Digital Asset Acquisition Corp-A(DAAQ) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's discussion for Digital Asset Acquisition Corp Item 1. Unaudited Condensed Financial Statements This section presents Digital Asset Acquisition Corp.'s unaudited condensed financial statements, detailing its financial position and performance for the period ended June 30, 2025 Condensed Balance Sheets This section presents the condensed balance sheets, detailing the company's financial position as of June 30, 2025, and December 31, 2024 Condensed Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | Change | | :----- | :------------ | :---------------- | :----- | | Total Assets | $175,066,597 | $25,000 | +$175,041,597 | | Total Liabilities | $7,053,229 | $5,112 | +$7,048,117 | | Marketable securities held in Trust Account | $173,664,886 | $— | +$173,664,886 | | Class A ordinary shares subject to possible redemption | $173,664,886 | $— | +$173,664,886 | | Total Shareholders' Equity (Deficit) | $(5,651,518) | $19,888 | $(5,671,406) | Condensed Statements of Operations This section presents the condensed statements of operations for the three and six months ended June 30, 2025 Condensed Statements of Operations Highlights | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :----- | :------------------------------- | :----------------------------- | | General and administrative expenses | $118,212 | $172,828 | | Net earnings on marketable securities held in Trust Account | $1,147,520 | $1,147,520 | | Net income | $1,029,308 | $974,692 | | Basic and diluted net income per Class A ordinary share | $0.06 | $0.09 | | Basic and diluted net income per Class B ordinary share | $0.06 | $0.09 | Condensed Statements of Changes in Shareholders' Equity (Deficit) This section details changes in shareholders' equity (deficit) for the three and six months ended June 30, 2025 Shareholders' Equity (Deficit) Changes | Metric | Balance at January 1, 2025 | Balance at June 30, 2025 | Change | | :----- | :------------------------- | :----------------------- | :----- | | Total Shareholders' Equity (Deficit) | $19,888 | $(5,651,518) | $(5,671,406) | | Accretion of Class A ordinary shares subject to redemption to redemption value | — | $(12,546,921) | $(12,546,921) | | Net income (six months) | — | $974,692 | +$974,692 | Condensed Statements of Cash Flows This section presents the condensed statements of cash flows for the six months ended June 30, 2025 Condensed Statements of Cash Flows Highlights (Six Months Ended June 30, 2025) | Cash Flow Activity | Amount | | :-------------------------------------------------- | :----- | | Net cash provided by operating activities | $158,436 | | Net cash used in investing activities | $(172,500,000) | | Net cash provided by financing activities | $172,341,564 | | Net Change in Cash | $— | Notes to Unaudited Condensed Financial Statements This section provides explanatory notes to the unaudited condensed financial statements, detailing accounting policies and significant events Note 1. Description of Organization, Business Operations and Going Concern This note describes the company's organization, business operations, and assessment of its ability to continue as a going concern - Digital Asset Acquisition Corp. was incorporated on December 9, 2024, as a blank check company to pursue a Business Combination[25] - The Initial Public Offering was consummated on April 30, 2025, generating gross proceeds of $172,500,000, which were placed in a Trust Account[27][29] - The company has until October 30, 2026 (or January 30, 2027, with an extension) to complete a Business Combination[37][41] - As of June 30, 2025, the company had a working capital surplus of $1,193,936, alleviating substantial doubt about its ability to sustain operations for one year[40] Note 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies adopted by the company, including its status as an emerging growth company - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new accounting standards[44][46] - Marketable securities held in the Trust Account as of June 30, 2025, consist of U.S. government treasury bills totaling $173,664,886[50] - Class A ordinary shares subject to possible redemption are classified as temporary equity, with changes in redemption value adjusted to equal $10.07 per share as of June 30, 2025[51] - Offering costs amounted to $10,931,212, with $10,881,785 recorded as a reduction of temporary equity and $49,427 as a reduction of permanent equity[54] - The company adopted ASU 2023-07 (Segment Reporting) on December 9, 2024, requiring enhanced disclosures for significant segment expenses and the CODM's use of segment profit or loss[71][72] Note 3. Initial Public Offering This note details the Initial Public Offering, including the number of units issued and gross proceeds generated - The IPO closed on April 30, 2025, issuing 17,250,000 Units (including the full exercise of the over-allotment option) and generating gross proceeds of $172,500,000[74] Note 4. Private Placement This