FTAC EMERALD ACQ(EMLDU) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Financial Statements The unaudited condensed financial statements detail the company's financial position, operational results, and cash flows Condensed Balance Sheets | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | Change | | :--------------------------------- | :----------------------- | :------------- | :------- | | Total assets | $52,156,156 | $165,959,208 | (68.69%) | | Investments held in Trust Account | $51,996,271 | $165,653,149 | (68.63%) | | Total current liabilities | $6,406,868 | $3,394,026 | 88.77% | | Total liabilities | $7,561,868 | $4,549,026 | 66.24% | | Total stockholders' deficit | $(7,401,983) | $(4,311,700) | (71.68%) | Condensed Statements of Operations | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | General and administrative expenses | $801,420 | $683,551 | $2,154,179 | $2,250,994 | | Interest income (Trust Account) | $668,748 | $3,278,712 | $2,353,695 | $9,027,924 | | Interest expense | $(128,012) | $0 | $(323,197) | $0 | | Non-redemption agreement expense | $0 | $(708,400) | $(838,825) | $(708,400) | | Net (loss) income | $(397,026) | $1,206,590 | $(1,444,875) | $4,202,024 | | Basic and diluted net (loss) income per common stock, Class A | $(0.03) | $0.04 | $(0.10) | $0.12 | Condensed Statements of Changes in Stockholders' Deficit | Metric | Dec 31, 2023 | Sep 30, 2024 (Unaudited) | Change | | :------------------------------------------ | :----------- | :----------------------- | :------- | | Total Stockholders' Deficit | $(4,311,700) | $(7,401,983) | (71.68%) | | Accretion of common stock subject to possible redemption (9 months) | N/A | $(1,764,032) | N/A | | Contribution from the Sponsor (9 months) | N/A | $838,825 | N/A | | Excise taxes on stock redemption (9 months) | N/A | $(1,154,897) | N/A | | Net loss (9 months) | N/A | $(1,444,875) | N/A | Condensed Statements of Cash Flows | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Net (loss) income | $(1,444,875) | $4,202,024 | | Net cash used in operating activities | $(2,055,335) | $(4,039,176) | | Net cash provided by investing activities | $116,010,573 | $99,283,690 | | Net cash used in financing activities | $(113,964,643) | $(95,291,644) | | Net Change in Cash | $(9,405) | $(47,130) | | Cash – End of period | $20,439 | $25,623 | | Excise tax on stock redemption (noncash) | $1,154,897 | $967,916 | Notes to Condensed Financial Statements NOTE 1. ORGANIZATION AND BUSINESS OPERATIONS The company, a blank check entity, has extended its combination deadline and entered a merger agreement with Fold, Inc - The Company is a blank check company incorporated in Delaware on February 19, 2021, for the purpose of effecting a business combination[25] - As of September 30, 2024, the Company had not commenced any operations and will not generate operating revenues until after the completion of its initial Business Combination[26] - On July 24, 2024, the Company announced a Merger Agreement with Fold, Inc., where Fold will become a wholly-owned subsidiary of the Company[40][111] Liquidity and Going Concern - As of September 30, 2024, the Company had $20,439 in cash and a working capital deficit of $6,159,733[41] - The Company has until December 20, 2024, to consummate a Business Combination, and failure to do so will result in mandatory liquidation, raising substantial doubt about its ability to continue as a going concern[45][160] - The Sponsor or affiliates may loan funds for working capital, with $3,000,000 outstanding as of September 30, 2024, under a promissory note[42][43] Subscription Agreement - On January 3, 2024, the Company entered into a subscription agreement with Polar Multi-Strategy Master Fund and its Sponsors for up to $550,000 in capital contributions to cover working capital[47][153] - The Capital Contribution is non-interest bearing and will be repaid to Polar by ESG Funding upon the closing of an initial business combination, either in common stock (1 share for $10) or cash[48][154] - If the Company liquidates without a business combination, remaining cash accounts (excluding the Trust Account) will be paid to Polar up to the funded Capital Contribution amount[49][155] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the accounting policies used in preparing the unaudited condensed financial statements Basis of Presentation - Financial statements are prepared in accordance with GAAP for interim information and SEC rules for interim financial reporting[51] - Certain information or footnote disclosures normally included in GAAP financial statements have been condensed or omitted[51] Emerging Growth Company - The Company is an "emerging growth company" and can take advantage of exemptions from various reporting requirements[54] - The Company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[55] Use of Estimates - Management makes estimates and assumptions that affect reported amounts of assets, liabilities, and expenses[56] - Actual results could differ significantly from estimates due to future confirming events[57] Cash and Cash Equivalents | Metric | Sep 30, 2024 | Dec 31, 2023 | | :----- | :----------- | :----------- | | Cash | $20,439 | $29,844 | | Cash Equivalents | $0 | $0 | Investments Held in Trust Account | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------- | :----------- | :----------- | | Investments held in Trust Account | $51,996,271 | $165,653,149 | - Proceeds from the Public Offering are invested in U.S. government securities or money market funds[59] Net (Loss) Income Per Common Stock | Metric | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Basic and diluted net (loss) income per common stock, Class A | $(0.03) | $(0.10) | - Warrants are excluded from diluted EPS calculation due to their exercise being contingent upon future events[60] Class A Common Stock Subject to Possible Redemption | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Shares subject to possible redemption | 4,757,884 | 15,630,150 | | Value of Class A common stock subject to possible redemption | $51,996,271 | $165,721,882 | - Class A common stock subject to possible redemption is classified as temporary equity due to redemption rights outside the Company's control[63] Fair Value of Financial Instruments - Fair value of financial instruments approximates carrying amounts due to their short-term nature[64] - The Company uses a three-tier fair value hierarchy (Level 1, 2, 3) for measuring fair value[65][67] Warrant Classification - Warrants are classified as equity in accordance with ASC 815-40[66] Income Taxes - The Company accounts for income taxes under ASC 740, recognizing deferred tax assets and liabilities[68] - A full valuation allowance is recorded against deferred tax assets[68] | Metric | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Effective tax rate | 52.3% | 50.12% | (26.21)% | (27.54)% | Concentration of Credit Risk - Cash accounts in financial institutions may exceed FDIC coverage limits, posing a concentration of credit risk[73] Recent Accounting Standards - No material effect is expected from recently issued, but not yet effective, accounting standards[74] Risks and Uncertainties - Geopolitical instability (Russia-Ukraine, Israel-Hamas conflicts) could adversely affect the Company's search for a business combination[75][76] - The Inflation Reduction Act of 2022 imposes a 1% excise tax on stock repurchases, potentially reducing cash available for a business combination[78][79] - As of September 30, 2024, the Company recorded a $2,122,813 excise tax liability for shares redeemed on September 19, 2023, and January 19, 2024[80] NOTE 3. INITIAL PUBLIC OFFERING The company completed its IPO in December 2021 and sold additional units via an over-allotment option in January 2022 - IPO completed on December 20, 2021, selling 22,000,000 units at $10.00 per unit[82] - An additional 2,869,342 units were sold on January 14, 2022, through a partial exercise of the over-allotment option[82] - Class A common stock from the IPO is subject to redemption and classified as temporary equity[83] NOTE 4. PRIVATE PLACEMENT The Sponsor purchased private placement units concurrently with the IPO and over-allotment exercise - Sponsor purchased 890,000 Private Placement Units for $8,900,000 concurrently with the IPO[87] - An additional 86,081 Private Placement Units were sold to the Sponsor for $860,810 with the over-allotment exercise[87] - Private Placement Warrants have transfer restrictions for the Sponsor and its permitted transferees[88] NOTE 5. RELATED PARTY TRANSACTIONS This section details transactions with related parties, including Founder Shares, promissory notes, and service agreements Founder Shares - The Sponsor initially purchased 7,992,750 Class B common shares, adjusted to 8,763,333 Founder Shares[89] - All outstanding Class B Founder Shares were converted to Class A common stock following a stockholder meeting on September 19, 2023[89] - Founder Shares are subject to transfer restrictions tied to the consummation of the initial Business Combination and Class A common stock price thresholds[90] Promissory Note —Related Party - The Sponsor or affiliates may loan funds for working capital, with $3,000,000 outstanding as of September 30, 2024, under a non-interest bearing promissory note[92][94] - The aggregate principal amount of the Promissory Note was increased from $1,500,000 to $3,000,000 on October 16, 2023[94] - Loans are due upon a business combination; if no combination, they may be repaid from working capital outside the Trust Account, or unpaid amounts would be forgiven[94] Administrative Services Agreement - The Company pays the Sponsor $30,000 per month for administrative services[95] | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Administrative support services incurred | $270,000 | $270,000 | - As of September 30, 2024, $556,451 of administrative support services was included in due to related party[95] NOTE 6. COMMITMENTS AND CONTINGENCIES This section details the company's commitments, including registration rights, fees, and the merger with Fold, Inc Registration Rights - Holders of Founder Shares, Private Placement Units, and Working Capital Loan conversion units have registration rights[96] - Holders can make