Fold Holdings, Inc 10-Q for FY2025 Q1
Fold Holdings, Inc. (FLD)
About this 10-Q
Fold Holdings, Inc filed this 10-Q on May 15, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.09M
- up 43.7% from $4.93M a year earlier
- Net loss
- $48.88M
- compared with a net loss of $945.05K a year earlier
- Diluted EPS
- -$1.92
- compared with -$0.16 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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 |
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Accelerated filer |
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Emerging growth company |
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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
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
As of May 15, 2025, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
43 |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of Fold Holdings, Inc. (“Fold,” the “Company,” “we,” “our,” and “us”) contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions.
We caution investors that any forward-looking statements presented in this Quarterly Report, or that we may make orally or in writing from time to time, are based on information currently available, as well as our beliefs and assumptions. The actual outcome related to forward-looking statements will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based only on known results and trends at the time they are made, to anticipate future results or trends.
The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: risks related to our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder; changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; the implementation, market acceptance and success of our business model; our ability to scale in a cost-effective manner; developments and projections relating to our competitors and industry; our future capital requirements and sources and uses of cash; our ability to obtain funding for its operations; our business, expansion plans and opportunities; our success in retaining or recruiting, or changes required in, officers, key employees or directors; the size of the addressable markets for our products and services; and those factors in the other documents filed by Fold from time to time with the U.S. Securities and Exchange Commission (“SEC”). The discussion in this Quarterly Report should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
This Quarterly Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report, except as may be required by law.
The accompanying notes are an integral part of these condensed financial statements.
3
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Fold Holdings, Inc.
Condensed Balance Sheets
(Unaudited)
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March 31, |
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December 31, |
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2025 |
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2024 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Digital assets - rewards treasury |
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Prepaid expenses and other current assets |
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Total current assets |
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Digital assets - investment treasury |
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Capitalized software development costs, net |
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Deferred transaction costs |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity (deficit) |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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December 2024 convertible note, net |
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Customer rewards liability |
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Deferred revenue |
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Total current liabilities |
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Deferred revenue, long-term |
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December 2024 convertible note, net |
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March 2025 convertible note - related party |
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Simple Agreements for Future Equity (“SAFEs”) |
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Total liabilities |
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Stockholders’ equity (deficit) |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Accumulated deficit |
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Total stockholders’ equity (deficit) |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
4
Fold Holdings, Inc.
Condensed Statements of Operations
(Unaudited)
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Three Months Ended March 31, |
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2025 |
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2024 |
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Revenues, net |
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$ |
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$ |
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Operating expenses |
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Banking and payment costs |
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Custody and trading costs |
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Compensation and benefits |
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Marketing expenses |
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Professional fees |
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Amortization expense |
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(Gain) loss on customer rewards liability |
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Loss (gain) on digital assets - rewards treasury |
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Other selling, general and administrative expenses |
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Total operating expenses |
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Operating loss |
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Other income (expense) |
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Loss on digital assets - investment treasury |
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Change in fair value of SAFEs |
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Change in fair value of convertible note |
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Convertible note issuance costs and fees |
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Interest expense |
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Other income |
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Other income (expense), net |
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Net loss before income taxes |
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Income tax expense |
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Net loss |
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$ |
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$ |
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Net loss per share attributable to common stockholders: |
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Basic and diluted |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic and diluted |
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The accompanying notes are an integral part of these condensed financial statements.
5
Fold Holdings, Inc.
Condensed Statements of Stockholders' Equity (Deficit)
(Unaudited)
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Convertible |
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Additional |
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Preferred Stock |
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Common Stock |
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Paid-In |
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Accumulated |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Total |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
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Retroactive application of recapitalization |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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Balance at January 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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- |
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- |
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- |
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- |
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( |
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Reverse recapitalization, net of expenses |
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- |
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Share based compensation expense |
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- |
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- |
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- |
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- |
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- |
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Exercise of Series B warrants |
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- |
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- |
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- |
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Issuance of March 2025 Closing Shares and Warrants |
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- |
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- |
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Balance at March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
6
Fold Holdings, Inc.
Condensed Statements of Cash Flows
(Unaudited)
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Three Months Ended March 31, |
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2025 |
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2024 |
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Cash flows from operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization expense |
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Loss (gain) on digital assets - rewards treasury |
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Loss on digital assets - investment treasury |
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(Gain) loss on customer rewards liability |
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Change in fair value of convertible note |
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Convertible note issuance costs and fees |
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Amortization of debt discount |
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Change in fair value of SAFEs |
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Share-based compensation expense |
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Increase (decrease) in cash resulting from changes in: |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Customer reward liability |
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Deferred revenue |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of digital assets |
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Proceeds from sales of digital assets |
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Payments for capitalized software development costs |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from recapitalization |
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Payments of deferred IPO costs |
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Proceeds received from SAFE financings |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Non-cash investing and financing activities |
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Distributions of digital assets to fulfill customer reward redemptions |
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Distributions of digital assets to satisfy other current liabilities |
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Recapitalization |
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Proceeds from convertible debt received in digital assets - related party |
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Distributions of digital assets for prepaid interest - related party |
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The accompanying notes are an integral part of these condensed financial statements.
7
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Background and Business Combination
Fold Holdings, Inc. (“Fold,” the “Company,” “we,” “our,” or “us”) is a bitcoin financial services company dedicated to expanding access to bitcoin through a comprehensive suite of consumer financial services. The Company was formed with the purpose of creating a modern financial services platform that allows customers to earn, accumulate, and utilize bitcoin in their everyday life. The Company offers consumers an FDIC insured checking account through Sutton Bank, a prepaid Visa debit card, bill payments, and an extensive catalog of merchant reward offers. The Company also offers various forms of bitcoin buying and selling with low-to-zero fees, instant withdrawals, and insured custody. By integrating bitcoin across traditional financial services, the Company acts as a key point of entry for consumers to engage with and integrate bitcoin into their everyday lives. The Company's products and services are available in the United States through the Fold mobile app.
The Company was originally incorporated in the state of Delaware as Fold, Inc. on August 20, 2019. On July 24, 2024, Fold, Inc. entered into a definitive agreement (the "Merger Agreement") with FTAC Emerald Acquisition Corp. (“FTAC Emerald”), a publicly-traded special purpose acquisition company, providing for a proposed business combination (the "Merger"). The registration statement for the Merger was declared effective by the SEC on January 23, 2025, the Merger was approved by FTAC’s shareholders on February 13, 2025, and the business combination was finalized on February 14, 2025. The combined company now operates under the name Fold Holdings, Inc., and its common stock and warrants trade on the Nasdaq under the ticker symbols “FLD” and “FLDDW,” respectively. The Company is a remote-first company and does not designate a physical headquarters.
Liquidity and capital resources
As of March 31, 2025, the Company had cash and cash equivalents of $
As of March 31, 2025, the Company held
As of March 31, 2025, we held
As of March 31, 2025, the Company had debt principal due of $
Management expects that the Company’s existing cash and cash equivalents, accounts receivable, and digital assets received through March 31, 2025 will be sufficient to enable the Company to fund its anticipated level of operations through one year from the date these financial statements are available to be issued.
8
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
There is limited historical financial information about the Company upon which to base an evaluation of its performance. The business is subject to risks inherent in the establishment of an emerging growth enterprise, including limited capital resources, possible delays in product development, and possible cost overruns due to price and cost increases in services. The Company may require additional capital to pursue certain business opportunities or respond to technological advancements, competitive dynamics or technologies, customer demands, challenges, or unforeseen circumstances. Additionally, the Company has incurred significant costs related to the Merger with FTAC Emerald and becoming a public company.
We may continue to pursue additional capital via various capital instruments in the future, however, such funding may not be available on terms acceptable to us or at all. Although management believes that such capital sources will continue to be available, there can be no assurances that financing will be available to the Company when needed, or if available, on terms acceptable to the Company. If the Company is unable to obtain adequate financing on terms that are satisfactory to the Company, when the Company requires it, the Company’s ability to continue to grow or support the business and to respond to business challenges could be significantly limited, which may adversely affect the Company’s business plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company.
Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. These condensed financial statements and accompanying notes should be read in conjunction with the audited financial statements and accompanying notes for the years ended December 31, 2024 and 2023. 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 include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The interim results for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025, or for any future periods.
Use of estimates
The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on assumptions that the Company believes are reasonable; however, actual results could significantly differ from those estimates. The Company evaluates these estimates on an ongoing basis.
Estimates, judgments, and assumptions in these financial statements include, but are not limited to, those related to the determination of the recognition, measurement, and valuation of current and deferred income taxes; the fair value of performance stock-based awards issued; the useful lives and impairment assessment of long-lived assets; the fair value of convertible notes; allowance for credit losses; the fair value of customer reward liability derivative instruments; the fair value of Simple Agreements for Future Equity ("SAFEs"); and loss contingency identification and valuation, including assessing the likelihood of adverse outcomes from positions, claims, and disputes, recoveries of losses recorded, and associated timing.
Segment information
We have
9
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the notes to the financial statements.
Capitalized software development costs, net
The Company capitalizes significant costs incurred in the acquisition or development of the internal software for use in the Company's various service offerings. The Company incurs costs in developing software inclusive of direct external costs and internal payroll costs. Internal payroll costs typically include salaries and wages. Capitalized software costs are stated at cost net of accumulated amortization. Amortization is provided utilizing the straight-line method over the estimated useful life of the software, which is three years. Costs incurred in the preliminary and post-implementation phases of the Company's internal use software are expensed as incurred.
Capitalized software development costs consisted of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||
Capitalized software, gross carrying amount |
|
$ |
|
|
|
$ |
|
|
||
Less: accumulated amortization |
|
|
|
( |
) |
|
|
|
( |
) |
Capitalized software, net carrying value |
|
$ |
|
|
|
$ |
|
|
||
The gross carrying amount of internally developed software costs that had been capitalized but not placed into service is as follows:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||
Capitalized software not placed into service |
|
$ |
|
|
|
$ |
|
|
||
During the three months ended March 31, 2025 and 2024, the Company recorded amortization expense on capitalized software development costs placed in service in the amount of $
Customer rewards liability
The Company offers certain rewards to its users through the Fold Rewards Program. This program allows the Company's users to earn promotional credits denominated in bitcoin by engaging in various actions, either by engaging in qualifying spend transactions (the "Revenue Rewards") or performing certain actions designated by the Company as primarily for marketing, growth, and retention purposes (the "Marketing Rewards"). Revenue Rewards are defined as those that are earned in direct relation to a qualifying spend transaction such as spending on the Fold Card, purchasing bitcoin, purchasing merchant offers, etc. Marketing Rewards are defined as those that are earned for behaviors unrelated to qualifying spend transactions such as sign-up bonuses, referral bonuses, spinning the daily spin wheel, etc. For accounting purposes, any reward that derives from a transaction where Fold receives revenue constitutes a Revenue Reward, whereas all other rewards constitute Marketing Rewards.
Revenue Rewards are considered “earned” at the time of the qualifying spend transaction. Revenue Rewards are immediately available for redemption by the user, except for those related to Fold Card transactions which cannot be redeemed until after a 30-day settlement period. Marketing Rewards are earned and available immediately upon the performance of a qualifying action by the user. To redeem available rewards, a user may request a withdrawal to a personal bitcoin wallet.
