UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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As of June 14, 2024, there were
PROJECT ENERGY REIMAGINED
ACQUISITION CORP.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Investments held in trust account | ||||||||
| Deferred offering costs | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued expenses - related party | ||||||||
| Promissory notes, net of discount - related party | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Accrued offering costs | ||||||||
| Total Liabilities | ||||||||
| Commitments (Note 6) | ||||||||
| Class A ordinary shares, $ | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
1
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest and dividend income on investments held in Trust Account | ||||||||
| Interest expense (amortization of debt discount) | ( | ) | ||||||
| Unrealized loss on fair value of derivative liability - forward purchase agreement | ( | ) | ||||||
| Unrealized loss on fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Net (loss) income | $ | ( | ) | $ | ||||
| $ | ( | ) | $ | |||||
| $ | ( | ) | $ | |||||
The accompanying notes are an integral part of these unaudited financial statements.
2
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
| THREE MONTHS ENDED MARCH 31, 2024 | ||||||||||||||||||||||||||||
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Capital contributions - related parties | — | — | ||||||||||||||||||||||||||
| Remeasurement of ordinary shares subject to redemption, to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| THREE MONTHS ENDED MARCH 31, 2023 | ||||||||||||||||||||||||||||
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of ordinary shares subject to redemption, to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
3
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Interest and dividend income on investments held in Trust Account | ( | ) | ( | ) | ||||
| Interest expense (amortization of debt discount) | ||||||||
| Unrealized loss on fair value of derivative liability - forward purchase agreement | ||||||||
| Unrealized loss on fair value of warrant liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued expenses - related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from promissory note - related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Deferred offering costs | $ | $ | ||||||
| Debt Discount | $ | $ | ||||||
| Remeasurement of Class A ordinary shares to redemption amount | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
4
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Project Energy Reimagined Acquisition Corp. (the “Company”) is a blank check company incorporated in the Cayman Islands on February 10, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2024, the Company had not commenced any operations. All activity for the period from February 10, 2021 (inception) through March 31, 2024 relates to the Company’s formation and the preparation of its initial public offering (“Initial Public Offering”), as described below, and since the closing of the Initial Public Offering, the search for a target for the Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of dividend income, interest income or gains on investments on the cash and investments held in a trust account from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration
statement for the Company’s Initial Public Offering was declared effective on October 28, 2021. On November 2, 2021, the
Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
The Company had granted the underwriters in the
Initial Public Offering a
Simultaneously with the closing of the partial
exercise of the over-allotment option, the Company consummated the sale of
Upon the closing of the Initial Public Offering
and the sales of the Over-Allotment Units and Over-Allotment Warrants, an amount of $
The Company will provide its Public Shareholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection
with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the
Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, in its sole discretion.
The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount held in the Trust Account
(initially $
5
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association as then in effect, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor and the Company’s management team have agreed to vote any Founder Shares (as defined in Note 5) held by them, and any Public Shares purchased by them in or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or vote at all.
If the Company seeks shareholder approval of the
initial Business Combination and the Company does not conduct redemptions in connection with the initial Business Combination pursuant
to the tender offer rules, the Amended and Restated Memorandum and Articles of Association provide that a Public Shareholder, together
with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined in Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from
seeking redemption rights with respect to more than an aggregate of
The Sponsor, Anchor Investors (as defined below
in Note 5) and management team have agreed to (i) waive their redemption rights with respect to any Founder Shares and, solely with respect
to the Sponsor and management team, Public Shares they hold in connection with the completion of an initial Business Combination, (ii)
waive their redemption rights with respect to any Founder Shares and, solely with respect to the Sponsor and management team, Public Shares
they hold in connection with a shareholder vote to approve an amendment to the Amended and Restated Memorandum and Articles of Association
to modify the substance or timing of the Company’s obligation to redeem
The Anchor Investors are not required to (i) hold any Units, Class A ordinary shares or warrants they may purchase in the Initial Public Offering or thereafter for any amount of time, (ii) vote any Class A ordinary shares they may own at the applicable time in favor of the Business Combination or (iii) refrain from exercising their right to redeem their Public Shares at the time of the Business Combination. The Anchor Investors have the same rights to the funds held in the Trust Account with respect to the Class A ordinary shares.
The Amended and Restated Memorandum and Articles of Association provided that the Company would have only 18 months from the closing of Initial Public Offering (or 21 months from the closing of the Initial Public Offering if the Company executed a letter of intent, agreement in principle, or definitive agreement for an initial Business Combination within 18 months from the closing of the Initial Public Offering, but had not completed an initial Business Combination within such 18-month period) to complete an initial Business Combination. The Company entered into a non-binding letter of intent, dated as of April 25, 2023, with respect to an initial Business Combination, that automatically extended the period that the Company had to complete an initial Business Combination to August 2, 2023 pursuant to the Amended and Restated Memorandum and Articles of Association. On August 1, 2023, the Company held an extraordinary general meeting in lieu of the 2023 annual general meeting of shareholders of the Company (the “First Extension Meeting”). At the First Extension Meeting, the Company’s shareholders approved, among other matters, the extension of the date by which the Company must consummate an initial Business Combination from August 2, 2023 to May 2, 2024, or such earlier date as determined by the Company’s board of directors, for a total extension of up to nine months (collectively, the “First Extension”). On April 29, 2024, the Company held an extraordinary general meeting of shareholders of the Company (the “Second Extension Meeting”) at which the Company’s shareholders approved the further extension of the date by which the Company must consummate an initial Business Combination from May 2, 2024 to August 2, 2024, or such earlier date as determined by the Company’s board of directors (the “Combination Period”), for a total extension of up to three months (collectively, the “Second Extension”). If the Company is unable to complete an initial Business Combination within the Combination Period (or such later date as may be approved by the Company’s shareholders at a meeting called for such purpose at which the Company’s shareholders will be given the opportunity to have their Public Shares redeemed for a pro rata portion of the funds in the Trust Account), the Company will then liquidate in accordance with the Amended and Restated Memorandum and Articles of Association.
6
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
If the Company is unable to complete an initial
Business Combination within the Combination Period or during any extension period, the Company will: (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than
The underwriters have agreed to waive their rights
to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account
that will be available to fund the redemption of the Public Shares. In April 2023, the underwriters further waived their rights to
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent,
confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below
the lesser of (i) $
On July 25, 2023, the Company entered into one
or more agreements (the “First Extension Non-Redemption Agreements”) with one or more unaffiliated third parties in exchange
for them each agreeing not to redeem an aggregate of
At the First Extension Meeting, the Company’s
shareholders approved the following items: (i) a proposal to amend the Amended and Restated Memorandum and Articles of Association to
provide for the First Extension (the “First Extension Amendment Proposal”); (ii) a proposal to amend the Amended and Restated
Memorandum and Articles of Association to eliminate (a) the limitation that the Company shall not redeem Public Shares in an amount that
would cause the Company’s net tangible assets to be less than $
Effective upon the approval of the Articles Amendment Proposals and the Trust Amendment Proposal, on August 1, 2023, (i) the Amended and Restated Memorandum and Articles of Association were amended pursuant to the resolutions set forth in the Articles Amendment Proposals, and (ii) the Company entered into the Trust Amendment with Continental Stock Transfer & Trust Company, as trustee.
7
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
On August 1, 2023, in connection with and following
the approval of the Articles Amendment Proposals and the Trust Amendment Proposal, (i) holders of
On April 29, 2024, at the Second Extension Meeting,
the Company’s shareholders approved a proposal to amend the Amended and Restated Memorandum and Articles of Association to provide
for the Second Extension (the “Second Extension Amendment Proposal”). Effective upon such approval, (i) the Amended and Restated
Memorandum and Articles of Association were amended pursuant to the resolutions set forth in the Second Extension Amendment Proposal to
implement the Second Extension, and (ii) the Public Shareholders elected to redeem
Proposed Business Combination
On October 2, 2023, the Company entered into a business combination agreement (as may be amended, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”) with Heramba Electric plc, an Irish public limited company duly incorporated under the laws of Ireland (“Holdco”), Heramba Merger Corp., an exempted company incorporated in the Cayman Islands with limited liability (“Merger Sub”), Heramba Limited, an Irish private company limited by shares duly incorporated under the laws of Ireland (the “Seller”), and Heramba GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) established under the laws of Germany (“Heramba”), which provides for a proposed business combination through a series of related transactions (collectively, the “Proposed Business Combination”), as described in more detail below.
On December 6, 2023, Holdco initially filed with the SEC a registration statement on Form F-4 (File No. 333-275903) in connection with the Proposed Business Combination, which was subsequently amended on January 16, 2024, February 27, 2024 and March 15, 2024 (as amended, the “Form F-4”). The Form F-4 contains a preliminary proxy statement/prospectus that constitutes (i) a preliminary proxy statement relating to the Proposed Business Combination in connection with the Company’s solicitation of proxies for the vote by its shareholders regarding the Proposed Business Combination and related matters, as described in the Form F-4, and (ii) a preliminary prospectus relating to, among other things, the offer of the securities to be issued by Holdco in connection with the Proposed Business Combination.
On March 19, 2024, the Form F-4 was declared effective by the SEC, and Holdco and the Company filed the definitive proxy statement/prospectus related to the Proposed Business Combination (the “definitive proxy statement/prospectus”) with the SEC. On or about March 19, 2024, the Company commenced the mailing of the definitive proxy statement/prospectus and other relevant documents to its shareholders as of March 1, 2024, the record date established for voting on the Proposed Business Combination. The terms of the Business Combination Agreement and other related ancillary agreements, including those noted below, are summarized in more detail in the Form F-4 and the definitive proxy statement/prospectus.
