UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40912

Compass Digital Acquisition Corp.

(Exact name of registrant as specified in its charter)

Cayman Islands		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

195 US HWY 50, Suite 309

Zephyr Cove, NV

89448

(Address of principal executive offices)

(Zip Code)

(214) 526-4423

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, each consisting of one Class A Ordinary Share and one-third of one redeemable Warrant	CDAQU	The Nasdaq Stock Market LLC

Class A Ordinary Shares, par value $0.0001 per share	CDAQ	The Nasdaq Stock Market LLC

Warrants, each exercisable for one Class A Ordinary Share for $11.50 per share	CDAQW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

As of August 13, 2024, there were 5,681,485 Class A ordinary shares, par value $0.0001 per share, and 2,110,122 Class B ordinary shares, par value $0.0001 per share, of the registrant issued and outstanding.

COMPASS DIGITAL ACQUISITION CORP.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION		5

Item 1.	Financial Statements.	5
	Condensed Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	5
	Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023	6
	Unaudited Condensed Statements of Changes in Shareholders’ Deficit for the Three and Six Months Ended June 30, 2024 and 2023	7
	Unaudited Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	8
	Notes to Unaudited Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	37
Item 4.	Controls and Procedures.	37

PART II. OTHER INFORMATION		38
Item 1.	Legal Proceedings.	38
Item 1A.	Risk Factors.	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	39
Item 3.	Defaults Upon Senior Securities.	40
Item 4.	Mine Safety Disclosures.	40
Item 5.	Other Information.	40
Item 6.	Exhibits.	40
SIGNATURES		41

Unless otherwise stated in this Report (as defined below), or the context otherwise requires, references to:

	●	“2021 Annual Report” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC (as defined below) on February 24, 2022;

	●	“2022 Annual Report” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on April 18, 2023;

	●	“2023 Annual Report” are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 1, 2024;

	●	“2023 EGM” are to our extraordinary general meeting of shareholders held on October 12, 2023;

	●	“2023 Founder Share Conversion” are to the 600,000 Class A Ordinary Shares (as defined below) issued on October 19, 2023, following the approval of the Founder Share Amendment Proposal (as defined below) by our shareholders at the 2023 EGM, to the Sponsors (as defined below) upon the conversion of an equal number of Class B Ordinary Shares (as defined below) held by the Sponsors as Founder Shares (as defined below);

	●	“2023 Non-Redemption Agreements” are to the agreements we entered into with the New Sponsor (as defined below) and unaffiliated third-party investors in exchange for such investors agreeing not to redeem an aggregate of 4,998,734 Public Shares (as defined below) in connection with the vote to approve the Charter Amendment Proposals (as defined below) at the 2023 EGM;

	●	“2023 Redemptions” are to the 16,045,860 Public Shares whose holders properly exercised their right to redeem their Public Shares for cash at a redemption price of approximately $10.54 per share in connection with the approval of the Charter Amendment Proposals;

	●	“2024 EGM” are to our extraordinary general meeting of shareholders in lieu of an annual general meeting of shareholders held on July 18, 2024;

	●	“2024 Founder Share Conversion” are to the 2,600,000 Class A Ordinary Shares issued on July 24, 2024 in connection with the 2024 EGM, to the Sponsors upon the conversion of an equal number of Class B Ordinary Shares held by the Sponsors as Founder Shares;

	●	“2024 Non-Redemption Agreements” are to the agreements we entered into with the New Sponsor and unaffiliated third-party investors in exchange for such investors agreeing not to redeem an aggregate of 2,475,000 Public Shares in connection with the vote to approve the Second Extension Amendment Proposal (as defined below) at the 2024 EGM;

	●	“2024 Redemptions” are to the 2,713,143 Public Shares whose holders properly exercised their right to redeem their Public Shares for cash at a redemption price of approximately $10.92 per share in connection with the approval of the Second Extension Amendment Proposal;

	●	“2024 SPAC Rules” are to the new rules and regulations for SPACs (as defined below) adopted by the SEC on January 24, 2024, which became effective on July 1, 2024;

	●	“Administrative Services Agreement” are to the Administrative Services Agreement, dated October 14, 2021, which we entered into with our Legacy Sponsor (as defined below), as assigned to our New Sponsor in connection with the Sponsor Handover (as defined below);

	●	“Amended and Restated Charter” are to our Amended and Restated Memorandum and Articles of Association, as amended and currently in effect;

	●	“ASC” are to the FASB (as defined below) Accounting Standards Codification;

	●	“ASC 480” are to FASB ASC Topic 480 “Distinguishing Liabilities from Equity”;

	●	“ASC 815” are to FASB ASC Topic 815, “Derivatives and Hedging”;

