | :---------------------------------------------- | :---------------------------- | :--------------------------- | :-------------------------- | | Total Shareholders' Deficit | $(1,369,057) | $(1,909,665) | $(1,778,389) | | Allocation of Polar Capital Investment payable proceeds to equity instrument | $204,549 | | | | Accretion of Class A Ordinary Shares to redemption amount | $(631,967) | $(639,184) | | | Net (loss) income | $(113,190) | $475,460 | | | Capital contribution from Sponsor | | $295,000 | | Unaudited Condensed Statements of Cash Flows This section presents the unaudited condensed statements of cash flows for the six months ended June 30, 2025, and 2024, detailing operating, investing, and financing activities | Cash Flows from Operating Activities | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(897,389) | $362,270 | | Net cash used in operating activities| $(443,321) | $(498,760) | | Cash Flows from Investing Activities | | | | Net cash provided by investing activities | $26,688,615 | — | | Cash Flows from Financing Activities | | | | Net cash (used in) provided by financing activities | $(26,271,493) | $545,000 | | Net (decrease) increase in cash | $(26,199) | $46,240 | | Cash - end of period | $1,521 | $90,286 | Notes to Unaudited Condensed Financial Statements This section provides detailed notes explaining the company's accounting policies, financial instruments, and significant transactions underlying the condensed financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Compass Digital Acquisition Corp. is a blank check company formed to effectuate a business combination. It completed its IPO in October 2021, raising $200 million, and subsequently exercised an over-allotment option. The company's Trust Account funds were initially invested in U.S. government obligations but were liquidated to an interest-bearing demand deposit account in October 2023. The company has extended its business combination period multiple times, most recently to April 20, 2026, leading to significant public share redemptions. A Business Combination Agreement with EEW Renewables Corp. was entered into in September 2024. The company faces substantial doubt about its ability to continue as a going concern due to limited working capital and the deadline for a business combination - The Company is a blank check company incorporated on March 8, 2021, for the purpose of effectuating a business combination[20] - The Initial Public Offering (IPO) was consummated on October 19, 2021, raising $200,000,000 from 20,000,000 units at $10.00 per unit[23][24] - On October 19, 2023, the Company instructed the trustee to liquidate investments in the Trust Account and hold funds in an interest-bearing demand deposit account[29] - The Company has extended its Combination Period multiple times, with the latest extension to April 20, 2026, approved on April 16, 2025[38][48] Public Share Redemptions in connection with Extension Votes: | Event | Date | Public Shares Redeemed | Redemption Amount (approx.) | Per Share Price (approx.) | | :---------------- | :--------------- | :--------------------- | :-------------------------- | :------------------------ | | 2023 Redemptions | October 19, 2023 | 16,045,860 | $169.1 million | $10.54 | | 2024 Redemptions | July 18, 2024 | 2,713,143 | $29.6 million | $10.92 | | 2025 Redemptions | April 16, 2025 | 2,370,619 | $26.7 million | $11.25 | - On September 5, 2024, the Company entered into a Business Combination Agreement with EEW Renewables Ltd, which will result in the Company and EEW becoming wholly-owned subsidiaries of a new public entity, Pubco[54][55] - As of June 30, 2025, the Company had $1,521 in operating bank accounts and a working capital deficit of $2,699,343, raising substantial doubt about its ability to continue as a going concern[60][64] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the significant accounting policies, including the basis of presentation in conformity with GAAP, the company's status as an emerging growth company, and key policies for cash, trust account, redeemable shares, income taxes, offering costs, earnings per share, warrant liabilities, derivative financial instruments, credit risk, and fair value measurements - The unaudited condensed financial statements are presented in conformity with GAAP for interim financial information[65] - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[67][68] - Class A Ordinary Shares subject to possible redemption are classified as temporary equity at redemption value, outside of shareholders' deficit[75] - Warrants are accounted for as liability-classified instruments and re-valued at each reporting date, with changes in fair value recognized in the statements of operations[86][87] - The Company applies ASC 820 for fair value measurements, categorizing assets and liabilities into Level 1, 2, or 3 based on observability of inputs[91][92][93][94][95] NOTE 3 - INITIAL PUBLIC OFFERING The Company completed its Initial Public Offering on October 19, 2021, selling 20,000,000 units at $10.00 each, generating $200,000,000. An over-allotment option was partially exercised on November 30, 2021, adding 1,240,488 