On March 28, 2024, the Company held an extraordinary general meeting of shareholders (the “Business Combination Meeting”) to consider and vote upon the proposals set forth in the definitive proxy statement/prospectus. At the Business Combination Meeting, the Company’s shareholders approved the Proposed Business Combination and related matters. The Company expects the Proposed Business Combination to close as soon as practicable.
8
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Business Combination Agreement
Pursuant to the Business Combination Agreement,
each of the following transactions will occur in the following order: (i) immediately prior to the effective time of the Merger (as defined
below) (the “Merger Effective Time”), (1) each of the Company’s issued and outstanding Units will be automatically separated
into its component securities (the “Unit Separation”) and (2) the sole issued and outstanding Class B ordinary share will
be automatically converted into one Class A ordinary share (such conversion, the “Closing Class B Conversion”); (ii) at the
Merger Effective Time, the Company will enter into a plan of merger with Merger Sub, pursuant to which Merger Sub will merge with and
into our company (the “Merger”), with the Company being the surviving company in the Merger (the “Surviving Company”)
and becoming a direct, wholly owned subsidiary of Holdco; (iii) at the Merger Effective Time, (a) each Class A ordinary share issued and
outstanding immediately prior to the Merger Effective Time (which, for the avoidance of doubt, will include the Class A ordinary shares
held as a result of the Unit Separation and the Closing Class B Conversion) will be automatically cancelled in exchange for the right
to be issued one ordinary share in the capital of Holdco with a nominal value of €
The consummation of the Proposed Business Combination is subject to a number of conditions set forth in the Business Combination Agreement including, among others, the Holdco Ordinary Shares being approved for listing on Nasdaq or another national securities exchange and the execution of various transaction agreements. There can be no assurance as to whether or when the Proposed Business Combination will be consummated.
Heramba Sole Shareholder Written Consent
Concurrently with the execution and delivery of the Business Combination Agreement, the Seller, as the sole shareholder of Heramba, delivered to the Company a written consent pursuant to which, among other things, it approved the execution of the Business Combination Agreement and related ancillary agreements, and approved the transactions contemplated thereby.
Sponsor Support Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, the Company entered into a sponsor support agreement with Heramba and the Sponsor, pursuant to which, among other things, the Sponsor (a) agreed to vote any ordinary shares held by it as of the record date established for voting on the Proposed Business Combination in favor of the Business Combination Agreement, the Proposed Business Combination and each of the proposals set forth in the Form F-4, and against any action that would reasonably be expected to impede the completion of the Proposed Business Combination as described therein, (b) agreed not to transfer such shares until the earliest of the closing of the Proposed Business Combination (the “Closing”) or the termination of the Business Combination Agreement, except as set forth therein, (c) agreed not to redeem such shares in connection with the Proposed Business Combination (which waiver of redemption rights was initially provided in connection with the Initial Public Offering in consideration for receipt of Founder Shares, and for certain covenants and commitments pursuant to a letter agreement entered into at the time of the Initial Public Offering, and without any separate consideration paid in connection with providing such waiver) and (d) waived certain anti-dilution rights with respect to any such shares that are Class B ordinary shares.
Share Contribution Agreement
In connection with the Closing, the Seller and Holdco will enter into a transfer agreement immediately following the Merger Effective Time, pursuant to which the Seller will transfer as a contribution to Holdco, and Holdco will assume from the Seller, all of the shares in Heramba, in exchange for the issuance by Holdco of the Share Consideration to the Seller.
9
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Lock-Up Agreement
In connection with the Closing, Holdco and certain
holders of Holdco securities upon the Closing, including the Sponsor, certain of the Company’s directors and executive officers
and certain Heramba shareholders holding greater than
Registration Rights Agreement
In connection with the Closing, Holdco and certain
holders of Holdco securities upon the Closing, including the Sponsor, will enter into a registration rights agreement, pursuant to which,
among other things, Holdco will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain Holdco Ordinary Shares
and other equity securities of Holdco that are held by the parties thereto from time to time. In addition, Holdco will agree to provide
such holders with customary demand and piggyback registration rights with respect to the Registrable Securities (as defined therein).
Such Registrable Securities are expected to include up to
Amended and Restated Warrant Agreement
In connection with the Closing, prior to the Merger Effective Time, the Company will enter into an amended and restated warrant agreement with Holdco and Continental Stock Transfer & Trust Company, as warrant agent, and any successor warrant agent, pursuant to which the terms and conditions of the warrant agreement entered into at the time of the Initial Public Offering will be amended and restated to, among other things, reflect the automatic adjustment of the Public Warrants to Holdco Public Warrants and the Private Placement Warrants to Holdco Private Warrants.
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
On August 16, 2022, the IR Act was signed into
federal law. The IR Act provides for, among other things, a new U.S. federal
On December 27, 2022, the Treasury released Notice 2023-2, which provided taxpayers with interim guidance on the excise tax to be relied upon until the Internal Revenue Service issued proposed Treasury regulations on such matter. Notice 2023-2 included as one of its exceptions to the excise tax a distribution in complete liquidation of a “covered corporation”, to which Sec. 331 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), applies (so long as Sec. 332(a) of the Code also does not also apply). On April 9, 2024, the Treasury published proposed regulations that would provide new guidance concerning the excise tax. Although the regulations are not final, taxpayers may generally rely upon such proposed regulations until final regulations are issued. The proposed regulations clarify that certain distributions in complete liquidation or pursuant to a resolution or plan of dissolution generally are not repurchases that would be subject to the excise tax. In addition, certain redemptions that occur in the same taxable year as a complete liquidation is completed or in which a dissolution occurs would generally be exempt from such excise tax.
10
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Although the Company was incorporated in the Cayman Islands and is currently not a “covered corporation”, there is a possibility that the Company may acquire a U.S. domestic corporation, redomicile as a U.S. domestic corporation or engage in a transaction in which a U.S. domestic corporation becomes the Company’s parent or its affiliate. Although it remains uncertain whether, and/or to what extent, the excise tax could apply to any redemptions of the Company’s Public Shares after December 31, 2022 if the Company was to become a “covered corporation” in the future, including any redemptions in connection with the First Extension or the Second Extension, the Company’s initial Business Combination or in the event the Company does not consummate an initial Business Combination by August 2, 2024, the Company would not expect the excise tax to apply to redemptions of its Public Shares that occur during a taxable year in which the Company completely liquidates under Sec. 331 of the Code.
If the Company was to become a “covered corporation” in the future, there is a possibility that any redemption or other repurchase that occurs after December 31, 2022 may be subject to the excise tax, including in connection with the Company’s initial Business Combination, certain amendments to the Amended and Restated Memorandum and Articles of Association (including in connection with the First Extension or the Second Extension) or otherwise. Whether and to what extent the Company would be subject to the excise tax would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the initial Business Combination, certain amendments to the Amended and Restated Memorandum and Articles of Association (including in connection with the First Extension or the Second Extension) or otherwise, (ii) the structure of the initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the initial Business Combination (or otherwise issued not in connection with the initial business combination but issued within the same taxable year of the initial Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the corporation and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. However, the Company has agreed that it will not utilize any funds from the Trust Account to pay any potential excise taxes that may become due pursuant to the IR Act upon a redemption of Public Shares. The foregoing could cause a reduction in the cash available on hand to complete the Company’s initial Business Combination and in the Company’s ability to complete an initial Business Combination.
In October 2023, the military conflict between Israel and militant groups led by Hamas has also caused uncertainty in the global markets. The full impact of the war between Israel and Hamas and related global economic disruptions on the Company’s financial condition and results of operations, as well as the Company’s ability to consummate an initial Business Combination, also remains uncertain. The Company’s management will continuously evaluate the effect of the conflict on the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As of March 31, 2024, the Company had $
11
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures normally included in condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 17, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. The Company has elected to implement the aforementioned exemptions.
Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s 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.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.
12
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did have any cash equivalents as of March 31, 2024 or December 31, 2023.
Investments Held in Trust Account
As of March 31, 2024 and December 31, 2023, the assets held in the Trust Account were held in money market funds which were invested in U.S. Treasury securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Any gain and loss resulting from the change in fair value of these securities is included in gain (loss) on investments held in Trust Account in the accompanying statements of operations. Interest and dividend income on these securities is included in interest and dividend income on investments held in Trust Account in the accompanying statements of operations.
Class A Ordinary Shares Subject to Possible Redemption
All of the
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 March 31, 2024 increased as
the income earned on the Trust Account exceeds the Company’s expected dissolution expenses (up to $
| Class A ordinary shares subject to possible redemption as of December 31, 2023 | $ | |||
| Remeasurement of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption as of March 31, 2024 | $ |
Offering Costs associated with the Initial Public Offering
The Company
complies with the requirements of ASC Topic 340, Other Assets and Deferred Costs and SEC Staff Accounting Bulletin Topic 5A - Expenses
of Offering (“SAB Topic 5A”). Offering costs consist principally of professional
and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly
attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for
equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting
to $
13
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Income Taxes
The Company accounts for income taxes under ASC Topic 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 periods, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. Consequently, income taxes are not reflected in the Company’s financial statements.
Net (Loss) Income Per Ordinary Share
The Company complies with accounting and disclosure
requirements of ASC 260, Earnings Per Share. Net (loss) income per ordinary share is computed by dividing net (loss) 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 (loss) income per share as the redemption value approximates fair value. Therefore, the net (loss) income per share calculation
allocates income and losses shared pro rata between Class A ordinary shares and Class B ordinary shares. As a result, the calculated
net (loss) income per share is the same for Class A ordinary shares and Class B ordinary 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 placements to purchase
an aggregate of
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net (loss) income per share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
| Denominator: | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
14
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $
Fair Value of Financial Instruments
The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying amounts reflected in the balance sheet for current assets and current liabilities approximate fair value due to their short-term nature.
