References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Fortune Rise Acquisition Corporation. References to our "management" or our "management team" refer to our officers and directors, and references to the "sponsor" refer to Fortune Rise Sponsor LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See "Cautionary Note Concerning Forward-Looking Statements."

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's final prospectus for its Initial Public Offering filed with the SEC on November 3, 2022. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a newly organized blank check company formed as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. We are not limited to a particular industry or geographic region for purposes of consummating an initial business combination except that we shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).

We will effectuate our business combination using cash derived from the proceeds of our initial public offering (the "IPO") and the sale of common stock (the "Private Placement Shares") in a private placement (the "Private Placement") to the Company's sponsor, Fortune Rise Sponsor LLC (the "Sponsor"), additional shares, debt or a combination of cash, shares and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful. Our management has broad discretion with respect to the specific application of the proceeds of the IPO and the Private Placement that are held out of the trust account (the "Trust Account"), although substantially all the net proceeds are intended to be applied generally towards consummating a business combination and working capital.

Since our IPO, our sole business activity has been identifying and evaluating suitable acquisition transaction candidates. We presently have no revenue and have had losses since inception from incurring formation and operating costs. We have relied upon the sale of our securities and loans from the Sponsor and other parties to fund our operations.

Recent Development

Proposed Business Combination with VCV Digital Technology

On November 30, 2021, we entered into a certain letter of intent for the business combination with VCV Power Sigma, Inc., a Delaware corporation, which was previously known as "TYMIF Coin Ventures LLC" ("Sigma") and formally started to discuss the related matters for the business combination.



                                       18

Table of Contents

On April 26, 2022, we entered into an agreement and plan of merger (the "Merger Agreement") by and among Sigma Merger Sub Inc., a Delaware corporation and our direct, wholly owned subsidiary ("Sigma Merger Sub"), Gamma Merger Sub Inc., a Delaware corporation and our direct, wholly owned subsidiary ("Gamma Merger Sub" and, together with Sigma Merger Sub, "Merger Subs" and each, a "Merger Sub"), VCV Power Sigma, Inc., a Delaware corporation ("Sigma"), VCV Power Gamma, Inc., a Delaware corporation ("Gamma", and, together with Sigma, "VCV Digital Technology"), and Jerry Tang, in his capacity as the representative for stockholders of VCV Digital Technology and for certain limited purposes under Section 5.13 thereunder. Pursuant to the Merger Agreement, among other things, (i) in accordance with the General Corporation Law of the State of Delaware, as amended (the "DGCL"), Sigma Merger Sub will merge with and into Sigma (the "Sigma Merger"), with Sigma surviving the Sigma Merger as our wholly owned subsidiary ("Surviving Sigma"), and (ii) in accordance with the DGCL, Gamma Merger Sub will merge with and into Gamma (the "Gamma Merger" and, together with the Sigma Merger, the "Mergers"), with Gamma surviving the Gamma Merger as our wholly owned subsidiary ("Surviving Gamma" and, together with Surviving Sigma, the "Surviving Companies" and each, a "Surviving Company"). The Mergers will become effective at such time on the date of the closing of the Mergers (the "Closing") as the certificates of merger are duly filed with the Secretary of State of the State of Delaware or at such other time specified in the certificates of merger (the "Effective Time"). Effective from the Closing, the Parent will change its name to "VCV Digital Technology, Inc."

Closing Merger Consideration

Pursuant to the Merger Agreement, as consideration for their shares of Class A common stock, par value $0.0001 per share, or Class B common stock, par value $0.0001 per share, of Sigma (collectively, "Sigma Common Stock"), stockholders of Sigma will receive an aggregate number of newly issued shares of our Class A common stock, par value $0.0001 per share (the "Class A Common Stock"), equal to the quotient obtained by dividing $50,000,000 by the per share redemption price at the Closing (the "Closing Price") provided for in our amended and restated certificate of incorporation (the "Sigma Merger Consideration Shares"). Each share of Sigma Common Stock (other than shares held immediately prior to the Effective Time by Sigma or us ("Sigma Excluded Shares") and shares as to which appraisal rights have been properly exercised in accordance with Delaware law ("Sigma Dissenting Shares")) will be automatically converted into the right to receive a number of shares of Class A Common Stock equal to the quotient obtained by dividing the Sigma Merger Consideration Shares by the number of shares of Sigma Common Stock (including restricted stock and Sigma Dissenting Shares but excluding Sigma Excluded Shares) outstanding as of immediately prior to the Effective Time (the "Sigma Exchange Ratio").

