Filing identity and period
Important identity discrepancy: The supplied filing is for FTAC Emerald Acquisition Corp., a Delaware blank-check company (SPAC), not Fold Holdings, Inc. It is a Form 10-Q for the quarter ended June 30, 2023, filed August 9, 2023. The financial statements are unaudited.
Business context and financial results
FTAC Emerald had not begun operating or generating operating revenue. Its activity was limited to seeking a business combination; reported income primarily came from interest on funds in its trust account.
| Metric | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 |
|---|---|---|---|---|
| Operating and formation costs | $694,546 | $383,532 | $1,567,443 | $873,036 |
| Trust investment interest income | $3,052,686 | $339,099 | $5,749,212 | $364,340 |
| Net income (loss) | $1,727,575 | $(88,770) | $2,995,434 | $(553,033) |
| Basic and diluted EPS, both share classes | $0.05 | $(0.00) | $0.09 | $(0.02) |
For Q2 2023, income before tax was $2,358,140 and income tax provision was $630,565. For the first half, those amounts were $4,181,769 and $1,186,335, respectively. Operating margins are not meaningful because the company had no operating revenue.
Financial position, liquidity and cash flow
- At June 30, 2023, assets totaled $259.7 million, including $258.3 million in trust investments; cash outside the trust was $145,898.
- Working capital deficit was $1,221,589, excluding franchise and income tax payables. Current liabilities were $1.51 million.
- The company had $1.275 million outstanding under a non-interest-bearing Sponsor promissory note, up from zero at December 31, 2022. This is its principal reported borrowing; the filing says it had no other long-term debt obligations.
- For the six months, operating cash use was $2.90 million, investing cash inflow was $1.70 million (including $1.70 million withdrawn from trust for taxes), and financing cash inflow was $1.275 million from the Sponsor note. Cash increased by $73,145 to $145,898.
- Redeemable Class A shares were carried as temporary equity at $258.2 million, or $10.38 per share, versus $253.8 million, or $10.21 per share, at year-end. The increase included $4.42 million of accretion.
Changes, outlook and risks
- Compared with the first half of 2022, first-half 2023 net results improved to income of $3.0 million from a loss of $553,033, mainly because trust interest rose to $5.75 million from $364,340. Operating and formation costs also increased to $1.57 million from $873,036.
- Management said the company had until September 20, 2023 to complete a business combination. Failure to do so would require liquidation and dissolution. Management stated its intent to complete a transaction before that deadline but warned completion was uncertain.
- The filing concludes that the liquidity condition and potential mandatory liquidation raise substantial doubt about the company’s ability to continue as a going concern. No liquidation-related adjustments were made to asset or liability carrying values.
- The Sponsor was not obligated to provide further loans. A subsequent $100,000 draw on working capital loans was made July 25, 2023. The existing note would be due upon a business combination; if no combination occurs, repayment is limited to eligible funds outside the trust and any unpaid balance may be forgiven.
- Completion-related obligations include $8.70 million of deferred underwriting discounts and a $1.155 million deferred advisory fee, payable in connection with a completed business combination. The filing also discusses potential federal excise tax on certain stock redemptions or repurchases, which could reduce cash available for a transaction.
- Management reported disclosure controls were effective as of June 30, 2023, with no material changes in internal control during the quarter. No material changes to the previously disclosed risk factors were reported.
Most important facts for investors to verify
- Confirm the issuer: this filing is for FTAC Emerald Acquisition Corp., not Fold Holdings, Inc.; verify that it is the intended filing before relying on it.
- Verify whether a business combination was completed by the September 20, 2023 deadline, or whether the company extended the deadline or liquidated.
- Review subsequent filings for the status and terms of Sponsor loans, trust funds, redemptions, and any transaction-related financing.
- Confirm the amount and treatment of deferred underwriting/advisory fees and any excise tax exposure in a transaction or liquidation.