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
See Note 9 for additional information on assets and liabilities measured at fair value.
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 (“ASC 815”). 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.
The Public Warrants and Private Placement Warrants are accounted for as a derivative instrument in accordance with ASC 815 and are presented as warrant liabilities on the balance sheet. The Public Warrants and Private Placement Warrants were measured at fair value at the Initial Public Offering and on a recurring basis, with subsequent changes in fair value to be recorded in the statements of operations.
15
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The forward purchase agreement is accounted for
as a derivative instrument in accordance with ASC 815 and is presented as a derivative forward purchase agreement liability on the balance
sheet. The Company was to issue and sell up to
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently evaluating the timing and impacts of adoption of ASU 2023-09.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
The registration statement for the Company’s
Initial Public Offering was declared effective on October 28, 2021. On November 2, 2021, the Company completed its Initial Public Offering
of
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On February 18, 2021, the Sponsor was issued
16
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Sponsor and the Additional Anchor Investors
(as defined below) have each agreed with the Company that, subject to certain limited exceptions, the Founder Shares are not transferable,
assignable or salable (except to the officers and directors and other persons or entities affiliated with the Sponsor, each of whom will
be subject to the same transfer restrictions) until the earlier of (A) year after the completion of the initial Business Combination
or earlier if, subsequent to the initial Business Combination, the closing price of the Class A ordinary shares equals or exceeds $
A total of
The other
The Anchor Investors have not been granted any shareholder or other rights in addition to those afforded to the Company’s other Public Shareholders. Further, the Anchor Investors are not required to (i) hold any Units, Class A ordinary shares or warrants they may purchase in the Initial Public Offering or thereafter for any amount of time, (ii) vote any Class A ordinary shares they may own at the applicable time in favor of the Business Combination or (iii) refrain from exercising their right to redeem their Public Shares at the time of the Business Combination. The Anchor Investors have the same rights to the funds held in the Trust Account with respect to the Class A ordinary shares underlying the Units they purchased in the Initial Public Offering as the rights afforded to the Company’s other Public Shareholders.
The Company estimated the fair value of the Founder
Shares attributable to the Anchor Investors to be $
17
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Forward Purchase Agreement
In September 2021, the Company amended and restated
the forward purchase agreement pursuant to which EWI Capital SPAC I LLC, which is an affiliate of Srinath Narayanan (the Company’s
President and Chief Executive Officer) and a member of the Sponsor (“EWI” or the “forward purchase investor”),
had subscribed to purchase from the Company up to
The Company would have determined in its sole
discretion the specific number of forward purchase units (up to
The forward purchase agreement also provided that the forward purchase investor was entitled to registration rights with respect to the forward purchase securities. The proceeds from the sale of the forward purchase units may have been used as part of the consideration to the sellers in an initial Business Combination, expenses in connection with an initial Business Combination or for working capital in the post-Business Combination company. These purchases were required to be made regardless of whether any Class A ordinary shares were redeemed by the Public Shareholders and were intended to provide the Company with a minimum funding level for an initial Business Combination. The forward purchase units would have been issued only in connection with the closing of an initial Business Combination.
The Company accounted for the forward purchase agreement in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the forward purchase units did not meet the criteria for equity treatment thereunder, the Company classified the securities underlying the forward purchase agreement as an asset or liability at its fair value. This asset or liability was subject to re-measurement at each balance sheet date. With each such remeasurement, the asset or liability was adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations.
On October 2, 2023, the Company and EWI entered
into a mutual termination agreement to terminate the forward purchase agreement. In consideration of the termination of the forward purchase
agreement, the Company determined that, under ASC 405-20-40, Liabilities – Extinguishment of Liabilities – Derecognition,
the derivative liability for the forward purchase agreement should be extinguished and removed from the balance sheet as of October 2,
2023. Pursuant to ASC 850, Related Party Disclosures, as the forward purchase agreement was determined to have been entered into with
a related party, the liability extinguishment of $
Administrative Services Agreement
On October 28, 2021, in connection with the Initial
Public Offering, the Company entered into an agreement with EWI to pay a total of $
18
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the
Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business
Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
On October 25, 2023, the Company issued an unsecured
promissory note in the principal amount of up to $
On January 26, 2024, the Company issued an unsecured
promissory note in the principal amount of up to $
The Company complies with ASC Topic 835, Interest
(“ASC 835”). In accordance with ASC 835-30, discounts to the principal amounts are included in the carrying value of the notes
and amortized to “Interest expense” over the remaining term of the underlying debt to the maturity date. During the three
months ended March 31, 2024 and 2023, the Company recorded $
19
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
First Extension Non-Redemption Agreements
On July 25, 2023, the Company entered into one
or more First Extension Non-Redemption Agreements with one or more unaffiliated third parties in exchange for them each agreeing not to
redeem an aggregate of
The Company determined that the fair value of
shares that will be issued to such investors upon the consummation of the offering was $
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares, Private Placement Warrants, Over-Allotment Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants, the Over-Allotment 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 has also granted such registration rights to the holders of Post-Combination Shares that may be issued pursuant to the First Extension Non-Redemption Agreements and certain other registration rights in respect of any Replacement Shares (as defined below) that may be issued pursuant to the Backstop Non-Redemption Agreements (as defined below). The Company will bear the expenses incurred in connection with the filing of any such registration statements. Pursuant to the forward purchase agreement with EWI, the Company had agreed that the forward purchase securities would be entitled to registration rights pursuant to the registration rights agreement.
Underwriting Agreement
In connection with the Initial Public Offering,
the underwriters were granted a 45-day option from the date of the Initial Public Offering to purchase up to
In connection with the closing of the Initial
Public Offering and subsequent partial exercise of the over-allotment option, the underwriters were paid a cash underwriting discount
of $
Vendor Agreements
On September 22, 2021, the Company entered into
an agreement with a financial advisor (the “First Financial Advisor” and such agreement, the “First Financial Advisor
Agreement”) for services to be rendered in connection with the Company’s Initial Public Offering, pursuant to which the Company
would pay the First Financial Advisor (i) an amount equal to the aggregate number of securities sold in the Initial Public Offering multiplied
by 0.02 and then further multiplied by 0.07, (ii) an amount equal to the aggregate number of securities sold upon the underwriters’
partial exercise of the over-allotment option multiplied by 0.02 and then further multiplied by 0.07, and (iii) on the date of any additional
or deferred payment to any underwriters or other persons performing similar services in connection with the Initial Public Offering an
amount equal to the aggregate number of securities sold in the Initial Public Offering, plus, the aggregate number of securities sold
upon the underwriters’ partial exercise of the over-allotment option multiplied by 0.035 and then further multiplied by 0.13 (such
fees in clause (iii), the “First Financial Advisor Deferred Fees”). The Company paid the First Financial Advisor a total of
$
20
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
On September 28, 2021, the Company entered into
an agreement with a financial advisor (the “Second Financial Advisor” and such agreement, the “Second Financial Advisor
Agreement”) for services to be rendered in connection with the Company’s Initial Public Offering, pursuant to which the Company
would pay the Second Financial Advisor (i) an amount equal to the aggregate number of securities sold in the Initial Public Offering multiplied
by 0.02 and then further multiplied by 0.03 and (ii) an amount equal to the aggregate number of securities sold upon the underwriters’
partial exercise of the over-allotment option multiplied by 0.02 and then further multiplied by 0.03. The Company paid the Second Financial
Advisor a total of $
On August 18, 2022, the Company entered into an
agreement with a legal advisor (the “Advisor”) for services to be rendered in connection with the consummation of a Business
Combination, pursuant to which the Company would pay the Advisor a fee of
On August 24, 2022, the Company entered into an
agreement with a consultant (the “Consultant”) for general project management and coordination of activities in connection
with consummating a Business Combination, pursuant to which the Company shall pay a retainer of $
On May 22, 2023, the Company entered into an agreement
with a financial advisor (the “Third Financial Advisor”) for financial and market related advice customary with the consummation
of a Business Combination, for the Company’s proposed Business Combination with Heramba. Pursuant to the agreement, the Company
will pay an amount equal to (i)
On July 20, 2023, the Company entered into an
agreement with a capital markets advisor (the “Capital Markets Advisor”) for services such as securing an extension of the
Combination Period, providing capital markets advice, advising on structure and terms of the Business Combination Agreement, and identifying
finance opportunities in connection with a Business Combination. Pursuant to the agreement, the Company will pay the Capital Markets Advisor
(i) an advisor fee in connection with the First Extension and the Business Combination in an amount equal to $
21
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 7. WARRANTS
As of March 31, 2024 and December 31, 2023, there
were
Public Warrants may only be exercised for a whole
number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. Accordingly,
unless holders purchase at least two Units, they will not be able to receive or trade a whole warrant. The warrants will expire
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the satisfying the obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable,
but in no event later than fifteen (
Redemption of warrants the price Class A ordinary
share equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption (the “ |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
The Company will not redeem the warrants as described
above unless a registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise
of the warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the
Redemption of warrants when the price Class
A ordinary share equals or exceeds $
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
22
PROJECT ENERGY REIMAGINED
ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| ● | if the closing price of the Class A ordinary shares for any |
The “fair market value” of the Class
A ordinary shares for the above purpose shall mean the volume-weighted average price of the Class A ordinary shares during the
In addition, if (x) the Company issues additional
Class A ordinary shares or equity-linked securities, excluding forward purchase units, for capital raising purposes in connection with
the closing of the initial Business Combination (excluding any forward purchase units) at an issue price or effective issue price of less
than $
The Private Placement Warrants are identical to
the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class
A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
The Company accounts for the
The accounting treatment of derivative financial instruments required that the Company record the warrants as derivative liabilities at fair value upon the closing of the Initial Public Offering. The warrant liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities are adjusted to current fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE 8. SHAREHOLDERS’ DEFICIT
Preference shares — The Company
is authorized to issue
Class A ordinary shares —
The Company is authorized to issue
Class B ordinary shares —
The Company is authorized to issue
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single Class on all matters submitted to a vote of the shareholders except as required by law.
