Fold Holdings, Inc. quarterly report, Q1 FY2023

Full document

Filing summary

Entity and period: The supplied filing is FTAC Emerald Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2023—not a filing identified as Fold Holdings, Inc. FTAC Emerald is a blank-check company seeking a business combination; it had not begun operating activities or generated operating revenue.

Financial results and position

  • Quarterly results: Net income was $1.27 million, versus a $464,263 net loss in Q1 2022. The 2023 result comprised $2.70 million of trust-account interest income, $872,897 of operating and formation costs, and $555,770 of income tax expense. Basic and diluted earnings per share were $0.04, compared with a $0.01 loss.
  • Revenue and margins: No operating revenue was reported. Operating loss was $872,897; operating and profit margins are not meaningful for this pre-combination SPAC.
  • Cash flow: Operating activities used $876,162, compared with $339,979 used in Q1 2022. Investing activities provided $120,486, primarily from a trust withdrawal for taxes; financing activities provided $750,000 from a related-party loan. Cash declined by $5,676 to $67,077.
  • Assets and liquidity: Total assets were $258.24 million, including $256.83 million in the trust account. Working capital deficit was $577,043, excluding franchise and income tax payables. Current liabilities were $1.80 million; total liabilities were $11.66 million. The filing reports no long-term debt.
  • Borrowings and redemption equity: A non-interest-bearing Sponsor promissory note had $750,000 outstanding at quarter-end, up from zero at December 31, 2022; the Sponsor committed to lend up to $1.5 million. Redeemable Class A shares were recorded at $255.86 million, or $10.29 per share, versus $253.81 million, or $10.21 per share, at year-end.

Changes versus prior-year quarter and year-end

  • Net results improved from a loss to income, principally because trust-account interest rose to $2.70 million from $25,241. Operating and formation costs increased to $872,897 from $489,504.
  • The trust balance increased from $254.25 million at December 31, 2022 to $256.83 million at March 31, 2023. The company recorded $2.05 million of accretion in the redemption value of Class A shares during the quarter.
  • The Sponsor loan balance increased from zero at year-end to $750,000. After quarter-end, the company drew a further $125,000 on April 24, 2023.

Outlook, risks, and contingencies

  • Management intended to complete a business combination by September 20, 2023, the stated end of the 21-month completion window. The filing says failure to complete a transaction by then would trigger mandatory liquidation and dissolution, and identifies substantial doubt about the company’s ability to continue as a going concern.
  • There is no assurance a transaction will be completed. The company had only $67,077 of cash outside the trust and may need additional financing; Sponsor loans are discretionary beyond the stated commitment. Trust funds generally cannot be used to repay working-capital loans if no transaction closes.
  • Potential redemptions may reduce cash available for a transaction. The filing also warns that the federal 1% stock-repurchase excise tax could apply to certain redemptions or repurchases and could reduce funds available.
  • Deferred underwriting fees of $8.70 million and a deferred advisory fee of $1.16 million are payable in connection with a completed business combination. The company also pays the Sponsor $30,000 monthly for administrative services.
  • The filing reports no legal proceedings and no material changes to the risk factors in its 2022 Form 10-K. Management said disclosure controls were effective as of March 31, 2023, with no material quarterly changes in internal control over financial reporting.

Important facts for investors to verify

  1. Confirm the intended issuer: the supplied document is for FTAC Emerald Acquisition Corp., not Fold Holdings, Inc.
  2. Verify whether the company completed a business combination or obtained an extension before the September 20, 2023 deadline; the filing states it had not yet completed one.
  3. Review subsequent liquidity, Sponsor-loan draws, and available cash outside the trust, given the quarter-end cash balance and working-capital deficit.
  4. Assess the impact of shareholder redemptions, transaction financing, deferred fees, and any applicable excise tax on funds available to a transaction.