	●	“Board of Directors” or “Board” are to our board of directors;

	●	“Business Combination” are to a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses;

	●	“Charter Amendment Proposals” are to the First Extension Amendment Proposal (as defined below) and the Founder Share Amendment Proposal, together;

	●	“Class A Ordinary Shares” are to our Class A ordinary shares, par value $0.0001 per share;

	●	“Class B Ordinary Shares” are to our Class B ordinary shares, par value $0.0001 per share;

	●	“Combination Period” are to the potentially 42-month period, from the closing of the Initial Public Offering to December 19, 2024 or April 19, 2025 if all four (4) monthly extensions pursuant to the Second Extension Amendment Proposal are used (or such earlier date as determined by the Board) as extended by the Second Extension Amendment Proposal approved at the 2024 EGM, that we have to consummate an initial Business Combination;

	●	“Company,” “our,” “we,” or “us” are to Compass Digital Acquisition Corp., a Cayman Islands exempted company;

	●	“Continental” are to Continental Stock Transfer & Trust Company, our transfer agent, trustee of our Trust Account (as defined below) and warrant agent of our Public Warrants (as defined below);

	●	“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

	●	“FASB” are to the Financial Accounting Standards Board;

	●	“First Extension Amendment Proposal” are to the proposal at the 2023 EGM to extend the Combination Period from October 19, 2023 to July 19, 2024 (or such earlier date as determined by the Board);

	●	“Founder Share Amendment Proposal” are to the proposal at the 2023 EGM to provide for the right of a holder of Class B Ordinary Shares to convert such shares into Class A Ordinary Shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holder;

	●	“Founder Shares” are to the Class B Ordinary Shares initially purchased by our Initial Shareholders (as defined below) in the Private Placement (as defined below) and the Class A Ordinary Shares that (i) will be issued upon the automatic conversion of the Class B Ordinary Shares at the time of our Business Combination as described herein and (ii) were issued in connection with the 2023 Founder Share Conversion and 2024 Founder Share Conversion upon the conversion of an equal number of Class B Ordinary Shares (for the avoidance of doubt, such Class A Ordinary Shares will not be “Public Shares”);

	●	“GAAP” are to the accounting principles generally accepted in the United States of America;

	●	“GCG” are to YAS International, LLC (d/b/a Gupta Capital Group), an affiliate of our Legacy Sponsor;

	●	“Initial Public Offering” or “IPO” are to the initial public offering that we consummated on October 19, 2021;

	●	“Initial Shareholders” are to holders of our Founder Shares, including out Legacy Sponsor, prior to our Initial Public Offering;

	●	“Institutional Anchor Investors” are to certain institutional investors that are not affiliated with us, our Sponsors, our Prior Directors or Officers (as defined below), or any member of our Management (as defined below), that purchased our securities in connection with the Initial Public Offering;

	●	“Investment Company Act” are to the Investment Company Act of 1940, as amended;

	●	“IPO Promissory Note” are to that certain unsecured promissory note in the principal amount of up to $250,000 issued to an affiliate of our Legacy Sponsor on March 9, 2021;

	●	“IPO Registration Statement” are to the Registration Statement on Form S-1 initially filed with the SEC on September 14, 2021, as amended, and declared effective on October 14, 2021 (File No. 333-259502);

	●	“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;

	●	“Legacy Sponsor” are to Compass Digital SPAC LLC, a Delaware limited liability company;

	●	“Legacy Working Capital Loans” are to funds that, in order to provide working capital or finance transaction costs in connection with a Business Combination, the Initial Shareholders, Sponsors or an affiliate of the Initial Shareholders or Sponsors, or certain of our Prior Directors and Officers or current directors and officers, may, but are not obligated to, loan us;

	●	“Letter Agreement” are to the Letter Agreement, dated October 14, 2021, which we entered into with our Legacy Sponsor and Prior Directors and Officers, as amended by the Letter Agreement Amendment (as defined below) and as agreed to by our current directors and officers pursuant to the Letter Agreement Joinder (as defined below);

	●	“Letter Agreement Amendment” are to the Amendment to Letter Agreement, dated as of August 31, 2023, which we entered into with our Sponsors and Prior Directors and Officers;

	●	“Letter Agreement Joinder” are to the Joinder to Letter Agreement, dated as of March 29, 2024, which we entered into with our current directors and officers;

	●	“Management” or our “Management Team” are to our executive officers and directors;

	●	“New Sponsor” are to HCG Opportunity, LLC, a Delaware limited liability company;

	●	“Ordinary Shares” are to the Class A Ordinary Shares and the Class B Ordinary Shares, together;