23
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Founder Shares were to automatically convert
into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination on a one-for-one
basis, subject to adjustment for share divisions, share dividends, reorganizations, recapitalizations and the like, and subject to further
adjustment as provided herein. In the case that additional Class A ordinary shares or equity-linked securities were issued or deemed issued
in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion of all Founder Shares
was to equal, in the aggregate, on an as-converted basis,
On August 1, 2023, pursuant to the Class B Conversion,
the holders of the Founder Shares converted
NOTE 9. FAIR VALUE MEASUREMENTS
| Description | Amount at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| March 31, 2024 (Unaudited) | ||||||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Deferred offering costs | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Accrued offering costs | $ | $ | $ | $ | ||||||||||||
| Warrant liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liability – Private Placement Warrants | ||||||||||||||||
| Warrant Liabilities | $ | $ | $ | $ | ||||||||||||
| Description | Amount at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Deferred offering costs | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Accrued offering costs | $ | $ | $ | $ | ||||||||||||
| Warrant liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liability – Private Placement | ||||||||||||||||
| Warrant Liabilities | $ | $ | $ | $ | ||||||||||||
The Company utilized a Monte Carlo simulation
model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of March 31, 2024 and
December 31, 2023 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker PEGRW.
The quoted price of the Public Warrants was $
24
PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company estimates the volatility of its ordinary
shares based on a back-solve lattice model which adjusts the trading price of the Public Warrants for the estimated probability of completing
the initial Business Combination. However, since the back-solve lattice model did not produce a meaningful volatility for the Private
Placement Warrants as of March 31, 2024 and December 31, 2023, the fair value of the Private Placement Warrants was set equal
to the fair value of the Public Warrants. The fair value of the Private Placement Warrants was $
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. For the three months ended March 31, 2024, there were no transfers between either Level 1, 2 or 3 inputs.
The model used to estimate the fair value of the
derivative liability for the forward purchase agreement is based on the assumption that the forward purchase securities are equivalent
to the Company’s Units and determined, on a per unit basis, as the price of the Company’s Units less the present value of
the contractually stipulated forward price of $
The Company recognized an unrealized loss on the
fair value of warrant liabilities of $
NOTE 10. SUBSEQUENT EVENTS
The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than those subsequent events described below, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
Vendor Agreement Amendments
On April 3, 2024, the Company and the First Financial
Advisor entered into an amendment to the First Financial Advisor Agreement, pursuant to which the First Financial Advisor agreed that
any First Financial Advisor Deferred Fees were waived upon the date of the waiver of the deferred underwriting fees by J.P. Morgan Securities
LLC and BofA Securities, Inc., and agreed that any services that have been provided by the First Financial Advisor after the Initial Public
Offering will be paid by the Company to the First Financial Advisor, up to a maximum of $
On April 3, 2024, the Company and the Second Financial
Advisor entered into an amendment to the Second Financial Advisor Agreement, pursuant to which the Company has agreed to cause
Second Extension Meeting
On April 29, 2024, at the Second Extension Meeting,
the Company’s shareholders approved the Second Extension Amendment Proposal. Effective upon such approval, (i) the Amended and Restated
Memorandum and Articles of Association were amended pursuant to the resolutions set forth in the Second Extension Amendment Proposal to
implement the Second Extension, and (ii) the Public Shareholders elected to redeem
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PROJECT ENERGY REIMAGINED ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In connection with the Second Extension, the Sponsor
agreed that it or its designees will deposit into the Trust Account as a loan, on each of May 2, 2024 and the 2nd day of each subsequent
calendar month until (but excluding) August 2, 2024 (each such date, a “Contribution Date”) the lesser of (x) $
Backstop Non-Redemption Agreements
On April 30, 2024, the Company entered into non-redemption
agreements (the “Backstop Non-Redemption Agreements”) with certain unaffiliated third parties (the “Backstop Investors”)
in exchange for the Backstop Investors agreeing to rescind or reverse all redemption demands delivered prior to the redemption deadline
for the Business Combination Meeting with respect to the Company’s Class A ordinary shares to be acquired by such Backstop Investors
(the “Backstop Investor Shares”), up to an aggregate of
On April 30, 2024, the Company received $
Related Party Loans
On May 2, 2024, the Company issued an unsecured
promissory note in the principal amount of up to $
On April 23, 2024 and April 29, 2024, the Company
received $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us,” “our” 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 our “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 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” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Proposed Business Combination (as defined and described below), 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, including that the conditions of the Proposed Business Combination are not satisfied. 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 this Quarterly Report and the Company’s most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). For information regarding risk factors related to the Proposed Business Combination, see the “Risk Factors” section of the Form F-4 and the definitive proxy statement/prospectus filed in connection therewith (in each case as defined and described below). 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). While we may pursue an initial business combination in any industry, sector or geographic region, we have focused 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 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, we consummated our 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 (the “Public Warrants”). Each whole warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment. On November 17, 2021, the underwriters of the Initial Public Offering purchased an additional 1,377,660 Units (“Over-Allotment Units”), due to a partial exercise of their over-allotment option, generating gross proceeds of $13,776,600.
Simultaneously with the closing of the Initial Public Offering, we 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 partial exercise of the over-allotment option, we consummated the sale of 275,532 additional Private Placement Warrants (the “Over-Allotment Warrants”) at a price of $1.00 per Over-Allotment Warrant in a private placement to our Sponsor, generating gross proceeds of $275,532.
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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 was placed in a trust account established in connection with the Initial Public Offering (the “Trust Account”) at J.P. Morgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee.
We have incurred and expect to continue to incur significant costs in the pursuit of our acquisition plans, including in connection with the Proposed Business Combination described below. We cannot assure you that our plans to complete the Proposed Business Combination, or any other initial business combination, will be successful. If we are unable to complete our initial business combination by August 2, 2024 (or such later date as may be approved by our shareholders), we will then liquidate in accordance with our amended and restated memorandum and articles of association (as amended, the “Articles”).
Recent Developments
Deferred Fee Waivers
On April 17, 2023 and April 27, 2023, J.P. Morgan Securities LLC and BofA Securities, Inc., respectively, constituting all of the underwriters of the Initial Public Offering, waived their rights to 100% of the deferred fee payable to such underwriters upon completion of our initial business combination pursuant to the underwriting agreement, totaling $9,232,181 (collectively, the “Deferred Fee Waivers”).
Extensions
On April 25, 2023, we entered into a non-binding letter of intent with respect to an initial business combination. As a result, pursuant to the Articles as then in effect, the date by which we must consummate an initial business combination was automatically extended to August 2, 2023.
On August 1, 2023, we held an extraordinary general meeting in lieu of the 2023 annual general meeting of our shareholders (the “First Extension Meeting”). At the First Extension Meeting, our shareholders approved the following items: (i) a proposal to amend the Articles as then in effect to extend the date by which we must consummate an initial business combination from August 2, 2023 to May 2, 2024, or such earlier date as determined by our board of directors, for a total extension of up to nine months (collectively, the “First Extension”, and such proposal, the “First Extension Amendment Proposal”); (ii) a proposal to amend the Articles as then in effect to eliminate (a) the limitation that we shall not redeem Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions and (b) the limitation that we shall not consummate an initial business combination unless we have net tangible assets of at least $5,000,001 upon consummation of such business combination (the “Redemption Limitation Amendment Proposal”); (iii) a proposal to amend the Articles as then in effect to provide for the right of holders of Class B ordinary shares to convert such Class B ordinary shares into Class A ordinary shares on a one-for-one basis at any time and from time to time at the option of the holder (the “Founder Share Amendment Proposal”, and collectively with the First Extension Amendment Proposal and the Redemption Limitation Amendment Proposal, the “Articles Amendment Proposals”); (iv) a proposal to amend the investment management trust agreement, dated as of October 28, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as then in effect, to provide for the First Extension (the “Trust Amendment”, and such proposal, the “Trust Amendment Proposal”); (v) a proposal to re-appoint Michael Browning to our board of directors to serve until the third annual general meeting of shareholders following the First Extension Meeting or until his successor is elected and qualified; and (vi) a proposal to ratify the selection by our audit committee of Marcum LLP to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2023.
Effective upon the approval of the Articles Amendment Proposals and the Trust Amendment Proposal, on August 1, 2023, (i) the Articles as then in effect were amended pursuant to the resolutions set forth in the Articles Amendment Proposals, and (ii) we entered into the Trust Amendment with Continental Stock Transfer & Trust Company, as trustee.
On August 1, 2023, in connection with and following the approval of the Articles Amendment Proposals and the Trust Amendment Proposal, (i) holders of 6,594,414 Class B ordinary shares voluntarily elected to convert such Class B ordinary shares to Class A ordinary shares, on a one-for-one basis, in accordance with the Articles as amended pursuant to the Articles Amendment Proposals (collectively, the “Class B Conversion”), and (ii) our public shareholders elected to redeem 15,498,302 Class A ordinary shares at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $161.3 million (the “First Extension Redemption”). After the satisfaction of the First Extension Redemption, the balance in the Trust Account was approximately $113.2 million. Upon completion of the Class B Conversion followed by the First Extension Redemption, 17,473,772 Class A ordinary shares and one Class B ordinary share remained issued and outstanding. Notwithstanding the Class B Conversion, the holders of the Class A ordinary shares received in the Class B Conversion will not be entitled to receive any funds held in the Trust Account with respect to any such converted shares.