The Company accrues both Revenue Rewards and Marketing Rewards, (collectively, the "Rewards") within ‘Customer rewards liability’ in our accompanying balance sheets at the time the Reward is earned, with the corresponding impact on our statements of operations dependent on the type of Reward. Revenue Rewards are recorded as a reduction in the transaction price of the related revenue earned -
10
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
see Revenue recognition below. Marketing Rewards are recorded as a marketing expense within operating expenses. The liability is initially recorded at the fair value of the bitcoin earned upon the action by the user and subsequently marked to fair value until redeemed or reversed, with gains and losses on this liability recorded within gain (loss) on customer rewards liability in our accompanying statements of operations. The liability is derecognized when the Reward is redeemed by the user and delivered to the user's bitcoin wallet.
Per the terms and conditions of the Fold Rewards Program, Rewards are subject to adjustment for chargebacks, returns, refunds, or other circumstances. In addition, Rewards are subject to expiry if users fail to maintain an active account for more than twelve consecutive months. The Company estimates the amount of Rewards that will expire based on historical data, current user trends, and other factors and records those estimated amounts in the period those Rewards were earned. These accruals are accounted for as an adjustment to the transaction price of the original revenue transaction if the expiration relates to Revenue Rewards, or as contra-expense within marketing expense if the expiration relates to Marketing Rewards.
Derivatives
As our customer rewards liability results in an obligation to deliver a fixed amount of digital assets in the future, the Company has determined that it meets the definition of a derivative and marked it to fair value as discussed above. The Company has not designated this derivative instrument as a hedging instrument. As of March 31, 2025 and December 31, 2024, the notional amount of the customer rewards liability outstanding was
Convertible notes and warrants
In December 2024, the Company entered into a Securities Purchase Agreement (the “December 2024 SPA”) with an institutional investor for the sale of a Senior Secured Convertible Note ("December 2024 Note") which is convertible into shares of the Company’s common stock. The Company has accounted for the December 2024 Note and related warrants using the relative fair value allocation method on the date of issuance. Refer to Note 10 for further information.
The December 2024 Note contains a host liability, freestanding warrants, and an embedded conversion feature. The Company uses the guidance under FASB ASC Topic 815 Derivatives and Hedging (“ASC 815”) to determine if the embedded conversion feature must be bifurcated and separately accounted for as a derivative under ASC 815. It also determines whether any embedded conversion features requiring bifurcation and/or freestanding warrants qualify for any scope exceptions contained within ASC 815. Generally, contracts issued or held by a reporting entity that are both (i) indexed to its own stock, and (ii) classified in shareholders equity, would not be considered a derivative for the purposes of applying ASC 815. Any embedded conversion features and/or freestanding warrants that do not meet the scope exception noted above are classified as derivative liabilities, initially measured at fair value, and remeasured at fair value each reporting period with change in fair value recognized in the condensed statements of operations. Any embedded conversion features and/or freestanding warrants that meet the scope exception under ASC 815 are initially recorded at their relative fair value in paid-in-capital and are not remeasured at fair value in future periods.
In March 2025, the Company entered into a Securities Purchase Agreement (the “March 2025 SPA”) with a related party for the sale of a Convertible Note ("March 2025 Investor Note") which is convertible into shares of the Company’s common stock upon certain triggering events or fully repayable in 500 bitcoin if no triggering events are met. The Company elected to account for the March 2025 Investor Note at the “fair value option” (“FVO”) election of ASC 825, Financial Instruments (“ASC 825”) on the date of issuance. The Company elected to use the FVO election as the debt host contained several embedded features which would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815. Notwithstanding, ASC 825-10-15-4 provides for the FVO election, to the extent not otherwise prohibited by ASC 825-10-15-5, to be afforded to financial instruments, wherein bifurcation of an embedded derivative is not necessary, and the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.
The estimated fair value adjustment, as required by ASC 825-10-45-5, is recognized as a component of other comprehensive income (“OCI”) with respect to the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk, with the remaining amount of the fair value adjustment recognized as other income (expense) in the accompanying condensed statements of
11
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
operations. With respect to the above notes, as provided for by ASC 825-10-50-30(b), the estimated fair value adjustment is presented in a respective single line item within other income (expense) in the accompanying condensed statements of operations, since the change in fair value of the March 2025 Investor Note was not attributable to instrument-specific credit risk. Refer to Note 10 for further information.
Recently issued accounting pronouncements not yet adopted
In March 2024, the SEC adopted new rules that will require registrants to provide certain climate-related information in their registration statements and annual reports. The rules require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks will also include disclosure of a registrant's greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. On April 4, 2024, the SEC voluntarily stayed the implementation of the rules pending the judicial review of challenges to the rules in the Eighth Circuit Court of Appeals. As proposed, the new rules would have been effective for fiscal years beginning in 2025, except for the greenhouse gas emissions disclosures, which would have been effective for fiscal years beginning in 2026. We are currently monitoring whether these rules will be implemented as well as evaluating the potential impact of these rules on our financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Topic 220), which requires entities to include more detailed information about the types of expenses, including purchases of inventory, employee compensation, depreciation, and amortization, in commonly presented expense captions such as cost of sales, research and development, and selling, general and administrative expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures.
In January 2025, the FASB issued ASU 2025-01 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”) clarifies the effective date of Accounting Standards Update 2024-03 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”) to stipulate that ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 will be effective for the Company beginning January 1, 2027 for the Company’s annual financial statements on Form 10-K and January 1, 2028 for the Company’s quarterly financial statements on Form 10-Q and is not expected to have a significant impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
We do not believe that any other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on our financial statements.
3. RECAPITALIZATION
On February 14, 2025, the Company closed the Merger pursuant to the terms of the Merger Agreement and acquired all of the issued and outstanding equity interests in FTAC Emerald. Pursuant to the Merger Agreement, FTAC Emerald purchased from the legacy stockholders of Fold, Inc. all of the issued and outstanding equity interests of Fold, Inc. for $
The Merger was accounted for as a reverse recapitalization, with the net assets of FTAC Emerald stated at historical cost and no goodwill or other intangible assets recorded. Under this method of accounting, FTAC Emerald was treated as the acquired company for financial reporting purposes. This determination was primarily based on post-Merger relative voting rights, composition of the governing board, management and intent of the Merger. Accordingly, for accounting purposes, the Merger was accounted for as the equivalent of Fold
12
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
issuing stock for the net assets of FTAC Emerald, accompanied by a recapitalization. The reported amounts from operations included herein prior to the Merger are those of Fold.
Share and per share information for all periods prior to the Merger have been retrospectively adjusted by the exchange ratio for the equivalent number of shares of common stock outstanding immediately after the Merger to effect the reverse recapitalization. Refer to Note 17 for further information.
In connection with the Merger, approximately
The number of shares of Common Stock of Fold Holdings as of March 31, 2025 was as follows:
Shares by Type |
Number of shares by type as of March 31, 2025 |
|
|
FTAC Emerald total shares outstanding prior to the Merger |
|
|
|
Less: Redemption of FTAC Emerald shares |
|
( |
) |
Class A Shares of FTAC Emerald |
|
|
|
Shares issued for Fold Common Stock |
|
|
|
Exercise of Series B warrants |
|
|
|
Issuance of March 2025 Closing Shares |
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|
|
Total Shares of Common Stock outstanding |
|
|
|
The Company incurred transaction costs related to the Merger of approximately $
4. REVENUE
Disaggregation of revenue
We disaggregate revenue by service type and by platform as follows:
Revenue stream |
|
Three Months Ended March 31, 2025 |
|
|
Three Months Ended March 31, 2024 |
|
||
Banking and payment revenues |
|
$ |
|
|
$ |
|
||
Custody and trading revenues |
|
|
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|
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|
||
Other revenues |
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|
|
|
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|
||
Less: Sales returns and allowances |
|
|
( |
) |
|
|
( |
) |
Revenues, net |
|
$ |
|
|
$ |
|
||
The above amounts are net of reductions in revenue related to Revenue Rewards totaling $
Deferred revenue
Contract liabilities are classified as deferred revenue in our balance sheets. As of March 31, 2025 and December 31, 2024, the contract liability related to our deferred subscription revenues was $
13
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
The activity in deferred revenue for the three months ended March 31, 2025 and the year ended December 31, 2024, was as follows:
|
|
Three Months Ended March 31, 2025 |
|
|
Year Ended December 31, 2024 |
|
||
Beginning of the period contract liability |
|
$ |
|
|
$ |
|
||
Revenue recognized from the contract liabilities included in the beginning balance |
|
|
( |
) |
|
|
( |
) |
Increases due to cash received net of amounts recognized in revenue during the period |
|
|
|
|
|
|
||
End of period contract liability |
|
$ |
|
|
$ |
|
||
Contract costs
For the three months ended March 31, 2025 and 2024, we incurred $
5. DIGITAL ASSETS
The Company holds digital assets, comprised solely of bitcoin, for two purposes: (1) to fulfill bitcoin rewards to customers in accordance with the terms and conditions of the Fold Rewards Program (“Rewards Treasury”); and (2) as a treasury asset with the intention to hold as a long-term investment (“Investment Treasury”). The Company purchases bitcoin for its Rewards Treasury to maintain a balance that is equal to or greater than its customer rewards liability and disburses bitcoin from its Rewards Treasury when customers redeem their rewards and the liability is satisfied.
The following is a summary of Fold’s bitcoin held in treasury as of the dates shown:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Rewards treasury (USD) |
|
$ |
|
|
$ |
|
||
Investment treasury (USD) |
|
|
|
|
|
|
||
Total bitcoin treasury (USD) |
|
$ |
|
|
$ |
|
||
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Rewards treasury (BTC) |
|
|
|
|
|
|
||
Investment treasury (BTC) |
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|
|
|
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|
||
Total bitcoin treasury (BTC) |
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|
|
|
|
|
||
As of March 31, 2025 and December 31, 2024, the Company held
14
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
A reconciliation, in the aggregate, of beginning and ending balances of the Company’s digital assets as of the dates shown is as follows:
|
|
Rewards Treasury |
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|
Investment Treasury |
|
|
Digital Assets |
|
|||
Bitcoin held at January 1, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Purchases of bitcoin |
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|
|
|
|
|
|
|
|
|||
Disbursements of bitcoin |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Remeasurement gain (loss) on bitcoin |
|
|
|
|
|
|
|
|
|
|||
Bitcoin held at March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Purchases of bitcoin |
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|
|
|
|
|
|
|
|
|||
Proceeds from SAFE financings received in bitcoin |
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|
|
|
|
|
|
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|
|||
Disbursements of bitcoin |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Proceeds from sale of bitcoin |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Remeasurement gain (loss) on bitcoin |
|
|
|
|
|
|
|
|
|
|||
Bitcoin held at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Purchases of bitcoin |
|
|
|
|
|
|
|
|
|
|||
Bitcoin received from March 2025 Investor Note (1) |
|
|
|
|
|
|
|
|
|
|||
Disbursements of bitcoin |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Remeasurement gain (loss) on bitcoin |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Bitcoin held at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
(1)
Disbursements of bitcoin represent amounts that were distributed to customers to fulfill customer rewards obligations and satisfy other current liabilities.
