Fold Holdings, Inc. SEC 10-K Report

Fold Holdings, Inc., a bitcoin financial services company founded in 2019, has released its Form 10-K report, providing a comprehensive overview of its financial and operational performance for the fiscal years 2023 and 2024. The report highlights the company's strategic initiatives, financial metrics, business operations, and the challenges it faces in the volatile bitcoin market.

Financial Highlights

Net Income: Fold Holdings reported a net income of $4.44 million for the year ended December 31, 2023, primarily driven by interest income earned on investments held in the Trust Account amounting to $11.21 million. This was partially offset by operating and formation costs. However, the company experienced a net loss of $1.87 million for the year ended December 31, 2024, mainly due to general and administrative expenses, non-redemption agreement expenses, provision for income tax, and interest expense, offset by interest income earned on investments held in the Trust Account.

Interest Income: The company generated $11.21 million in interest income for the year ended December 31, 2023, and $2.95 million for the year ended December 31, 2024, from investments held in the Trust Account.

General and Administrative Expenses: These expenses amounted to $2.92 million for the year ended December 31, 2024, contributing to the net loss for the period.

Non-Redemption Agreement Expense: Fold Holdings incurred $0.84 million in non-redemption agreement expenses for the year ended December 31, 2024, and $0.71 million for the year ended December 31, 2023, related to agreements with third parties not to redeem public shares.

Business Highlights

Company Overview: Fold Holdings is a bitcoin financial services company offering a suite of consumer financial products, including an FDIC-insured checking account, a Visa prepaid debit card, and a rewards program that allows users to earn bitcoin.

Product and Service Offerings: The company provides a comprehensive suite of financial services tailored for bitcoin integration, including banking and payments, a rewards network, and partnerships with third-party service providers for bitcoin exchange and custody services.

Rewards Network: The Fold Rewards Program allows users to earn bitcoin through various actions, with rewards calculated based on the USD-BTC exchange rate at the time of the transaction. Rewards can be redeemed to a personal bitcoin wallet.

Custody & Trading: Fold partners with Fortress Trust LLC and BitGo Trust Company to offer bitcoin buying, selling, storing, and withdrawing services, ensuring operational redundancy and compliance with state regulations.

Customer Demographics: Fold's core customer base is primarily aged 25-54, with strong financial positions, making over $100K annually, and is positioned for significant financial decisions like starting families and buying homes.

Strategic Partnerships: Fold collaborates with Marqeta for card issuing, Visa for payment processing, Sutton Bank for banking services, and Bitcoin Service Providers for digital asset custody, enhancing its service offerings.

First Mover Advantage: As the first company to launch a bitcoin rewards debit card program, Fold leverages proprietary data on customer behavior to expand its user base and deepen market penetration.

Bitcoin Treasury Strategy: Fold actively invests in bitcoin for its treasury, viewing it as a strategic reserve asset with potential for price appreciation, inflation hedging, and diversification benefits.

Growth Strategy: Fold aims to grow by enhancing its platform, expanding partnerships, aligning with the bitcoin brand, and exploring global expansion opportunities, while maintaining low customer acquisition costs.

Regulatory Compliance: Fold adheres to a robust compliance framework, including AML and sanctions laws, FDIC banking regulations, and state money transmission laws, ensuring secure and compliant operations.

Human Capital: Fold employs 28 full-time employees and various contractors, focusing on attracting and retaining talent through competitive compensation, benefits, and a commitment to diversity and inclusion.

Strategic Initiatives

Business Combination: The company completed its Business Combination with Fold, Inc. on February 14, 2025, marking a significant strategic initiative aimed at expanding its business operations. This merger was part of the company's broader strategy to effect a business combination with one or more target businesses. Additionally, the company entered into non-redemption agreements with third parties to ensure sufficient capital for its business combination efforts.

Capital Management: The company managed its capital through a series of strategic actions, including the redemption of shares and the issuance of promissory notes. It conducted multiple extensions of its business combination deadline, each time allowing shareholders to redeem their shares, which resulted in significant cash outflows. The company also issued promissory notes to affiliates to cover working capital requirements and excise tax liabilities, which were repaid upon the completion of the business combination. Furthermore, the company waived deferred underwriting fees, enhancing its capital structure.

Future Outlook: Following the successful merger with Fold, Inc., the company is positioned to leverage its expanded operational capabilities. The focus will likely be on integrating Fold's operations and exploring further growth opportunities. The company has raised sufficient capital for its operations post-merger, indicating a stable financial outlook aimed at sustainable growth.

Challenges and Risks

Market Volatility: The company faces significant risks due to the highly volatile nature of Bitcoin, which causes substantial fluctuations in operating results. This volatility is influenced by market conditions, regulatory changes, and macroeconomic factors such as interest rates and inflation. The company's ability to forecast growth trends is challenged by these unpredictable factors, potentially impacting stock trading prices.

Regulatory Landscape: The regulatory landscape is highly evolving and uncertain, with extensive laws governing financial services, Bitcoin asset custody, and other areas. Changes in regulations or failure to comply could adversely affect the company's brand, reputation, and financial condition. The company is subject to scrutiny from U.S. and foreign regulators, and any adverse changes could impact its ability to offer products and services.

Competitive Industry: The company operates in a highly competitive industry, facing competition from traditional financial firms, fintech providers, and companies focused on the Bitcoin market. Competitors may have advantages such as greater resources, established relationships, and lower costs, which could adversely affect the company's business if it cannot compete effectively.

Innovation and Product Development: The company's success depends on its ability to develop new and innovative products and services to keep pace with the rapidly evolving market for payments and financial services. Failure to do so could materially and adversely affect the business.

Banking Relationships: The company is exposed to risks related to its relationships with bank partners, which may be subject to increased regulatory scrutiny. Changes in card network rules or standards could also adversely affect the business.

Litigation Risks: The company may face material litigation, including class action lawsuits and regulatory investigations, which could be costly and time-consuming, potentially harming the business and financial condition.

Operational Scaling: The company must effectively scale its business and maintain systems and processes to manage growth. Failure to do so could lead to operational failures and noncompliance with laws, impacting the company's operations.

Third-Party Dependencies: The company relies on third-party service providers for critical operations, and any disruption in these services could adversely impact the business. The security of Bitcoin and fiat currencies held by the company and its partners is crucial, and any breach could result in significant financial losses and reputational harm.

Regulatory Classification of Bitcoin: The company faces risks related to the classification of Bitcoin as a security, which could lead to regulatory scrutiny and impact the business. The loss of critical banking or insurance relationships could also adversely affect the company's operations.

Management's Response: Management acknowledges the challenges posed by the volatile Bitcoin market and regulatory uncertainties. The company is focused on enhancing its competitive position by investing in new technologies and expanding its product offerings. Management is also working to strengthen internal controls and processes to manage growth effectively.

Market Risks: The company is exposed to market risks, including fluctuations in Bitcoin prices and foreign currency exchange rates. These risks could adversely affect financial results, and the company is implementing strategies to mitigate these exposures.

SEC Filing: Fold Holdings, Inc. [ FLD ] - 10-K - Mar. 28, 2025