References in this Annual Report to "we," "us" or the "Company" refer to Project
Energy Reimagined Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors, and references to the
"sponsor" refer to Smilodon Capital, 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 Annual Report. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve
risks and uncertainties.
Overview
We are a blank check company incorporated on February 10, 2021 as a Cayman
Islands exempted company. Our business purpose is to effect a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses (referred to in this Annual
Report as our initial business combination). We have not selected any specific
target business. While we may pursue an initial business combination in any
industry, sector or geographic region, we intend to focus on targets that enable
what we call the "Electric Grid 2.0". We believe the "Electric Grid 2.0"
addresses several mega trends that are creating a long tail of value-creating
opportunities within the energy storage value-chain, including: (i) climate
change and mandated reduction of GHG emissions, with a resulting increase in the
share of renewable power generation (and associated grid-stability challenges);
(ii) electrification of transportation, AI enabled grid optimization, V2G and
V2X technology and smart battery management systems; and (iii) second life use
of batteries and end of life battery recycling. Our mission is to partner with
companies that have a roadmap to execute on the world's energy transition to
clean energy, and more specifically, those that enable technological advances to
facilitate the increasing demand for energy storage. We will seek to partner
with a company that shares our overarching goal of solving goal seven of the
United Nations Sustainable Development Goals to "ensure access to affordable,
reliable, sustainable and modern energy for all" while utilizing our combined
experience to drive sustainable growth and long-term economic value.
On November 2, 2021, the Company consummated its initial public offering (the
"Initial Public Offering") of 25,000,000 units at $10.00 per unit (each, a
"Unit"). Each Unit consists of one Class A ordinary share (the "Public Shares")
and one-half of one redeemable warrant. Each whole warrant entitles the holder
to purchase one Class A ordinary share at a price of $11.50 per share. On
November 17, 2021 the underwriters of the Initial Public Offering purchased an
additional 1,377,660 units, due to a partial exercise of their over-allotment
option, generating gross proceeds of $13,776,600.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since February 10, 2021 (inception) have been organizational
activities and those necessary to prepare for the Initial Public Offering. We do
not expect to generate any operating revenues until after completion of our
initial business combination. We generate non-operating income in the form of
interest income on investments held in our trust account (the "Trust Account").
Our expenses have increased substantially after the closing of our initial
public offering. We incur 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 year ended December 31, 2022, we had net income of $13,274,685, which
resulted from gains on the change in fair value of warrant liabilities of
$11,239,468, interest and dividend income on investments held in Trust Account
of $3,699,187, gains on the change in fair value of the forward purchase
agreement of $119,065, and gains on investments held in the Trust Account of
$2,900, offset in part by operating costs of $1,785,935.
For the period from February 10, 2021 (inception) through December 31, 2021, we
had a net income of $6,418,686, which resulted from a gain on change in the fair
value of warrant liabilities of $9,378,431, offset in part by expensed offering
costs of $2,089,260, change in fair value of derivative liability-forward
purchase agreement of $426,600, operating and formation costs of $440,985, and a
loss on investments held in Trust Account of $2,900.
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Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of founder shares by our Sponsor, for $25,000
and loans from our Sponsor.
On November 2, 2021, we consummated our Initial Public Offering of 25,000,000
Units, at $10.00 per Unit, generating gross proceeds of $250,000,000. On
November 12, 2021, the underwriters of the Initial Public Offering partially
exercised their over-allotment option and on November 17, 2021, purchased an
additional 1,377,660 Units (the "Over-Allotment Units"), generating gross
proceeds of $13,776,600.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the sale of 8,150,000 private placement warrants ("Private Placement
Warrants") at a price of $1.00 per Private Placement Warrant in a private
placement to our sponsor, generating gross proceeds of $8,150,000.
Simultaneously with the closing of the exercise of the over-allotment option,
the Company consummated the sale of 275,532 additional Private Placement
Warrants (the "Over-Allotment Warrants") at a price of $1.00 per warrant in a
private placement to our sponsor, generating gross proceeds of $275,532.