The remeasurement loss of $
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||
Prepaid interest |
|
$ |
|
|
|
$ |
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|
||
Prepaid expenses |
|
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|
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|
||
Other receivables |
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|
||
Interest receivable |
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|
|
|
|
|
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|
||
Total |
|
$ |
|
|
|
$ |
|
|
||
15
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
7. CUSTOMER REWARDS LIABILITY
A reconciliation, in the aggregate, of beginning and ending balances of the Company’s customer rewards liability as of the dates shown is as follows:
|
|
Customer Rewards Liability |
|
|
Balance at January 1, 2024 |
|
$ |
|
|
Rewards earned by customers |
|
|
|
|
Rewards fulfilments |
|
|
( |
) |
Expired rewards |
|
|
( |
) |
Remeasurement (gain) loss on customer rewards liability |
|
|
|
|
Balance at March 31, 2024 |
|
$ |
|
|
Rewards earned by customers |
|
|
|
|
Rewards fulfilments |
|
|
( |
) |
Expired rewards |
|
|
( |
) |
Remeasurement (gain) loss on customer rewards liability |
|
|
|
|
Balance at December 31, 2024 |
|
$ |
|
|
Rewards earned by customers |
|
|
|
|
Rewards fulfilments |
|
|
( |
) |
Expired rewards |
|
|
( |
) |
Remeasurement (gain) loss on customer rewards liability |
|
|
( |
) |
Balance at March 31, 2025 |
|
$ |
|
|
Rewards fulfilments represent amounts that were distributed to customers to fulfill customer rewards obligations.
8. RELATED PARTIES
During the three months ended March 31, 2025, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with SATS Credit Fund LP (the “Investor”), pursuant to which the Company issued to the Investor a convertible note in the aggregate principal amount of approximately $
During the year ended December 31, 2024, the Company entered into a SAFE with Thesis Inc., a principal shareholder of the Company, totaling $
9. SAFEs
On February 14, 2025, in connection with the closing of the Merger with FTAC Emerald, all SAFE notes held by the Company converted into
As of and for the three months ended March 31, 2025 and year ended December 31, 2024, the fair value of the SAFEs was $
16
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
During the three months ended March 31, 2025 and year ended December 31, 2024, the Company entered into SAFEs with various investors with aggregate gross proceeds of $
10. CONVERTIBLE NOTES AND WARRANTS
A summary of the Company’s convertible notes for the respective periods presented is as follows:
The December 2024 Initial Investor Note
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
December 2024 Initial Investor Note |
|
$ |
|
|
$ |
|
||
Convertible debt, gross |
|
|
|
|
|
|
||
Less: |
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|
|
|
|
|
||
Debt discount, net of amortization |
|
|
|
|
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|
||
Debt issuance costs, net of amortization |
|
|
|
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|
||
Convertible debt, net |
|
|
|
|
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|
||
Less: Current portion of long-term debt |
|
|
|
|
|
|
||
December 2024 convertible note, net - long-term |
|
$ |
|
|
$ |
|
||
In December 2024, the Company entered into a Securities Purchase Agreement (the “December 2024 SPA”) with an institutional investor (the “Investor”) for the sale of a Senior Secured Convertible Note which is convertible into shares of the Company’s common stock. The Company executed the December 2024 SPA and consummated the issuance of (i) an Initial Note in the principal amount of $
On February 14, 2025, following the finalization of the Merger, the maturity of the December 2024 Initial Investor Note extended from 10 months to 36 months from Fold's public listing event (the "Public Company Date") and was reclassified from a current liability to long term liability. The Series A warrants were exercisable immediately and expire eight years from the date of issuance. The Series B and Series C warrants became exercisable at the time of Fold's Public Company Date and expire eight years from the date of issuance and one year from the Public Company Date, respectively. Following the Public Company Date, the Investor exercised the Series B warrants in a cashless exercise, acquiring the
As of March 31, 2025, the principal amount outstanding under the December 2024 Initial Investor Note was $
The Company has accounted for the December 2024 Initial Investor Note and the Investor Warrants using the relative fair value allocation method on the date of issuance. The estimated fair values of the December 2024 Initial Investor Note and Investor Warrants were calculated under a Black-Scholes model utilizing the enterprise valuation of Fold's common shares as of the issuance date. The Company has elected not to subsequently remeasure the convertible note. Further, the Company concluded that the Investor’s right to acquire the Additional Investor Note is separately exercisable from the December 2024 Initial Investor Note and the Investor Warrants. Each of the Investor Notes will be sold at an original issue discount of
The Company recorded interest expense under the December 2024 Initial Investor Note based on a stated interest rate of
17
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
Total interest expense recognized related to the December 2024 Initial Investor Note for the three months ended March 31, 2025 was $
The December 2024 Initial Investor Note, plus accrued and unpaid interest, is convertible at any time, at the Investor’s option, into shares of the Company’s common stock at an initial fixed conversion price of $
The December 2024 Initial Investor Note provides for certain events of default, including, among other things, any breach of the covenants described in the December 2024 SPA. In connection with an event of default, the Investor may require the Company to redeem all or any portion of the December 2024 Initial Investor Note at a premium set forth in the December 2024 SPA. The Company is also subject to certain customary affirmative and negative covenants regarding the rank of the December 2024 Initial Investor Note, the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. As of March 31, 2025, the Company was in compliance with all covenants and there have been no events of default during the period.
The March 2025 Investor Note
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
March 2025 Investor Note |
|
$ |
|
|
$ |
|
||
Fair value adjustment |
|
|
|
|
|
|
||
March 2025 investor note - related party |
|
$ |
|
|
$ |
|
||
On March 6, 2025, Fold entered into a Securities Purchase Agreement (the “March 2025 SPA”) with a related party (the “Investor”), pursuant to which Fold issued to the Investor (i) a Convertible Note in an aggregate principal amount of $
As of March 31, 2025, the principal amount outstanding under the March 2025 Investor Note was $
The March 2025 Investor Note was funded with
The Company has elected to account for the March 2025 Investor Note using the fair value option and will remeasure the March 2025 Investor Note at each reporting period. As of the date of issuance, the fair value of the March 2025 Investor Note was $
18
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
During the three months ended March 31, 2025, the Company recorded a $
The Company separately valued the March 2025 Warrants and Closing Shares issued at $
The Investor Note will accrue interest at a rate of
The March 2025 Investor Note provides for certain events of default. In connection with an event of default, the Investor may require the Company to redeem all or any portion of the March 2025 Investor Note by returning to the Holder the amount of Bitcoin Collateral that has not previously been released to the Company in connection with the conversion of the principal into shares of common stock. The Company is also subject to certain customary affirmative and negative covenants regarding the rank of the March 2025 Investor Note, the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, distributions or redemptions, the transfer of assets, and the maturity of other indebtedness, among other customary matters. As of March 31, 2025, the Company was in compliance with all covenants and there have been no events of default during the period.
11. STOCKHOLDERS' EQUITY
Common stock
Pursuant to the Third Restated Certificate of Incorporation of the Company dated February 14, 2025, the Board is authorized to issue
Preferred stock
Pursuant to the Third Restated Certificate of Incorporation of the Company dated February 14, 2024, the Board is authorized to issue
Warrants
As of March 31, 2025, Fold had the following equity-classified warrants: (1)
12. SHARE-BASED COMPENSATION EXPENSE
Prior to the Merger, Fold historically granted Restricted Stock Awards ("RSAs") and Restricted Stock Units (“RSUs”) under the Fold, Inc. 2019 Equity Incentive Plan (the “2019 Equity Plan”). In connection with the Merger, the Company adopted a new 2025 Incentive Award Plan (the "2025 Equity Plan") as well as an employee stock purchase plan (the "2025 ESPP") which became effective immediately on the date of the Merger. Collectively, these plans are referred to as the "Equity Plans".
19
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
The purpose of the Equity Plans is to offer select Participants (defined as employees, consultants, or outside directors) the opportunity to acquire equity in the Company through the awards of Options, Restricted Stock Awards, Stock Appreciation Rights, Restricted Stock Units, and Other Stock Awards (collectively and individually, “Awards”). RSUs are Awards of an unfunded and unsecured right to receive Shares (or cash or a combination of Shares and cash, as determined in the sole discretion of the Board) upon settlement of the Award. RSAs are Awards of restricted shares of Company common stock. Each Award may or may not be subject to vesting. Vesting occurs upon satisfaction of the conditions specified in each individual award agreement. As of March 31, 2025, the Company has
Restricted Stock Units
Prior to the Merger the Company's RSUs had two vesting conditions:
On February 14, 2025, upon finalization of the Merger Agreement with FTAC Emerald, each outstanding Fold RSU award was converted into an award of restricted stock units covering a number of shares of common stock determined by multiplying (i) the number of shares of Fold common stock subject to the Fold RSU award immediately prior to the consummation of the Merger by (ii)
The Company recognized $
Restricted Stock Award
The Company's awarded RSAs are not subject to any performance condition vesting requirements and are instead subject only to service conditions. We recorded a nominal amount of share-based compensation expense related to RSAs for the three months ended March 31, 2025 and March 31, 2024. There was
Determination of fair value
The initial value of the awards on the dates that the RSUs and RSAs were granted was determined based on the underlying value of the Company’s common stock. As a private company, the common stock was valued by performing an enterprise valuation using a guideline public company market approach method. This method leverages an analysis of publicly traded peers to develop relevant market multiples and ratios applied to the Company’s historical and expected cash flows. As a public company, the common stock will be valued based on the Company's stock price.
20
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
RSU and RSA activity
The following table summarizes RSU and RSA share activity under the Equity Plans for the three months ended March 31, 2025 and 2024:
|
|
RSUs |
|
|
RSAs |
|
||
Shares nonvested at January 1, 2025 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
( |
) |
Forfeited |
|
|
|
|
|
|
||
Shares nonvested at March 31, 2025 |
|
|
|
|
|
|
||
|
|
RSUs |
|
|
RSAs |
|
||
Shares nonvested at January 1, 2024 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
( |
) |
|
Forfeited |
|
|
|
|
|
|
||
Shares nonvested at March 31, 2024 |
|
|
|
|
|
|
||
13. COMMITMENTS AND CONTINGENCIES
401(k) Plan
We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Both Company and employee contributions to the 401(k) plan are discretionary. For each of the three months ended March 31, 2025 and 2024, we recorded a nominal amount of expense related to the 401(k) plan, which is included in compensation and benefits in the accompanying statements of operations.
Litigation
The Company was
14. INCOME TAXES
During the three months ended March 31, 2025, the Company had losses before income taxes of $
As of March 31, 2025, the Company has federal and state net operating loss (NOL) carryforwards available to offset future taxable income. Section 382 imposes an annual limitation on the amount of taxable income that can be offset by NOLs following a greater than
21
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
15. FAIR VALUE MEASUREMENTS
Financial assets and liabilities that are measured at fair value on a recurring basis are classified as Level 1, Level 2, and Level 3 as follows:
|
|
As of March 31, 2025 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer rewards liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
March 2025 Investor Note |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer rewards liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
SAFEs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities, and deferred revenue approximate their fair values due to their short-term nature.
The fair value of our digital assets was determined using the Level 1 input of bitcoin prices in the market we determined to be the principal market as of March 31, 2025 and December 31, 2024.
