ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this annual report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this annual report on Form 10-K.
Overview
We are a blank check company incorporated in the Cayman Islands on May 22, 2024, formed for the purpose of effecting a business combination. Our Sponsor is Fifth Era Acquisition Sponsor I LLC.
Although we are not limited to a particular industry or sector for the purpose of consummating the business combination, we are focusing our search on technology enabled businesses in a diverse range of areas including, internet, enterprise technology, software, including artificial intelligence, fintech, and blockchain. We are an early stage and emerging growth company, and, as such, we are subject to all of the risks associated with early stage and emerging growth companies.
On March 3, 2025, we consummated our IPO of 23,000,000 Units, including 3,000,000 Units issued pursuant to the full exercise of the underwriters’ over-allotment option. Each Unit consists of one Public Share and one-tenth of one Share Right. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $230,000,000.
Simultaneously with the closing of the IPO and pursuant to the private placement units purchase agreements, attached as Exhibit 10.4 and 10.5 hereto, we completed the sale of an aggregate of 600,000 Private Placement Units to the Sponsor and Cantor in the Private Placement at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to us of $6,000,000. Of those 600,000 Private Placement Units, the Sponsor purchased 380,000 Private Placement Units and Cantor purchased 220,000 Private Placement Units. The Private Placement Units (and underlying securities) are identical to the Units, except as otherwise disclosed in the IPO registration statement.
Following the closing of the IPO and Private Placement, an amount of $230,000,000 from the net proceeds of the IPO and the Private Placement was initially placed in the Trust Account located in the United States. The Trust Account may be invested only (i) in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act with a maturity of 185 days or less, (ii) in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, or (iii) as cash or cash items (including in demand deposit accounts) at a bank as determined by us, until the earlier of: (x) the completion of the business combination and (y) the distribution of the Trust Account, as described below.
If we are unable to complete the business combination by the end of the Combination Deadline, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay taxes, if any, divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject, in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
We may seek to extend the Combination Deadline consistent with applicable laws, regulations and stock exchange rules by amending our Articles. Any such amendment would require the approval of our Public Shareholders, who will be provided the opportunity to redeem all or a portion of their Public Shares in connection with the vote on such approval. Such redemptions will decrease the amount held in our Trust Account and our capitalization, and may affect our ability to maintain our listing on Nasdaq. In addition, the Nasdaq rules currently require SPACs (such as us) to complete their initial business combination within 36 months of the effectiveness of our IPO registration statement . If we do not meet this requirement, our securities will likely be subject to a suspension of trading and delisting from Nasdaq. Our Sponsor may also, in its discretion, consider selling its interest in us to another sponsor entity, which may result in a change to our management.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since May 22, 2024 (inception) through December 31, 2025, have been (i) organizational activities and (ii) activities relating to (x) the IPO and (y) identifying and evaluating prospective acquisition candidates and activities in connection with the initial business combination. We will not generate any operating revenues until after completion of our initial business combination. We have generated non-operating income in the form of interest income on investments held in the Trust Account after the IPO. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance, among other things), as well as for due diligence expenses.
For the year ended December 31, 2025, we had a net income of $4,130,222, which consists of interest income on marketable securities held in the Trust Account of $7,854,908, partially offset by operating costs of $3,724,686.
For the period from May 22, 2024 (inception) through December 31, 2024, we had a net loss of $76,899 which primarily consists of operating costs.
Liquidity, Capital Resources and Going Concern
Following the IPO, including the full exercise of the Over-Allotment Option, and the Private Placement, a total of $230,000,000 was initially placed in the Trust Account. We incurred fees of $15,557,879, consisting of a $4,000,000 cash underwriting fee, a deferred underwriting fee of $10,950,000 and $607,879 of other offering costs.
For the year ended December 31, 2025, cash used in operating activities was $890,559. Net income of $ $4,130,222 was affected by interest earned on marketable securities held in the Trust Account of $7,854,908 and payment of operation costs through the IPO Promissory Note of $3,394. Changes in operating assets and liabilities provided $2,830,733 of cash for operating activities.