up to three demands for registration, and also have "piggy-back" rights[96] - The Company will bear the expenses incurred in connection with the filing of any such registration statements[96] Warrant Amendments - Warrant terms can be amended without consent to cure ambiguities or maintain equity classification[98] - Amendments adversely affecting public warrant holders require approval by at least 50% of outstanding Public Warrants[98] Underwriting Agreement - Underwriter earned a cash underwriting discount of $4,973,868[99] - Deferred underwriting discount of $8,704,270 was waived by the underwriter on October 18, 2023, and recorded to additional paid-in capital[99][166] Financial Advisory Fee - CCM received a fee for IPO advisory services and is entitled to additional advisory fees upon the closing of a business combination[100][101] - A deferred advisory fee of $1,155,000 was reversed and recognized as an expense as of December 31, 2023, following the underwriter's waiver of its deferred underwriting discount[102][167] Non-redemption Agreements - In September 2023, the Company agreed to issue 1,610,000 Class A Investor Shares for non-redemption commitments, with an estimated fair value of $708,400[104] - In January 2024, the Company agreed to issue 1,112,500 Class A Investor Shares for non-redemption commitments, with an estimated fair value of $838,825[105] - The fair value of these Investor Shares was recorded as an expense with a corresponding credit to additional paid-in capital[104][105] Merger Agreement - On July 24, 2024, the Company entered into a Merger Agreement with Fold, Inc., making Fold a wholly-owned subsidiary[111] - Aggregate consideration will be Class A common stock based on Fold's pre-money equity value of $365 million[113] - Consideration may increase by up to $54.75 million if Bitcoin's 60-volume weighted average price exceeds $90,000 prior to closing[113] NOTE 7. STOCKHOLDERS' DEFICIT This section details the company's capital structure, including authorized and outstanding shares and warrants Preferred Stock - 1,000,000 shares of preferred stock are authorized, but none are issued or outstanding[115] Class A Common Stock - 42,000,000 shares of Class A common stock are authorized[117] | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Class A common stock issued and outstanding | 14,349,106 | 25,221,372 | | Class A common stock subject to possible redemption | 4,757,884 | 15,630,150 | Class B Common Stock - 10,000,000 shares of Class B common stock are authorized[118] - All outstanding Class B common stock was converted to Class A common stock following the September 19, 2023, meeting[118] - No Class B common stock was issued or outstanding as of September 30, 2024, and December 31, 2023[118] Warrants | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------- | :----------- | :----------- | | Public Warrants outstanding | 12,434,671 | 12,434,671 | | Private Placement Warrants outstanding | 488,041 | 488,041 | - Each whole warrant entitles the holder to purchase one Class A common stock at $11.50 per share, subject to adjustment[119] - The Company may redeem outstanding warrants under specific conditions, including a Class A common stock price exceeding $18.00 for 20 trading days within a 30-day period[124] NOTE 8. FAIR VALUE MEASUREMENTS The company's Trust Account investments are Level 1 fair value, while a promissory note is classified as Level 3 Promissory note valuation | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Investments held in Trust Account (Level 1) | $51,996,271 | $165,653,149 | | Promissory Note, net of discount (Level 3) | $438,501 | $0 | - The promissory note was valued using a Black Scholes model, considered a Level 3 fair value measurement[127] - Key inputs for the Black Scholes model included a 3.90% risk-free interest rate, 5.0-year term, and 20.0% probability of de-SPAC[127] NOTE 9. SUBSEQUENT EVENTS The company issued two non-interest bearing promissory notes to an affiliate of the Sponsors after the reporting period - On October 25, 2024, the Company issued a promissory note to Frontier SPV, LLC for up to $2,000,000[129] - On October 31, 2024, the Company issued a promissory note to Frontier for $973,116.44 to satisfy excise tax liability[130] - Both subsequent promissory notes are non-interest bearing and due upon consummation of a Business Combination[129][130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity challenges, and merger progress Special Note Regarding Forward-Looking Statements - The report includes forward-looking statements subject to risks and uncertainties[132] - Actual results may differ materially from those discussed in forward-looking statements[132] - The Company disclaims any intention or obligation to update or revise forward-looking statements[132] Overview - The Company is a blank check company formed in February 2021 to effect a business combination[133] - The Company expects to incur significant costs in pursuing acquisition plans[134] - Operating revenues are not expected until after the completion of a business combination[141] Recent Developments - Stockholders