Customer rewards liability
The customer reward liability is classified as a Level 3 financial instrument within the fair value hierarchy primarily due to the reward forfeiture rate applied to the value of the bitcoin obligation, which is an unobservable input to the fair value measurement. The Company has determined the bitcoin price based on its value in the market we determined to be the principal market for the related digital asset as of March 31, 2025 and December 31, 2024, which is considered a Level 1 input. The forfeiture rate is then applied to reflect an estimated breakage rate of rewards that have been forfeited based on the contractual terms and conditions of our Rewards Program and historical trends of forfeiture rates on a
Simple Agreements for Future Equity
On February 14, 2025, upon closing of the Merger with FTAC Emerald, the SAFEs of the Company converted into approximately
Prior to conversion, the estimated fair value of the SAFEs (refer to Note 9) was determined based on the aggregated, probability-weighted average of the outcomes of certain scenarios, including: (i) equity financing, with conversion of the SAFEs into a number of
22
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
shares of convertible preferred stock at the lower of the post-money valuation cap price or discount price (ii) liquidity event (change of control, direct listing, or an initial public offering) with mandatory conversion to common stock at the lower of the post-money valuation cap price or discount price and (iii) dissolution event, with SAFE holders automatically entitled to receive cash payments equal to the purchase amount, prior to and in preference to any distribution of any assets or surplus funds to the holders of convertible preferred and common stock. The combined value of the probability-weighted average of those outcomes was then discounted back to each reporting period in which the SAFEs are outstanding, in each case based on a risk-adjusted discount rate estimated to set the probability-weighted sum of each scenario to the purchase price. The discount rate at each valuation date was adjusted by the change in the USD CCC bond rate to reflect the market movement between the issuance date and valuation date. Additionally, in the Company’s estimate of the fair value of the Bitcoin SAFEs, the current value of bitcoin was used as an estimate of the future value of a BTC-denominated payout. If there is not a Liquidity Event, the SAFE will result in the repayment of the bitcoin contributed at the issuance of the note. To value this scenario, which is weighted at an
Fair value measurements associated with SAFEs were determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. Increases and decreases in the fair value of the SAFEs can result from updates to assumptions such as expected timing and probability of a qualified financing event, or changes in discount rates, among other assumptions. Based on the Company’s assessment of the valuation of the SAFEs, performed by the Company’s third-party valuation specialists, none of the changes in the fair value of those instruments were due to changes in the Company’s own credit risk for the reporting periods presented. Judgment is used in determining these assumptions as of the initial valuation date and at each subsequent reporting period. Changes or updates to assumptions could have a material impact on the reported fair value and the change in fair value of SAFEs and the results of operations in any given period.
The following table summarizes the changes in fair value associated with Level 3 SAFE financial instruments held at the beginning or end of the periods presented:
|
|
SAFEs |
|
|
Balance at January 1, 2024 |
|
$ |
|
|
Proceeds from issuances of SAFEs |
|
|
|
|
Change in fair value of SAFEs |
|
|
|
|
Balance at March 31, 2024 |
|
|
|
|
Proceeds from issuances of SAFEs |
|
|
|
|
Change in fair value of SAFEs |
|
|
|
|
Balance at December 31, 2024 |
|
|
|
|
Proceeds from issuances of SAFEs |
|
|
|
|
Change in fair value of SAFEs |
|
|
|
|
Conversion of SAFEs |
|
|
( |
) |
Balance at March 31, 2025 |
|
$ |
|
|
Convertible Note
The estimated fair value of the convertible note (refer to Note 10) was determined using a Monte Carlo simulation model, which requires the use of several inputs and significant assumptions, including the risk-free rate and volatility. The discount rate at each valuation date was the risk free rate. Additionally, in the Company’s estimate of the fair value of the convertible note, the forced conversion right was treated as soft call options within the valuation model.
Fair value measurements associated with the convertible note were determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. Increases and decreases in the fair value of the convertible note can result from updates to assumptions such as the price of bitcoin, expected timing and probability of the Company being able to exercise their forced conversion right, or changes in the risk-free rate, among other assumptions. Based on the Company’s assessment of the valuation of the convertible note, performed by the Company’s third-party valuation specialists, none of the changes in the fair value of those instruments were due to changes in the Company’s own credit risk for the reporting periods presented. Judgment is used in determining these assumptions as of the initial valuation date and at each subsequent reporting period. Changes or updates to assumptions could have a material impact on the reported fair value and the change in fair value of the convertible note and the results of operations in any given period.
23
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
The following table summarizes the changes in fair value associated with Level 3 convertible note financial instruments held at the beginning or end of the periods presented:
|
|
Convertible Note |
|
|
Balance at December 31, 2024 |
|
|
|
|
Additions |
|
|
|
|
Fair Value adjustment, Day one loss on issuance of debt |
|
|
|
|
Fair Value adjustment, Change in fair value |
|
|
( |
) |
Balance at March 31, 2025 |
|
$ |
|
|
The following table summarizes the significant inputs which the fair value measurements associated with the convertible note was determined:
|
|
As of March 31, 2025 |
|
As of December 31, 2024 |
|
||
Risk-Free Rate (continuously compounded) |
|
|
% |
|
|
||
Fold Volatility (Annual) |
|
|
% |
|
|
||
Bitcoin Volatility (Annual) |
|
|
% |
|
|
||
Note Term |
|
|
|
|
|||
Fold Stock Price |
|
$ |
|
|
|
||
Bitcoin Price |
|
$ |
|
|
|
||
Correlation (Fold and Bitcoin) |
|
|
|
|
|
||
Conversion price |
|
$ |
|
|
|
||
Dividend Yield (Annual) |
|
|
% |
|
|
||
16. CUSTODY OF DIGITAL ASSETS
We provide custody services on behalf of our customers through unrelated third-party service providers, who are qualified custodians. We do not own digital assets held in a custodial capacity on behalf of our customers. We maintain internal record keeping of those assets and are obligated to safeguard the assets. We do not hold the cryptographic key information on behalf of our customers. The qualified custodians used by Fold hold our customer cryptographic key information. We are not aware of any actual or possible safeguarding loss events requiring recognition under ASC 450-20, Loss Contingencies, as of and for the three months ended March 31, 2025 or year ended December 31, 2024.
The fair value of customer digital assets held by our qualified custodians totaled $
17. NET LOSS PER SHARE
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock. In periods when the Company reported a net loss, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items were anti-dilutive.
As described in Note 3 - Recapitalization, the Company accounted for the Merger as a reverse recapitalization. Net loss per share calculations for all periods prior to the Merger have been retrospectively adjusted by the Exchange Ratio for the equivalent number of shares of common stock outstanding immediately after the Merger to effect the reverse recapitalization. The Exchange Ratio was calculated as the quotient of (a) the Aggregate Merger Consideration, divided by (b) the number of shares of Fold Fully Diluted Capital Stock. Subsequent to the Merger, net loss per share is calculated based on the weighted average number of shares of common stock outstanding.
24
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Basic net loss per share: |
|
|
|
|
|
|
||
Numerator: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
|
||
Basic shares: |
|
|
|
|
|
|
||
Weighted-average shares used to compute basic and diluted net loss per share |
|
|
|
|
|
|
||
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
||
Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Convertible preferred stock |
|
|
|
|
|
|
||
Unvested restricted stock units |
|
|
|
|
|
|
||
SAFEs (1) |
|
|
|
|
|
|
||
Convertible notes (2) |
|
|
|
|
|
|
||
Investor warrants (3) |
|
|
|
|
|
|
||
Total anti-dilutive securities |
|
|
|
|
|
|
||
18. SUBSEQUENT EVENTS
The Company evaluated subsequent events, if any, that would require an adjustment to the Company’s financial statements or require disclosure in the notes to the financial statements through May 15, 2025, the date the financial statements were available to be issued.
25
Fold Holdings, Inc.
Notes to Unaudited Condensed Financial Statements
Where applicable, the notes to these financial statements have been updated to discuss significant subsequent events which have occurred.
There have been no subsequent events that would require disclosure or adjustment in the accompanying financial statements.
26
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
The following discussion and analysis presents management’s perspective on our financial condition and results of operations, including performance metrics that management uses to assess company performance and should be read together with our financial statements and the related notes and other financial information included elsewhere in this filing.
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based upon current expectations, as well as management’s beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 10-K”). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.
Unless otherwise indicated or the context otherwise requires, references included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Fold,” “we,” “us,” “our,” and the “Company” refer to the business of Fold, Inc., a Delaware corporation, both prior and subsequent to the closing of the Merger.
Business overview
Founded in 2019, Fold is a bitcoin financial services company dedicated to expanding access to bitcoin through a comprehensive suite of consumer financial services. The Company was formed with the purpose of creating a modern financial services platform that allows customers to earn, accumulate, and utilize bitcoin in their everyday life. The Company offers consumers an FDIC insured checking account through Sutton Bank, a prepaid Visa debit card, bill payments, and an extensive catalog of merchant reward offers. The Company also offers various forms of bitcoin buying and selling with low-to-zero fees, instant withdrawals, and insured custody. By integrating bitcoin across traditional financial services, the Company acts as a key point of entry for consumers to engage with and integrate bitcoin into their everyday lives. The Company's products and services are available in the United States through the Fold mobile app.
Since Fold was founded, we have been a pioneer in bitcoin consumer financial services. From our earliest days, Fold has provided users an opportunity to spend their bitcoin via the Lightning Network - a use case largely underrepresented in the overall bitcoin ecosystem. In 2020, we partnered with Visa to launch the first ever bitcoin rewards debit card. In 2022, we launched a bitcoin exchange product, and have since added a comprehensive suite of purchase options including spot buys, dollar-cost averaging, direct paycheck conversion, and round-ups. In 2024, we provided consumers the ability to “get on zero” - the ability to live primarily off of bitcoin instead of fiat currency - and we launched a rewards product for ACH payments that allows users to earn up to 1.5% back on paying mortgages, rent, and other bill payments. In February 2025 we publicly announced our intention to offer a bitcoin-rewards credit card which we expect to launch in 2025, and in May 2025 we announced a Bitcoin Gift Card that is set to roll out to national merchant networks across the country over the coming months. We expect to continue to innovate in the bitcoin consumer financial services space over the coming years.
In addition to new products and features, we have committed significant resources towards optimizing our business through design and user experience ("UX") updates, refinement of our systems architecture, scaling our customer support services, expanding our rewards network, and adding strategic partnerships. Through these efforts we have achieved product-level profitability for all core product lines, inclusive of the contra-revenue effect of rewards, and we are well positioned to scale those lines.
One of the foundational value propositions of bitcoin is trust and security. Over the past few years, many “crypto”-adjacent business models failed to live up to those values, prioritizing short-term gains over their fiduciary duties to customers. As a result, many of these companies suffered a combination of reputational damage, bankruptcy, litigation, and fines. Throughout our existence, Fold has been focused on ensuring the safety and security of our customer assets while also complying with regulatory guidance relevant to our business. We believe that a solid trust foundation is critical for continued user adoption and in building a positive brand image, both of which are crucial for our long-term success.
27
In addition to our core operating business, Fold has adopted a bitcoin treasury strategy that aligns our corporate goals with the products we offer to our customers. As of May 15, 2025, Fold has accumulated more than 1,490 bitcoin in our Investment Treasury, and we plan to continue to accumulate bitcoin over time. We view our bitcoin holdings as a long-term strategic investment and not as a trading asset.
Recent developments
The Company was originally incorporated in the state of Delaware as Fold, Inc. on August 20, 2019. On July 24, 2024, Fold, Inc. entered into a definitive agreement (the "Merger Agreement") with FTAC Emerald Acquisition Corp. (“FTAC Emerald”), a publicly-traded special purpose acquisition company, providing for a proposed business combination (the "Merger"). The registration statement for the Merger was declared effective by the SEC on January 23, 2025, the Merger was approved by FTAC’s shareholders on February 13, 2025, and the business combination was finalized on February 14, 2025. The combined company now operates under the name Fold Holdings, Inc., and its common stock and warrants trade on the Nasdaq under the ticker symbols “FLD” and “FLDDW,” respectively. The Company is a remote-first company and does not designate a physical headquarters.
