In a significant financial move, Compass Digital Acquisition Corp. (NASDAQ:CDAQ), a blank check company, has entered into a material definitive agreement with its sponsor, HCG Opportunity (SO:FTCE11B), LLC. On Thursday, the company disclosed the issuance of a promissory note for up to $2.5 million to its sponsor to cover working capital expenses.
As of today, the sponsor has already advanced $415,000 under this arrangement. The note carries no interest and is set to be repaid on the earlier of two events: the completion of the company's initial business combination or the company's liquidation. In a scenario where the note is not fully settled before a business combination, the sponsor has the option to convert up to $1.375 million of the outstanding principal into warrants at $1.50 each. These warrants would be identical to those issued in a private placement at the time of the company's IPO and would come with registration rights.
The issuance of the note was made in compliance with the exemption from registration outlined in Section 4(a)(2) of the Securities Act of 1933. This move demonstrates Compass Digital Acquisition Corp.'s ongoing efforts to secure the necessary capital for its operations as it seeks to execute its business strategy.
This financial maneuver is based on a press release statement and provides a glimpse into the strategic financial planning undertaken by Compass Digital Acquisition Corp. as it navigates the corporate landscape.
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