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Subsequent to the period covered by this Quarterly Report, on April 29, 2024, we held an extraordinary general meeting of our shareholders at which our shareholders approved a proposal to amend the Articles as then in effect to extend the date by which we must consummate an initial business combination from May 2, 2024 to August 2, 2024, or such earlier date as determined by our board of directors, for a total extension of up to three months (collectively, the “Second Extension”, and such proposal, the “Second Extension Amendment Proposal”). Effective upon such approval, (i) the Articles as then in effect were amended pursuant to the resolutions set forth in the Second Extension Amendment Proposal to implement the Second Extension, and (ii) our public shareholders elected to redeem 4,226,571 Class A ordinary shares at a redemption price of approximately $10.85 per share, for an aggregate redemption amount of approximately $45.8 million (the “Second Extension Redemption”). After the satisfaction of the Second Extension Redemption, the balance in the Trust Account was approximately $72.2 million. Upon completion of the Second Extension Redemption, 13,247,201 Class A ordinary shares and one Class B ordinary share remain issued and outstanding.
Contributions to Trust Account
In connection with the Second Extension, our Sponsor agreed that it or its designees will deposit into the Trust Account as a loan, on each of May 2, 2024 and the 2nd day of each subsequent calendar month until (but excluding) August 2, 2024 (each such date, a “Contribution Date”) the lesser of (x) $75,000 or (y) $0.015 per Public Share multiplied by the number of Public Shares outstanding on the applicable Contribution Date (a “Contribution”, and our Sponsor or its designee making such Contribution, a “Contributor”). We did not ask our Sponsor to reserve for, nor have we independently verified whether our Sponsor will have sufficient funds to satisfy, any such Contributions. If a Contributor fails to make a Contribution by an applicable Contribution Date, we will liquidate and dissolve as soon as practicable after such date and in accordance with the Articles. The Contributions will be evidenced by a non-interest bearing, unsecured promissory note and will be repayable by us upon consummation of our initial business combination. If we do not consummate our initial business combination by August 2, 2024 (or such earlier date as may be determined by our board of directors), any such promissory notes will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven. If we have consummated our initial business combination or announced our intention to wind up prior to any Contribution Date, any obligation to make Contributions will terminate. On each of May 3, 2024 and June 3, 2024, a Contribution from our Sponsor was deposited into the Trust Account. Such Contributions were initiated by our Sponsor prior to the respective Contribution Dates and, therefore, we have continued to operate and pursue the consummation of our initial business combination.
Proposed Business Combination
On October 2, 2023, we entered into a business combination agreement (as may be amended, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”) with Heramba Electric plc, an Irish public limited company duly incorporated under the laws of Ireland (“Holdco”), Heramba Merger Corp., an exempted company incorporated in the Cayman Islands with limited liability (“Merger Sub”), Heramba Limited, an Irish private company duly incorporated under the laws of Ireland (the “Seller”), and Heramba GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) established under the laws of Germany (“Heramba”), which provides for a proposed business combination through a series of related transactions (collectively, the “Proposed Business Combination”).
On December 6, 2023, Holdco initially filed with the SEC a registration statement on Form F-4 (File No. 333-275903) in connection with the Proposed Business Combination, which was subsequently amended on January 16, 2024, February 27, 2024 and March 15, 2024 (as amended, the “Form F-4”). The Form F-4 contains a preliminary proxy statement/prospectus that constitutes (i) a preliminary proxy statement relating to the Proposed Business Combination in connection with our solicitation of proxies for the vote by our shareholders regarding the Proposed Business Combination and related matters, as described in the Form F-4, and (ii) a preliminary prospectus relating to, among other things, the offer of the securities to be issued by Holdco in connection with the Proposed Business Combination.
On March 19, 2024, the Form F-4 was declared effective by the SEC, and we and Holdco filed the definitive proxy statement/prospectus related to the Proposed Business Combination (the “definitive proxy statement/prospectus”) with the SEC. On or about March 19, 2024, we commenced the mailing of the definitive proxy statement/prospectus and other relevant documents to our shareholders as of March 1, 2024, the record date established for voting on the Proposed Business Combination. The terms of the Business Combination Agreement and other related ancillary agreements, including those noted below, are summarized in more detail in the Form F-4 and the definitive proxy statement/prospectus.
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On March 28, 2024, we held an extraordinary general meeting of shareholders (the “Business Combination Meeting”) to consider and vote upon the proposals set forth in the definitive proxy statement/prospectus. At the Business Combination Meeting, our shareholders approved the Business Combination Proposal, the Merger Proposal and each of the Advisory Governance Proposals, in each case as defined and described in more detail in the definitive proxy statement/prospectus. We expect the Proposed Business Combination to close as soon as practicable.
Business Combination Agreement
Pursuant to the Business Combination Agreement, each of the following transactions will occur in the following order: (i) immediately prior to the effective time of the Merger (as defined below) (the “Merger Effective Time”), (1) each of our issued and outstanding Units will be automatically separated into its component securities (the “Unit Separation”) and (2) the sole issued and outstanding Class B ordinary share will be automatically converted into one Class A ordinary share (such conversion, the “Closing Class B Conversion”); (ii) at the Merger Effective Time, we will enter into a plan of merger with Merger Sub, pursuant to which Merger Sub will merge with and into our company (the “Merger”), with our company being the surviving company in the Merger (the “Surviving Company”) and becoming a direct, wholly owned subsidiary of Holdco; (iii) at the Merger Effective Time, (a) each Class A ordinary share issued and outstanding immediately prior to the Merger Effective Time (which, for the avoidance of doubt, will include the Class A ordinary shares held as a result of the Unit Separation and the Closing Class B Conversion) will be automatically cancelled in exchange for the right to be issued one ordinary share in the capital of Holdco with a nominal value of €0.0001 (“Holdco Ordinary Shares”), (b) each Public Warrant will remain outstanding but will be automatically adjusted to become one Holdco public warrant (“Holdco Public Warrants”), (c) each Private Placement Warrant will remain outstanding but will be automatically adjusted to become one Holdco private warrant (“Holdco Private Warrants” and together with the Holdco Public Warrants, the “Holdco Warrants”), (d) each Class A ordinary share properly tendered for redemption and issued and outstanding immediately prior to the Merger Effective Time will be automatically cancelled and cease to exist and will thereafter represent only the right to be paid a pro rata portion of the Trust Account pursuant to the Articles, (e) each dissenting ordinary share issued and outstanding immediately prior to the Merger Effective Time held by a dissenting shareholder will be automatically cancelled and cease to exist and will thereafter represent only the right to be paid the fair value of such dissenting ordinary share and such other rights as are granted by the Companies Act (As Revised) of the Cayman Islands and (f) each ordinary share of Merger Sub issued and outstanding at the Merger Effective Time will be automatically cancelled in consideration for the issuance of one validly issued, fully paid and non-assessable ordinary share of par value $1.00 in the Surviving Company; (iv) immediately following the Merger Effective Time, pursuant to a transfer agreement to be entered into by and between the Seller and Holdco, the Seller will transfer as a contribution to Holdco, and Holdco will assume from the Seller, the shares in Heramba, all of which are held by the Seller, in exchange for the issuance by Holdco of 36,700,000 Holdco Ordinary Shares (the “Share Consideration”) to the Seller; and (v) all deferred ordinary shares in the capital of Holdco with a nominal value of €1.00 each (“Holdco Deferred Shares”) shall within one month of the Merger Effective Time be surrendered by the holder thereof to Holdco for nil consideration and such Holdco Deferred Shares shall thereafter be held as treasury shares by Holdco in satisfaction of the minimum capital requirements for a public limited company under Irish law.
The consummation of the Proposed Business Combination is subject to a number of conditions set forth in the Business Combination Agreement including, among others, the Holdco Ordinary Shares being approved for listing on The Nasdaq Stock Market LLC (“Nasdaq”) or another national securities exchange and the execution of various transaction agreements. There can be no assurance as to whether or when the Proposed Business Combination will be consummated.
Heramba Sole Shareholder Written Consent
Concurrently with the execution and delivery of the Business Combination Agreement, the Seller, as the sole shareholder of Heramba, delivered to us a written consent pursuant to which, among other things, it approved the execution of the Business Combination Agreement and related ancillary agreements, and approved the transactions contemplated thereby.
Sponsor Support Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, we entered into a sponsor support agreement (the “Sponsor Support Agreement”) with Heramba and our Sponsor, pursuant to which, among other things, our Sponsor (a) agreed to vote any ordinary shares held by it as of the record date established for voting on the Proposed Business Combination in favor of the Business Combination Agreement, the Proposed Business Combination and each of the proposals set forth in the Form F-4, and against any action that would reasonably be expected to impede the completion of the Proposed Business Combination as described therein, (b) agreed not to transfer such shares until the earliest of the closing of the Proposed Business Combination (the “Closing”) or the termination of the Business Combination Agreement, except as set forth therein, (c) agreed not to redeem such shares in connection with the Proposed Business Combination (which waiver of redemption rights was initially provided in connection with the Initial Public Offering in consideration for receipt of Founder Shares (as defined below), and for certain covenants and commitments pursuant to a letter agreement entered into at the time of the Initial Public Offering, and without any separate consideration paid in connection with providing such waiver) and (d) waived certain anti-dilution rights with respect to any such shares that are Class B ordinary shares.
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Share Contribution Agreement
In connection with the Closing, the Seller and Holdco will enter into a transfer agreement immediately following the Merger Effective Time, pursuant to which the Seller will transfer as a contribution to Holdco, and Holdco will assume from the Seller, all of the shares in Heramba, in exchange for the issuance by Holdco of the Share Consideration to the Seller.