In July 2024, we released a new rewards program for ACH bill payments, a feature that we believe currently has limited competition in the financial payments industry. This program provides eligible users the ability to earn up to 1.5% back on their mortgage, rent, or other bill payments. The amount of ACH payments eligible for rewards are tied directly to spending volumes elsewhere in the Fold ecosystem - for example, by spending $1,000 to purchase bitcoin on Fold, a user can earn rewards on up to $1,000 in ACH payments. This feature had been sought after by our existing user base for some time, and we expect it to drive increased volumes across all forms of eligible spend on our platform.
In September 2024, we added support for users from the state of Texas for our bitcoin exchange product, and we added the ability for users to deposit bitcoin into Fold to use as a funding method.
In November 2024, we launched joint accounts, a feature that provides the ability for users to add authorized users to their existing accounts (i.e. add a family member to your Fold Debit Card).
From January 1, 2024, to December 31, 2024 the Company entered into SAFEs with various investors with aggregate proceeds of $72.1 million.
In December 2024, Fold entered into a Securities Purchase Agreement (the “December 2024 Securities Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which (i) Fold issued to the Investor a Senior Secured Convertible Note in an aggregate principal amount of $20,000,000 (the “December 2024 Initial Investor Note”), and (ii) following the closing of the Merger, Fold (or New Fold, as successor to Fold) may issue to the Investor an additional Senior Secured Convertible Note in an aggregate principal amount of up to $10,000,000 (the “Additional Investor Note” and, together with the December 2024 Initial Investor Note, the “Investor Notes”), subject to the mutual discretion of Fold and the Investor. The Investor Notes will be convertible into shares of New Fold Common Stock at a conversion price of $11.50 per share. The Investor Notes are secured by Fold’s assets as collateral, including a portion of Fold’s proprietary bitcoin, and will mature on February 14, 2028.
In February 2025, we publicly announced a new product line, the Fold Bitcoin Rewards Credit Card. This product is an expansion of our current bitcoin-rewards Fold Debit Card. As with our Fold Debit Card, we have partnered with Visa to launch this product which is expected to launch in 2025. Premium customers will receive unlimited 2% bitcoin rewards, a free metal card, a variety of sign-up bonuses, and all the benefits of our premium membership, Fold+. A recent survey of Fold users indicated nearly 95% currently use credit cards, and over 85% indicated the ability to earn bitcoin instead of traditional cash back, miles, or points is "very important" or "extremely important" to them. Historically one of our most highly requested products, we expect the Fold Credit Card to drive both new user acquisition and deeper engagement within the Fold ecosystem.
In March 2025, Fold entered into a Securities Purchase Agreement (the “March 2025 SPA”) with a related party (the “Investor”), pursuant to which Fold issued to the Investor (i) a Convertible Note in an aggregate principal amount of $46.3 million (the “March 2025 Investor Note”), which is convertible into shares of Common Stock at any time, at the option of the Investor, at a conversion price of $12.50 per share, (ii) warrants exercisable for 925,590 shares of Common Stock with an exercise price of $15.00 per share (the “March 2025 Warrants”, and (iii) an aggregate of 750,000 shares of Common Stock (the “Closing Shares”). The March 2025 Investor Note was funded with 475 bitcoin, net of 25 bitcoin of which was paid to the Investor as prepayment for the first year of interest. On the maturity date, the Company shall transfer to the Investor the balance of any bitcoin not previously released to the Company upon conversion of the March 2025 Investor Note to Common Stock, with a maximum potential repayment of 500 bitcoin if no amounts convert to Common Stock during the life of the note. No cash payments by Fold are contemplated under the Note.
In May 2025, we publicly announced a new product line, the Fold Bitcoin Gift Card. This product will provide customers the ability to purchase USD denominated gift cards through the Fold app, through online gift card distributors, and through national brick-and-mortar
28
merchant locations and redeem those gift cards for bitcoin through Fold. This product is expected to roll out to new distribution channels in phases throughout 2025.
Looking ahead
Fold has a proven track record of launching products that enhance engagement with our current customers and attract new customers to our platform. In 2025, we intend to build on this success by expanding our existing offerings to further engage our existing users, and we expect to introduce several new products to attract new customers. Here is how we intend to continue our momentum:
Product strategy
As highlighted above, we announced two significant new product lines during the first few months of 2025: (1) the Fold Bitcoin Rewards Credit Card, which we expect to launch sometime in 2025; and (2) the Fold Bitcoin Gift Card, which was announced in May and we expect to roll out to new merchant locations throughout the remainder of 2025. These products are collectively expected to drive higher volumes, revenues, and margins, but we also expect them to drive both new user acquisition and contribute to deeper engagement within the Fold ecosystem.
In addition to these new products, we are devoting significant time and resources to our Custody and Trading platform which we expect to continue to be a significant growth driver for Fold. Specifically, we are refining our onboarding experience, our funding options, our systems architecture, and our geographic footprint where we offer this product. Over the course of 2025 we expect to add support for larger orders via wires, to open our exchange product to non-cardholder customers, and to add users from new states where we have not previously supported access.
The timing of these product and feature releases will impact our ability to meet financial targets for 2025, however, we expect that each of these releases will further enhance our existing market position and drive increased volumes across the platform.
Growth Strategy
In addition to our product strategy, we intend to grow our customer base, transaction volume, and revenues through increased investment into organic and paid marketing channels that have proven successful to date.
Fold intends to continue to leverage our social media channels and customer referral program to drive maximum growth via organic channels which have been our primary growth channels to date. In addition, to further accelerate growth we intend to increase investments in paid marketing and affiliate opportunities in 2025, with a budgeted allocation of approximately $3.0 million for traditional marketing and advertising strategies. This contrasts with our full year 2024 spend of $0.3 million.
While we expect our existing products to benefit from this growth strategy, we also expect the addition of new products like the Fold Credit Card and the Fold Bitcoin Gift Card to create synergies across product lines and attract new users who are looking for a more comprehensive suite of financial products.
Bitcoin treasury strategy
As of March 31, 2025, we held approximately 1,579 BTC in our Bitcoin Treasury which had a market value of $130.3 million based on the market price of one bitcoin on the Coinbase exchange at 11:59:59 p.m. UTC time on March 31, 2025, which was approximately $82.5 thousand.
Fold’s purpose for holding bitcoin in treasury is twofold: (1) to fulfill bitcoin rewards to customers in accordance with the terms and conditions of Fold’s user agreements (“Rewards Treasury”); and (2) as a treasury asset with the intention to hold as a long term investment (“Investment Treasury”). The following is a summary of Fold’s bitcoin held in treasury as of the dates shown:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Rewards treasury (USD) |
|
$ |
7,365,544 |
|
|
$ |
8,569,651 |
|
Investment treasury (USD) |
|
|
122,957,753 |
|
|
|
93,568,700 |
|
Total bitcoin treasury (USD) |
|
$ |
130,323,297 |
|
|
$ |
102,138,351 |
|
29
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Rewards treasury (BTC) |
|
|
89 |
|
|
|
92 |
|
Investment treasury (BTC) |
|
|
1,490 |
|
|
|
1,002 |
|
Total bitcoin treasury (BTC) |
|
|
1,579 |
|
|
|
1,094 |
|
We believe existing macro conditions to be favorable towards adding additional bitcoin to our balance sheet at current market prices and we will continue to consider additional bitcoin accumulation opportunities over the near term. We have not set any specific target for the amount of bitcoin we seek to hold. We plan to fund further bitcoin acquisitions primarily through issuances of common stock and a variety of financial instruments, including debt, convertible notes, preferred stock, or other structures as may be considered appropriate for our business.
Our Investment Treasury strategy also contemplates that we may (i) periodically sell bitcoin for general corporate purposes, (ii) pledge or commit a portion of our bitcoin as collateral for purposes of entering into financing transactions, (iii) utilize our bitcoin as reserve collateral for various products used in our operating business, and/or (iv) consider opportunities to create income streams or otherwise generate funds using our bitcoin holdings. As of March 31, 2025, 800 bitcoin are restricted from use in operations under collateral agreements related to our convertible notes.
Key operating metrics
We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources, and assess our performance. In addition to certain GAAP metrics, we also monitor various non-GAAP measures to evaluate our business. We believe the following metrics and measures are useful to facilitate period-to-period comparisons of our business and to facilitate comparisons of our performance to that of other financial service providers. Where applicable we have provided definitions of metrics we consider key to our operations below.
Accounts
During the three months ended March 31, 2025, we added:
Transaction volumes
Transaction Volume is inclusive of deposits, spend, and withdrawals across our platform and are inclusive of both fiat ("USD") and bitcoin ("BTC") transaction volumes.
From inception through March 31, 2025, Fold processed approximately $2.8 billion in Transaction Volume through our platform. For the three months ended March 31, 2025, we averaged more than $84 million in monthly Transaction Volume.
Key components of results of operations
Revenue
Banking and payments revenue
Fold is a financial services platform and not a chartered bank. Our banking and payments revenues consist of revenues received from our Fold Debit Card and related product features, including:
30
The Company notes that the above categories of revenue are combined into Banking and Payments given their interconnected nature. For example, for the three months ended March 31, 2025, 97% of merchant offers were purchased with a Fold Debit Card. In addition, Fold primarily incentivizes users to sign up for its Fold+ subscription by reducing transaction fees and increasing rewards on Fold Debit Card transactions as well as by providing access to exclusive merchant offers. While Fold assesses each of these revenue streams separately for revenue recognition purposes, they all derive primarily from Fold Debit Card transactions which are funded by user accounts at Sutton Bank.
Custody and trading revenue
Fold partners with BitGo Trust Company, Inc. (“BitGo”) and Fortress Trust LLC (“Fortress”) (collectively “Exchange Providers”) to offer eligible customers the ability to buy, sell, store, insure, and withdraw bitcoin using the Fold app via an “Exchange Account”. Fold earns revenue on these transactions via a combination of transaction fees and transaction spreads. Spreads on trades include two components: (1) spreads charged by our Exchange Providers, which include any spreads passed on by their liquidity providers, and (2) Fold’s spread. For customers that do not have a Fold+ subscription, Fold also adds a transaction fee to certain buy and sell transactions as outlined in our terms and conditions which can change from time to time. Transaction fees are stated as a percentage of the purchase or sale amount (i.e. 1.5%).
Other revenue
We occasionally earn revenues from alternate sources, including Fold merchandise sales, sponsorship revenues, affiliate revenues, and other one-off revenue models. These revenues are typically non-recurring and are not currently material to our business.
Revenue Rewards
Users can earn bitcoin rewards by engaging in qualifying revenue-generating activities (spending money on Fold’s products, “Revenue Rewards”). Revenue Rewards are defined as those that are earned in direct relation to a qualifying spend transaction such as spending on the Fold Debit Card, purchasing bitcoin, purchasing merchant offers, etc. Marketing Rewards are defined as those that are earned for behaviors unrelated to qualifying spend transactions such as sign-up bonuses, referral bonuses, spinning the daily spin wheel, etc. For accounting purposes, any reward that derives from a transaction where Fold receives revenue constitutes a Revenue Reward, whereas all other rewards constitute Marketing Rewards. Marketing Rewards are recorded as a marketing expense within operating expenses.