As consideration for their shares of Class A common stock, par value $0.0001 per share, or Class B common stock, par value $0.0001 per share of Gamma (collectively, "Gamma Common Stock"), stockholders of Gamma will receive an aggregate number of newly issued shares of Class A Common Stock equal to the quotient obtained by dividing $200,000,000 by the Closing Price (the "Gamma Merger Consideration Shares" and, together with the Sigma Merger Consideration Shares, the "Closing Merger Consideration Shares"). Each share of Gamma Common Stock (other than shares held immediately prior to the Effective Time by Gamma or us ("Gamma Excluded Shares") and shares as to which appraisal rights have been properly exercised in accordance with Delaware law ("Gamma Dissenting Shares")) will be automatically converted into the right to receive a number of shares of Class A Common Stock equal to the quotient obtained by dividing the Gamma Merger Consideration Shares by the number of shares of Gamma Common Stock (including restricted stock and Gamma Dissenting Shares but excluding Gamma Excluded Shares) outstanding as of immediately prior to the Effective Time (the "Gamma Exchange Ratio").

Earnout Consideration and Earnout Escrow Account

In addition to the Gamma Merger Consideration Shares, Gamma stockholders will be eligible to receive earnout consideration of up to an aggregate number of newly issued shares of Class A common Stock equal to the quotient obtained by dividing $100,000,000 by the Closing Price (the "Gamma Earnout Consideration Shares"). At the Closing, we shall deposit with Vstock Transfer LLC, as the escrow agent (the "Escrow Agent") the Gamma Earnout Consideration Shares, less any portion of the Gamma Earnout Consideration Shares that has become vested and deliverable to Gamma stockholders prior to the Closing, in a segregated escrow account (the "Earnout Escrow Account"). As provided in the Merger Agreement, during the period beginning on the date of the Merger Agreement and ending on April 30, 2023, each one fourth of the Gamma Earnout Consideration Shares will be disbursed from the Earnout Escrow Account and delivered to Gamma stockholders upon the achievement of the following events (the "Triggering Events"):

Deployment of 4,500 aggregate miners by us, VCV Digital Technology, the

a) Surviving Companies, or any subsidiaries of any of the foregoing, including by

means of a merger or asset acquisition, as reflected in the applicable mining


    pool monitor; and


                                       19

  Table of Contents

Each additional deployment of 2,000 miners (up to a maximum of 6,000

b) additional miners) by us, VCV Digital Technology, the Surviving Companies, or

any subsidiaries of any of the foregoing, including by means of a merger or

asset acquisition, as reflected in the applicable mining pool monitor.

If any of the Triggering Events has been achieved prior to Closing, the applicable portion of the Gamma Earnout Consideration Shares shall become vested and deliverable to Gamma stockholders at the Closing. If any of the Triggering Events has not been achieved by April 30, 2023, the applicable portion of the Gamma Earnout Consideration Shares shall be forfeited pursuant to the Merger Agreement and the escrow agreement to be entered by and among us, Jerry Tang, as the stockholder representative, and the Escrow Agent.

The Mergers also call for additional agreements, including, among others, the Lock-Up Agreements and the Voting Agreements, as described elsewhere in the current report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2022.

Results of Operations

Our entire activity from inception up to date was related to the Company's formation, the IPO and general and administrative activities. Since the IPO, our activity has been limited to the evaluation of Business Combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of interest income on investments. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2022, we had net loss of $270,622, consisting of $230,359 of operating costs, consisting mostly of general and administrative expenses and $48,400 franchise tax expenses, offset by $8,137 of interest income from investments in the Trust Account.