Lock-Up Agreement
In connection with the Closing, Holdco and certain holders of Holdco securities upon the Closing, including the Sponsor, certain of our directors and executive officers and certain Heramba shareholders holding greater than 5% of the outstanding Holdco Ordinary Shares upon the Closing, will enter into a lock-up agreement (the “Lock-Up Agreement”), pursuant to which, among other things, each of such holders will agree to not effect any sale or distribution of the Lock-Up Securities (as defined therein), subject to certain customary exceptions set forth in the Lock-Up Agreement, until the earliest of: (i) the twelve month anniversary of the date of the Closing (the “Closing Date”), (ii) such time that the trading price of the Holdco Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 calendar days after the Closing Date, and (iii) such date on which Holdco completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all Holdco shareholders having the right to exchange their Holdco Ordinary Shares for cash, securities or other property. The Lock-Up Securities include up to 5,422,698 Holdco Ordinary Shares to be issued in exchange for the Founder Shares held by the Sponsor and certain of our officers and directors, and 34,000,000 Holdco Ordinary Shares to be held by certain Heramba shareholders.
Registration Rights Agreement
In connection with the Closing, Holdco and certain holders of Holdco securities upon the Closing, including the Sponsor, will enter into a registration rights agreement, pursuant to which, among other things, Holdco will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain Holdco Ordinary Shares and other equity securities of Holdco that are held by the parties thereto from time to time. In addition, Holdco will agree to provide such holders with customary demand and piggyback registration rights with respect to the Registrable Securities (as defined therein). Such Registrable Securities are expected to include up to 6,594,415 Holdco Ordinary Shares to be issued in exchange for the Founder Shares, 8,425,532 Holdco Private Warrants resulting from the automatic adjustment of the Private Placement Warrants at the Merger Effective Time (and the Holdco Ordinary Shares underlying such Holdco Private Warrants), 1,645,596 Holdco Ordinary Shares to be issued as the Post-Combination Shares (as defined below) under the First Extension Non-Redemption Agreements (as defined below), and 36,700,000 Holdco Ordinary Shares to be held by certain Heramba shareholders.
Amended and Restated Warrant Agreement
In connection with the Closing, prior to the Merger Effective Time, we will enter into an amended and restated warrant agreement with Holdco and Continental Stock Transfer & Trust Company, as warrant agent, and any successor warrant agent, pursuant to which the terms and conditions of the warrant agreement entered into at the time of the Initial Public Offering will be amended and restated to, among other things, reflect the automatic adjustment of the Public Warrants to Holdco Public Warrants and the Private Placement Warrants to Holdco Private Warrants.
Non-Redemption Agreements
On July 25, 2023, we entered into one or more agreements (the “First Extension Non-Redemption Agreements”) with one or more unaffiliated third parties in exchange for them each agreeing not to redeem an aggregate of 760,000 Public Shares in connection with certain proposals considered and voted upon at the First Extension Meeting, in exchange for our agreeing to issue or cause to be issued to each such investor 138,000 Class A ordinary shares (“Post-Combination Shares”) at the time of our initial business combination. We subsequently entered into additional First Extension Non-Redemption Agreements with unaffiliated third parties on the same or similar terms reflecting the above ratio of non-redeemed Public Shares to Post-Combination Shares. Pursuant to all such First Extension Non-Redemption Agreements, we have agreed to issue or cause to be issued to such investors an aggregate of 1,645,596 Post-Combination Shares. In addition, we have agreed that we will not utilize any funds from the Trust Account to pay any potential excise taxes that may become due pursuant to the Inflation Reduction Act of 2022 (the “IR Act”) upon a redemption of Public Shares.
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Subsequent to the period covered by this Quarterly Report, on April 30, 2024, we entered into non-redemption agreements (the “Backstop Non-Redemption Agreements”) with certain unaffiliated third parties (the “Backstop Investors”) in exchange for the Backstop Investors agreeing to rescind or reverse all redemption demands delivered prior to the redemption deadline for the Business Combination Meeting with respect to our Class A ordinary shares to be acquired by such Backstop Investors (the “Backstop Investor Shares”), up to an aggregate of 1,000,000 Backstop Investor Shares. The Backstop Investors are also lenders under certain loan agreements (the “Loan Agreements”) with an affiliate of Heramba (the “Heramba Affiliate”), which agreements included execution of the Backstop Non-Redemption Agreements as a closing condition. Upon consummation of the Proposed Business Combination, we will pay or cause to be paid to the Backstop Investors a payment in respect of the Backstop Investor Shares held by the Backstop Investors at the Closing of the Proposed Business Combination, from cash released from the Trust Account, equal to such number of Backstop Investor Shares multiplied by the Redemption Price (as defined in the Backstop Non-Redemption Agreements). The Backstop Investors have agreed to certain lock-up restrictions with respect to up to an aggregate of 500,000 Backstop Investor Shares (the “Lock-Up Shares”) until the earlier of the three month anniversary of the Closing Date and such date on which Holdco completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of Holdco’s shareholders having the right to exchange their Holdco Ordinary Shares for cash, securities or other property. However, such lock-up period will not apply to any Lock-Up Shares that are sold by a Backstop Investor at a price that equals or exceeds $10.00 per share. Additionally, if a Backstop Investor is unable to purchase the applicable amount of Backstop Investor Shares pursuant to its respective Backstop Non-Redemption Agreement (the “Share Cap”), then we will issue Class A ordinary shares (or cause the issuance of Holdco Ordinary Shares) to such Backstop Investor in an amount equal to the difference between the Share Cap and the number of Backstop Investor Shares acquired by the Backstop Investor (the “Replacement Shares”). We will have no obligation to issue or cause the issuance of any Replacement Shares if the Closing does not occur.
Subsequent to the period covered by this Quarterly Report, on April 30, 2024, we received $1,800,000 on behalf of the Heramba Affiliate, which funds were loaned to the Heramba Affiliate by the Backstop Investors pursuant to the Loan Agreements. As of the date of this Quarterly Report, we have distributed approximately $1,800,000 back to the Heramba Affiliate. We are not a party to, and have no rights or obligations under, the Loan Agreements.
Nasdaq Notices
On October 9, 2023, we received a notice from the Listing Qualifications Department of Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(2), which requires us to have at least 400 total holders for continued listing on the Nasdaq Global Market. The notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of our securities on the Nasdaq Global Market. The notice stated that we had 45 calendar days, or until November 24, 2023, to submit a plan to regain compliance with such rule. On November 24, 2023, we submitted to Nasdaq a plan to regain compliance. If Nasdaq accepts our plan, Nasdaq may grant us an extension to evidence compliance with such rule. If Nasdaq does not accept our plan, we will have the opportunity to appeal the decision to a Nasdaq Hearings Panel.
Subsequent to the period covered by this Quarterly Report, on May 30, 2024, we received a notice from the Listing Qualifications Department of Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5250(c)(1) due to a delay in filing this Quarterly Report with the SEC. The notice was only a notification of deficiency, not of imminent delisting, and had no effect on the listing or trading of our securities on the Nasdaq Global Market. Upon the filing of this Quarterly Report, we expect to regain compliance with such rule.
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 and, subsequent to the Initial Public Offering, the search for a target for our initial business combination and the completion of the First Extension and the Second Extension. 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 dividend income, interest income or gains on investments on the cash and investments held in the Trust Account. Our expenses have increased substantially after the closing of the 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. We are also incurring expenses in connection with the Proposed Business Combination.
For the three months ended March 31, 2024, we had a net loss of $2,858,264, which resulted from operating costs of $1,782,912, unrealized loss on change in fair value of warrant liabilities of $2,581,325, and interest expense (amortization of debt discount) of $5,281, offset in part by interest and dividend income on investments held in the Trust Account of $1,511,254.
For the three months ended March 31, 2023, we had net income of $1,426,832, which resulted from interest and dividend income on investments held in Trust Account of $2,843,532, offset in part by loss on change in fair value of warrant liabilities of $648,431, operating costs of $604,781, and loss on the change in fair value of the forward purchase agreement of $163,488.
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Liquidity, Capital Resources and Going Concern
Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B ordinary shares, par value $0.0001 per share (“Founder Shares”), by our Sponsor, for an aggregate of $25,000, and loans from our Sponsor.
On November 2, 2021, we consummated the 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 Over-Allotment Units, generating gross proceeds of $13,776,600.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 8,150,000 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 partial exercise of the over-allotment option, we consummated the sale of 275,532 Over-Allotment Warrants at a price of $1.00 per Over-Allotment 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 three months ended March 31, 2024, net cash used in operating activities was $378,305, which was due to our net loss of $2,858,264, and interest and dividend income on investments held in Trust Account of $1,511,254, partially offset by changes in operating assets and liabilities of $1,404,607, the unrealized loss on fair value of warrant liabilities of $2,581,325, and interest expense (amortization of debt discount) of $5,281.
For the three months ended March 31, 2023, net cash used in operating activities was $414,205, which was due to our net loss of $1,426,832, and interest and dividend income on investments held in Trust Account of $2,843,532, partially offset by changes in operating assets and liabilities of $190,576, the unrealized loss on fair value of warrant liabilities of $648,431, and unrealized loss on fair value of derivative liability on forward purchase agreement of $163,488.
There were no cash flows from investing activities for the three months ended March 31, 2024 and 2023.
For the three months ended March 31, 2024, net cash provided by financing activities was $260,000, which was due to proceeds from promissory notes of $260,000.
There were no cash flows from financing activities for the three months ended March 31, 2023.
As of March 31, 2024, we had marketable securities held in the Trust Account of $117,492,860 consisting of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, which invest only in direct U.S. government treasury obligations.