	●	“Over-Allotment Option” are to the 45-day option we granted to the underwriters of the Initial Public Offering;

	●	“Over-Allotment Units” are to units purchased by the underwriters of the Initial Public Offering upon partial exercise of the Over-Allotment Option on November 30, 2021;

	●	“Polar” are to Polar Multi-Strategy Master Fund;

	●	“Polar Capital Investment” are to the agreement by Polar to fund up to $1,500,000 to us, subject to funding milestones, which when reached, Polar will fund certain amounts to us if the New Sponsor requests a draw down pursuant to the Polar Subscription Agreement (as defined below);

	●	“Polar Subscription Agreement” are to the Subscription Agreement, dated September 6, 2023, that we entered into with Polar and our New Sponsor;

	●	“Prior Directors and Officers” are to Abidali Neemuchwala, Burhan Jaffer, Satish Gupta, Steven Freiberg, Deborah C. Hopkins and Bill Owens;

	●	“Private Placement” are to the private placement of Private Placement Warrants (as defined below) that occurred simultaneously with the closing of our Initial Public Offering;

	●	“Private Placement Warrants” are to the warrants issued to our Legacy Sponsor and the underwriters of the Initial Public Offering in the Private Placement;

	●	“Public Shares” are to the Class A Ordinary Shares sold as part of the Units (as defined below) in our Initial Public Offering (whether they were purchased in our Initial Public Offering or thereafter in the open market);

	●	“Public Shareholders” are to the holders of our Public Shares, including our Sponsors, Initial Shareholders, Prior Directors and Officers and Management Team to the extent our Sponsors, Initial Shareholders, Prior Directors and Officers and and/or the members of our Management Team purchase Public Shares, provided that each Sponsors’, Initial Shareholder’s, Prior Directors’ and Officers’ and each member of our Management Team’s status as a “Public Shareholder” will only exist with respect to such Public Shares;

	●	“Public Warrants” are to the redeemable warrants sold as part of the Units in our Initial Public Offering (whether they were subscribed for in our Initial Public Offering or purchased in the open market);

	●	“Registration Rights Agreement” are to the Registration Rights Agreement, dated October 14, 2021, which we entered into with the Initial Shareholders and the holders party thereto, including parties of the Registration Rights Agreement Joinder (as defined below);

	●	“Registration Rights Agreement Joinder” are to the joinder to the Registration Rights Agreement entered into by our New Sponsor in connection with the Sponsor Handover;

	●	“Report” are to this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024;

	●	“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;

	●	“SEC” are to the U.S. Securities and Exchange Commission;

	●	“Second Extension Amendment Proposal” are to the proposal at the 2024 EGM to extend the Combination Period from July 19, 2024 to December 19, 2024, or April 19, 2025 if all four (4) monthly extensions pursuant to the Second Extension Amendment Proposal are used (or such earlier date as determined by the Board);

	●	“Securities Act” are to the Securities Act of 1933, as amended;

	●	“SPACs” are to special purpose acquisition companies;

	●	“Sponsor Handover” are to the transactions contemplated by the Sponsor Purchase Agreement (as defined below), which were consummated on August 31, 2023;

	●	“Sponsor Purchase Agreement” are to the Securities Purchase Agreement, effective as of August 31, 2023, into which our Sponsors entered in connection with the Sponsor Handover;

	●	“Sponsors” are to our Legacy Sponsor and New Sponsor, together;

	●	“Trust Account” are to the U.S.-based trust account in which an amount of $200,000,000 from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants in the Private Placement was placed following the closing of the Initial Public Offering;

	●	“Units” are to the units sold in our Initial Public Offering, which consist of one Public Share and one-third of one Public Warrant;

	●	“Warrants” are to the Private Placement Warrants and the Public Warrants, together;

	●	“WCL Promissory Note” are to the unsecured promissory note in the principal amount of up to $1,000,000 we issued to GCG on December 30, 2021 in connection with the Legacy Working Capital Loans; and

	●	“WCL Warrants” are to the warrants to purchase Class A Ordinary Shares, which may be issued upon the conversion of any unpaid balance of the WCL Promissory Note at GCG’s option.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

COMPASS DIGITAL ACQUISITION CORP.

