10-Q: Fold Holdings Reports Wider Losses Amid Growth & Bitcoin Strategy

Fold Holdings, Inc. reported a significant increase in net losses and cash burn for the first half of 2025, despite strong revenue growth and strategic expansion into new bitcoin-centric financial products.

Summary

• Net revenues increased by 52% to $15.3 million for the six months ended June 30, 2025, up from $10.1 million in the prior year period, primarily driven by merchant offers and custody/trading.
• The company reported a net loss of $35.5 million for the six months ended June 30, 2025, a substantial increase from a $3.3 million net loss in the same period last year.
• Operating loss widened to $15.8 million for the six months ended June 30, 2025, compared to $2.0 million in the prior year.
• Cash used in operating activities significantly increased to $9.0 million for the six months ended June 30, 2025, from $1.2 million in the same period of 2024.
• Adjusted EBITDA (Loss) worsened to $(8.9) million for the six months ended June 30, 2025, from $(2.0) million in the prior year.
• Total assets increased to $182.1 million as of June 30, 2025, from $125.7 million at December 31, 2024, largely due to an increase in digital assets held in the investment treasury.
• Digital assets in the Investment Treasury grew to $159.9 million (1,492 BTC) as of June 30, 2025, up from $93.6 million (1,002 BTC) at December 31, 2024.
• The company launched new products including the Fold Credit Card (announced February 2025, expected 2025 launch) and the Fold Bitcoin Gift Card (announced May 2025, rolling out through 2025).
• Fold entered into a $250 million equity purchase facility with SZOP Opportunities I, LLC in June 2025, providing a potential source of future capital.
• As of June 30, 2025, the company had $6.6 million in cash and cash equivalents and $7.8 million in positive working capital.
• Total principal debt outstanding from two convertible notes was $66.3 million as of June 30, 2025, with 800 BTC ($85.7 million) restricted as collateral.

Sentiment

Score: 4

Explanation: While the company shows strong revenue growth and strategic product expansion, the significant increase in net losses, operating losses, and cash burn, coupled with identified material weaknesses in internal controls, indicates a challenging financial position. The large bitcoin treasury and new equity facility provide some stability and future potential, but the current financial performance is a notable concern.

Positives

• Net revenues increased by 52% year-over-year for the six months ended June 30, 2025, indicating strong top-line growth.
• Custody and trading revenues saw significant growth, increasing from a nominal amount to $0.4 million for the six months ended June 30, 2025, signaling potential for this segment.
• Achieved product-level profitability for all core product lines, inclusive of the contra-revenue effect of rewards.
• Successfully completed a reverse recapitalization and became a publicly traded company on Nasdaq in February 2025.
• Introduced new strategic products like the Fold Credit Card and Fold Bitcoin Gift Card, expected to drive user acquisition and engagement.
• Accumulated a substantial Bitcoin Investment Treasury of 1,492 BTC valued at $159.9 million, viewed as a long-term strategic investment.
• Secured a $250 million equity purchase facility, providing a significant potential source of capital for future operations and bitcoin acquisitions.
• Increased total accounts to over 615,000 and verified accounts to nearly 80,000, demonstrating user base expansion.
• Processed over $3.0 billion in transaction volume since inception, averaging over $88 million per month in Q2 2025.

Negatives

• Net loss significantly widened to $35.5 million for the six months ended June 30, 2025, compared to $3.3 million in the prior year, indicating increased unprofitability.
• Cash used in operating activities increased substantially to $9.0 million for the six months ended June 30, 2025, from $1.2 million in the prior year, reflecting higher cash burn.
• Adjusted EBITDA (Loss) worsened by 340% to $(8.9) million for the six months ended June 30, 2025, primarily due to increased professional fees, compensation, marketing, and insurance expenses.
• Accumulated deficit grew to $136.8 million as of June 30, 2025, reflecting ongoing losses.
• Incurred a $9.6 million loss on extinguishment of debt due to the amendment of the December 2024 Initial Investor Note.
• Incurred $9.6 million in convertible note issuance costs and fees related to the March 2025 Investor Note, expensed immediately.
• Cash and cash equivalents decreased significantly to $6.6 million as of June 30, 2025, from $18.3 million at December 31, 2024.

Risks

• The company has a history of net operating losses and an accumulated deficit, indicating ongoing financial challenges.
• Future funding may not be available on acceptable terms or at all, which could significantly limit the company's ability to grow or support its business.
• The $250 million equity purchase facility may cause substantial dilution to existing stockholders if shares are sold to SZOP.
• Subsequent sales of shares acquired by SZOP, or the perception of such sales, could cause the price of the common stock to fall.
• The company may not have access to the full $250 million available under the equity facility due to Nasdaq's 19.99% Exchange Cap without stockholder approval, or SZOP's beneficial ownership cap.
• The company is exposed to market price changes in bitcoin, which can cause volatility in financial results due to remeasurement gains/losses on digital assets and bitcoin-denominated liabilities.
• Material weaknesses exist in internal control over financial reporting as of June 30, 2025, specifically regarding undocumented top-down risk assessment and ineffective controls for accurate SEC disclosures.
• The company has not completed a study to assess Section 382 limitations on its federal and state net operating loss (NOL) carryforwards, which could materially impact its ability to offset future taxable income.
• As an emerging growth enterprise, the business is subject to risks including limited capital resources, possible delays in product development, and potential cost overruns.