approved extensions for the business combination deadline to January 19, 2024, and then to December 20, 2024[135][138] - Redemptions of Class A common stock totaled approximately $96.79 million in September 2023 and $115.49 million in January 2024[135][138] - Non-redemption agreements were entered into, and all Class B common stock was converted to Class A common stock[136][137][139] - A Merger Agreement with Fold, Inc. was announced on July 24, 2024[140] Results of Operations | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(309,776) | $1,206,590 | $(1,357,625) | $4,202,024 | | General and administrative expenses | $801,420 | $683,551 | $2,154,179 | $2,250,994 | | Interest income (Trust Account) | $668,748 | $3,278,712 | $2,353,695 | $9,027,924 | | Non-redemption agreement expense | $0 | $(708,400) | $(838,825) | $(708,400) | Liquidity and Capital Resources - As of September 30, 2024, the Company had $20,439 in cash outside of trust and a working capital deficit of $6,159,733[150] - Investments in the Trust Account decreased to $51,996,271 as of September 30, 2024, following significant redemptions[152] - The Company relies on Working Capital Loans from the Sponsor ($3,000,000 outstanding) and a Subscription Agreement with Polar (up to $550,000) to finance operations and transaction costs[151][153] Going Concern - The Company has until December 20, 2024, to consummate a Business Combination[160] - The liquidity condition and mandatory liquidation raise substantial doubt about the Company's ability to continue as a going concern[160] - Management intends to consummate a Business Combination prior to December 20, 2024[160] Off-Balance Sheet Financing Arrangements - The Company has no off-balance sheet arrangements as of September 30, 2024[161] Contractual Obligations - The Company pays a monthly administrative services fee of $30,000 to the Sponsor[163] - Holders of founder shares, private placement units, and working capital loan conversion units are entitled to registration rights[164] - The deferred underwriting discount of $8,704,270 was waived by the underwriter on October 18, 2023[166] - CCM is entitled to an advisory fee upon the closing of a Business Combination[167] Critical Accounting Policies and Estimates Class A Common Stock Subject to Possible Redemption - Class A common stock subject to possible redemption is classified as temporary equity[170] - Changes in redemption value are recognized immediately, adjusting the carrying value to the redemption value at each period end[171] Net (Loss) Income Per Common Share - Earnings and losses are shared pro rata between Class A and Class B common stock[173] - Warrants are excluded from diluted EPS calculations as their exercise is contingent upon future events[173] Recent Accounting Standards - No material effect is expected from recently issued, but not yet effective, accounting standards[174] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2024 Evaluation of Disclosure Controls and Procedures - Disclosure controls and procedures were evaluated as effective as of September 30, 2024[176] - Disclosure controls provide reasonable, not absolute, assurance that objectives are met[177] Changes in Internal Control over Financial Reporting - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[178] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company has no legal proceedings to report - No legal proceedings are reported[180] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors since the Annual Report on Form 10-K[181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the IPO, private placements, and significant redemptions of Class A common stock - IPO completed on December 20, 2021, with 22,000,000 units sold, and an additional 2,869,342 units via over-allotment[182][185] - Sponsor purchased 890,000 Private Placement Units and an additional 86,081 units in unregistered sales under Section 4(a)(2)[183][185] - Class A common stock redemptions totaled approximately $96.79 million in September 2023 and $115.49 million in January 2024[186] - The deferred underwriting discount of $8,704,270 was waived by the underwriter on October 18, 2023[188] Item 3. Defaults Upon Senior Securities The company has no defaults upon senior securities to report - No defaults upon senior securities are reported[190] Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - No mine safety disclosures are reported[191] Item 5. Other Information The company has no other information to report - No other information is reported[192] Item 6. Exhibits This section lists the exhibits filed with this Quarterly Report, including the merger agreement and promissory notes - Exhibits include the Agreement and Plan of Merger with Fold, Inc. dated July 24, 2024[194] - Promissory notes dated October 25, 2024, and October 31, 2024, with Frontier SPV, LLC are filed as exhibits[194] SIGNATURES Signatures The report is signed by the President and Chief Executive Officer, and the Chief Financial Officer, on November 12, 2024 - Report signed by President and CEO Bracebridge H. Young, Jr. and CFO Doug Listman[198] - Signing date is November 12, 2024[198]