CONDENSED BALANCE SHEETS

	JUNE 30, 2024			DECEMBER 31, 2023
	(unaudited)
ASSETS
Cash	$	90,286		$	44,046
Prepaid expenses		46,300			35,635
Total current assets		136,586			79,681
Cash held in Trust Account		56,618,707			55,347,556
Total Assets	$	56,755,293		$	55,427,237

LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	590,319		$	476,567
Polar Capital Investment payable – related party		136,364			90,909
WCL Promissory Note payable – Legacy Sponsor		125,000			125,000
Accrued expenses		349,749			167,798
Total current liabilities		1,201,432			860,274
Derivative warrant liabilities		713,543			588,464
Total liabilities		1,914,975			1,448,738

Commitments and Contingencies (Note 5)		-			-

Class A ordinary shares subject to possible redemption, $0.0001 par value; 5,194,628 shares at $10.90 and 10.65 per share at June 30, 2024 and December 31, 2023, respectively		56,618,707			55,347,556

Shareholders’ deficit
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding		-			-
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 600,000 shares issued or outstanding (excluding 5,194,628 shares subject to possible redemption at June 30, 2024 and December 31, 2023)		60			60
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 4,710,122 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		471			471
Common stock, value		471			471
Accumulated deficit		(1,778,920	)		(1,369,588	)
Total shareholders’ deficit		(1,778,389	)		(1,369,057	)
Total Liabilities, Ordinary Shares Subject to Possible Redemption, and Shareholders’ Deficit	$	56,755,293		$	55,427,237

The accompanying notes are an integral part of these unaudited condensed financial statements.

COMPASS DIGITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

	For The Three Months Ended June 30, 2024			For The Three Months Ended June 30, 2023			For The Six Months Ended June 30, 2024			For The Six Months Ended June 30, 2023

Operating expenses	$	516,106		$	323,230		$	723,802		$	612,034
Administrative expenses - related party		30,000			10,000			60,000			40,000
Loss from operations		(546,106	)		(333,230	)		(783,802	)		(652,034	)
Change in fair value of derivative warrant liabilities		382,382			(223,949	)		(125,079	)		(819,560	)
Interest earned on cash or investments held in Trust Account		639,184			2,568,625			1,271,151			4,873,014
Net income	$	475,460		$	2,011,446		$	362,270		$	3,401,420
Weighted average shares outstanding of Class A Ordinary shares subject to possible redemption, basic and diluted		5,194,628			21,240,488			5,194,628			21,240,488
Basic and diluted net income per share, Class A Ordinary Shares subject to possible redemption	$	0.05		$	0.08		$	0.03		$	0.13
Weighted average shares outstanding of Class A non-redeemable Class A Ordinary Shares, basic and diluted		600,000			-			600,000			-
Basic and diluted net income per share, Class A non-redeemable Ordinary Shares	$	0.05		$	0.00		$	0.03		$	0.00
Weighted average shares outstanding of Class B non-redeemable Class B Ordinary Shares, basic and diluted		4,710,122			5,310,122			4,710,122			5,310,122
Basic and diluted net income per share, Class B non-redeemable Ordinary Shares	$	0.05		$	0.08		$	0.03		$	0.13

The accompanying notes are an integral part of these unaudited condensed financial statements.

COMPASS DIGITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit
	Ordinary Shares								Additional						Total
	Class A				Class B				Paid-In			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit
Balance as of January 1, 2024		600,000	$	60		4,710,122		471	$	-		$	(1,369,588	)	$	(1,369,057	)
Allocation of Polar Capital Investment payable proceeds to equity instrument		-		-		-		-		204,549			-			204,549
Accretion of Class A Ordinary Shares to redemption amount		-		-		-		-		(204,549	)		(427,418	)		(631,967	)
Net loss		-		-		-		-		-			(113,190	)		(113,190	)
Balance as of March 31, 2024 (unaudited)		600,000	$	60		4,710,122	$	471	$	-		$	(1,910,196	)	$	(1,909,665	)

Capital contribution from Sponsor		-		-		-		-		295,000			-			295,000
Accretion of Class A Ordinary Shares to redemption amount		-		-		-		-		(295,000	)		(344,184	)		(639,184	)
Net income		-		-		-		-		-			475,460			475,460
Balance as of June 30, 2024 (unaudited)		600,000	$	60		4,710,122	$	471	$	-		$	(1,778,920	)	$	(1,778,389	)

	Ordinary Shares								Additional					Total
	Class A				Class B				Paid-In		Accumulated			Shareholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance as of January 1, 2023		-	$	-		5,310,122		531	$	-	$	(8,356,114	)	$	(8,355,583	)
Accretion of Class A Ordinary Shares to redemption amount						-		-		-		(2,304,389	)		(2,304,389	)
Net income		-		-		-		-		-		1,389,974			1,389,974
Balance as of March 31, 2023 (unaudited)		-	$	-		5,310,122	$	531	$	-	$	(9,270,529	)	$	(9,269,998	)
Balance		-	$	-		5,310,122	$	531	$	-	$	(9,270,529	)	$	(9,269,998	)
Accretion of Class A Ordinary Shares to redemption value						-		-		-		(2,568,625	)		(2,568,625	)
Net income		-		-		-		-		-		2,011,446			2,011,446
Net income (loss)		-		-		-		-		-		2,011,446			2,011,446
Balance as of June 30, 2023 (unaudited)		-	$	-		5,310,122	$	531	$	-	$	(9,827,708	)	$	(9,827,177	)
Balance		-	$	-		5,310,122	$	531	$	-	$	(9,827,708	)	$	(9,827,177	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