Revenue Rewards constitute a “non-revenue element” of our contracts with customers and are accounted for under ASC 815 – Derivatives and Hedging. Under that guidance, for all applicable revenue streams, Revenue Rewards are recorded as a direct reduction in the transaction price of the related revenue earned (ex. we reduce interchange revenue by the amount of rewards earned by customers when completing qualifying spend transactions).
All rewards are earned immediately upon the performance of a qualifying action by the user, but not all rewards are immediately available for redemption. The redemption criteria for rewards varies by the type of qualifying action or transaction as outlined in the terms and conditions of the Fold Rewards Program. For example, rewards earned on the daily spin wheel are available for redemption immediately, while rewards earned via certain qualifying spend transactions on the Fold Card are subject to a 30-day settlement period before becoming available for redemption, a policy that is in place to prevent fraudulent activities.
31
The Company accrues both Revenue Rewards and Marketing Rewards, (collectively, the "Rewards") within ‘Customer rewards liability’ in our accompanying balance sheets at the time the Reward is earned, with the corresponding impact on our statements of operations dependent on the type of Reward. The liability is initially recorded at the fair value of the bitcoin earned upon the action by the user and subsequently marked to fair value until redeemed or reversed, with gains and losses on this liability recorded within 'Gain (Loss) on customer rewards liability' in our accompanying statements of operations. The liability is derecognized when the Reward is redeemed by the user and delivered to the user's bitcoin wallet.
Per the terms and conditions of the Fold Rewards Program, rewards are subject to adjustment for chargebacks, returns, refunds, or other circumstances. In addition, rewards are subject to expiry if users fail to maintain an active account for more than twelve consecutive months. The Company estimates the amount of rewards that will expire based on historical data, current user trends, and other factors and accrues for those amounts in the period those rewards were earned.
Sales returns and allowances
All revenue is recognized net of sales returns and allowances, when applicable, which arise from time to time for various reasons. Returns and allowances have been primarily related to merchant offers and have historically been immaterial to our business.
Operating Expenses
Operating expenses consist of the costs to satisfy our performance obligations to our customers; compensation and benefits; marketing expenses; professional fees; amortization of capitalized software development costs; and other selling, general, and administrative expenses.
Banking and payment costs
Banking and payments costs include direct costs related to licensing, servicing, and processing transactions within our banking and payments products, including costs related to our Fold Debit Card and Merchant Offers. For accounting purposes, the Company is the principal in gift card transactions and therefore recognizes (1) gross revenues for the sales price of the gift card to the customer, and (2) gross costs of sales for the cost of each gift card sold.
Custody and trading costs
Custody and trading costs consist primarily of licensing, servicing, and custodial fees related to our bitcoin exchange product. Custody and trading costs scale in proportion to our volumes.
Compensation and benefits expenses
Compensation and benefits expenses primarily consist of salaries and wages, employee insurance expenses, share-based compensation, and other payroll benefits related to full time employees.
Marketing expenses
A significant portion of marketing expense is related to rewards earned for the purposes of marketing, growth, or retention under the Fold Rewards Program (the "Marketing Rewards"). The Company accrues Marketing Rewards within ‘Customer rewards liability’ in our accompanying balance sheets at the time the Marketing Reward is earned, with the corresponding expense recorded within marketing expenses in our statements of operations. The liability is initially recorded at the fair value of the bitcoin earned upon the action by the user and subsequently marked to fair value, with gains and losses on this liability recorded within 'Gain (Loss) on customer rewards liability' in our accompanying statements of operations. The liability is derecognized when the reward is claimed by the user and delivered to the user's external bitcoin wallet.
Per the terms and conditions of the Fold Rewards Program, rewards are subject to adjustment for chargebacks, returns, refunds, or other circumstances. In addition, rewards are subject to expiry if users fail to maintain an active account for more than twelve consecutive months. The Company estimates the amount of rewards that will expire based on historical data, current user trends, and other factors and accrues for those amounts in the period those rewards were earned. These accruals are accounted for as a contra-expense within marketing expense for Marketing Rewards.
The other portion of marketing expense primarily relates to advertising and other promotional expenses.
32
Professional fees
Professional fees consist primarily of expenses related to fees paid for services, including legal, tax, accounting, and audit services.
Gain (loss) on customer rewards liability
Gain (loss) on customer rewards liability includes components of unrealized gains (losses) resulting from the remeasurement in fair value of Revenue Rewards and Marketing Rewards denominated in bitcoin in the current reporting period, as well as realized gains (losses) that occur upon the fulfillment of Rewards. Management has determined that gains or losses on digital assets held for purposes of fulfilling Rewards are related to its core operations, and therefore classifies all gains and losses on the remeasurement of this liability as an operating income or expense in its financial statements.
Gain (loss) on digital assets - rewards treasury
Gain (loss) on digital assets - rewards treasury includes components of unrealized gains (losses) resulting from the remeasurement in fair value of bitcoin held by Fold in our Rewards Treasury in the current reporting period as well as realized gains (losses) that occur upon the fulfillment of Rewards. Management has determined that gains or losses on digital assets held for the purposes of rewards redemptions are related to its core operations, and therefore classifies all gains and losses on the remeasurement of these digital assets as an operating income or expense in its financial statements.
Other selling, general and administrative expenses
Other selling, general and administrative expenses consist primarily of costs associated with contract labor, computer and internet, insurance, customer support costs, dues and subscriptions, and travel.
Other income (expense)
Gain (loss) on digital assets - investment treasury
Gain (loss) on digital assets - investment treasury includes components of unrealized gains (losses) resulting from the remeasurement in fair value of bitcoin held by Fold with the intention to hold as a long-term investment in the current reporting period. Management has determined that gains or losses on digital assets held as a long-term investment are not related to its core operations, and therefore classifies all gains and losses on the remeasurement of these digital assets as a non-operating income or expense in its financial statements.
Change in fair value of SAFEs
Change in fair value of SAFEs results from unrealized gain or loss due to the change in fair value of SAFEs. For accounting purposes, outstanding SAFEs are classified as liabilities and the change in their fair value is reflected in the statement of operations. However, Fold's SAFEs were structured to be settled via the delivery of common and/or preferred shares upon execution of an equity financing or liquidity event. On February 14, 2025, upon finalization of the Merger with FTAC Emerald, all SAFEs held by the Company converted into common shares and we will not have future gains or losses related to SAFE fair value remeasurements.
Change in fair value of convertible note
Change in fair value of convertible note results from the fair value gain or loss related to the March 2025 Investor Note.
Convertible note issuance costs and fees
Convertible note issuance costs and fees relates to the March 2025 SPA including the March 2025 Warrants and Closing Shares.
Interest expense
Interest expense primarily consists of amortization of the convertible note discount and issuance costs, as well as interest expense on the convertible note.
Other income
Other income primarily consists of interest income earned on cash and cash equivalents.
33
Income tax expense
The provision for income taxes consists primarily of federal, state and local tax. Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, changes resulting from the amount of recorded valuation allowance, permanent differences between U.S. generally accepted accounting principles and local tax laws, and certain one-time items.
Results of operations for the three months ended March 31, 2025 and 2024
Results of operations
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenues, net |
|
$ |
7,087,837 |
|
|
$ |
4,931,211 |
|
|
$ |
2,156,626 |
|
|
|
44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Banking and payment costs |
|
|
6,758,924 |
|
|
|
4,626,748 |
|
|
|
2,132,176 |
|
|
|
46 |
% |
Custody and trading costs |
|
|
45,785 |
|
|
|
21,288 |
|
|
|
24,497 |
|
|
|
115 |
% |
Compensation and benefits |
|
|
6,457,940 |
|
|
|
757,365 |
|
|
|
5,700,575 |
|
|
NM(i) |
|
|
Marketing expenses |
|
|
399,798 |
|
|
|
42,467 |
|
|
|
357,331 |
|
|
NM(i) |
|
|
Professional fees |
|
|
1,788,505 |
|
|
|
36,668 |
|
|
|
1,751,837 |
|
|
NM(i) |
|
|
Amortization expense |
|
|
91,071 |
|
|
|
57,353 |
|
|
|
33,718 |
|
|
|
59 |
% |
(Gain) Loss on customer rewards liability |
|
|
(1,100,857 |
) |
|
|
3,423,045 |
|
|
|
(4,523,902 |
) |
|
|
-132 |
% |
Loss (gain) on digital assets - rewards treasury |
|
|
1,010,586 |
|
|
|
(3,491,889 |
) |
|
|
4,502,475 |
|
|
|
-129 |
% |
Other selling, general and administrative expenses |
|
|
1,136,455 |
|
|
|
312,894 |
|
|
|
823,561 |
|
|
NM(i) |
|
|
Total operating expenses |
|
|
16,588,207 |
|
|
|
5,785,939 |
|
|
|
10,802,268 |
|
|
|
187 |
% |
Operating loss |
|
|
(9,500,370 |
) |
|
|
(854,728 |
) |
|
|
(8,645,642 |
) |
|
NM(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on digital assets - investment treasury |
|
|
(15,617,152 |
) |
|
|
— |
|
|
|
(15,617,152 |
) |
|
NM(i) |
|
|
Change in fair value of SAFEs |
|
|
(6,503,113 |
) |
|
|
(95,064 |
) |
|
|
(6,408,049 |
) |
|
NM(i) |
|
|
Change in fair value of convertible note |
|
|
(6,534,143 |
) |
|
|
— |
|
|
|
(6,534,143 |
) |
|
NM(i) |
|
|
Convertible note issuance costs and fees |
|
|
(9,569,109 |
) |
|
|
— |
|
|
|
(9,569,109 |
) |
|
NM(i) |
|
|
Interest expense |
|
|
(1,271,638 |
) |
|
|
— |
|
|
|
(1,271,638 |
) |
|
NM(i) |
|
|
Other income |
|
|
120,303 |
|
|
|
12,855 |
|
|
|
107,448 |
|
|
NM(i) |
|
|
Other income (expense), net |
|
|
(39,374,852 |
) |
|
|
(82,209 |
) |
|
|
(39,292,643 |
) |
|
NM(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss before income taxes |
|
|
(48,875,222 |
) |
|
|
(936,937 |
) |
|
|
(47,938,285 |
) |
|
NM(i) |
|
|
Income tax expense |
|
|
3,978 |
|
|
|
8,109 |
|
|
|
(4,131 |
) |
|
|
-51 |
% |
Net loss |
|
$ |
(48,879,200 |
) |
|
$ |
(945,046 |
) |
|
$ |
(47,934,154 |
) |
|
NM(i) |
|
|
(i) Not meaningful ("NM")
Revenue
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||
Banking and payment revenues |
|
$ |
6,921,625 |
|
|
$ |
4,920,666 |
|
|
$ |
2,000,959 |
|
|
|
41 |
% |
Custody and trading revenues |
|
|
151,855 |
|
|
|
11,933 |
|
|
|
139,922 |
|
|
NM(i) |
|
|
Other revenues |
|
|
26,035 |
|
|
|
7 |
|
|
|
26,028 |
|
|
NM(i) |
|
|
Less: Sales returns and allowances |
|
|
(11,678 |
) |
|
|
(1,395 |
) |
|
|
(10,283 |
) |
|
NM(i) |
|
|
Revenues, net |
|
$ |
7,087,837 |
|
|
$ |
4,931,211 |
|
|
$ |
2,156,626 |
|
|
|
44 |
% |
(i) Not meaningful ("NM")
34
Total net revenue for the three months ended March 31, 2025 increased by $2.2 million, or 44%, compared to the three months ended March 31, 2024. Those amounts are net of reductions in revenue related to Revenue Rewards totaling $0.5 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively.