For the period from May 22, 2024 (inception) through December 31, 2024, we used no cash in operating activities. Our net loss of $76,899 consisted of mainly payment of operation costs through the IPO Promissory Note of $57,020 and formation costs applied to prepaid expenses contributed by the Sponsor through the IPO Promissory Note of $13,185. Changes in operating assets and liabilities provided $6,697 of cash for operating activities.
As of December 31, 2025, we had marketable securities held in the Trust Account of approximately $237,854,908 (including approximately $7,854,908 of interest income). We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which intertest shall be net of taxes payable and exclude the deferred underwriting fees), to complete our business combination. To the extent that we use our share capital or debt, in whole or in part, as consideration to complete our business combination, we will use the remaining proceeds held in the Trust Account as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in the Trust Account, we may, at any time, (based on our management team’s ongoing assessment of all factors related to our potential status under the Investment Company Act) instruct the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in cash or in an interest-bearing demand deposit account at a bank.
As of December 31, 2025, we had cash of $543,258 and a working capital deficit of $2,410,655. We use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants, or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
We satisfied our liquidity needs through December 31, 2025, through (i) a contribution of $25,000 from the Sponsor in exchange for the issuance of our Founder Shares, (ii) a loan pursuant to the IPO Promissory Note and (iii) the net proceeds from the consummation of the Private Placement not held in the Trust Account.
Promissory Note
Prior to the closing of our IPO, our Sponsor agreed to loan us an aggregate of up to $300,000 under the IPO Promissory Note. Such loans and advances were non-interest bearing and payable on the earlier of June 30, 2025, or the completion of our IPO. We repaid the loans of $222,141 upon the consummation of our IPO on March 3, 2025. No additional borrowing is available under the IPO Promissory Note.
Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, lend us Working Capital Loans as may be required. If we complete a business combination, we would repay such Working Capital Loans. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such Working Capital Loans, but no proceeds from our Trust Account would be used for such repayment. Up to $1.5 million of such Working Capital Loans may be convertible into units of the post-business combination entity at a price of $10.00 per unit at the option of the lender. Such units would be identical to the Private Placement Units.
Going Concern
In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements—Going Concern”, management has determined that we currently lack the liquidity we need to sustain operations for a reasonable period of time, which is considered to be at least one year from the date that the financial statements and the notes thereto included in this report under Item 1. “Financial Statements” are issued as we expect to continue to incur significant costs in pursuit of our acquisition plans. In addition, management has determined that if we are unable to complete an initial business combination by the Combination Deadline, then we will cease all operations except for the purpose of liquidating. These conditions raise substantial doubt about our ability to continue as a going concern. Our management plans to consummate an initial business combination prior to the Combination Deadline. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after March 3, 2027. We cannot our shareholders that our plans to raise capital or to consummate an initial business combination will be .
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as follows:
Administrative Services Agreement
Commencing on February 27, 2025, and until the completion of our business combination or liquidation, we reimburse the managing member of our Sponsor $15,000 per month for office space, utilities, and secretarial and administrative support pursuant to the Administrative Services Agreement. For the year ended December 31, 2025, we incurred $151,071 in fees for these services, of which $15,000 is included in accrued expenses in the balance sheets of the financial statements included in this report under Item 1. “Financial Statements”. Of which $100,714 was used as compensation to Mr. Mechigian. For the period from May 22, 2024 (inception) through December 31, 2024, no fees were incurred for these services.
Underwriting Agreement
The underwriters were entitled to a cash underwriting discount of $4,000,000 (2.0% of the gross proceeds of the Units offered in the IPO, excluding any proceeds from the exercise of the Over-Allotment Option), which was paid upon the closing of the IPO. Additionally, the underwriters are entitled to the deferred underwriting fee of 4.50% of the gross proceeds of the base IPO held in the Trust Account following all properly submitted shareholder redemption in connection with the consummation of our initial business combination (excluding any proceeds from Units sold pursuant to the underwriters’ over-allotment option) and 6.50% of the gross proceeds sold pursuant to the Over-Allotment Option, or $10,950,000 in the aggregate, payable upon the completion of the initial business combination pursuant to the terms of the underwriting agreement.