COMPASS DIGITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

	FOR THE SIX MONTHS ENDED JUNE 30, 2024			FOR THE SIX MONTHS ENDED JUNE 30, 2023
Cash Flows from Operating Activities
Net income	$	362,270		$	3,401,420
Adjustments to reconcile net income to net cash used in operating activities:
Interest earned on cash or investments held in Trust Account		(1,271,151	)		(4,873,014	)
Change in fair value of derivative warrant liabilities		125,079			819,560
Changes in operating assets and liabilities:
Prepaid expenses		(10,661	)		170,114
Accounts payable and accrued expenses		295,703			130,260
Net cash used in operating activities		(498,760	)		(351,660	)
Cash Flows from Financing Activities
Proceeds from Polar Capital Investment payable-related party		250,000			-
Proceeds of Legacy Working Capital Loans		-			35,000
Capital contribution from Sponsor		295,000			-
Net cash provided by financing activities		545,000			35,000

Net increase (decrease) in cash		46,240			(316,660	)
Cash - beginning of period		44,046			936,434
Cash - end of period	$	90,286		$	619,774

Supplemental disclosure of non-cash investing and financing activities:
Allocation of Polar Capital Investment payable proceeds to equity instrument	$	(499,545	)	$	-
Accretion of Class A ordinary shares to redemption amount	$	1,271,151		$	4,873,014

The accompanying notes are an integral part of these unaudited condensed financial statements.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Compass Digital Acquisition Corp. (the “Company”) is a blank check company incorporated in the Cayman Islands on March 8, 2021. The Company was formed for the purpose of effectuating a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of June 30, 2024, the Company had not yet commenced any operations. All activity for the period from March 8, 2021 (inception) through June 30, 2024 relates to the Company’s formation, the initial public offering that was consummated by the Company on October 19, 2021 (the “Initial Public Offering” or “IPO”), which is described below, and the search for a target business with which to consummate an initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and the Private Placement (as defined below). The Company has selected December 31 as its fiscal year end.

The Company’s sponsor was originally Compass Digital SPAC LLC (the “Legacy Sponsor”), until August 31, 2023 and has been HCG Opportunity, LLC, a Delaware limited liability company (the “New Sponsor,” together, with the Legacy Sponsor, the “Sponsors”), since August 31, 2023 (see Note 5). The Registration Statement on Form S-1 for the Initial Public Offering, initially filed with the Securities and Exchange Commission (the “SEC”) on September 14, 2021, as amended (File No. 333-259502), was declared effective on October 14, 2021 (the “IPO Registration Statement”). On October 19, 2021, the Company consummated the Initial Public Offering of 20,000,000 units (“Units” and, with respect to the (i) Class A Ordinary Shares (as defined below) included in the Units offered, the “Public Shares” and (ii) redeemable warrants included in the Units offered, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of $200,000,000. Each Unit consists of one Class A Ordinary Share, par value $0.0001 per share, of the Company (the “Class A Ordinary Shares”), and one-third of one Public Warrant (see Note 3).

Certain institutional anchor investors that are not affiliated with the Company, the Legacy Sponsor, or the Company’s officers, directors, or any member of the Company’s management (“Management” and such investors, the “Institutional Anchor Investors”) purchased an aggregate of 20,000,000 Units in the Initial Public Offering. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $200,000,000.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,666,667 warrants (the “Private Placement Warrants,” and together with the Public Warrants, the “Warrants”) to the Legacy Sponsor at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $7,000,000 (such sale, the “Private Placement”) (see Note 4). Concurrently with the closing of the Private Placement, the Institutional Anchor Investors paid the Legacy Sponsor $280,000 for the transfer of an aggregate of 186,667 Private Placement Warrants, which transfer will take place upon the closing of the initial Business Combination.

The Institutional Anchor Investors also purchased a portion of the equity interests of the Legacy Sponsor equivalent to 1,547,727 Founder Shares (as defined in Note 5) from the Legacy Sponsor at the original purchase price of $0.004 per share. The Founder Shares may be converted into Class A Ordinary Shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holders and will be automatically converted into Class A Ordinary Shares at the Business Combination on a one-for-one basis, subject to adjustment as provided in its Amended and Restated Memorandum and Articles of Association (as amended and currently in effect, the “Amended and Restated Charter”).