As of March 31, 2024, we had cash of $9,319 held outside the Trust Account and a working capital deficit of $6,588,799. 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 our initial 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, if any), to complete our initial business combination. We may withdraw interest income (if any) to pay income taxes, if any. Our annual income tax obligations, if any, 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 any 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.
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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. 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 the 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. 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 the Trust Account.
On October 25, 2023, we issued an unsecured promissory note in the principal amount of up to $500,000 to our Sponsor (the “October Note”), including with respect to certain loaned amounts outstanding from the Sponsor prior to the issuance of the October Note. The October Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which our initial business combination is consummated and (ii) the date that our winding up is effective. In the event that we do not consummate an initial business combination, the October Note will be repaid only from amounts remaining outside of the Trust Account, if any. On August 21, 2023, September 27, 2023, and November 6, 2023, we drew $50,000, $250,000, and $200,000 from the October Note, respectively. As of March 31, 2024, we had a total outstanding balance under the October Note of $500,000, which has not yet been repaid as of March 31, 2024.
On January 26, 2024, we issued an unsecured promissory note in the principal amount of up to $375,000 to Srinath Narayanan (our President and Chief Executive Officer) (the “January Note”), including with respect to certain loaned amounts outstanding from Mr. Narayanan prior to the issuance of such note. The January Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which our initial business combination is consummated and (ii) the date that our winding up is effective. In the event that we do not consummate an initial business combination, the January Note will be repaid only from amounts remaining outside of the Trust Account, if any. On January 25, 2024 and March 22, 2024, we drew $250,000 and $10,000 from the January Note, respectively. As of March 31, 2024, we had a total outstanding balance under the January Note of $260,000, which has not yet been repaid as of March 31, 2024. Subsequently, on April 18, 2024, we drew $81,000 from the January Note.
In accordance with ASC 835-30, discounts to the principal amounts are included in the carrying value of the notes and amortized to “Interest expense” over the remaining term of the underlying debt to the maturity date. During the three months ended March 31, 2024 and 2023, we recorded $7,842 and $0 of debt discount upon the draws under the notes, respectively. The discount is being amortized to interest expense over the term of the debt to the date that we had to complete a business combination at the time of the draw, of May 2, 2024. The carrying value of the promissory notes, net of discount are $252,158 and $0 as of March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the amortization of the discount resulted in interest expense of $5,281 and $0, respectively.
Subsequent to the period covered by this Quarterly Report, on April 23, 2024 and April 29, 2024, we received $200,000 and $600,000, respectively, in proceeds from an unaffiliated third party. We, our Sponsor and such third party expect to negotiate and execute definitive documentation with respect to the repayment of such funds. As of the date of this Quarterly Report, we have used $365,157 of these funds.
Subsequent to the period covered by this Quarterly Report, on May 2, 2024, we issued an unsecured promissory note in the principal amount of up to $225,000 to our Sponsor to be drawn down in connection with the Contributions (the “Contributions Note”), including with respect to certain loaned amounts outstanding from our Sponsor prior to the issuance of such note. The Contributions Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which our initial business combination is consummated and (ii) the date that our winding up is effective. In the event that we do not consummate an initial business combination, the Contributions Note will be repaid only from amounts remaining outside of the Trust Account, if any. On each of May 3, 2024 and June 3, 2024, a Contribution from our Sponsor was deposited into the Trust Account and, accordingly, we drew $75,000 on each such date from the Contributions Note. Such Contributions were initiated by our Sponsor prior to the respective Contribution Dates and, therefore, we have continued to operate and pursue the consummation of our initial business combination.
In connection with our assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s (the “FASB”) 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 we are unable to complete an initial business combination by August 2, 2024 (or such later date as may be approved by our shareholders at a meeting called for such purpose at which our shareholders will be given the opportunity to have their Public Shares redeemed for a pro rata portion of the funds in the Trust Account), then we 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 us to operate for the next 12 months from the issuance of the financial statements. The expected liquidity concerns, date for mandatory liquidation and subsequent dissolution, raise substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should we be unable to continue as a going concern. We intend to complete an initial business combination before the mandatory liquidation date or obtain approval for an extension.
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Critical Accounting Policies
Class A 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 our liquidation, if there is a shareholder vote or tender offer in connection with an initial business combination and in connection with certain amendments to the Articles. In accordance with ASC 480-10-S99, redemption provisions not solely within our control require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Class A ordinary shares have been classified outside of permanent equity, except 6,594,414 Founder Shares that were converted from Class B ordinary shares into 6,594,414 Class A ordinary shares in August 2023.
We recognize changes in redemption value immediately as they occur and adjust 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 March 31, 2024 increased as the income earned on the Trust Account exceeds our expected dissolution expenses (up to $100,000). As such, we recorded an increase in the carrying amount of the redeemable ordinary shares of $1,511,254 for the three months ended March 31, 2024.
Net (Loss) Income Per Ordinary Share
Net (loss) income per ordinary share is computed by dividing net (loss) 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 (loss) income per share as the redemption value approximates fair value. Therefore, the net (loss) income per share calculation allocates income and losses shared pro rata between Class A ordinary shares and Class B ordinary shares. As a result, the calculated net (loss) income per share is the same for Class A ordinary shares and Class B ordinary shares. We have not considered the effect of the warrants sold in the Initial Public Offering, the partial exercise of the over-allotment option and private placements to purchase an aggregate of 21,614,362 shares in the calculation of diluted net (loss) income per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted net (loss) income per share is the same as basic income per share for the periods presented.
Derivative Financial Instruments
We evaluate our 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.
Critical Accounting Estimates
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 estimates:
Derivative Financial Instruments
We estimate the volatility of our ordinary shares based on a back-solve lattice model which adjusts the trading price of the Public Warrants for the estimated probability of completing our initial business combination. However, since the back-solve lattice model did not produce a meaningful volatility for the Private Placement Warrants as of March 31, 2024 and December 31, 2023, the fair value of the Private Placement Warrants was set equal to the fair value of the Public Warrants. The fair value of the Private Placement Warrants was $0.15 and $0.043 per warrant as of March 31, 2024 and December 31, 2023, respectively.
The model used to estimate the fair value of the derivative liability for the forward purchase agreement was based on the assumption that the forward purchase securities were equivalent to our Units and determined, on a per unit basis, as the price of our Units less the present value of the contractually stipulated forward price of $10.00.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. We are currently evaluating the timing and impacts of adoption of ASU 2023-09.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2024 and December 31, 2023, we did not have any off-balance sheet arrangements.
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Commitments and Contractual Obligations
Office Space and Administrative Support
We have an agreement to pay EWI Capital SPAC I LLC, which is an affiliate of Mr. Narayanan and a member of the Sponsor (“EWI”), a monthly fee of $30,000 for office space and administrative support. We began incurring these fees on October 29, 2021 and will continue to incur these fees monthly until the earlier of the completion of the initial business combination or our liquidation.
Forward Purchase Agreement
Pursuant to a forward purchase agreement entered into in connection with the Initial Public Offering, EWI subscribed to purchase up to 2,000,000 units for $10.00 per unit, or up to $20,000,000, in a private placement to close substantially concurrently with the closing of our initial business combination. On October 2, 2023, we mutually agreed with EWI to terminate the forward purchase agreement.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of working capital loans) are entitled to registration rights pursuant to a registration rights agreement entered into at the time of the Initial Public Offering. 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 “piggy-back” registration rights with respect to registration statements filed subsequent to consummation of an initial business combination. We have also granted such registration rights to the holders of Post-Combination Shares that may be issued pursuant to the First Extension Non-Redemption Agreements and certain other registration rights in respect of any Replacement Shares that may be issued pursuant to the Backstop Non-Redemption Agreements. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement and Deferred Fees
The underwriters of the Initial Public Offering were entitled to a deferred fee of $9,232,181 that would 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. On April 17, 2023 and April 27, 2023, pursuant to the Deferred Fee Waivers, the underwriters of the Initial Public Offering gratuitously waived their rights to 100% of such deferred fee.
Certain Vendor Agreements
On September 22, 2021, we entered into a financial advisory agreement with J. Wood Capital Advisors LLC (“J. Wood”) for services to be rendered in connection with the Initial Public Offering, pursuant to which we would pay J. Wood certain fees upon consummation of the Initial Public Offering and our initial business combination. We paid J. Wood a total of $369,287 upon consummation of the Initial Public Offering, and a total of approximately $1,200,184 was to be paid upon consummation of our initial business combination (the “J. Wood Deferred Fee”). Following the Deferred Fee Waivers, and pursuant to a letter agreement dated April 3, 2024, we agreed with J. Wood that (i) the J. Wood Deferred Fee would be deemed waived effective upon the date of the Deferred Fee Waivers and (ii) fees for any financial advisory services provided by J. Wood after the Initial Public Offering will be paid only upon consummation of our initial business combination, up to maximum of $1,200,000.
On September 28, 2021, we entered into a financial advisory agreement with Private D Capital Group Corp (“Private D”) for services to be rendered in connection with the Initial Public Offering, pursuant to which we would pay Private D certain fees upon consummation of the Initial Public Offering and our initial business combination. We paid Private D a total of $158,266 upon consummation of the Initial Public Offering, and a total of approximately $1,107,862 was to be paid upon consummation of our initial business combination (the “Private D Deferred Fee”). Pursuant to a letter agreement dated April 3, 2024, we agreed with Private D that (i) the Private D Deferred Fee would be deemed waived effective upon the date of the Deferred Fee Waivers and (ii) fees for any financial advisory services provided by Private D after the Initial Public Offering will be satisfied by 250,000 Class A ordinary shares (or equivalent securities of the post-combination company) to be delivered to Private D in connection with, and only upon consummation of, our initial business combination.