units and $12,404,880 to the Trust Account. Underwriters subsequently waived their rights to deferred underwriting fees - Initial Public Offering (IPO) on October 19, 2021: 20,000,000 Units sold at $10.00 per Unit, generating $200,000,000 gross proceeds[98] - Partial exercise of Over-Allotment Option on November 30, 2021: additional 1,240,488 Units sold, adding $12,404,880 to the Trust Account[100] - Underwriters waived their rights to deferred underwriting commission held in the Trust Account on August 11 and 14, 2023[100] NOTE 4 - PRIVATE PLACEMENT Simultaneously with the IPO, the Legacy Sponsor purchased 4,666,667 Private Placement Warrants for $7,000,000. An additional 165,398 Private Placement Warrants were purchased in connection with the over-allotment option. These warrants are identical to Public Warrants but lack redemption rights and expire worthless if a business combination is not consummated - Legacy Sponsor purchased 4,666,667 Private Placement Warrants at $1.50 each, generating $7,000,000[101] - Additional 165,398 Private Placement Warrants purchased with the partial exercise of the Over-Allotment option[101] - Private Placement Warrants have no redemption rights or liquidating distributions from the Trust Account and expire worthless if no Business Combination is consummated[102] NOTE 5 - RELATED PARTY TRANSACTIONS This note details transactions with related parties, including the issuance and conversion of Founder Shares, payroll allocations under the Sponsor Employment Agreement, Working Capital Loans (2021 and 2024 Promissory Notes) from affiliates, and the Polar Capital Investment. It also covers the fair value accounting for Founder Shares transferred under non-redemption agreements - Initially, 5,750,000 Class B Ordinary Shares (Founder Shares) were issued to the Legacy Sponsor. After forfeitures and conversions, 2,110,122 Class B Ordinary Shares were outstanding as of June 30, 2025[103] - The Sponsor has agreed to transfer 782,490 Class B Ordinary Shares to certain investors under non-redemption agreements, with an aggregate fair value of $4,155,022 as of June 30, 2025[111][112] - Working Capital Loans include a $125,000 outstanding 2021 Promissory Note and a $1,532,122 outstanding 2024 Promissory Note as of June 30, 2025, both non-interest bearing and convertible into warrants at the lender's discretion[113][114][115][116] - The Company has drawn $1,250,000 from the Polar Capital Investment as of June 30, 2025, fair valued at $227,273, which is repayable in cash or Class A Ordinary Shares upon business combination[120][121] - Administrative expenses paid to the Sponsors for office space and support were $30,000 for the three months and $60,000 for the six months ended June 30, 2025[122] NOTE 6 - COMMITMENTS AND CONTINGENCIES This note outlines the Company's commitments and contingencies, including registration rights for various securities, details of the underwriting agreement (with deferred fees waived), and non-redemption agreements from 2023, 2024, and 2025. These non-redemption agreements involve the Sponsor transferring Founder Shares to investors in exchange for their commitment not to redeem Public Shares - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan Warrants are entitled to registration rights[123] - Underwriters of the IPO waived their entitlement to deferred underwriting fees held in the Trust Account[129] - Non-Redemption Agreements (2023, 2024, 2025) involve the Sponsor agreeing to transfer 782,490 Class B Ordinary Shares to investors who committed not to redeem Public Shares[130][131][132][133] NOTE 7 – DERIVATIVE WARRANT LIABILITIES The Company's warrants are classified as derivative liabilities and are re-measured at fair value each reporting period, with changes recognized in the statements of operations. Public Warrants become exercisable 30 days after a business combination and expire five years later, subject to redemption conditions based on Class A Ordinary Share price thresholds ($18.00 or $10.00). Private Placement Warrants are similar but non-redeemable and exercisable on a cashless basis when held by initial purchasers or permitted transferees - Warrants are accounted for as liabilities and re-measured at fair value at each balance sheet date, with changes recognized in the condensed statements of operations[134][159] - Public Warrants become exercisable 30 days after a Business Combination and expire five years from consummation, or earlier upon redemption or liquidation[135] - The Company may redeem Warrants if the Class A Ordinary Share price equals or exceeds $18.00 (at $0.01 per warrant) or $10.00 (at $0.10 per warrant, with cashless exercise option)[139][140][142][143] - Private Placement Warrants are identical to Public Warrants but are non-transferable until 30 days after a Business Combination, exercisable on a cashless basis, and non-redeemable when held by initial purchasers or permitted transferees[147] Changes in Fair Value of Warrant Liabilities: | Item | Fair Value as of Dec 31, 2024 | Change in Fair Value (Q1 2025) | Fair Value as of Mar 31, 2025 | Change in Fair Value (Q2 2025) | Fair Value as of Jun 30, 2025 | | :------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | :---------------------------- | | Private Placement Warrants| $48,321 | $50,253 | $98,574 | $143,029 | $241,603 | | Public Warrants | $70,802 | $73,633 | $144,435 | $209,573 | $354,008 | | Total Warrant Liabilities | $119,123 | $123,886 | $243,009 | $352,602 | $595,611 | NOTE 8 - CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION Class A Ordinary Shares with redemption rights are classified as temporary equity at their redemption value. As of June 30, 2025, 110,866 shares were subject to possible redemption, down from 2,481,485 shares at December 31, 2024, reflecting significant redemptions during the period - Class A Ordinary Shares subject to possible redemption are classified as temporary equity at redemption value[148] Reconciliation of Class A Ordinary Shares Subject to Possible Redemption: | Item | Amount (USD) | | :---------------------------------------------- | :----------- | | Class A Ordinary Shares subject to possible redemption at December 31, 2023 | $55,347,556 | | Plus: Accretion to redemption value (2024) | $1,928,109 | | Less: Redemption of Class A Ordinary Shares (2024)| $(29,638,365)| | Class A Ordinary Shares subject to possible redemption at December 31, 2024 | $27,637,300 | | Plus: Accretion to redemption value (Q1 2025) | $242,531 | | Class A Ordinary Shares subject to possible redemption at March 31, 2025 | $27,879,831 | | Plus: Accretion to redemption value (Q2 2025) | $81,044 | | Less: Redemption of Class A Ordinary Shares (Q2 2025)| $(26,688,615)| | Class A Ordinary Shares subject to possible redemption at June 30, 2025 | $1,272,260 | NOTE 9 – SHAREHOLDERS' DEFICIT The Company is authorized to issue Preference Shares, Class A Ordinary Shares, and Class B Ordinary Shares. As of June 30, 2025, there were no Preference Shares, 3,310,866 Class A Ordinary Shares (with 110,866 subject to redemption), and 2,110,122 Class B Ordinary Shares outstanding. Class B shares are convertible into Class A shares on a one-for-one basis, subject to certain adjustments - Authorized 1,000,000 Preference Shares ($0.0001 par value); none issued or outstanding as of June 30, 2025, and December 31, 2024[150] - Authorized 200,000,000 Class A Ordinary Shares ($0.0001 par value); 3,310,866 issued and outstanding as of June 30, 2025 (110,866 subject to redemption)[151][152] - Authorized 20,000,000 Class B Ordinary Shares ($0.0001 par value); 2,110,122 issued and outstanding as of June 30, 2025. Class B shares are convertible into Class A shares on a one-for-one basis[153][155][156] NOTE 10 - FAIR VALUE MEASUREMENTS The Company measures certain assets and liabilities at fair value using a hierarchy of inputs (Level 1, 2, 3). Warrant liabilities are classified as Level 2, while non-redemption liabilities and Polar Capital Investment Payable are Level 3, reflecting the use of unobservable inputs in their valuation. The fair value of warrant liabilities increased significantly from December 31, 2024, to June 30, 2025 Fair Value Measurements of Liabilities: | Description | Level | June 30, 2025 | Level | December 31, 2024 | | :------------------------------ | :------ | :------------ | :------ | :---------------- | | Private Placement Warrants | Level 2 | $241,603 | Level 2 | $48,321 | | Public Warrants | Level 2 | $354,008 | Level 2 | $70,802 | | Non-redemption Liability | Level 3 | $4,155,022 | Level 3 | $4,028,008 | | Polar Capital Investment Payable| Level 3 | $227,273 | Level 3 | $227,273 | - Warrants are classified as Level 2 liabilities due to lack of trading activity for Public Warrants and reference to Public Warrant prices for Private Placement Warrants[160] Changes in Fair Value of Warrant Liabilities: | Item | Fair Value as of Dec 31, 2024 | Change in Fair Value (Q1 2025) | Fair Value as of Mar 31, 2025 | Change in Fair Value (Q2 2025) | Fair Value as of Jun 30, 2025 | | :------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | :---------------------------- | | Private Placement Warrants| $48,321 | $50,253 | $98,574 | $143,029 | $241,603 | | Public Warrants | $70,802 | $73,633 | $144,435 | $209,573 | $354,008 | | Total Warrant Liabilities | $119,123 | $123,886 | $243,009 | $352,602 | $595,611 | NOTE 11 - SEGMENT INFORMATION The Company operates as a single reportable segment, with the Chief Executive Officer serving as the chief operating decision maker (CODM). The CODM reviews overall company assets, operating results, and financial metrics, including cash, cash held in Trust Account, general and administrative expenses, and interest earned on Trust Account funds, to allocate resources and assess performance - The Company has determined that there is only one reportable segment, with the Chief Executive Officer identified as the CODM[165][166] - Key metrics reviewed by the CODM include cash, cash held in Trust Account, general and administrative expenses, and interest earned on Trust Account funds[167] NOTE 12 - SUBSEQUENT EVENTS Subsequent to June 30, 2025, the Company has drawn an additional $42,000 on the 2024 Promissory Note, increasing the total outstanding balance to $1,574,121 - An additional $42,000 was drawn on the 2024 