Registration Rights
The holders of (i) the Founder Shares, (ii) the Private Placement Units and (iii) any private placement-equivalent units issued in connection with the Working Capital Loans, if any (and in each case holders of their underlying securities, as applicable) are entitled to registration rights pursuant to the registration rights agreement, dated February 27, 2025, attached as Exhibit 10.3 hereto, the Registration Rights Agreement, requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A Ordinary Shares). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain piggyback registration rights with respect to registration statements filed subsequent to the completion of the initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Letter Agreement
Our Sponsor, directors and officers have entered into the Letter Agreement with us, pursuant to which, they have waived their rights to liquidating distributions from the Trust Account with respect to any of their Founder Shares held by them if we fail to complete our initial business combination by the Combination Deadline. However, if they acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to complete our initial business combination within the Combination Deadline.
Additionally, pursuant to the Letter Agreement, our Sponsor, directors and officers will not propose any amendment to our Articles to modify (i) the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our Public Shares if we do not complete our initial business combination by the Combination Deadline or (ii) any other material provisions relating to shareholders’ rights or pre-initial business combination activity, unless we provide our Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding Public Shares.
Advisory Agreement
On May 27, 2025, we engaged an advisor to act as our capital markets advisor in connection with a business combination. Pursuant to such agreement, we shall pay the advisor a non-refundable cash fee equal to 5.0% of the aggregate maximum gross proceeds received or receivable by us in connection with a financing transaction, including any aggregate amounts committed by investors to purchase equity securities, whether or not all equity securities are issued at the closing of such financing. However, in no event shall the aggregate aforementioned financing fee payable by us to the advisor be less than $3,000,000 in cash.
Critical Accounting Estimates and Policies
We have identified the following as our critical accounting policies. See Note 2—”Summary of Significant Accounting Policies” of our financial statements and notes thereto included in this report under Item 1. “Financial Statements” for additional information regarding these critical accounting policies and other significant accounting policies.
Use of Estimates
The preparation of the financial statements and notes thereto included in this report under Item 1. “Financial Statements” in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and the disclosure of contingent assets and liabilities, in our financial statements. These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments, and we evaluate these estimates on an ongoing basis. To the extent actual experience differs from the assumptions used, our financial statements and notes thereto included in this report under Item 1. “Financial Statements” could be materially affected. We believe that the following accounting policies involve a higher degree of judgment and complexity.
Class A Ordinary Shares Subject to Possible Redemption
We account for the Class A Ordinary Shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480, “Distinguishing Liabilities from Equity.” We classify Class A Ordinary Shares subject to mandatory redemption (if any) as liability instruments and measured at fair value. Conditionally redeemable Class A Ordinary Shares (including Class A Ordinary Shares that feature redemption rights that are either within the control of the holder or subject to possible redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, we classify Class A Ordinary Shares as shareholders’ equity. All of the Public Shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, we present Class A Ordinary Shares subject to possible redemption at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheets included in this report under Item 1. “Financial Statements”.
Net Income (Loss) Per Ordinary Share
We comply with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per Ordinary Share is computed by dividing net income (loss) applicable to shareholders by the weighted average number of Ordinary Shares outstanding for the applicable periods. We apply the two-class method in calculating earnings per Ordinary Share and allocate net income (loss) pro rata to Class A Ordinary Shares subject to possible redemption, nonredeemable Class A Ordinary Shares and Class B Ordinary Shares. Accretion associated with the redeemable Class A Ordinary Shares is excluded from earnings per share as the redemption value is not in excess of the fair value.
Recent Accounting Standards
We do not believe that any issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements and notes thereto included in this report under Item 1. “Financial Statements”.
Recent Developments
On March 17, 2026, Gary Cookhorn resigned as a director of our board of directors, effective immediately. Mr. Cookhorn’s resignation did not result from any disagreement with the Company on any matter relating to the our operations, policies or practices.
On March 20, 2026, our board of directors unanimously appointed Donald H. Putnam to serve as a director , effective immediately.
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