On August 18, 2022, we entered into an agreement with a legal advisor for services in connection with the consummation of our initial business combination, pursuant to which €25,000 were paid to such advisor for services rendered. On April 30, 2023, any outstanding obligations under such agreement were assumed by Heramba.
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On August 24, 2022, we entered into an agreement with a consultant for services in connection with the consummation of our initial business combination, pursuant to which $25,000 were paid to such consultant for services rendered. In August 2023, such agreement was terminated.
On May 22, 2023, we engaged Piper Sandler & Co. (“Piper”) as our M&A financial advisor in connection with the Proposed Business Combination. The fee due to Piper for such services consists of a fixed portion and a variable portion contingent upon certain future events, which fee will be no less than $3,500,000 and due only if the Proposed Business Combination is consummated.
On July 20, 2023, we engaged Cohen & Company Capital Markets, a division of JVB Financial, LLC (“Cohen”), as our capital markets advisor in connection with the First Extension and our initial business combination, and as PIPE placement agent in connection with our initial business combination. The fee due to Cohen for such services consists of a fixed portion and a variable portion contingent upon certain future events, which fee will be no less than $750,000 and due only if our initial business combination is consummated.
Non-Redemption Agreements
Pursuant to the First Extension Non-Redemption Agreements entered into on and after July 25, 2023, we have agreed to issue or cause to be issued to such investors party thereto an aggregate of 1,645,596 Post-Combination Shares. In addition, we have agreed that we will not utilize any funds from the Trust Account to pay any potential excise taxes that may become due pursuant to the IR Act upon a redemption of Public Shares.
Pursuant to the Backstop Non-Redemption Agreements entered into on April 30, 2024, we have agreed to pay or cause to be paid to the Backstop Investors, upon consummation of the Proposed Business Combination, a payment in respect of the Backstop Investor Shares held by the Backstop Investors at the Closing of the Proposed Business Combination, from cash released from the Trust Account, equal to such number of Backstop Investor Shares multiplied by the Redemption Price. Additionally, if a Backstop Investor is unable to purchase the applicable amount of Backstop Investor Shares pursuant to its respective Backstop Non-Redemption Agreement, then we will issue Replacement Shares to such Backstop Investor in an amount equal to the difference between the Share Cap and the number of Backstop Investor Shares acquired by the Backstop Investor. We will have no obligation to issue or cause the issuance of any Replacement Shares if the Closing does not occur.
Promissory Notes - Related Party
On October 25, 2023, January 26, 2024 and May 2, 2024, we issued the October Note, the January Note and the Contributions Note, respectively. Each such note accrues no interest on the unpaid principal balance and is due on the earlier of (i) the date on which we consummate an initial business combination and (ii) the date that our winding up is effective. In the event that we do not consummate an initial business combination, such notes will be repaid only from amounts remaining outside of the Trust Account, if any.
Proposed Business Combination
We have entered into the Business Combination Agreement and the Sponsor Support Agreement in connection with the Proposed Business Combination, as described above.
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 the Initial Public Offering or until we otherwise no longer qualify as an “emerging growth company.”
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this Quarterly Report our disclosure controls and procedures were not effective because of the material weakness in internal control over financial reporting described below.
Nevertheless, based on the performance of additional procedures by management designed to ensure reliability of financial reporting, management has concluded that, notwithstanding the material weakness described below, the financial statements included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods presented, in conformity with U.S. GAAP.
Material Weakness and Management’s Remediation Measures
We have identified a material weakness in our internal control over financial reporting that existed as of December 31, 2023. A material weakness is a deficiency, or combination of deficiencies, in a company’s internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over financial reporting that existed due to a lack of formal review controls, as required by COSO principles, over the accounting for complex financial instruments, to achieve complete, accurate and timely financial accounting, reporting and disclosures, resulting in adjustments to several accounts and disclosures.
Management is committed to maintaining a strong internal control environment. In response to the identified material weakness in the overall control environment, management has identified remediation actions to implement going forward. We have commenced our remediation efforts by taking the following steps:
| ● | Implement a more thorough second level review process over financial statements, including any new significant events. |
| ● | Implement a more thorough process whereby management conducts meetings with those responsible for preparation of the financial statements and disclosures prior to the start of the quarter and prior to the start of the quarter-close procedures to ensure accurate recording for the accounting impact of the agreements. |
We will continue to review and improve our internal controls over financial reporting to address the underlying causes of the material weakness and control deficiencies. The material weakness will not be remediated until our remediation plan has been fully implemented, and we have concluded that our internal controls are operating effectively for a sufficient period of time. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control Over Financial Reporting
Except for the material weakness and the remediation efforts described above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our most recent Annual Report on Form 10-K filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on April 17, 2024. For information regarding risk factors related to the Proposed Business Combination, see the “Risk Factors” section of the Form F-4 and the definitive proxy statement/prospectus filed in connection therewith.
The completed redemptions of Public Shares in connection with the First Extension and the Second Extension, and the ability of our public shareholders to exercise redemption rights with respect to a large number of Public Shares in connection with our initial business combination, could increase the probability that our initial business combination would not be consummated and that you would have to wait for liquidation in order to redeem your Public Shares.
We paid approximately $161.3 million and $45.8 million out of the Trust Account to shareholders that tendered their Public Shares for redemption in connection with the First Extension and the Second Extension, respectively. After the satisfaction of such redemption payments, the balance in the Trust Account was approximately $72.2 million and 6,652,787 Public Shares remain outstanding. If our public shareholders exercise redemption rights with respect to a large number of Public Shares in connection with our initial business combination, there may not be sufficient funds in the Trust Account to enable us to consummate our initial business combination. Additionally, the combined company may not meet the initial or continued listing requirements of Nasdaq (or another national securities exchange) or have sufficient funds to support its operations without additional third-party financing, which may be unavailable on acceptable terms or at all. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.
A new 1% U.S. federal excise tax could be imposed on us in connection with redemptions by us of our shares, including in connection with the First Extension and the Second Extension.
On August 16, 2022, the IR Act was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
On December 27, 2022, the Treasury released Notice 2023-2, which provided taxpayers with interim guidance on the excise tax to be relied upon until the Internal Revenue Service issued proposed Treasury regulations on such matter. Notice 2023-2 included as one of its exceptions to the excise tax a distribution in complete liquidation of a “covered corporation”, to which Sec. 331 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), applies (so long as Sec. 332(a) of the Code also does not also apply). On April 9, 2024, the Treasury published proposed regulations that would provide new guidance concerning the excise tax. Although the regulations are not final, taxpayers may generally rely upon such proposed regulations until final regulations are issued. The proposed regulations clarify that certain distributions in complete liquidation or pursuant to a resolution or plan of dissolution generally are not repurchases that would be subject to the excise tax. In addition, certain redemptions that occur in the same taxable year as a complete liquidation is completed or in which a dissolution occurs would generally be exempt from such excise tax.
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Although we were incorporated in the Cayman Islands and currently are not a “covered corporation”, there is a possibility that we may acquire a U.S. domestic corporation, redomicile as a U.S. domestic corporation or engage in a transaction in which a U.S. domestic corporation becomes our parent or affiliate. Although it remains uncertain whether, and/or to what extent, the excise tax could apply to any redemptions of the Public Shares after December 31, 2022 if we were to become a “covered corporation” in the future, including any redemptions in connection with the First Extension or the Second Extension, our initial business combination or in the event we do not consummate our initial business combination by August 2, 2024, we would not expect the excise tax to apply to redemptions of Public Shares that occur during a taxable year in which we completely liquidate under Sec. 331 of the Code.
If we were to become a “covered corporation” in the future, there is a possibility that any redemption or other repurchase that occurs after December 31, 2022 may be subject to the excise tax, including in connection with our initial business combination, certain amendments to the Articles (including in connection with the First Extension or the Second Extension) or otherwise. Whether and to what extent we would be subject to the excise tax would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the initial business combination, certain amendments to the Articles (including in connection with the First Extension or the Second Extension) or otherwise, (ii) the structure of the initial business combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the initial business combination (or otherwise issued not in connection with the initial business combination but issued within the same taxable year of the initial business combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the corporation and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. However, we have agreed that we will not utilize any funds from the Trust Account to pay any potential excise taxes that may become due pursuant to the IR Act upon a redemption of Public Shares. The foregoing could cause a reduction in the cash available on hand to complete our initial business combination and in our ability to complete our initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 26, 2024, we issued the January Note in the principal amount of up to $375,000 to Mr. Narayanan. The January Note accrues no interest on the unpaid principal balance and is due on the earlier of (i) the date on which we consummate an initial business combination and (ii) the date that our winding up is effective. In the event that we do not consummate an initial business combination, the January Note will be repaid only from amounts remaining outside of the Trust Account, if any. The issuance of the January Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
For a description of the use of the proceeds generated in the Initial Public Offering, including the effects of the Deferred Fee Waivers, the First Extension and the Second Extension, and the Contributions, see Part I, Item 2 of this Quarterly Report. The specific investments in the Trust Account may change from time to time.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on November 2, 2021 and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Current Report on Form 8-K filed on August 4, 2023 and incorporated by reference herein. |
| (3) | Previously filed as an exhibit to our Current Report on Form 8-K filed on May 3, 2024 and incorporated by reference herein. |
| (4) | Previously filed as an exhibit to our Current Report on Form 8-K filed on February 1, 2024 and incorporated by reference herein. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PROJECT ENERGY REIMAGINED ACQUISITION CORP. | |||
| Date: June 14, 2024 | By: | /s/ Srinath Narayanan | |
| Name: | Srinath Narayanan | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
| Date: June 14, 2024 | By: | /s/ Prakash Ramachandran | |
| Name: | Prakash Ramachandran | ||
| Title: | Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | |||
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