A total of $263,776,600 of the proceeds of the sale of the Units in the Initial
Public Offering, the Over-Allotment Units, the Over-Allotment Warrants and the
Private Placement Warrants were placed in the Trust Account at J.P. Morgan Chase
Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as
trustee.
For the year ended December 31, 2022, net cash used in operating activities was
$978,399, which was primarily due to operational costs paid during the period.
For the period from February 10, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $886,922, which was primarily due to
operational and formation costs paid during the period.
There were no cash flows from investing activities for the year ended December
31, 2022.
For the period from February 10, 2021 (inception) through December 31, 2021, net
cash used in investing activities of $263,776,600 was the result of the amount
of net proceeds from the Initial Public Offering and the partial exercise of the
over-allotment option being deposited to the Trust Account.
There were no cash flows from financing activities for the year ended December
31, 2022.
For the period from February 10, 2021 (inception) through December 31, 2021, net
cash provided by financing activities of $266,157,455 was comprised of
$258,501,068 in proceeds from the issuance of units in the Initial Public
Offering and the partial exercise of the over-allotment option, net of
underwriter's discounts paid, $8,425,532 in proceeds from the issuance of
warrants in a private placement to our sponsor, reimbursement of offering costs
from the underwriters' pursuant to the agreement letter of $527,553, proceeds
from the promissory note-related party of $298,629 and proceeds from the sale of
Class B ordinary shares to our sponsor of $25,000, offset in part by the payment
of $1,321,698 for offering costs associated with the Initial Public Offering and
repayment of the outstanding balance on the promissory note to our sponsor of
$298,629.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $267,475,787 consisting of money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act which invest only in direct
U.S. government treasury.
As of December 31, 2022, we had cash of $515,534 held outside the Trust Account
and a working capital surplus of $141,303. We intend to 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.
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We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
taxes payable and deferred underwriting commissions), to complete our initial
business combination. We may withdraw interest income (if any) to pay income
taxes, if any. Our annual income tax obligations will depend on the amount of
interest and other income earned on the amounts held in the Trust Account. We
expect the interest income earned on the amount in the Trust Account (if any)
will be sufficient to pay our income taxes. To the extent that our equity or
debt is used, in whole or in part, as consideration to complete our initial
business combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
We believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a period of time within one year from
the date that the financial statements are issued. In order to fund working
capital deficiencies or finance transaction costs in connection with an intended
initial business combination, our sponsor or an affiliate of our sponsor or
certain of our officers and directors may, but are not obligated to, loan us
funds as may be required. If we complete our initial business combination, we
would repay such loaned amounts. In the event that our 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. Up to $1,500,000 of such loans
may be convertible into warrants of the post business combination entity at a
price of $1.00 per warrant at the option of the lender. The warrants would be
identical to the private placement warrants. The terms of such loans, if any,
have not been determined and no written agreements exist with respect to such
loans. Prior to the completion of our initial business combination, we do not
expect to seek loans from parties other than our sponsor or an affiliate of our
sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 2014-15, Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,
management has determined that if the Company is unable to complete a Business
Combination within the Combination Period, then the Company will cease all
operations except for the purpose of liquidating. In addition, the cash held
outside the Trust Account is not expected to be sufficient for the Company to
operate for the next 12 months from the issuance of the financial statements.
The date for mandatory liquidation and subsequent dissolution, and the expected
liquidity concerns raises substantial doubt about the Company's ability to
continue as a going concern within one year from the date that these financial
statements are issued. No adjustments have been made to the carrying amounts of
assets or liabilities should the Company be unable to continue as a going
concern. The Company intends to complete a Business Combination before the
mandatory liquidation date or obtain approval for an extension.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Ordinary Shares Subject to Possible Redemption
All of the 26,377,660 Class A ordinary shares sold as part of the Units in the
Initial Public Offering and the partial exercise of the over-allotment option
contain a redemption feature which allows for the redemption of such Public
Shares in connection with the Company's liquidation, if there is a shareholder
vote or tender offer in connection with the Business Combination and in
connection with certain amendments to the amended and restated memorandum and
articles of association. In accordance with ASC 480-10-S99, redemption
provisions not solely within the control of the Company require ordinary shares
subject to redemption to be classified outside of permanent equity. Therefore,
all Public Shares have been classified outside of permanent equity.
