CDT Equity Inc. Debt Disclosure

8. Loans Payable

 

Loans

 

On May 1, 2022, the Company entered into Loan Agreements (the “Loans”) with two lenders, totaling $0.2 million. The Loans mature two years from the date of the agreement and bear no interest. Each loan was made available to the Company by the lenders in three tranches of (i) $33 thousand (£30 thousand); (ii) $33 thousand (£30 thousand) and (iii) $28 thousand (£25 thousand), totaling $0.2 million. The Loans provided for events of default, including, among others, failure to make payment, bankruptcy and non-compliance with the terms of the Loans. As of December 31, 2024, the Company utilized all three tranches of the first loan and two out of three tranches of the second loan, with loans payable totaling $0.2 million at December 31, 2023 and December 31, 2024 respectively.

 

 

On October 9, 2024, the Company and the Loans holders amended the loan agreements (the “Loans Amendment”) to extend the maturity date for the Loans to December 19, 2024. The Loans Amendment also modified the payment terms for the Loans from a cash payment of £85,000 per loan to (1) a cash payment of £60,000, (2) £25,000 worth of shares of Common Stock converted into USD at the prevailing exchange rate, to be issued at the closing market price on the date prior to issuance, and in consideration for the extension, and (3) 2,500 additional shares of Common stock. On October 11, 2024, the Company issued each of the Loan holders 5,690 shares (11,380 in total). The Loans remain outstanding as of December 31, 2024.

 

The extension was accounted for as a debt extinguishment. On October 9, 2024, the Company recorded a loss on debt extinguishment of approximately $42 thousand calculated as the difference between (i) the $0.2 million carrying value of the Loans immediately prior to the Loans Amendment (ii) the $0.1 million fair value of the Loans immediately after the Loans Amendment and (iii) the $0.1 million fair value of the shares issued to the holder as consideration for extending the maturity date. The difference between the $0.2 million carrying value immediately prior to the Loans Amendment and the $0.1 million fair value immediately after the Loans Amendment was recorded as a debt discount and amortized over the term date of the Loans using the effective interest method.

 

During the year ended December 31, 2024, the Company incurred interest expense on the Loans of approximately $40 thousand related to the amortization of the debt discount recorded as a result of the Loans Amendment. No interest expense was recorded for the year ended December 31, 2023. The Loans remained outstanding as of December 31, 2024, therefore the Company was considered to be in default. The Company repaid the lenders the outstanding principal balance of $0.1 million in February 2025. See Note 20 for additional details.

 

 

October 2024 Nirland Note

 

On October 28, 2024, the Company issued a promissory note (the “October 2024 Nirland Note”) to Nirland, a related party, in the original principal amount of $0.6 million in exchange for funds in such amount. See Note 16 for further reference to the relationship between the Company and Nirland. The Nirland Note bears interest at a rate of 12% per annum, is due and payable semi-annually in arrears, and matures on October 31, 2025. If an event of default under and as defined in the Nirland Note occurs, the interest rate will be increased to 18% per annum or to the maximum rate permitted by law. In connection with the Nirland Note, the Company has agreed to pay Nirland a 1% arrangement fee, which will be included with the principal and interest owed under the Nirland Note. The 1% arrangement fee is accounted for as a debt discount and will be amortized to interest expense, net in the consolidated statement of operations and comprehensive income (loss) using the effective interest method over the life of the October 2024 Nirland Note.

 

During the year ended December 31, 2024, the Company recorded approximately $14,000 of interest expense. The interest expense of $14,000 is comprised of (i) accrued interest of $13,000 based on the coupon rate of the debt and (ii) amortization of the debt discount of $1 thousand, with both components recorded within interest expense, net in the consolidated statement of operations and comprehensive income (loss). Accrued interest of $13,000 was recorded as a liability on the Company’s consolidated balance sheet within accrued expenses and other current liabilities. The $1,000 amortization of the debt discount decreased the debt discount contra-liability included within the Loans payable, current portion on the consolidated balance sheets.

 

A.G.P. Bridge Note

 

On October 29, 2024, the Company entered into a Bridge Loan Agreement (the “Bridge Agreement”), with A.G.P., pursuant to which AGP. made an advance (the “Advance”) to the Company in an amount not to exceed $0.6 million (the “Commitment”). As partial consideration for the Advance, the Company entered into a Common Stock Purchase Warrant Agreement (the “Warrant Agreement”) and issued AGP warrants to purchase up to 28,625 shares of the Company’s common stock, $0.0001 par value per share, which is equal to 50% of the sum of the Commitment divided by the closing price of the Company’s Common Stock on October 29, 2024, at an exercise price of $10.48 per share. Refer to Note 18 for additional information on the warrants issued to A.G.P.

 

In connection with the Advance, the Company issued a promissory note (the “A.G.P. Bridge Note”) to A.G.P. in the original principal amount of $0.6 million. The Bridge Note bears interest at a rate of 4.21% per annum and is due and payable on December 31, 2024.

 

As noted above, the Company issued to A.G.P. warrants to purchase up to 28,625 shares of the Company’s common stock. The Company determined that the Bridge Note and Warrant Agreement issuance were part of a basket transaction and allocated the net proceeds using the residual value method. The warrants issued under the Warrant Agreement were initially recorded at their fair value of $0.2 million. The warrants were classified as derivative liabilities because they do not meet the criteria in ASC 815-40 to be considered indexed to the entity’s own stock. Refer to Note 18 for additional information and discussion of liability classification. The $0.2 million recorded for the warrants was considered to be a discount on the A.G.P. Bridge Note making the balance of the note to be $0.6 million note payable, less a total debt discount of $0.2 million. The debt discount will be amortized to interest expense using the effective interest method over the life of the note.

 

During the year ended December 31, 2024, the Company recorded and paid approximately $1 thousand of interest expense related to the A.G.P. Additionally, the entire debt discount of $0.2 million was amortized and recorded as interest expense during the year. The interest expense of $1 thousand and amortization of the debt discount of $0.2 million were recorded within Interest expense, net in the consolidated statement of operations and comprehensive income (loss). As of December 31, 2024, the A.G.P. Bridge note was fully repaid.