Transaction costs amounted to $11,929,189, consisting of $4,000,000 of underwriting fees, $7,000,000 of deferred underwriting fees and $929,189 of other offering costs. Of these transaction fees, the Company subsequently obtained a discount related to the underwriter fees of $199,999 and expensed $631,124 related to the allocation of offering costs and Founders Shares to Warrant expense. Other non-cash transaction costs include the fair value in excess of consideration of $10,414,655 in relation to Founder Shares purchased by Institutional Anchor Investors. Subsequent to the Initial Public Offering close, there was an additional $676,712 in related transaction offering costs incurred, of which $37,917 related to the allocation of offering costs and Founders Shares to Warrant expense in 2021.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

Following the closing of the Initial Public Offering on October 19, 2021, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants in the Private Placement was placed in a trust account located in the United States (the “Trust Account”) and shall be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below. On October 19, 2023, the Company instructed Continental Stock Transfer & Trust Company, the trustee of the Trust Account (“Continental”), to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at Citibank, N.A., with Continental continuing to act as trustee, until the earlier of the consummation of the initial Business Combination or the Company’s liquidation. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and Private Placement are no longer invested in U.S. government securities or money market funds invested in U.S. government securities.

The underwriters of the Initial Public Offering notified the Company of their intention to partially exercise the over-allotment option on November 30, 2021 (the “Over-Allotment Option”). As such, on November 30, 2021, the Company consummated the sale of an additional 1,240,488 units (the “Over-Allotment Units”), at $10.00 per Over-Allotment Unit, and the sale of an additional 165,398 Private Placement Warrants, at $1.50 per Private Placement Warrant, generating total gross proceeds of $12,404,880 and $248,097, respectively. The underwriters forfeited the balance of the Over-Allotment Option. A total of $12,404,880 of the net proceeds of the exercise of the Over-Allotment Option was deposited into the Trust Account, bringing the aggregate proceeds deposited into the Trust Account in connection with the Initial Public Offering to $212,404,880. The Company incurred additional offering costs of $682,268 in connection with the exercise of the Over-Allotment Option (of which $434,171 was for deferred underwriting fees). On August 11, 2023 and August 14, 2023, the underwriters informed the Company of their decision to waive their rights to the deferred underwriting commission held in the Trust Account.

Management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the Private Placement, although substantially all of the net proceeds are being applied generally toward consummating a Business Combination. The Nasdaq Stock Market LLC (“Nasdaq”) rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less any taxes payable on interest earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company will provide its holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares without voting, and if they do vote, irrespective of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such closing of a Business Combination and, if the Company seeks shareholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.

If the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Charter provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written consent.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.90 per Public Share as of June 30, 2024, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Warrants. These Class A Ordinary Shares were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”).

If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Charter, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.

The Sponsors have agreed (i) to vote their Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination; (ii) not to propose an amendment to the Amended and Restated Charter with respect to the Company’s pre-Business Combination activities prior to the closing of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (iii) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Charter relating to shareholders’ rights of pre-Business Combination activity; and (iv) that the Founder Shares shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsors will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.

If the Company is unable to complete a Business Combination by December 19, 2024, or April 19, 2025 if all four (4) monthly extensions pursuant to the Second Extension Amendment Proposal (as defined in Note 11) are used (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company (less taxes payable and up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors (the “Board of Directors”), liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the requirements of applicable law. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit $10.00.

The Sponsors have agreed that they will be liable to the Company if and to the extent any claims by a third party (other than the independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the Trust Account assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsors to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsors have sufficient funds to satisfy their indemnity obligations and believe that the Sponsors’ only assets are securities of the Company. Therefore, the Company cannot assure its shareholders that the Sponsors would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. The Company seeks to reduce the possibility that the Sponsors will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities, with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