Promissory Note, bringing the total outstanding balance to $1,574,121[171] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the Company's financial condition and operational results, highlighting its status as a blank check company, recent financial performance, liquidity challenges, and ongoing efforts to complete a business combination. It also discusses key events like the Sponsor Handover, extensions of the combination period, and the Business Combination Agreement with EEW Renewables Corp Overview Compass Digital Acquisition Corp. is a blank check company focused on a business combination, generating non-operating income from its Trust Account. Following its IPO and over-allotment, funds were placed in a Trust Account, later moved to an interest-bearing demand deposit account. The company has extended its combination period multiple times, leading to significant redemptions, and faces liquidation if a business combination is not completed by April 20, 2026 - The Company is a blank check company formed to effectuate a Business Combination, generating non-operating income from interest on IPO and Private Placement proceeds[174][175] - The Trust Account funds, initially invested in U.S. government obligations, were liquidated to an interest-bearing demand deposit account on October 19, 2023[179] - The Company must complete a Business Combination by April 20, 2026, or face mandatory liquidation and redemption of Public Shares[187] - As of June 30, 2025, the Company had $1,521 in cash and a working capital deficit of $2,699,343, indicating significant liquidity challenges[188] Recent Developments Since June 30, 2025, the Company has drawn an additional $42,000 on the 2024 Promissory Note, increasing the outstanding balance to $1,574,121. The Company's securities were delisted from Nasdaq on March 5, 2025, and are now quoted on the OTCID. On April 16, 2025, shareholders approved an extension of the Business Combination Period to April 20, 2026, and eliminated the net tangible assets redemption limitation - An additional $42,000 was drawn on the 2024 Promissory Note, bringing the total outstanding balance to $1,574,121[189] - The Company's securities were delisted from Nasdaq on March 5, 2025, and are now quoted on the OTCID[190] - Shareholders approved extending the Business Combination Period to April 20, 2026, and eliminating the redemption limitation on April 16, 2025[191][192] Sponsor Handover On August 31, 2023, the Legacy Sponsor transferred Founder Shares and Private Placement Warrants to the current Sponsor, HCG Opportunity, LLC. This handover also involved a change in the Board of Directors and officers, and the assignment of the Administrative Services Agreement to the new Sponsor - On August 31, 2023, the Legacy Sponsor transferred 3,093,036 Founder Shares and 4,645,398 Private Placement Warrants to the current Sponsor[193] - The Sponsor Handover included changes in the Board of Directors and officers, with new appointments for CEO and CFO[193] Extensions of our Combination Period The Company has repeatedly extended its Business Combination Period through shareholder approvals at EGMs in 2023, 2024, and 2025. Each extension resulted in significant redemptions of Public Shares, reducing the funds in the Trust Account - The Company extended its Business Combination Period from October 19, 2023, to July 19, 2024, then to April 19, 2025, and most recently to April 20, 2026[195][196][197][198] Public Share Redemptions in connection with Extension Votes: | Event | Public Shares Redeemed | Redemption Amount (approx.) | Per Share Price (approx.) | | :---------------- | :--------------------- | :-------------------------- | :------------------------ | | 2023 Redemptions | 16,045,860 | $169.1 million | $10.54 | | 2024 Redemptions | 2,713,143 | $29.6 million | $10.92 | | 2025 Redemptions | 2,370,619 | $26.7 million | $11.25 | Business Combination with EEW On September 5, 2024, the Company entered into a Business Combination Agreement with EEW Renewables Ltd. This agreement outlines a merger and share exchange that will result in the Company and EEW becoming wholly-owned subsidiaries of a new public entity, Pubco, which will then be publicly traded. The base consideration for sellers is $300,000,000 in Pubco Ordinary Shares, with potential earnout shares based on price targets or EBITDA performance - On September 5, 2024, the Company entered into a Business Combination Agreement with EEW Renewables Ltd[54][200] - The transaction involves a merger of Merger Sub into the Company and Pubco acquiring EEW shares, making both the Company and EEW wholly-owned subsidiaries of Pubco, which will become publicly traded[55][201] - The base consideration for Sellers is $300,000,000, paid in newly issued Pubco Ordinary Shares valued at $10.00 per share[56] - Sellers are also entitled to up to 4,200,000 Earnout Shares based on Pubco Ordinary Share price targets ($11.00 and $12.00) or Pubco's consolidated EBITDA for fiscal year ended April 30, 2025, exceeding $41.9 million[57] Results of Operations For the three and six months ended June 30, 2025, the Company reported net losses of $414,138 and $897,389, respectively. This