Digital Asset Acquisition Corp Unit(DAAQU) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed financial statements and management's analysis of financial condition and results of operations 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 Condensed Balance Sheets This section provides a summary of the company's financial position through its condensed balance sheets as of June 30, 2025, and December 31, 2024 Condensed Balance Sheet Highlights | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | | :----- | :------------ | :---------------- | :----- | | Total Assets | 175,066,597 | 25,000 | +175,041,597 | | Total Liabilities | 7,053,229 | 5,112 | +7,048,117 | | Marketable securities held in Trust Account | 173,664,886 | — | +173,664,886 | | Class A ordinary shares subject to possible redemption | 173,664,886 | — | +173,664,886 | | Total Shareholders' Equity (Deficit) | (5,651,518) | 19,888 | (5,671,406) | Condensed Statements of Operations This section details the company's financial performance through its condensed statements of operations for the three and six months ended June 30, 2025 Condensed Statements of Operations Highlights | Metric | Three Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2025 ($) | | :----- | :------------------------------- | :----------------------------- | | General and administrative expenses | 118,212 | 172,828 | | Net earnings on marketable securities held in Trust Account | 1,147,520 | 1,147,520 | | Net income | 1,029,308 | 974,692 | | Basic and diluted net income per Class A ordinary share | 0.06 | 0.09 | | Basic and diluted net income per Class B ordinary share | 0.06 | 0.09 | Condensed Statements of Changes in Shareholders' Equity (Deficit) This section outlines changes in the company's shareholders' equity (deficit) for the three and six months ended June 30, 2025 Shareholders' Equity (Deficit) Changes | Metric | Balance at January 1, 2025 ($) | 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 company's cash flow activities 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 detailed explanatory notes accompanying the unaudited condensed financial statements Note 1. Description of Organization, Business Operations and Going Concern This note describes the company's formation, 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 key accounting principles and policies applied in preparing the financial statements - 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 specifics of the company's Initial Public Offering, including proceeds and shares issued - 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 conducted concurrently with the Initial Public Offering - 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 the company's operating segments and how management assesses performance - 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 discloses transactions and balances with related parties, including the Sponsor - 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 significant commitments and potential contingent liabilities - 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 components of shareholders' equity (deficit), including ordinary shares and warrants - 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 ($) | 11.5 | | Expected dividend | —% | | Market pricing adjustment | 15% | Note 9. Fair Value Measurements This note provides information on the fair value measurements of the company's assets and liabilities Fair Value Hierarchy of Assets (June 30, 2025) | Asset | Level | June 30, 2025 ($) | | :---- | :---- | :------------ | | Marketable securities held in Trust Account | 1 | 173,664,886 | Note 10. Subsequent Events This note discloses significant events that occurred after the balance sheet date - On August 14, 2025, the company received the outstanding balance of $1,221,540 from the Sponsor, fully settling the 'Due from Sponsor' balance[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and capital resources Special Note Regarding Forward-Looking Statements This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - This Quarterly Report includes forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those projected[123] Overview This section provides a brief overview of Digital Asset Acquisition Corp.'s formation and purpose as a blank check company - Digital Asset Acquisition Corp. is a blank check company incorporated on December 9, 2024, formed to pursue a Business Combination[124] Results of Operations This section analyzes the company's financial performance, focusing on revenues, expenses, and net income - The company has not generated any operating revenues to date, with activities limited to organizational matters and the Initial Public Offering[125][127] Net Income Summary | Metric | Three Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2025 ($) | | :----- | :------------------------------- | :----------------------------- | | Net income | 1,029,308 | 974,692 | | Investment earnings on marketable securities | 1,147,520 | 1,147,520 | | General and administrative expenses | 118,212 | 172,828 | Liquidity and Capital Resources This section discusses the company's cash position, sources of funds, and ability to meet its financial obligations Cash Flow Summary (Six Months Ended June 30, 2025) | Cash Flow Activity | Amount ($) | | :----------------- | :----- | | 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 the reporting date - As of June 30, 2025, the company did not have any off-balance sheet arrangements[136] Contractual Obligations This section details the company's significant contractual commitments, including registration rights and deferred 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 highlights key accounting estimates and judgments that significantly impact the financial statements - 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 discusses the adoption and impact of recently issued accounting standards on the company - 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 The Principal Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective. No material changes in internal control over financial reporting occurred during the quarter Evaluation of Disclosure Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures by executive officers - 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 reports on any material changes in the company's internal control over financial reporting - 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 additional information not covered in the financial statements, including legal proceedings, risk factors, 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 There have been no material changes to the risk factors previously disclosed in the company's final prospectus for its Initial Public Offering filed on April 30, 2025 - 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 unregistered sales of equity securities, including private placement warrants, and the use of proceeds from the Initial Public Offering - 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 the exhibits filed as part of, or incorporated by reference into, 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 Co-Chairman, and Jeff Tuder, Chief Financial Officer and Co-Chairman, 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]