References in this report (the "Quarterly 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 unaudited condensed 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.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" 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 Quarterly Report
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
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
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 Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). 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 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 Quarterly
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 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 our
underwriters purchased an additional 1,377,660 units, due to a partial exercise
of their over-allotment option, generating gross proceeds of $13,776,600.
22
Table of Contents
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 our 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. 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 three months ended June 30, 2022, we had net income of $8,841,557, which
resulted from gains on the change in fair value of warrant liabilities of
$8,861,888, interest and dividend income on investments held in Trust Account of
$312,613, and the gain on the change in fair value of the forward purchase
agreement of $50,123, offset in part by unrealized losses on investments held in
the Trust Account of $23,484 and operating costs of $359,583.
For the three months ended June 30, 2021, we had a net loss of $22,896, which
resulted entirely from operating and formation costs
For the six months ended June 30, 2022, we had net income of $8,967,750, which
resulted from gains on the change in fair value of warrant liabilities of
$9,078,032, gains on the change in fair value of the forward purchase agreement
of $374,718, interest and dividend income on investments held in Trust Account
of $312,613, and unrealized gains on investments held in the Trust Account of
$2,900, offset in part by operating costs of $800,513.
For the period from February 10, 2021 (inception) through June 30, 2021, we had
a net loss of $30,763, which resulted entirely from operating and formation
costs.
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.
As of June 30, 2022, we had $981,972 in cash and working capital of $1,059,118.
On November 2, 2021, we consummated our initial public offering ("Initial Public
Offering") of 25,000,000 units (the "Units" and, with respect to the Class A
ordinary shares included in the Units sold, the "Public Shares"), at $10.00 per
Unit, generating gross proceeds of $250,000,000. On November 12, 2021, the
underwriters partially exercised the 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 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 from the net proceeds of the sale of the
units in the Initial Public Offering, and the over-allotment units, the sale of
the over-allotment warrants and the sale of the Private Placement Warrants were
placed in a trust account (the "Trust Account") at J.P. Morgan Chase Bank, N.A.
maintained by Continental Stock Transfer & Trust Company, acting as trustee.
For the six months ended June 30, 2022, net cash used in operating activities
was $511,961, which was due to gains on the change in the fair value of warrant
liabilities of $9,078,032, gains on the change in fair value of the forward
purchase agreement of $374,718, interest and dividend income on investments held
in Trust Account of $312,613, and unrealized gains on investments held in Trust
Account of $2,900, partially offset by our net income of $8,967,750 and changes
in operating assets and liabilities of $288,552.
23
Table of Contents
For the period from February 10, 2021 (inception) through June 30, 2021, net
cash used in operating activities was $0, which was due to our net loss of
$30,763, fully offset by changes in operating assets and liabilities of $22,896
and formation costs paid by Sponsor in exchange for issuance of Class B ordinary
shares of $7,867.
There were no cash flows from investing activities for the six months ended June
30, 2022 and for the period from February 10, 2021 (inception) through June 30,
2021.
There were no cash flows from financing activities for the six months ended June
30, 2022 and for the period from February 10, 2021 (inception) through June 30,
2021.
As of June 30, 2022, we had marketable securities held in the Trust Account of
$264,089,213 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 June 30, 2022, we had cash of $981,972 held outside the Trust Account. 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.
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 do not 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. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate 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 unaudited condensed 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.
Critical Accounting Policies
The preparation of condensed 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 condensed 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
24
Table of Contents
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.
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 June 30, 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 $212,613 as of June 30, 2022.
Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
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 (loss) per share as the redemption value approximates fair
value. Therefore, the net income (loss) 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 (loss) 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 (loss) per share, since the exercise of the warrants is
contingent upon the occurrence of future events. As a result, diluted net income
(loss) 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 condensed financial statements.
Off-Balance Sheet Arrangements
As of June 30, 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
25
Table of Contents
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 Capital SPAC I
LLC, we have agreed that the forward purchase securities will be entitled to
registration rights pursuant to the registration rights agreement.
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 (5) years following the completion of
our Initial Public Offering or until we otherwise no longer qualify as an
"emerging growth company."
© Edgar Online, source Glimpses
PROJECT ENERGY REIMAGINED ACQUISITION CORP. 