note describes the private placement of warrants, including the number sold and proceeds generated - Simultaneously with the IPO, 5,450,000 Private Placement Warrants were sold at $1.00 per warrant, generating $5,450,000, with proceeds added to the Trust Account[75] Note 5. Segment Information This note clarifies that the company operates as a single reportable segment, with the CFO as the CODM - The company operates as a single reportable segment, with the Chief Financial Officer identified as the Chief Operating Decision Maker (CODM)[77] - The CODM reviews total assets, general and administrative expenses, and net income to manage resources and assess performance[78][80] Note 6. Related Party Transactions This note details transactions with related parties, including share issuances, promissory notes, and administrative service fees - The Sponsor was issued 5,750,000 Class B ordinary shares (Founder Shares) for $25,000, with 75,000 shares transferred to director nominees and 40,000 to company advisors[82][83] - A promissory note from the Sponsor for up to $300,000 to cover IPO expenses was fully repaid during the three months ended June 30, 2025[91][138] - As of June 30, 2025, the company had $75,321 outstanding due to related parties[92] - The company pays the Sponsor up to $20,000 per month for administrative services, totaling $40,000 for the three and six months ended June 30, 2025[93] Note 7. Commitments and Contingencies This note outlines the company's commitments and contingencies, including registration rights and deferred underwriting fees - Holders of Founder Shares, Private Placement Warrants, and potential working capital loan warrants have registration rights for up to 12,700,000 Class A ordinary shares and 6,500,000 warrants[96][137] - Underwriters are entitled to a deferred fee of $6,900,000, payable from the Trust Account upon completion of a Business Combination[99][140] Note 8. Shareholders' Equity (Deficit) This note details the composition of shareholders' equity (deficit), including ordinary shares and warrants issued - As of June 30, 2025, there were 17,250,000 Class A ordinary shares issued and outstanding (all subject to possible redemption) and 5,750,000 Class B ordinary shares issued and outstanding[102][103] - Class B ordinary shares automatically convert into Class A ordinary shares on a one-for-one basis upon the consummation of a Business Combination, subject to adjustment[105] - A total of 14,075,000 warrants were issued, comprising 8,625,000 Public Warrants and 5,450,000 Private Placement Warrants[106][113] - Public Warrants are exercisable at $11.50 per share, commencing 30 days after the Business Combination, and expire five years thereafter[106] - Warrants may be called for redemption at $0.01 per warrant if the Class A ordinary share closing price equals or exceeds $18.00 for 20 trading days within a 30-trading day period[110][115] Fair Value Assumptions for Warrants (Black-Scholes Model) | Assumption | Value | | :--------- | :---- | | Risk-free interest rate | 3.6% | | Expected term (years) | 2.52 | | Expected volatility | 7.9% | | Stock price on valuation date | $10.21 | | Exercise price | $11.5 | | Expected dividend | —% | | Market pricing adjustment | 15% | Note 9. Fair Value Measurements This note provides fair value measurements for the company's assets, specifically marketable securities held in the Trust Account Fair Value Hierarchy of Assets (June 30, 2025) | Asset | Level | June 30, 2025 | | :---- | :---- | :------------ | | Marketable securities held in Trust Account | 1 | $173,664,886 | Note 10. Subsequent Events This note discloses significant events that occurred after the reporting period, specifically the settlement of 'Due from Sponsor' - On August 14, 2025, the company received the outstanding balance of $1,221,540 from the Sponsor, fully settling the 'Due from Sponsor' balance[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Digital Asset Acquisition Corp.'s financial condition, results of operations, liquidity, and critical accounting estimates Special Note Regarding Forward-Looking Statements This note highlights that the report contains forward-looking statements subject to risks and uncertainties - This Quarterly Report includes forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those projected[123] Overview This section provides an overview of Digital Asset Acquisition Corp. as a blank check company formed for a Business Combination - Digital Asset Acquisition Corp. is a blank check company incorporated on December 9, 2024, formed to pursue a Business Combination[124] Results of Operations This section discusses the company's results of operations, noting the absence of operating revenues to date - The company has not generated any operating revenues to date, with activities limited to organizational matters and the Initial Public Offering[125][127] Net Income Summary | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :----- | :------------------------------- | :----------------------------- | | Net