Banking and payments
The primary driver behind increased banking and payments revenues related to merchant offers within our banking and payments business. Net revenues from merchant offers increased 48% from $4.4 million for the three months ended March 31, 2024 to $6.5 million for the three months ended March 31, 2025. This increase was driven primarily due to our intentional focus on marketing our merchant offers product during Q1 2025 via internal and external marketing channels.
Excluding merchant offers, our gross banking and payments revenues for the three months ended March 31, 2025 and three months ended March 31, 2024 were $0.5 million, respectively.
Custody and trading
Net revenues from custody and trading increased from a nominal amount for the three months ended March 31, 2024 to $0.2 million for the three months ended March 31, 2025. While still a small part of our overall revenue in 2025, we believe that custody and trading revenues will be an important growth driver for both volumes and revenues going forward. As highlighted above, we are devoting significant time and resources to our Custody and Trading platform which we expect to continue to be a significant growth driver for Fold. Specifically, we are refining our onboarding experience, our funding options, our systems architecture, and our geographic footprint where we offer this product. Over the course of 2025 we expect to add support for larger orders via wires, to open our exchange product to non-Fold cardholders, and to add users from new states where we have not previously supported access.
Revenues from our newest product, the Fold Bitcoin Gift Card, will also be included within this revenue line going forward.
Operating expenses
Banking and payments costs
Banking and payments costs include direct costs related to licensing, servicing, and processing transactions within our banking and payments products, including costs related to our Fold Debit Card and merchant offers. Banking and payments costs increased in relation to our increased merchant offer volumes as noted above. Costs of sales from merchant offers increased 46% from $4.4 million for the three months ended March 31, 2024 to $6.4 million for the three months ended March 31, 2025.
Excluding merchant offers, our banking and payments costs increased to $0.4 million for the three months ended March 31, 2025 compared to $0.2 million for the three months ended March 31, 2024. This increase is driven by increased card fulfillment fees and KYC costs related to new cardholder sign-ups of $0.1 million during the three months ended March 31, 2025.
Custody and trading costs
Custody and trading costs consist primarily of licensing, servicing, and custodial fees related to our bitcoin exchange product. Custody and trading costs scale in proportion to our volumes. While most of our custody and trading costs scale in direct proportion to our volumes and revenues, some of our costs, such as monthly platform fees, are fixed and do not scale with volume. Due to this cost structure, our margins on custody and trading are expected to increase over time with increased volumes.
Compensation and benefits
During the three months ended March 31, 2025 we added 7 full time employees to support our continued growth and compliance obligations as a public company. Payroll expenses increased in correlation with our increased employee headcount, which was 35 employees as of March 31, 2025 and 22 employees as of March 31, 2024. We expect to hire additional staff in strategic roles to support the launches of our new product lines and continued growth throughout 2025.
Compensation and benefits expense for the three months ended March 31, 2025 and 2024 also included non-cash share-based compensation expense of $5.2 million and $0.0 million, respectively. The $5.2 million of share-based compensation expense for the three months ended March 31, 2025 included $4.4 million of unrecognized share-based compensation expense as of December 31, 2024 that was immediately recognized due to the performance condition being satisfied on February 14, 2025 as a result of the Merger with FTAC Emerald. As the performance condition was not met as of March 31, 2024, no share-based compensation was recognized for the three months ended March 31, 2024. There was $5.2 million of unrecognized shared-based compensation expense related to unvested awards as of March 31, 2025.
35
Marketing expenses
Marketing expenses were under $0.4 million for the three months ended March 31, 2025 compared to nominal amounts for the three months ended 2024, respectively. As noted above, to further accelerate growth we plan to increase investments in paid marketing and affiliate opportunities in 2025, with a budgeted allocation of approximately $3.0 million for traditional marketing and advertising strategies.
Professional fees
Professional fees increased to $1.8 million for the three months ended March 31, 2025, compared to nominal amounts for the three months ended March 31, 2024. This increase was driven primarily by fees paid to our legal counsel, independent auditors, and third-party consultants during 2025 in support of our Merger with FTAC Emerald.
Gain (loss) on customer reward liability and digital assets - rewards treasury
Gain (loss) on customer reward liability and digital assets - rewards treasury include components of unrealized gains (losses) resulting from the remeasurement gain or loss for the change in fair value of bitcoin held by Fold for the purposes of fulfilling our customer rewards liability in the current reporting period, as well as realized gains (losses) that occur upon the fulfillment of customer rewards liabilities. The price of bitcoin was approximately $42.3 thousand, $71.3 thousand, $93.4 thousand and $82.5 thousand as of the three months ended December 31, 2023, March 31, 2024, December 31, 2024, and March 31, 2025, respectively. These price changes were the primary driver of gains (losses) for both customer rewards liabilities and digital assets - rewards treasury for the three months ended March 31, 2025 and 2024.
Other income (expense)
Change in fair value of SAFEs results from unrealized gain or loss due to the change in fair value of our long-term SAFE note liabilities, which is determined based on the aggregated, probability-weighted average of the outcomes of certain scenarios. For accounting purposes, outstanding SAFEs are classified as liabilities and the change in their fair value is reflected in the statement of operations. However, Fold's SAFEs were structured to be settled via the delivery of common and/or preferred shares upon execution of an equity financing or liquidity event. On February 14, 2025, upon finalization of the Merger Agreement with FTAC Emerald, all SAFE notes held by the Company converted into common shares.
Gain (loss) on digital assets - investment treasury include unrealized gains (losses) resulting from the remeasurement gain or loss for the change in fair value of bitcoin held by Fold as a long-term investment. The price of bitcoin depreciated to approximately $82.5 thousand as of the three months ended March 31, 2025. The price change is the primary driver of losses for digital assets – investment treasury for the three months ended March 31, 2025. There was no gain (loss) on digital asset - investment treasury for the three months ended March 31, 2024.
Change in fair value of convertible note results from the fair value gain or loss related to the March 2025 Investor Note. The net loss on the fair value of the convertible note of $6.5 million during the three months ended March 31, 2025 is comprised of a $12.7 million day one loss on the issuance of debt offset by a $6.2 million gain on the change in fair value. There were no changes in fair value of convertible note for the three months ended March 31, 2024.
Convertible note issuance costs and fees relates to the March 2025 SPA including the March 2025 Warrants and Closing Shares. The total issuance costs expensed were $9.6 million for the three months ended March 31, 2025. There were no issuance costs or fees for the three months ended March 31, 2024.
Interest expense relates to amortization of the December 2024 Investor Note discount and issuance costs, as well as interest expense on the convertible notes. Of the total interest expense, $1.1 million relates to the December 2024 Investor Note and $0.1 million relates to the March 2025 Investor Note.
Non-GAAP Financial Measures
Adjusted EBITDA
In addition to net loss and other results under GAAP, we utilize non-GAAP calculations of adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) to monitor the financial health of our business. Adjusted EBITDA is defined as net loss, excluding (i) interest expense, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) share-based compensation, (v) remeasurement gains and losses such as fair value remeasurements on our digital assets, convertible notes, and SAFE notes, and (vi) impairments, restructuring charges, and business acquisition- or disposition-related expenses that we believe are
36
not indicative of our core operating results. This non-GAAP financial information has limitations as an analytical tool when assessing our operating performance, is presented for supplemental informational purposes only, should not be considered in isolation or as a substitute for, or superior to, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.
The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items are unpredictable, are not driven by core results of operations, and/or render comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of core operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.
The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net loss:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net loss |
|
$ |
(48,879,200 |
) |
|
$ |
(945,046 |
) |
Add: |
|
|
|
|
|
|
||
Interest expense |
|
|
1,271,638 |
|
|
|
- |
|
Income tax expense |
|
|
3,978 |
|
|
|
8,109 |
|
Amortization expense |
|
|
91,071 |
|
|
|
57,353 |
|
Share-based compensation expense |
|
|
5,170,275 |
|
|
|
- |
|
(Gain) loss on customer rewards liability |
|
|
(1,100,857 |
) |
|
|
3,423,045 |
|
Loss (gain) on digital assets - rewards treasury |
|
|
1,010,586 |
|
|
|
(3,491,889 |
) |
Loss on digital assets - investment treasury |
|
|
15,617,152 |
|
|
|
- |
|
Change in fair value of SAFEs |
|
|
6,503,113 |
|
|
|
95,064 |
|
Change in fair value of convertible note |
|
|
6,534,143 |
|
|
|
- |
|
Convertible note issuance costs and fees |
|
|
9,569,109 |
|
|
|
- |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
(4,208,992 |
) |
|
$ |
(853,364 |
) |
Adjusted EBITDA (non-GAAP) for the three months ended March 31, 2025 decreased by $3.4 million, or 393% compared to the three months ended March 31, 2024. The principal driver of decreased Adjusted EBITDA (non-GAAP) relates to (i) increased professional fees of $1.8 million; (ii) increased compensation and benefits expense excluding share-based compensation of $0.5 million; (iii) increased marketing expenses of $0.4 million; and (iv) increased insurance expenses of $0.3 million.
Increased professional fees related directly to legal, advisory, and audit services incurred as part of our transition to becoming a public company. Payroll expenses increased in correlation with our increased employee headcount, which was 35 employees as of March 31, 2025 and 22 employees as of March 31, 2024. Marketing expenses increased in accordance with our planned growth strategy for 2025, which includes budgeted expenditures for paid marketing channels. Insurance expenses related to increased coverage premiums as result of our transition to becoming a public company.
Adjusted EBITDA (Loss) Per Share
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Adjusted EBITDA (Loss) |
|
$ |
(4,208,992 |
) |
|
$ |
(853,364 |
) |
Weighted-average shares used to compute basic and diluted net loss per share |
|
|
25,436,398 |
|
|
|
5,836,882 |
|
|
|
|
|
|
|
|
||
Adjusted EBITDA (Loss) per share attributable to common stockholders: |
|
|
|
|
|
|
||
Basic and diluted |
|
$ |
(0.17 |
) |
|
$ |
(0.15 |
) |
Financial condition
Liquidity and Capital Resources
As of March 31, 2025, the Company had cash and cash equivalents of $11.7 million and positive working capital of $13.3 million. The Company has a history of net operating losses, including net operating losses of $9.5 million for the three months ended March 31,
37
2025. The Company has an accumulated deficit of $150.2 million. Of that amount, $98.0 million relates to fair value adjustments on the Company's SAFE notes, $16.6 million relates to fair value adjustments on the Company's digital assets, and $6.5 million relates to fair value adjustments on convertible debt instruments.
As of March 31, 2025, the Company held 1,490 bitcoin in our Investment Treasury, valued at $123.0 million. Of that amount, 800 bitcoin, valued at $66.0 million, were restricted from use as operating capital and served as collateral for our convertible notes. Our Investment Treasury is considered a long-term investment and we do not believe we will need to sell or engage in other transactions with respect to any of our Investment Treasury within the next twelve months to meet our working capital requirements, although we may from time to time sell or engage in other transactions with respect to our Investment Treasury as part of treasury management operations.
As of March 31, 2025, we held 89 bitcoin in our Rewards Treasury, valued at $7.4 million, which matched our existing customer rewards liability, which is denominated in bitcoin. The Company anticipates being able to cover the costs for future rewards via future revenues and operational capital on hand.