contrasts with net incomes of $475,460 and $362,270 for the corresponding periods in 2024. The losses in 2025 were primarily driven by operating expenses, changes in fair value of non-redemption liability, and derivative warrant liabilities, partially offset by interest earned on the Trust Account Net (Loss) Income Summary: | Period | Net (Loss) Income | | :------------------------------------ | :---------------- | | Three months ended June 30, 2025 | $(414,318) | | Three months ended June 30, 2024 | $475,460 | | Six months ended June 30, 2025 | $(897,389) | | Six months ended June 30, 2024 | $362,270 | - Key drivers for the net loss in 2025 include operating expenses, changes in fair value of non-redemption liability, and derivative warrant liabilities, partially offset by interest income from the Trust Account[204][205] Liquidity, Capital Resources and Going Concern As of June 30, 2025, the Company had limited cash and a significant working capital deficit, raising substantial doubt about its ability to continue as a going concern. Liquidity has been historically met through sponsor payments, promissory notes, private placement proceeds, and the Polar Capital Investment. The Company needs to complete a Business Combination by April 20, 2026, but lacks sufficient financial resources to sustain operations for a reasonable period - As of June 30, 2025, the Company had $1,521 in cash and a working capital deficit of $2,699,343[208] - Liquidity needs have been satisfied through various sources, including sponsor payments, IPO Promissory Note, Private Placement proceeds, 2021 and 2024 Working Capital Loans, and the Polar Capital Investment[208] - The 2021 Promissory Note had $125,000 outstanding, and the 2024 Promissory Note had $1,532,122 outstanding as of June 30, 2025[211][212] - The Company had drawn $1,250,000 from the Polar Capital Investment as of June 30, 2025[213] - Management believes the Company may not have sufficient working capital to meet its needs through the consummation of a Business Combination by the April 20, 2026 deadline, raising substantial doubt about its ability to continue as a going concern[215][216] Contractual Obligations The Company's contractual obligations include an Administrative Services Agreement with the Sponsor for monthly fees, registration rights for various securities, and the Underwriting Agreement (with deferred fees waived). It also details the Polar Capital Investment repayment terms, the Letter Agreement with Sponsors and officers, and the Non-Redemption Agreements which involve the transfer of Founder Shares to investors - The Company may reimburse the Sponsors up to $10,000 per month for administrative support, with $220,000 accrued but unpaid as of June 30, 2025[217] - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan Warrants are entitled to registration rights[218] - Underwriters waived their deferred underwriting fees from the IPO[222] - The Polar Capital Investment of up to $1,500,000 is repayable in cash or Class A Ordinary Shares upon a Business Combination[223] - Sponsors and officers waived rights to liquidating distributions from the Trust Account for Founder Shares if no Business Combination is completed[224] - Non-Redemption Agreements (2023, 2024, 2025) commit the Sponsor to transfer 782,490 Founder Shares to investors who agreed not to redeem Public Shares[226][228][229][230] Critical Accounting Estimates The preparation of financial statements requires management to make significant estimates and judgments, particularly concerning the fair value of financial instruments and accrued expenses. These estimates are based on historical experience and various factors, and actual results may differ - Preparation of financial statements requires significant estimates and judgments, affecting reported amounts of assets, liabilities, revenues, and expenses[231] - Key estimates include the fair value of financial instruments and accrued expenses[231] Emerging Growth Company The Company is an 'emerging growth company' under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements. It has elected not to opt out of the extended transition period for new or revised financial accounting standards, which may impact comparability with other public companies - The Company is an 'emerging growth company' and benefits from exemptions under the JOBS Act[232] - The Company has elected not to opt out of the extended transition period for new accounting standards, which may affect comparability of financial statements[233] Use of Estimates Management's financial reporting relies on estimates and assumptions that influence reported asset and liability amounts, as well as contingent disclosures. These estimates involve significant judgment, and actual outcomes could vary from these projections - Financial statements require management to make estimates and assumptions affecting reported amounts and disclosures[234] - Estimates involve significant judgment, and actual results may differ from these estimates[235] Critical Accounting Policies The Company's critical accounting policies include the calculation of Net Loss Per Ordinary Share, the accounting for