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The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by charges against
additional paid-in capital and accumulated deficit. The redemption value of the
redeemable ordinary shares as of December 31, 2022 increased as the income
earned on the Trust Account exceeds the Company's expected dissolution expenses
(up to $100,000). As such, the Company recorded an increase in the carrying
amount of the redeemable ordinary shares of $3,599,187 as of December 31, 2022.
Net Income Per Ordinary Share
Net income per ordinary share is computed by dividing net income by the
weighted-average number of ordinary shares outstanding during the period.
Remeasurement associated with the redeemable Class A ordinary shares is excluded
from net income per share as the redemption value approximates fair value.
Therefore, the net income per share calculation allocates income and losses
shared pro rata between Class A ordinary shares and Class B ordinary shares
("Founder Shares"). As a result, the calculated net income per share is the same
for Class A ordinary shares and Founder Shares. The Company has not considered
the effect of the warrants sold in the Initial Public Offering, the partial
exercise of the over-allotment option and private placement to purchase an
aggregate of 21,614,362 shares in the calculation of diluted net income per
share, since the exercise of the warrants is contingent upon the occurrence of
future events. As a result, diluted net income per share is the same as basic
income per share for the periods presented.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC 815, Derivatives and Hedging. For derivative financial
instruments that are accounted for as assets or liabilities, the derivative
instrument is initially recorded at its fair value on the grant date and is then
re-valued at each reporting date, with changes in the fair value reported in the
statements of operations. Derivative instruments are classified in the balance
sheet as current or non-current based on whether or not net-cash settlement or
conversion of the instrument could be required within 12 months of the balance
sheet date.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2022 and December 31, 2021, we did not have any off-balance
sheet arrangements.
Commitments and Contractual Obligations
Office Space and Administrative Support
We have an agreement to pay EWI Capital SPAC I LLC, an affiliate of our Chief
Executive Officer and a member of our sponsor a monthly fee of $30,000 for
office space and administrative support. We began incurring these fees on
October 28, 2021 and will continue to incur these fees monthly until the earlier
of the completion of the initial business combination or our liquidation.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of working capital loans (the "Working Capital Loans")
(and any Class A ordinary shares issuable upon the exercise of the Private
Placement Warrants and warrants issued upon conversion of the Working Capital
Loans) are entitled to registration rights pursuant to a registration rights
agreement signed on the effective date of the Initial Public Offering. The
holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to consummation of a business
combination. The Company bears the expenses incurred in connection with the
filing of any such registration statements. Pursuant to the forward purchase
agreement with EWI, we have agreed that the forward purchase securities will be
entitled to registration rights pursuant to the registration rights agreement.
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Promissory Note - Related Party
On February 12, 2021, the Company issued an unsecured promissory note to the
sponsor (the "Promissory Note"), pursuant to which the Company could borrow up
to $300,000 to cover expenses related to the Initial Public Offering. The
Promissory Note was non-interest bearing and was payable on the earlier of (i)
December 31, 2021 or the consummation of the Initial Public Offering. On
November 3, 2021, the Company repaid the outstanding balance under the
Promissory Note. The Promissory Note is no longer available to the Company.
Underwriting Agreement and Deferred Fees
The underwriters of the Initial Public Offering are entitled to a deferred fee
of $9,232,181 that will become payable to the underwriters from the amounts held
in the trust account solely in the event that we complete our initial business
combination, subject to the terms of the underwriting agreement.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose comparisons of the chief
executive officer's compensation to median employee compensation. These
exemptions will apply for a period of five years following the completion of our
Initial Public Offering or until we otherwise no longer qualify as an "emerging
growth company."
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