CDT Equity Inc. Fair Value Disclosure
5. Fair Value
During the period ended December 31, 2025, there were no transfers between Level 1 and Level 2, nor into or out of Level 3. The following table presents as of December 31, 2025 the Company’s assets and liabilities subject to measurement at fair value on a recurring basis (in thousands):
| Fair Value Measurements as of December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 739 | $ | $ | $ | 739 | ||||||||||
| Total Assets | $ | 739 | $ | $ | $ | 739 | ||||||||||
| Liabilities: | ||||||||||||||||
| Convertible notes payable at fair value | $ | $ | $ | 660 | $ | 660 | ||||||||||
| Total Liabilities | $ | $ | $ | 660 | $ | 660 | ||||||||||
The following table presents as of December 31, 2024 the Company’s assets and liabilities subject to measurement at fair value on a recurring basis (in thousands):
| Fair Value Measurements as of December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 192 | $ | $ | $ | 192 | ||||||||||
| Total Assets | $ | 192 | $ | $ | $ | 192 | ||||||||||
| Liabilities: | ||||||||||||||||
| Convertible notes payable at fair value | $ | $ | $ | 5,856 | $ | 5,856 | ||||||||||
| Liability Classified Warrants | 138 | 138 | ||||||||||||||
| Total Liabilities | $ | $ | $ | 5,994 | $ | 5,994 | ||||||||||
The following table presents additional information about the Convertible Notes Payable subject to measurement at fair value on a recurring basis and warrant liabilities, for which the Company used unobservable inputs (Level 3) (in thousands):
Convertible Notes Payable | Liability Classified Warrants | |||||||
| Balance as of December 31, 2023 | $ | $ | ||||||
| Fair value at Issuance | 7,899 | 229 | ||||||
| Conversion of convertible notes | (92 | ) | ||||||
| Change in fair value | (1,951 | ) | (91 | ) | ||||
| Balance as of December 31, 2024 | $ | 5,856 | $ | 138 | ||||
| Conversion of convertible notes | (4,530 | ) | ||||||
| Interest expense | 277 | |||||||
| Change in fair value | (815 | ) | (138 | ) | ||||
| Gain on settlement of convertible note | (128 | ) | ||||||
| Balance as of December 31, 2025 | $ | 660 | $ | |||||
During the year ended December 31, 2025, there were no transfers between Level 1 and Level 2, nor into or out of Level 3.
Digital Assets
Digital assets are measured at fair value on a recurring basis using quoted prices in their principal market (Level 1 inputs). The Company has designated a principal market based on the market the Company has access to and that has the greatest volume and level of orderly transactions for BTC. The Company reassesses its principal market when facts and circumstances change, including but not limited to when new markets become accessible, or the volume/activity in the current principal market declines.
Convertible Notes Payable
As discussed in Note 8, on October 31, 2024, the Company and Nirland agreed to amend the Senior Secured Promissory Note entered into by the Company and Nirland on August 6, 2024 (the “August 2024 Nirland Note”), whereby the August 2024 Nirland Note was amended to provide for the conversion of the August 2024 Nirland Note into shares of Common Stock, at Nirland’s discretion, in a multiple of any unpaid amounts, if not otherwise previously paid, pursuant to the conversion rate contained therein. The August 2024 Nirland Note was then amended for a second time on November 22, 2024. On February 12, 2025, the August 2024 Nirland Note was repaid in full.
Additionally, as discussed in Note 8, during November 2024, the Company issued to Alliance Global Partners (“A.G.P.”) a convertible promissory note (the “A.G.P. Convertible Note”) in the principal amount of $5.7 million to evidence the A.G.P.’s currently owed deferred commission payable.
The Company elected to account for the August 2024 Nirland Note and A.G.P. Convertible Note (collectively the “Convertible Notes Payable”) at fair value. The fair value of the Convertible Notes Payable is estimated each period using a binomial lattice model. Significant estimates in the binomial lattice model include the Company’s stock price, volatility, risk-free rate, corporate bond yield, credit spread, probability of default, and recovery upon default.
The fair value of the August 2024 Nirland Note and A.G.P. Convertible Note as of December 31, 2024 were estimated using a binomial lattice model.
The following table outlines the range of significant unobservable inputs used in calculating the fair value of the August 2024 Nirland Note as of the dates noted below:
October 31, 2024 |
November 22, 2024 |
December 31, 2024 |
||||||||||
| Stock Price | $ | $ | $ | |||||||||
| Term (years) | 0.8 | 0.7 | 0.6 | |||||||||
| Corporate bond yield | 9.1 | % | 8.7 | % | 11.4 | % | ||||||
| Credit Spread | 15.9 | % | 15.9 | % | 15.9 | % | ||||||
| Probability of Default | 40 | % | 40 | % | 40 | % | ||||||
| Recovery upon default | 20 | % | 20 | % | 20 | % | ||||||
| Volatility | 103.2 | % | 96.5 | % | 123.7 | % | ||||||
As of December 31, 2025, no obligations remain under the August 2024 Nirland Note (refer to Note 8 for details) and therefore only the fair value of the A.G.P. Convertible Note was estimated using a binomial lattice model.
The following table outlines the range of significant unobservable inputs used in calculating the fair value of the A.G.P. Convertible Note as of the dates noted below:
November 25, 2024 | December 31, 2024 | December 31, 2025 | ||||||||||
| Stock Price | $ | $ | $ | |||||||||
| Term (years) | 1 | 0.9 | 0.4 | |||||||||
| Corporate bond yield | 8.8 | % | 9.0 | % | 5.5 | % | ||||||
| Credit Spread | 26.2 | % | 26.2 | % | 26.2 | % | ||||||
| Probability of Default | 40 | % | 40 | % | 70 | % | ||||||
| Recovery upon default | 0 | % | 0 | % | 0 | % | ||||||
| Volatility | 108.7 | % | 101.6 | % | 135 | % | ||||||
Liability Classified Warrants
Liability Classified Warrants The A.G.P. 2024 Warrants, as defined in Note 18, are accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities in the consolidated balance sheets. Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within other income (expense), net in the consolidated statements of operations and comprehensive loss.
The measurement of the A.G.P. 2024 Warrants is classified as Level 3 due to the use of an option-pricing model that utilizes unobservable inputs and requires significant judgement. The Company estimated the fair value of the warrants issued as the issuance date, October 29, 2024, as of December 31, 2024 and as of December 31, 2025, using a Black-Scholes option-pricing model utilizing the following assumptions:
| December 31, 2025 | December 31, 2024 | October 29, 2024 | ||||||||||
| Closing stock price | $ | $ | $ | |||||||||
| Contractual exercise price | $ | 30,000 | $ | 30,000 | $ | 30,000 | ||||||
| Risk-free rate | 3.73 | % | 4.38 | % | 4.11 | % | ||||||
| Estimated volatility | 99.3 | % | 98.6 | % | 98.4 | % | ||||||
| Time period to expiration (in years) | 4.0 | 5.0 | 5.2 | |||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 15, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Apr 16, 2024 | |
| 2022 | Mar 28, 2023 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.