Customer Rewards and Financial Products - Fold's total customer rewards liability was $6.9 million as of December 31, 2025, with an equal amount held in the Rewards Treasury[39]. - The Fold Bitcoin Credit Card offers cardholders automatic base rewards of 1.5% back in bitcoin, with potential rewards of up to 4.0% based on qualifying transactions[33]. - Customers can earn up to 15% or more in bitcoin rewards through card-linked merchant offers and up to 20% back through the catalog of merchant offers[34]. - Fold's banking platform includes an FDIC-insured checking account and a Visa prepaid debit card, allowing users to receive paychecks up to three days early[31]. - The Fold Bitcoin Gift Card is available in both physical and digital formats, redeemable for bitcoin, and serves as a customer acquisition channel[44][46]. - The company integrates traditional banking services with bitcoin-based rewards, aiming to help customers improve their financial outcomes over time[24]. - Fold's treasury strategy includes holding bitcoin as part of its corporate treasury to align with customer interests and support long-term operations[28]. - The Fold App allows users to buy, sell, and store bitcoin, with transactions processed through BitGo, a federally chartered national trust bank[40]. - Fold's rewards are calculated based on the USD value at the time of the transaction, with 100,000,000 satoshis in 1 bitcoin[35]. - The company launched the Fold Credit Card in March 2026, allowing eligible cardholders to earn bitcoin rewards on qualifying purchases[58]. - The Fold Bitcoin Gift Card was publicly announced in May 2025, allowing customers to purchase USD-denominated gift cards redeemable for bitcoin[63]. - The company released the updated Fold App, "Fold 2.0," on February 4, 2026, enhancing the user experience in preparation for the credit card launch[59]. Customer Demographics and Engagement - A January 2025 survey indicated that 83% of Fold's core customer demographic is between 25-54 years old, with 81% having credit scores of 700+ and 71% earning over $100K annually[71]. - 81% of Fold's customers have credit scores of 700 or higher, with 40% having scores of 800 or above[73]. - 71% of users have household incomes of $100,000 or more, with 26% earning between $150,000 and $249,000, and 21% earning $250,000 or more[79]. - Fold's "Auto stack" feature allows users to purchase bitcoin at specified intervals, with a minimum requirement of $10 for recurring purchases[53]. - The "Round-Ups" feature enables users to convert spare change from transactions into bitcoin, with a minimum purchase amount of $10[53]. Financial Performance and Challenges - The company incurred an operating loss of $27.7 million for 2025, compared to a loss of $5.8 million for 2024, highlighting ongoing financial challenges[197]. - The company's net cash used in operating activities was a loss of $16.1 million for 2025, compared to a loss of $3.3 million for 2024, indicating worsening cash flow issues[197]. - The company has a history of negative cash flows, with an accumulated deficit of $170.9 million as of December 31, 2025[197]. - The company held approximately $140.5 million in bitcoin in its treasury accounts, reflecting significant exposure to bitcoin price volatility[195]. - The price of bitcoin experienced significant volatility, with values ranging from approximately $42,623.54 on December 18, 2023, to $100,041.54 on December 18, 2024[193]. - Future operating expenses may increase due to talent acquisition, marketing efforts, and regulatory compliance, potentially impacting profitability and cash flow[203]. - The company has experienced challenges in customer retention, growth, and engagement, which could adversely affect revenue and financial results[201]. Regulatory Compliance and Risks - Fold's partnership with Sutton Bank and BitGo requires compliance with AML regulations due to their status as financial institutions[104]. - Fold has implemented a risk-based AML program to enhance customer identification practices and monitor transactions in real-time[105]. - Continuous OFAC and sanctions screenings are performed daily on all users to ensure compliance with international regulations[108]. - The company operates in a highly evolving regulatory landscape, with potential adverse effects on brand, reputation, and financial condition due to non-compliance with laws and regulations[137]. - The company is subject to increased regulatory scrutiny and compliance costs due to recent events in the crypto industry, including the bankruptcy of Synapse Financial Technologies, Inc.[153][154]. - The company may be subject to significant fines and penalties if found non-compliant with regulatory requirements, impacting its financial condition[142][143]. - The evolving nature of the bitcoin economy and regulatory frameworks may require the company to adapt its business operations and compliance measures[141]. - The company faces constraints from regulatory authorities and banking partners, limiting its ability to offer non-bitcoin digital assets or services requiring specialized regulatory permissions[161]. - The complexity of regulatory environments could lead to overlapping investigations and legal proceedings, adversely affecting the company's operating results and financial condition[166]. - The company is classified as an "emerging growth company," allowing it to take advantage of certain reporting exemptions until specific revenue thresholds are met[126]. - Fold is also a "smaller reporting company," which permits reduced disclosure obligations until market value or revenue thresholds are reached[129]. Technology and Innovation - The company must innovate and develop new products to keep pace with rapidly evolving market demands, as failure to do so could adversely affect financial performance[159][160]. - Significant technological changes, including omnichannel commerce and AI, pose challenges to the company's current offerings[219]. - The ability to adapt to new technologies and industry standards is crucial for the company's success[220]. - Generative AI adoption is increasing, and the company must enhance its products to remain competitive[220]. - The company depends on third parties for technology development, which can impact its ability to innovate[221]. - Continuous modification of products is necessary to ensure compatibility with various systems and infrastructures[221]. - Failure to keep pace with technological changes could lead to reduced demand and customer dissatisfaction[221]. Partnerships and Strategic Growth - Fold has established partnerships with large online and physical retailers to expand the availability of its bitcoin services[27]. - The company has established partnerships with key service providers, including Marqeta for card issuance and BitGo for bitcoin custody[74][77]. - Fold's growth strategy includes scaling adoption through partnerships with major retailers and financial institutions to enhance legitimacy and reduce friction[89]. - The company focuses on capital-efficient growth, utilizing organic methods and partner-led distribution while also exploring paid marketing opportunities[90]. - The company has established a Master Loan Agreement with Two Prime Lending Limited, providing a revolving credit facility[61]. Operational Risks and Challenges - The company faces risks related to operational scaling, including managing headcount and processes efficiently, which could strain resources and affect service quality[204]. - The company relies on third-party partners for safeguarding customer assets, which poses risks if those partners fail to maintain necessary controls[144][149]. - The company may face material litigation and regulatory investigations, which could harm its financial condition and operating results[167]. - Loss of critical banking relationships could adversely impact the company's operations, although it has not yet experienced significant issues in this area[169]. - Disruptions in the company's products and services or information technology systems could result in loss of customers and adversely impact its brand and financial condition[174]. - The company's bitcoin held in custodial accounts may be at risk in the event of a partner's insolvency, potentially treating customer assets as part of a bankruptcy estate[178]. - Recent insolvencies in the digital asset space could lead to customers perceiving the company's services as riskier, adversely affecting its customer base and financial condition[181].
FTAC Emerald Acquisition (EMLD) - 2025 Q4 - Annual Report