Sponsor Handover

On August 30, 2023, the Legacy Sponsor and the New Sponsor entered into an agreement (the “Sponsor Purchase Agreement”), and on August 31, 2023, the Legacy Sponsor and the New Sponsor consummated the transactions contemplated thereby (the “Sponsor Handover”). Pursuant to the terms of the Sponsor Purchase Agreement, at the Sponsor Handover: (i) the Legacy Sponsor transferred 3,093,036 Founder Shares and 4,645,398 Private Placement Warrants to the New Sponsor; (ii) New Sponsor agreed to cause the Company to pay an aggregated amount of $300,000 in cash consideration upon closing of the Business Combination at the Legacy Sponsor’s direction to entities or accounts as directed by the Legacy Sponsor (including the repayment of the $125,000 balance of the note payable to the Legacy Sponsor); (iii) New Sponsor entered into a joinder to the Company’s registration rights agreement, dated October 14, 2021 (the “Registration Rights Agreement”); (iv) the Legacy Sponsor assigned the existing administrative services agreement with the Company, dated October 14, 2021 (the “Administrative Services Agreement”) to the New Sponsor; (v) all of the members of the Board of Directors and officers of the Company resigned, and Daniel J. Hennessy, Thomas D. Hennessy, Anna Brunelle, Kirk Hovde, Matt Schindel and M. Joseph Beck were appointed as directors and Thomas D. Hennessy and Nick Geeza were appointed as the Chief Executive Officer and the Chief Financial Officer of the Company, respectively; and (vi) the Company entered into an amendment to the existing Letter Agreement, dated October 14, 2021 (as amended, the “Letter Agreement”). with the Legacy Sponsor, the New Sponsor and the Company’s former officers and directors, pursuant to which the New Sponsor became a party to the Letter Agreement and all Founder Shares and Private Placement Warrants transferred to the New Sponsor remain subject to the terms of the Letter Agreement. Immediately following the Sponsor Handover, the Legacy Sponsor retained 2,217,086 Founder Shares and 186,667 Private Placement Warrants, which Private Placement Warrants will be transferred to the Institutional Anchor Investors upon the closing of the initial Business Combination.

On March 29, 2024, the Company entered into a Joinder to Letter Agreement with each of the current directors and officers, which is effective as of the Sponsor Handover on August 31, 2023.

Extension of the Combination Period

At the extraordinary general meeting of shareholders called by the Company on October 19, 2023 (the “2023 EGM”), to approve proposals to amend the Amended and Restated Charter to (i) extend the date by which the Company must consummate an initial business combination from October 19, 2023 to July 19, 2024 (the “First Extension Amendment Proposal”) and (ii) to provide for the right of holders of the Company’s Class B Ordinary Shares, par value $0.0001 per share (the “Class B Ordinary Shares,” and together with the Class A Ordinary Shares, the “Ordinary Shares”), to convert such shares into Class A Ordinary Shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holders (the “Founder Share Amendment Proposal” and together with the First Extension Amendment Proposal, the “Charter Amendment Proposals”).

In connection with the vote to approve the Charter Amendment Proposals, Public Shareholders holding 16,045,860 Public Shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account (the “2023 Redemptions”). As a result, approximately $169.1 million (approximately $10.54 per share) was removed from the Trust Account to pay such holders.

Founder Share Conversion

On October 19, 2023, following the approval of the Founder Share Amendment Proposal at the 2023 EGM, the Sponsors also converted an aggregate of 600,000 Founder Shares on a one-for-one basis into Class A Ordinary Shares (the “2023 Founder Share Conversion”) and waived any right to receive funds from the Trust Account with respect to the Class A Ordinary Shares received upon such conversion and acknowledged that such shares will be subject to all of the restrictions applicable to the original Founder Shares under the terms of the Letter Agreement.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

As of June 30, 2024, there were 5,794,628 Class A Ordinary Shares and 4,710,122 Class B Ordinary Shares issued and outstanding and the Legacy Sponsor and Sponsor held approximately 21.11% and 29.44%, respectively, of the issued and outstanding Ordinary Shares.

Liquidity and Going Concern

As of June 30, 2024, the Company had $90,286 in its operating bank accounts and a working capital deficit of $1,064,846.

To date, the Company’s liquidity needs have been satisfied through (i) a payment of $25,000 from the Legacy Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares, (ii) a loan of approximately $195,000 from the Legacy Sponsor pursuant to a promissory note for up to $250,000 (the “IPO Promissory Note”), (iii) the net proceeds from the consummation of the Private Placement not held in the Trust Account, (iv) the Polar Capital Investment (as defined in Note 5) and (v) the Legacy Working Capital Loans (as defined in Note 5). The Company fully repaid the IPO Promissory Note on October 19, 2021. No additional borrowing is available under the IPO Promissory Note (see Note 5). Also, as of June 30, 2024, the Company had drawn $750,000 from the Polar Capital Investment that was fair valued at $136,364 and had $125,000 outstanding from the Legacy Working Capital Loans (see Note 5).