For the period from February 1, 2021 (inception) through March 31, 2021, we had net loss of $9,875, consisting mostly of formation costs.

Liquidity and Capital Resources

For the three months ended March 31, 2022, cash used in operating activities was $229,699. As of March 31, 2022, we had cash outside the Trust Account of $617,472 available for working capital needs. All remaining cash is held in the Trust Account and is generally unavailable for our use, prior to an initial Business Combination, and is restricted for use either in a Business Combination or to redeem the shares of common stock. As of March 31, 2022, none of the amount on deposit in the Trust Account was available to be withdrawn as described above.

Until consummation of the Business Combination, we will be using the funds not held in the Trust Account, and any additional funding that may be loaned to us by our Sponsor, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

If our estimates of the costs of undertaking in-depth due diligence and negotiating Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate its business prior to the Business Combination and will need to raise additional capital. In this event, our officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we consummate an initial Business Combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us upon consummation of the Business Combination, or, at the lender's discretion, up to $3,000,000 of such loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. In the event that the initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. The terms of such loans by our initial stockholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

Moreover, we may need to obtain additional financing either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial Business



                                       20

Table of Contents

Combination. Following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Financing Arraignments

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of March 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

As of March 31, 2022, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

We are obligated to pay the underwriters a deferred underwriters' discount equal to 3.5% of the gross proceeds of the IPO and the underwriters' full exercise of the over-allotment. The deferred underwriters' discount of $3,421,250 will become payable to the U.S. Tiger Securities ("US Tiger") and EF Hutton, a division of Benchmark Investment LLC, two representatives of the several underwriters of the IPO (each, a "Representative"), from the amounts held in the Trust Account solely in the event that we complete a Business Combination.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Investments held in Trust Account

At March 31, 2022, the assets held in the Trust Account were held in money market funds, which are invested in U.S. Treasury securities.

We classify its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 "Investments - Debt and Equity Securities." Held-to-maturity securities are those securities which we have the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.

Warrants

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in Financial Accounting Standards Board ("FASB") ASC 480 "Distinguishing Liabilities from Equity" ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.



                                       21

  Table of Contents

Class A Common Stock Subject to Possible Redemption

We account for our Class A common stock, $0.0001 par value per share (the "Class A Common Stock") subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A Common Stock (including Class A Common Stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A Common Stock are classified as stockholders' equity. Our public shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of March 31, 2022, shares of Class A Common Stock subject to possible redemption are presented at redemption value of $10.20 per share as temporary equity, outside of the shareholders' equity section of our balance sheet. We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A Common Stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of shares of redeemable Class A Common Stock are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals to zero.

Fair Value of Financial Instruments

ASC Topic 820 "Fair Value Measurements and Disclosures" defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect our assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for

identical assets or liabilities that we have the ability to access. Valuation

? adjustments and block discounts are not being applied. Since valuations are

based on quoted prices that are readily and regularly available in an active

market, valuation of these securities does not entail a significant degree of

judgment.

Level 2 - Valuations based on (i) quoted prices in active markets for similar

assets and liabilities, (ii) quoted prices in markets that are not active for

? identical or similar assets, (iii) inputs other than quoted prices for the

assets or liabilities, or (iv) inputs that are derived principally from or

corroborated by market through correlation or other means.

? Level 3 - Valuations based on inputs that are unobservable and significant to

the overall fair value measurement.

The fair value of our assets and liabilities, which qualify as financial instruments under ASC Topic 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.

Income Taxes

We account for income taxes under ASC 740 Income Taxes ("ASC 740"). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.



                                       22

Table of Contents

We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022. We are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

We have identified the United States as its only "major" tax jurisdiction.

We may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Our management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

We are incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.

Net Income (Loss) per Share

We comply with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, we first considered the undistributed income (loss) allocable to both the redeemable common stock and non-redeemable common stock and the undistributed income (loss) is calculated using the total net loss less any dividends paid. We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable common stock. Any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

© Edgar Online, source Glimpses