income | $1,029,308 | $974,692 | | Investment earnings on marketable securities | $1,147,520 | $1,147,520 | | General and administrative expenses | $118,212 | $172,828 | Liquidity and Capital Resources This section analyzes the company's liquidity and capital resources, including the use of IPO proceeds Cash Flow Summary (Six Months Ended June 30, 2025) | Cash Flow Activity | Amount | | :----------------- | :----- | | Net cash provided by operating activities | $158,436 | | Net cash used in investing activities | $(172,500,000) | | Net cash provided by financing activities | $172,341,564 | - $172,500,000 from the Initial Public Offering and Private Placement Warrants was placed in a Trust Account[133] - The company expects sufficient funds for operations but may need additional financing to complete its initial Business Combination[135] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of June 30, 2025 - As of June 30, 2025, the company did not have any off-balance sheet arrangements[136] Contractual Obligations This section details the company's contractual obligations, including registration rights and deferred underwriting fees - Registration rights exist for up to 12,700,000 Class A ordinary shares and 6,500,000 warrants held by founders, private placement warrant holders, and potential working capital loan warrant holders[137] - A promissory note from the Sponsor for up to $300,000 was fully repaid during the three months ended June 30, 2025[138] - Underwriters are entitled to a deferred fee of $6,900,000, payable from the Trust Account upon completion of a Business Combination[140] Critical Accounting Estimates This section discusses critical accounting estimates, particularly regarding net income per share and temporary equity classification - The calculation of net income per ordinary share does not consider the effect of warrants due to their exercise being contingent upon future events[142] - Class A ordinary shares subject to possible redemption are classified as temporary equity, with changes in redemption value ($10.07 per share as of June 30, 2025) recognized immediately[145] Recent Accounting Standards This section outlines the adoption of recent accounting standards, specifically ASU 2023-07 on Segment Reporting - The company adopted ASU 2023-07 (Segment Reporting) on December 9, 2024, which requires enhanced disclosures for significant segment expenses and the CODM's use of segment profit or loss[146][147] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Digital Asset Acquisition Corp. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide market risk disclosures[149] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025 - The Principal Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[151] Changes in Internal Control Over Financial Reporting This section confirms no material changes in internal control over financial reporting occurred during the most recent fiscal quarter - There were no material changes in internal control over financial reporting during the most recently completed fiscal quarter[152] PART II - OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings for the period - No legal proceedings were reported[153] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the IPO prospectus filed on April 30, 2025, have occurred - No material changes to risk factors have occurred since the IPO prospectus filed on April 30, 2025[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the IPO proceeds, unregistered sales of Private Placement Warrants, their characteristics, and the allocation of funds to the Trust Account - The IPO generated $172,500,000 in gross proceeds from 17,250,000 Units[155] - 5,450,000 Private Placement Warrants were sold for $5,450,000, issued under the Section 4(a)(2) exemption from registration[156] - Private Placement Warrants are not redeemable, have transfer restrictions, and can be exercised on a cashless basis[157] - $172,500,000 from the IPO and Private Placement Warrants proceeds was placed in the Trust Account[158] - Total underwriting discounts and commissions were $10,350,000, with $6,900,000 deferred, and other IPO costs were approximately $700,000[159] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[161] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine safety disclosures are not applicable to the company[162] Item 5. Other Information The company reported no other information - No other information was reported[163] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including various agreements and certifications - The report includes various exhibits such as the Underwriting Agreement, Amended and Restated Memorandum of Association, Warrant Agreement, and certifications[165] Signatures The report was signed by Peter Ort (Principal Executive Officer) and Jeff Tuder (Chief Financial Officer) on August 18, 2025 - The report was signed by Peter Ort (Principal Executive Officer and Co-Chairman) and Jeff Tuder (Chief Financial Officer and Co-Chairman) on August 18, 2025[170]