Future Outlook

The company expects to continue innovating in the bitcoin consumer financial services space, expanding existing offerings, and introducing new products like the Fold Credit Card and Fold Bitcoin Gift Card, which are anticipated to drive higher volumes, revenues, and margins, as well as new user acquisition and deeper engagement. Significant resources are being devoted to refining the custody and trading platform, including enhanced funding options, opening the exchange product to non-cardholders, and expanding geographic access. The company plans to increase investments in paid marketing and affiliate opportunities to accelerate growth and intends to continue accumulating bitcoin for its corporate treasury, funding acquisitions primarily through common stock issuances, including via the new equity purchase facility.

Management Comments

• Management expects that existing cash and cash equivalents, accounts receivable, financing available from the Facility, and digital assets received through June 30, 2025, will be sufficient to fund anticipated operations through one year from the date these financial statements are available to be issued.
• We expect to continue to innovate in the bitcoin consumer financial services space over the coming years.
• We believe that a solid trust foundation is critical for continued user adoption and in building a positive brand image, both of which are crucial for our long-term success.
• We view our bitcoin holdings as a long-term strategic investment and not as a trading asset.
• We believe existing macro conditions to be favorable towards adding additional bitcoin to our balance sheet at current market prices and we will continue to consider additional bitcoin accumulation opportunities over the near term.
• We have not set any specific target for the amount of bitcoin we seek to hold.
• We plan to fund further bitcoin acquisitions primarily through issuances of Common Stock through a variety of financial instruments, including our Facility, debt, convertible notes, preferred stock, or other structures as may be considered appropriate for our business.

Industry Context

Fold Holdings operates within the rapidly evolving bitcoin financial services sector, aiming to integrate bitcoin into everyday consumer financial activities. The company positions itself as a pioneer, emphasizing trust and security in contrast to past failures of 'crypto-adjacent business models' that prioritized short-term gains. Its strategy aligns with broader trends of increasing bitcoin adoption and institutional interest, leveraging products like bitcoin rewards cards, exchange services, and gift cards. The company's growth is influenced by macroeconomic factors such as public awareness, regulatory clarity, institutional adoption, political environment, monetary policy, and technological innovation within the blockchain space.

Comparison to Industry Standards

• No specific comparable companies, projects, or global benchmarks were detailed in the filing for direct assessment against industry standards.

Corporate Governance

Legal Proceedings

• The company may be subject to claims, inquiries, or legal proceedings in the ordinary course of business, but currently does not expect any such matters to have a material adverse effect on its financial position, liquidity, capital resources, or annual results of operations.

Related Party Transactions

• Entered into a Securities Purchase Agreement with SATS Credit Fund LP, a related party (an affiliate of Fold's chairman, Dr. Jonathan Kirkwood), for a $46.3 million Convertible Note in March 2025.
• Dr. Jonathan Kirkwood recused himself from the board of directors approval of the Securities Purchase Agreement and related transactions.
• Recognized nominal amounts of revenue related to merchant offers purchased by Thesis Inc., a principal shareholder of the company.

Stakeholder Impact

• Shareholders face potential dilution from the $250 million equity purchase facility and the risk of depressed stock prices from subsequent sales by SZOP.
• Employees benefit from the adoption of the new 2025 Incentive Award Plan and 2025 ESPP, and increased headcount.
• Customers benefit from new product offerings like the Fold Credit Card and Bitcoin Gift Card, and continued expansion of rewards and services.
• Creditors (convertible note holders) have their debt secured by a portion of the company's bitcoin treasury.

Next Steps

• Launch the Fold Credit Card, expected in 2025.
• Continue rolling out the Fold Bitcoin Gift Card to new retail locations throughout the remainder of 2025 and beyond.
• Refine the custody and trading platform, including onboarding experience, funding options, systems architecture, and geographic footprint.
• Add support for larger orders via wires for the custody and trading platform.
• Open the exchange product to non-cardholder customers.
• Add users from new states where access was not previously supported.
• Increase investments in paid marketing and affiliate opportunities.
• Continue to accumulate additional bitcoin for the corporate treasury.
• Remediate identified material weaknesses in internal control over financial reporting, including engaging consultants for technical accounting, financial reporting, closing process, segregation of duties, and internal controls review.
• Complete a study to assess Section 382 limitations on net operating loss carryforwards.
• Assess the impact of the One Big Beautiful Bill Act (OBBBA) on financial statements.

Key Dates

Recommendation

While Fold Holdings demonstrates strong revenue growth and strategic product innovation in the burgeoning bitcoin financial services sector, the significant increase in net losses and cash burn raises concerns about its near-term profitability and operational efficiency. The substantial bitcoin treasury and the newly secured $250 million equity facility provide a liquidity buffer and future growth potential, but also introduce risks of significant shareholder dilution. The identified material weaknesses in internal controls are a critical area requiring immediate and effective remediation. For a seasoned investor, the company presents a high-risk, high-reward profile. The 'Hold' recommendation reflects a cautious stance, acknowledging the company's strategic positioning and asset base, but advising to monitor closely for improvements in financial performance and successful remediation of internal control issues before considering further investment.

Keywords

Bitcoin, Fintech, Cryptocurrency, Financial Services, Digital Assets, Rewards Program, Debit Card, Credit Card, SEC Filing, 10-Q, Nasdaq, Convertible Notes, Equity Facility, Blockchain