Warrant Liability as a re-measured liability, and the classification of Class A Ordinary Shares Subject to Redemption as temporary equity - Net Loss Per Ordinary Share is calculated by dividing net loss by the weighted average of Ordinary Shares outstanding, excluding the effect of warrants due to contingent exercise[236] - Warrants are accounted for as liability-classified instruments, recorded at fair value at issuance and re-valued at each balance sheet date, with changes recognized in the statements of operations[237][238] - Class A Ordinary Shares subject to possible redemption are classified as temporary equity at redemption value due to redemption rights outside the Company's control[239] Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, Compass Digital Acquisition Corp. is not required to provide detailed quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[240] Item 4. Controls and Procedures. The Company's management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[242] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[244] PART II. OTHER INFORMATION This section covers other pertinent information, including legal proceedings, risk factors, equity security sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings. To the best of management's knowledge, there is no material litigation currently pending or contemplated against the Company or its officers and directors - No material litigation is currently pending or contemplated against the Company or its officers/directors[246] Item 1A. Risk Factors. As a smaller reporting company, the Company is not required to include risk factors in this report. For additional risks, reference is made to the Company's Annual Report on Form 10-K and Definitive Proxy Statement - The Company, as a smaller reporting company, is not required to include risk factors in this report[247] - Additional risks are detailed in the Company's Annual Report on Form 10-K and Definitive Proxy Statement[247] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section confirms no unregistered sales of equity securities. It also details the use of IPO and Private Placement proceeds, noting the change in Trust Account investment strategy and the impact of redemptions from the 2025 EGM on equity securities Unregistered Sales of Equity Securities This subsection confirms that there were no unregistered sales of equity securities during the reporting period - There were no unregistered sales of equity securities[248] Use of Proceeds This subsection details the utilization of proceeds from the IPO and Private Placement, including the change in Trust Account investment strategy - The Trust Account funds, initially invested in U.S. government securities, were liquidated and are now held in an interest-bearing demand deposit account[250] Purchases of Equity Securities by the Issuer and Affiliated Purchasers This subsection outlines the repurchases of equity securities, specifically detailing public share redemptions in connection with the 2025 EGM - In connection with the 2025 EGM, Public Shareholders redeemed 2,370,619 Public Shares, resulting in approximately $26.7 million being removed from the Trust Account[251] Repurchases of Equity Securities (Three Months Ended June 30, 2025): | Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | | :---------------------- | :------------------------------------------ | :------------------------------------- | :------------------------------------------------------------------------------------------ | :-------------------------------------------------------------------------------------------------------------------- | | April 1 – April 30, 2025| 2,370,619 | $11.25 | — | — | | May 1 – May 31, 2025 | — | — | — | — | | June 1 – June 30, 2025 | — | — | — | — | Item 3. Defaults Upon Senior Securities. There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[254] Item 4. Mine Safety Disclosures. This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[255] Item 5. Other Information. This section confirms that no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter Trading Arrangements This subsection confirms that no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter ended June 30, 2025[256] Additional Information This subsection provides any additional information not covered elsewhere in the report Item 6. Exhibits. This section lists the exhibits filed as part of, or incorporated by reference into, the Form 10-Q report, including amendments to the Articles of Association, certifications, and XBRL documents - Exhibits include the Third Amendment to Amended and Restated Memorandum and Articles of Association, certifications from principal executive and financial officers, and Inline XBRL documents[258] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, attesting to the report's accuracy Signatures The report is duly signed on behalf of Compass Digital Acquisition Corp. by its Chief Executive Officer, Thomas D. Hennessy, and Chief Financial Officer, Nicholas Geeza, on August 13, 2025 - The report was signed by Thomas D. Hennessy, Chief Executive Officer, and Nicholas Geeza, Chief Financial Officer, on August 13, 2025[263]