Based on the foregoing, Management believes that the Company may not have sufficient working capital to meet its anticipated obligations through the earlier of the consummation of an initial Business Combination or one year from the date of the accompanying unaudited condensed financial statements. Over this period, the Company will be using these funds for paying existing accounts payable, operating costs, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Subtopic 205-40 “Presentation of Financial Statements – Going Concern,” the Company has until December 19, 2024, or April 19, 2025 if all four (4) monthly extensions pursuant to the Second Extension Amendment Proposal are used, to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time and the Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the date of the accompanying unaudited condensed financial statements. If a Business Combination is not consummated with the Combination Period, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company cannot provide any assurance that (i) new financing will be available to it on commercially acceptable terms, if at all, or (ii) that its plans to consummate an initial Business Combination will be successful. Management has determined that the liquidity condition and mandatory liquidation should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed financial statements do not include any adjustments that might result from the Company’s inability to continue as a going concern.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of Management, the accompanying unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 1, 2024.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2022, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Risks and Uncertainties

Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics) may contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. These market volatilities could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between nations, the United States and other countries have imposed sanctions or other restrictive actions against certain countries. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.

Management continues to evaluate the impact of these types of risks on the industry and has concluded that while it is reasonably possible that these types of risks could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the accompanying unaudited condensed financial statements. The accompanying unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

Use of Estimates

The preparation of the accompanying unaudited condensed financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accompanying unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires Management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the accompanying unaudited condensed financial statements, which Management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $90,286 and $44,046 of cash and no cash equivalents as of June 30, 2024 and December 31, 2023, respectively.

Cash Held in Trust Account

At June 30, 2024 and December 31, 2023, the Company had $56,618,707 and $55,347,556, respectively, in cash held in the Trust Account.

At June 30, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in cash. Gains and losses resulting from the change in fair value of these investments are included in interest earned on cash or investments held in Trust Account in the accompanying unaudited condensed statements of operations.

Class A Ordinary Shares Subject to Redemption

The Company accounts for its Ordinary Shares subject to possible redemption in accordance with the guidance in ASC 480. Ordinary Shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable Ordinary Shares (including Ordinary Shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Ordinary Shares are classified as shareholders’ deficit. The Ordinary Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Ordinary Shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the accompanying condensed balance sheets. Additionally, for the three and six months ended June 30, 2024, the Company recorded accretion on the Class A Ordinary Shares of $639,184 and $1,271,151, respectively, to redemption value related to the interest in the Trust Account. For the three months and six months ended June 30, 2023, the Company recorded accretion on the Class A Ordinary Shares of $2,568,625 and $4,873,014, respectively, to redemption value related to the interest in the Trust Account.

Income Taxes

The Company complies with the accounting and reporting requirements of FASB ASC Topic 740, “Income Taxes” (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

COMPASS DIGITAL ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2024

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. Therefore, the Company’s tax provision was zero for the period presented.

Offering Costs Associated with the Initial Public Offering

Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the accompanying condensed balance sheet dates that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering, the offering costs were allocated using the relative fair values of the Class A Ordinary Shares and Warrants. The costs allocated to Warrants were recognized in other expenses, and those related to the Class A Ordinary Shares were charged against the carrying value of Class A Ordinary Shares. The Company complies with the requirements of the FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs.”

Net Income Per Ordinary Share

The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of Ordinary Shares: Class A Ordinary Shares and Class B Ordinary Shares. Income is shared pro rata between the two classes of Ordinary Shares. Net income per Ordinary Share is calculated by dividing the net income by the weighted average number of Ordinary Shares outstanding for the respective period. For the three months and six months ended June 30, 2024 and 2023, the inclusion of financial instruments in the calculation of earnings per share is contingent on a future event. As a result, diluted net income per Ordinary Share is the same as basic net income per Ordinary Share for the periods presented. Accretion associated with the redeemable Class A Ordinary Shares is excluded from earnings per share as the redemption value approximates fair value.

The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of Ordinary Shares:

	For The Three Months Ended June 30, 2024		For The Three Months Ended June 30, 2023		For The Six Months Ended June 30, 2024		For The Six Months Ended June 30, 2023
Redeemable Class A Ordinary Shares
Numerator: Net income allocable to Redeemable Class A Ordinary Shares
Net income allocable to Redeemable Class A Ordinary Shares	$	235,116	$	1,609,157	$	179,144	$	2,721,136

Denominator: Weighted Average Share Outstanding, Redeemable Class A Ordinary Shares
Basic and diluted weighted average shares outstanding, Redeemable Class A		5,194,628		21,240,488		5,194,628		21,240,488
Basic and diluted net income per share, Class A Ordinary Shares subject to possible redemption	$	0.05	$	0.08	$	0.03	$	0.13

Non-Redeemable Class A Ordinary Shares
Numerator: Net income allocable to non-redeemable Class A Ordinary Shares
Net income allocable to non-redeemable Class A Ordinary Shares	$	27,157	$	-	$	20,692	$

SEC Form 10-Q filed by Compass Digital Acquisition Corp.