As of March 31, 2025, the Company had debt principal due of $66.3 million in the form of two convertible notes. The December 2024 Senior Secured Investor Note has a principal due of $20.0 million and is convertible into common shares at a conversion price of $11.50 per share. The note is secured by Fold’s assets as collateral, including 300 of Fold’s proprietary bitcoin, and will mature three years after the closing of the Merger. The March 2025 Investor Note has a principal due of $46.3 million and is convertible into common shares at a price of $12.50 per share. The Note is secured by Fold’s assets as collateral, including 500 of Fold’s proprietary bitcoin, and will mature five years from the date the note was issued. On the maturity date, the Company shall transfer to the Investor the balance of any bitcoin not previously released to the Company upon conversion of the March 2025 Investor Note to Common Stock, with a maximum potential repayment of 500 bitcoin if no amounts convert to Common Stock during the life of the note. No cash payments by Fold are contemplated under the Note.
Management expects that the Company’s existing cash and cash equivalents, accounts receivable, and digital assets received through March 31, 2025 will be sufficient to enable the Company to fund its anticipated level of operations through one year from the date these financial statements are available to be issued.
We may continue to pursue additional capital via various capital instruments in the future, however, such funding may not be available on terms acceptable to us or at all. Although management believes that such capital sources will continue to be available, there can be no assurances that financing will be available to the Company when needed, or if available, on terms acceptable to the Company. If the Company is unable to obtain adequate financing on terms that are satisfactory to the Company, when the Company requires it, the Company’s ability to continue to grow or support the business and to respond to business challenges could be significantly limited, which may adversely affect the Company’s business plan.
For the three months ended March 31, 2025 and 2024
The following table summarizes our cash flow activities:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(4,954,200 |
) |
|
$ |
(354,231 |
) |
Net cash used in investing activities |
|
|
(1,829,194 |
) |
|
|
(612,601 |
) |
Net cash provided by financing activities |
|
|
152,587 |
|
|
|
500,000 |
|
Net increase (decreased) in cash |
|
$ |
(6,630,807 |
) |
|
$ |
(466,832 |
) |
Cash flows from operating activities
For the three months ended March 31, 2025, cash used in operating activities was $5.0 million compared to $0.4 million for the three months ended March 31, 2025. This increase was driven primarily due to (i) increased professional fees of $1.8 million; (ii) increased compensation and benefits expense excluding share-based compensation of $0.5 million; (iii) increased marketing expenses of $0.4 million; and (iv) increased insurance expenses of $0.3 million.
Increased professional fees related directly to legal, advisory, and audit services incurred as part of our transition to becoming a public company. Payroll expenses increased in correlation with our increased employee headcount, which was 35 employees as of March 31, 2025 and 22 employees as of March 31, 2024. Marketing expenses increased in accordance with our planned growth strategy for 2025,
38
which includes budgeted expenditures for paid marketing channels. Insurance expenses related to increased coverage premiums as result of our transition to becoming a public company.
Cash flows from investing activities
Cash flows used in investing activities increased from March 31, 2024 to March 31, 2025 by $1.2 million, primarily due to increased volume of purchases of bitcoin for our Investment Treasury.
Cash flows from financing activities
For the three months ended March 31, 2025 and 2024, cash provided by financing activities was $0.2 million and $0.5 million, respectively. For the three months ended March 31, 2025 and 2024, we raised $0.0 million and $0.5 from SAFE note financings, respectively. For the three months ended March 31, 2025 we received proceeds from issuance of the March 2025 Investor Note; however, those proceeds were received in bitcoin rather than cash and are therefore not included in cash provided by financing activities.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2025. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires us to make certain estimates and judgments that affect the amounts reported in our financial statements. We base our estimates on historical experience, anticipated future trends, and other assumptions we believe to be reasonable under the circumstances. Because these accounting estimates require significant judgment, our actual results may differ materially from our estimates. According to the U.S. Securities and Exchange Commission (SEC), a "critical accounting estimate" is defined as an estimate that meets two criteria:
Simple agreements for future equity ("SAFEs")
The Company has issued certain SAFEs, none of which remained outstanding as of March 31, 2025, that grant investors rights to participate in a future equity financing. The number of shares deliverable upon settlement is determined based on the market price of the shares at the settlement date. The Company’s SAFEs are recorded as a liability in the accompanying balance sheets and the Company records subsequent remeasurements in changes in fair value of SAFEs in the statements of operations. Issuance costs related to the SAFEs are expensed in the period incurred.
Convertible notes and warrants
The Company has accounted for the December 2024 Investor Note and the related Investor Warrants issued using the relative fair value allocation method on the date of issuance. The estimated fair values of the conversion option under the December 2024 Initial Investor Note and Investor Warrants were calculated under a Black-Scholes model utilizing the enterprise valuation of Fold's common shares as of December 31, 2024.
The fair value of the December 2024 Investor Note included the fair value of the conversion option as well as the discounted future contractually obligated cash flows under scenarios in which the Company achieved or did not achieve a public offering.
The estimated fair value of the March 2025 Investor Note was calculated under a Monte Carlo model as of March 31, 2025. The March 2025 Warrants were calculated under a Black-Scholes model utilizing Fold's stock price as of the issuance date.
39
Stock-based compensation expense
Each of the granted RSU's in historical periods required both service-based and performance-based vesting criteria, including the occurrence of a specified liquidity event in order to vest. The liquidity event requirements were met in conjunction with the Merger, and as such the Company recognized stock-based compensation expense associated with the outstanding RSU grants vested on that date. The Fold Board of Directors relied on independent third-party valuations of Fold Common Stock in determining the fair value of the RSU's on each grant date. Between grant dates, Fold evaluated whether there were any changes to forecasts or events that would impact the value of its common stock and obtained updated third-party valuations as necessary.
The valuations utilized the guideline public company method within the market approach whereby the valuation leveraged guidance company market multiples and ratios such as revenue, earnings before interest and taxes, earnings before interest, taxes, depreciation, and amortization, and net income and/or tangible book value to apply to Fold's corresponding financial data to compute the implied total value of Fold equity. Guideline companies were selected based on business description, financial size and performance, and stock liquidity. Weighting was applied to the identified guideline public companies to obtain multiples that most appropriately reflected Fold's current performance and financial metrics. The risk-free rate used was the constant maturity U.S. Treasury rate corresponding to the applicable time to liquidity.
Recent accounting pronouncements
See “Recent accounting pronouncements” described in Note 2, Summary of Significant Accounting Policies within Notes to the Financial Statements.
40
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Macroeconomic trends impacting our market
The following macroeconomic factors as they relate to bitcoin specifically impact our business:
Bitcoin market price risk
Some of our assets and liabilities are denominated in bitcoin, including our bitcoin Investment Treasury, our customer rewards liability, and the March 2025 Investor Note. These assets and liabilities are remeasured to fair value at the end of each reporting period using observed bitcoin prices from active exchanges. Fair value adjustments are recorded in the statements of operations and could result in volatility in our financial results in future periods. Negative swings in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin-denominated assets and liabilities.
41
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as a result of the material weaknesses in our internal control over financial reporting described below, the design and operation of our disclosure controls and procedures were not effective as of March 31, 2025.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses in our internal control over financial reporting exist as of March 31, 2025:
We have begun the process of, and are focused on, designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate these material weaknesses. Our efforts include several actions:
The actions that we are taking are subject to ongoing senior management review, as well as oversight of the audit committee of our Board. We also may conclude that additional measures may be required to remediate the material weaknesses or determine to modify the remediation plans described above. We will not be able to conclude that we have remediated the material weaknesses until the applicable controls are fully implemented and operate for a sufficient period of time and management has concluded, through formal testing, that these controls are operating effectively. We will continue to monitor the design and effectiveness of these and other processes, procedures, and controls and make any further changes management deems appropriate.
Changes in Internal Control over Financial Reporting
Other than the ongoing remediation efforts described above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be subject to various claims, lawsuits and other legal and administrative proceedings that may arise in the ordinary course of business. Some of these claims, lawsuits and other proceedings may range in complexity and result in substantial uncertainty; it is possible that they may result in damages, fines, penalties, non-monetary sanctions, or relief. We currently do not have any claims, lawsuits, or proceedings against us that, individually or in the aggregate, would be considered material to our business or likely to result in a material adverse effect on our future operating results, financial condition, or cash flows.
Item 1A. Risk Factors.
There are numerous factors that affect our business and operating results, many of which are beyond our control. There have been no material changes to the risk factors previously described in our 2024 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
On March 6, 2025, Fold entered into a Securities Purchase Agreement (the “March 2025 SPA”) with a related party (the “Investor”), pursuant to which Fold issued to the Investor (i) a Convertible Note in an aggregate principal amount of $46.3 million (the “March 2025 Investor Note”), which is convertible into common shares at any time, at the option of the Investor, at a conversion price of $12.50 per share, (ii) warrants exercisable for 925,590 shares of common shares with an exercise price of $15.00 per share (the “March 2025 Warrants”, and (iii) an aggregate of 750,000 shares of Common Stock (the “Closing Shares”). The March 2025 Investor Note was funded with 475 bitcoin, net of 25 bitcoin of which was paid to the Investor as prepayment for the first year of interest. Refer to Note 10 for further details.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
43
Item 6. Exhibits.
Exhibit Number |
|
Description |
2.1 |
|
|
3.1 |
|
Third Amended and Restated Certificate of Incorporation of Fold Holdings, Inc.(1) |
3.2 |
|
Second Amended and Restated Bylaws of Fold Holdings, Inc.(1) |
4.1 |
|
|
4.2 |
|
|
4.3 |
|
|
4.4 |
|
|
10.1 |
|
|
10.2 |
|
|
10.3 |
|
|
10.4 |
|
|
10.5# |
|
|
10.6# |
|
|
10.7# |
|
|
10.8# |
|
Form of Notice of Restricted Stock Unit Grant under the Fold, Inc. 2019 Equity Incentive Plan.(1) |
10.9 |
|
|
10.10 |
|
|
10.11 |
|
|
10.12 |
|
|
10.13 |
|
Securities Purchase Agreement, by and between the Company and the Investor, dated March 6, 2025.(3) |
10.14 |
|
|
10.15 |
|
Registration Rights Agreement, by and between the Company and the Investor, dated March 12, 2025.(3) |
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
# Indicates management contract or compensatory plan or arrangement.
(1) Previously filed as an exhibit to our Current Report on Form 8-K filed on February 14, 2025.
(2) Previously filed as an exhibit to our Registration Statement on Form S-4, as amended (File No. 333-282520).
(3) Previously filed as an exhibit to our Current Report on Form 8-K filed on March 12, 2025.
44
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Fold Holdings, Inc. |
|
|
|
|
|
Date: May 15, 2025 |
|
By: |
/s/ Will Reeves |
|
|
|
Will Reeves |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: May 15, 2025 |
|
By: |
/s/ Wolfe Repass |
|
|
|
Wolfe Repass |
|
|
|
Chief Financial Officer (Principal Accounting Officer) |
45
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Will Reeves, certify that:
Date: May 15, 2025 |
By: |
/s/ Will Reeves |
|
|
Will Reeves |
|
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Wolfe Repass, certify that:
Date: May 15, 2025 |
By: |
/s/ Wolfe Repass |
|
|
Wolfe Repass |
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Will Reeves, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 15, 2025 |
By: |
/s/ Will Reeves |
|
|
Will Reeves |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Wolfe Repass, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 15, 2025 |
By: |
/s/ Wolfe Repass |
|
|
Wolfe Repass |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |