Spring Valley Acquisition Corp. II(SVIIU) - 2023 Q4 - Annual Report

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section identifies forward-looking statements and warns that actual results may differ materially due to various factors, with no obligation to update them - Forward-looking statements are identified by terms such as "believes," "estimates," "anticipates," "expects," "intends," "plans," "may," "will," "potential," "projects," "predicts," "continue," or "should"[9] - Actual results may differ materially due to various factors, including the company's ability to select an appropriate target business, complete an initial business combination, the performance of a prospective target, and the retention or recruitment of officers, key employees, or directors[9] - The company undertakes no obligation to update or revise any forward-looking statements, except as required under applicable securities laws[10] SUMMARY OF RISK FACTORS This section highlights key risks, including the company's lack of operating history, limited shareholder voting rights, potential for hindered business combinations, and liquidation risk if a combination is not completed within 36 months - The company has no operating history and no revenues, providing no basis to evaluate its ability to achieve its business objective[12][153][154] - Public shareholders may not have an opportunity to vote on a proposed initial business combination, limiting their influence to the exercise of redemption rights[12][159][160] - The ability of public shareholders to exercise redemption rights for a large number of shares may hinder the completion of the most desirable business combination or optimize the capital structure[12][165][166] - Failure to consummate an initial business combination within 36 months after the IPO closing will result in liquidation, with public shareholders receiving approximately $10.25 per share (or less) and rights and warrants expiring worthless[12][176][178] PART I Part I outlines the company's business as a blank check company (SPAC) focused on identifying and acquiring a business in the broadly-defined sustainability industry. It details the team's expertise, acquisition strategy, and the criteria for target businesses, alongside a comprehensive discussion of associated risks, legal, and operational aspects ITEM 1. BUSINESS. This section describes Spring Valley Acquisition Corp. II as a blank check company (SPAC) formed to effect a business combination, primarily targeting the broadly-defined sustainability industry. It highlights the management team's extensive experience and network in this sector, the strategic approach to identifying and acquiring established market leaders, and the benefits a target business would gain from becoming a public company through this combination General The company, incorporated in January 2021, is a blank check "shell company" with no operations or revenue, aiming for a business combination in the sustainability industry - Spring Valley Acquisition Corp. II is a blank check company incorporated in the Cayman Islands on January 19, 2021, for the purpose of effecting an initial business combination[21] - The company has no operations or generated any revenue to date and is classified as a "shell company" under the Exchange Act[21] - The company intends to focus on opportunities in the broadly-defined sustainability industry, including renewable energy, resource optimization, environmental services, and grid infrastructure[22] Our Team The company is backed by Pearl Energy Investment Management, LLC, and its team possesses extensive industry networks and expertise in the sustainability sector - The company is supported by Pearl Energy Investment Management, LLC, a Dallas-based investment firm with $1.7 billion of committed capital under management as of June 2022, focusing on the North American energy industry[25] - The management team and advisors have extensive industry networks and expertise to identify, acquire, and operate businesses in the sustainability sector[22][26] Business Strategy The company's strategy involves leveraging its team's extensive experience and network to identify and acquire sustainability-focused businesses, enhancing their growth and competitive position - The acquisition and value creation strategy is to identify and complete an initial business combination with a Sustainability-focused company that leverages the team's industry experience[26] - The company expects to develop its pipeline through its management team's over 100 cumulative years of experience, deep relationships, and extensive network in the Sustainability industry[27] - The company intends to focus on opportunities where its team's strategic vision, operating expertise, relationships, and capital markets experience can enhance growth, competitive position, and financial upside[29] Our Competitive Strengths The team demonstrates strong deal-making skills and a track record of creating shareholder value in sustainability, though past performance does not guarantee future success - The team has a substantial deal-making skillset and has created significant shareholder value through high-profile transactions in the sustainability sector[30] - Examples of past successes include leading a $100 million investment to create Renewable Energy Group, Inc. (REGI), leading Power-One, Inc. to $1 billion in revenue and its sale to ABB, and pioneering business models for SunEdison and SunRun[30][31][32] - Past performance of the team or their affiliates is not a guarantee of future success or the ability to identify and execute a transaction[35] Industry Opportunity The sustainability industry offers a vast market with trillions in investments, driven by macroeconomic and social trends, and characterized by high barriers to entry - The Sustainability industry is a large target market, with global cumulative investments in renewables estimated at $13 trillion and energy efficiency at $29 trillion between 2016 and 2050[36] - Growth is driven by favorable macroeconomic trends (urbanization, population growth, government spending, regulatory requirements) and social trends (increased focus on ESG practices)[37][38] - The industry presents a broad universe of over 10,800 companies (as of Feb 2022) and high barriers to entry due to global regulations, government spending, and technological breakthroughs[40][41] Investment Approach The company utilizes a proactive, data-driven investment approach, leveraging its team's expertise in deal execution and offering value-add capabilities to target companies - The company employs a proactive and proprietary transaction sourcing approach, leveraging its management team's extensive deal experience and network[42] - A data-driven analysis of potential opportunities involves reviewing the entire value chain, analyzing current trends, and developing investment theses[43] - The team's execution and structuring capabilities, developed through creating multi-billion dollar public and private companies, enable complex problem-solving and rigorous due diligence[44] - The company offers significant value-add capabilities to target companies, including strategic direction, performance improvement, management recruitment, and capital markets advice[45] Business Combination Criteria Target businesses are sought based on sustainability focus, market leadership, strong financials, and experienced management, with flexibility to consider targets not meeting all guidelines - Key criteria for target businesses include a sustainability focus, established market leadership, potential to benefit from public company status, experienced management, attractive financial profiles (strong recurring revenues, high margins, growth prospects), and technological advantages[48][49][50][51] - The company also seeks middle-market businesses with strong or near-term potential for consistent and stable free cash flow[52] - While these criteria serve as guidelines, the company may enter into a business combination with a target that does not meet all of them, with disclosure to shareholders[53][55] Our Acquisition Process The acquisition process involves thorough due diligence, but potential conflicts of interest among directors and officers, and competition from affiliates, may influence target selection - The acquisition process involves extensive due diligence, including meetings with management, document reviews, customer/supplier interviews, facility inspections, and financial analysis[56] - Directors and officers may have conflicts of interest due to their ownership of founder shares and private placement warrants, potentially influencing the selection of a target business[57][58] - The Sponsor and its affiliates manage other investment vehicles and certain officers/directors have fiduciary obligations to other entities, which may create competition for acquisition opportunities[59] Initial Business Combination The initial business combination must meet an 80% fair market value threshold relative to the trust account, be completed within 36 months, and result in the company owning a controlling interest - The initial business combination must involve one or more target businesses with an aggregate fair market value of at least 80% of the value of assets in the trust account (excluding deferred underwriting commissions and taxes)[60] - The company has until 36 months from the closing of its Initial Public Offering to consummate an initial business combination[61] - The post-business combination company will own or acquire 50% or more of the outstanding voting securities or a controlling interest in the target business[61] Other Considerations The company may pursue affiliated business combinations with a fairness opinion, but potential conflicts of interest exist due to Sponsor and management involvement in other blank check companies - The company is not prohibited from pursuing an initial business combination with an affiliated company, but would obtain a fairness opinion from an independent firm in such cases[66][67] - Sponsor, officers, and directors may sponsor or participate in other blank check companies, potentially creating additional conflicts of interest in pursuing acquisition targets[68] Status as a Public Company Public company status offers target businesses an efficient IPO alternative, and the company benefits from reduced disclosure and extended accounting transition periods as an emerging growth company - Being an existing public company offers a target business an alternative to a traditional IPO, potentially being more expeditious and cost-effective[69][70] - The company is an "emerging growth company" and "smaller reporting company," allowing it to take advantage of reduced disclosure obligations and an extended transition period for new accounting standards[73][74][76] Financial Position The company's financial position is characterized by a substantial trust account balance, offering flexibility for business combinations, though third-party financing has not yet been secured Trust Account Balance (as of December 31, 2023) | Item | Amount | | :-------------------------------- | :------------- | | Funds held in trust account | $249,254,022 | | Deferred underwriting fees | $8,050,000 | - The funds in the trust account offer a target business options for liquidity, capital for growth, or balance sheet strengthening[77] - The company has flexibility to use cash, debt, or equity securities, or a combination, for the business combination, but has not secured third-party financing[77] Effecting Our Initial Business Combination The company plans to use various financing methods for its business combination, potentially targeting risky early-stage businesses, and may require additional financing if redemptions are high - The company intends to effectuate its initial business combination using cash from IPO proceeds, private placement warrants, sale of shares, debt, or a combination[78] - The company may pursue a financially unstable or early-stage target business, which carries inherent risks[78] - Additional financing may be needed if the transaction requires more cash or if a significant number of public shares are redeemed[81] Sources of Target Businesses Target businesses are sourced from unaffiliated market participants and proprietary deal flow from officers and directors, with finder's fees potentially paid from the trust account - Target business candidates are expected from various unaffiliated sources, including investment market participants, private equity groups, investment banking firms, and consultants[83] - Officers and directors, through their business contacts, may also bring proprietary deal flow opportunities[84] - The company may engage professional firms for business acquisitions, paying finder's fees from the trust account upon completion of a transaction[84] Evaluation of a Target Business and Structuring of Our Initial Business Combination The evaluation process involves extensive due diligence, with uncompleted transaction costs leading to losses, and no consulting fees paid to management for the business combination - Evaluation involves extensive due diligence, including meetings with management, document reviews, customer/supplier interviews, and financial information analysis[87] - Costs incurred for identifying and evaluating prospective target businesses that are not ultimately completed will result in losses and reduce funds for other combinations[88] - The company will not pay consulting fees to management team members or their affiliates for services related to the initial business combination[88] Lack of Business Diversification The company's success may hinge on a single business, exposing it to economic, competitive, and regulatory risks due to limited diversification resources - Success may depend entirely on the future performance of a single business, as the company will likely lack resources to diversify operations[89] - Lack of diversification may subject the company to negative economic, competitive, and regulatory developments, and dependence on a single or limited number of products/services[89] Limited Ability to Evaluate the Target's Management Team The company faces challenges in accurately assessing target management, whose future commitment is uncertain, and may struggle to recruit additional skilled managers post-combination - Assessment of a target business's management may not be correct, and future management may lack the necessary skills for a public company[90] - The future role of the company's management team in the target business is uncertain, and they may not devote full efforts post-combination[90] - There is no assurance that the company will be able to recruit additional managers with requisite skills or experience to supplement incumbent management[92] Shareholders May Not Have the Ability to Approve Our Initial Business Combination Shareholders may not vote on redemptions unless legally required, but approval is typically needed for significant share issuances, director interests, or control changes - The company may conduct redemptions without a shareholder vote if not required by law or stock exchange listing, or may choose to seek shareholder approval for business reasons[93][95] - Shareholder approval is typically required if the company issues shares equal to or exceeding 20% of outstanding shares, if directors/officers have a significant interest in the target, or if the issuance results in a change of control[94] Permitted Purchases and Other Transactions with Respect to Our Securities Affiliates may purchase company securities to influence votes or meet closing conditions, with such transactions subject to federal securities laws and reporting requirements - Sponsor, directors, executive officers, advisors, or their affiliates may purchase public shares, rights, or warrants in privately negotiated transactions or on the open market to influence a vote or reduce the public "float"[96][99] - Such purchases could increase the likelihood of obtaining shareholder approval for a business combination or satisfy closing conditions requiring minimum net worth or cash[98] - Purchases would be reported under Section 13 and Section 16 of the Exchange Act and comply with Rule 10b-18 and other federal securities laws[96][101] Redemption Rights for Public Shareholders upon Completion of Our Initial Business Combination Public shareholders can redeem Class A ordinary shares at the trust account's per-share price upon business combination, with Sponsor and management waiving their redemption rights - Public shareholders have the right to redeem all or a portion of their Class A ordinary shares upon completion of an initial business combination at a per-share price equal to the aggregate amount in the trust account[102] - The redemption price will not be reduced by deferred underwriting commissions[102] - Sponsor and management have waived their redemption rights for founder shares and public shares in connection with a business combination or charter amendments[103] Manner of Conducting Redemptions Redemptions can occur via a general meeting or tender offer, with Sponsor and management committed to voting in favor of the business combination, increasing approval likelihood - Redemptions can be conducted either in connection with a general meeting to approve the business combination or by means of a tender offer[104] - If shareholder approval is sought, redemptions will be conducted with a proxy solicitation; if a tender offer, documents will be filed with the SEC[107][110] - Sponsor and management have agreed to vote their founder shares and public shares in favor of the initial business combination, increasing the likelihood of approval[109] Limitation on Redemption upon Completion of Our Initial Business Combination If We Seek Shareholder Approval Public shareholders are limited to redeeming 15% of IPO shares without consent, preventing forced premium purchases, but this does not restrict their voting rights - Public shareholders are restricted from redeeming more than an aggregate of 15% of the shares sold in the IPO ("Excess Shares") without prior consent, to discourage large block holders from using redemption rights to force premium purchases[113] - This restriction does not limit shareholders' ability to vote all their shares (including Excess Shares) for or against the business combination[114] Tendering Share Certificates in Connection with a Tender Offer or Redemption Rights Shareholders must tender certificates or deliver shares electronically before a vote to exercise redemption rights, making the election irrevocable upon approval, with funds returned if the combination fails - Public shareholders exercising redemption rights must tender their certificates or deliver shares electronically via DWAC System up to two business days prior to the scheduled vote[115] - This delivery requirement ensures that a redeeming shareholder's election to redeem is irrevocable once the business combination is approved[119] - If the business combination is not approved or completed, public shareholders who elected to redeem will not receive funds, and certificates will be returned[121] Redemption of Public Shares and Liquidation If No Initial Business Combination Failure to complete a business combination within 36 months leads to liquidation and public share redemption, with the Sponsor waiving liquidation rights and liable for trust account shortfalls - If no initial business combination is consummated within 36 months from the IPO closing, the company will cease operations, redeem public shares at a per-share price from the trust account, and liquidate[123][124] - Sponsor and management have waived rights to liquidating distributions from the trust account for founder shares if no business combination is completed[125] - The Sponsor has agreed to be liable for third-party claims that reduce the trust account below $10.25 per public share (or less), with certain exceptions[130] Competition The company faces intense competition from better-resourced entities, and its redemption obligations and potential warrant dilution may create a competitive disadvantage - The company faces intense competition from other entities with similar business objectives, including other blank check companies, private equity groups, and public companies[136] - Many competitors possess greater financial, technical, human, and other resources, limiting the company's ability to acquire larger target businesses[137] - The obligation to pay cash for redemptions and the potential dilution from outstanding warrants may place the company at a competitive disadvantage[137] Indemnity The Sponsor indemnifies the company for trust account shortfalls below $10.25 per share, though its ability to satisfy this is uncertain, and officers/directors provide no such indemnity - The Sponsor has agreed to indemnify the company if third-party claims reduce the trust account below $10.25 per public share (or actual amount if lower), with exceptions for waived claims and underwriter indemnities[138][139] - The Sponsor's ability to satisfy indemnification obligations is uncertain, as its only assets are believed to be company securities[139] - None of the company's officers or directors will indemnify the company for claims by third parties[140] Facilities The company's executive offices are in Dallas, with a monthly cost of $10,000 paid to a Sponsor affiliate, and the space is deemed adequate for current operations - The executive offices are located at 2100 McKinney Ave, Suite 1675, Dallas, TX 75201[141] - The cost for office space is $10,000 per month, paid to an affiliate of the Sponsor[141] - The current office space is considered adequate for current operations[141] Website The company's corporate website, www.sv-ac.com, contains information not incorporated by reference into this report and should not be used for investment decisions - The company maintains a corporate website at www.sv-ac.com[142](index=142&type=chunk) - Information on the website is not incorporated by reference into the report and should not be relied upon for investment decisions[142] Employees The company has two executive officers and no full-time employees, with officers dedicating time as needed for business combination efforts - The company currently has two executive officers and does not intend to have any full-time employees prior to the completion of its initial business combination[142] - Executive officers are not obligated to devote a specific number of hours but will dedicate time as necessary for business combination efforts[142] Periodic Reporting and Financial Information The company is subject to SEC reporting, provides target audited financials to shareholders, and benefits from reduced disclosure as an emerging growth and smaller reporting company - The company is subject to Exchange Act reporting obligations, including filing annual, quarterly, and current reports with the SEC[143] - Audited financial statements of the target business will be provided to shareholders as part of proxy or tender offer materials, which may limit the pool of potential targets[144] - As an "emerging growth company" and "smaller reporting company," the company is eligible for reduced disclosure obligations and an extended transition period for accounting standards[149][151] ITEM 1A. RISK FACTORS. This section details the significant risks associated with investing in the company, categorized into risks related to its search for and consummation of a business combination, risks concerning its securities and trust account, risks tied to the Sponsor and management team, and general risks. Key concerns include the company's lack of operating history, the potential for failure to complete a business combination within the required timeframe, the possibility of dilution, conflicts of interest, and the impact of regulatory changes Risks Relating to our Search for, and Consummation of or Inability to Consummate, a Business Combination Risks include the company's lack of operating history, potential for unmet industry expectations, limited due diligence time due to the 36-month deadline, and increased competition for targets - The company has no operating history or revenues, making it difficult to evaluate its ability to achieve its business objective of completing an initial business combination[153][154] - Expectations regarding changes in the Sustainability industry may not materialize, hindering the ability to find a suitable target[157][158] - The requirement to consummate a business combination within 36 months may give target businesses leverage in negotiations and limit due diligence time[173][175] - Increased competition from other SPACs for attractive targets may increase acquisition costs or lead to an inability to find a target[216][218] Risks Relating to our Securities and Trust Account Risks include limited shareholder rights to trust funds, potential Nasdaq delisting, and the possibility of trust account reduction below $10.25 per share due to third-party claims or negative interest rates - Public shareholders will not have rights or interests in funds from the trust account except under limited circumstances, forcing them to sell securities to liquidate investments, potentially at a loss[228][229] - Nasdaq may delist the company's securities, limiting investors' ability to transact and subjecting the company to additional trading restrictions[232][235] - If third parties bring claims against the company, proceeds in the trust account could be reduced, leading to a per-share redemption amount less than $10.25[243][244][247] - The securities in the trust account could bear a negative interest rate, reducing the per-share redemption amount below $10.25[255][256] Risks Relating to our Sponsor and Management Team and Their Respective Affiliates and to the Post-Business Combination Company Risks include significant dilution from Sponsor's low-cost founder shares, potential conflicts of interest due to management's other commitments, and the Sponsor's substantial control influencing shareholder votes - The nominal purchase price paid by the Sponsor for founder shares (approximately $0.004 per share) may significantly dilute the implied value of public shares upon a business combination[307][308] - The Sponsor is likely to make a substantial profit on its investment even if the business combination causes the trading price of ordinary shares to decline[308] - Executive officers and directors allocate time to other businesses, potentially causing conflicts of interest in their commitment to the company's affairs[299][300] - The Sponsor controls a substantial interest (approximately 24.6% on an as-converted basis) in the company, potentially influencing shareholder votes[326] General Risks General risks include adverse U.S. tax consequences from PFIC status, potential taxes upon reincorporation, increased debt post-combination, and difficulties for investors enforcing rights as a Cayman Islands company - The company may be deemed a passive foreign investment company (PFIC), which could result in adverse U.S. federal income tax consequences to U.S. investors[333][334] - Reincorporation in another jurisdiction in connection with a business combination may result in taxes imposed on shareholders, rights holders, or warrant holders[336][337] - The company may incur substantial debt to complete a business combination, which could adversely affect its leverage and financial condition[341][342] - As a Cayman Islands exempted company, investors may face difficulties in protecting their interests and enforcing rights through U.S. federal courts[384][385][386] ITEM 1B. UNRESOLVED STAFF COMMENTS. The company reports that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[418] ITEM 1C. CYBERSECURITY. As a blank check company with no business operations, the company does not face direct cybersecurity threats but relies on third-party digital technologies. Its board of directors oversees cybersecurity risks, which are primarily related to third-party systems, and has not experienced any incidents since its IPO - As a blank check company, the company has no business operations and therefore no direct cybersecurity threats[419] - The company depends on the digital technologies of third parties, and sophisticated attacks on these systems could lead to corruption or misappropriation of assets and data[419] - The board of directors oversees the company's cybersecurity risks, reviewing descriptions of these risks in the report[419] - The company has not encountered any cybersecurity incidents since its Initial Public Offering[419] ITEM 2. PROPERTIES. The company's executive offices are located in Dallas, TX, with the cost covered by a monthly fee paid to an affiliate of its Sponsor. The current office space is considered adequate - The executive offices are located at 2100 McKinney Ave, Suite 1675, Dallas, TX 75201[420] - The cost for the use of this space is $10,000 per month, paid to an affiliate of the Sponsor[420] - The current office space is considered adequate for current operations[420] ITEM 3. LEGAL PROCEEDINGS. To the best of management's knowledge, there is no material litigation, arbitration, or governmental proceeding currently pending against the company, its officers, directors, or property - To the knowledge of management, there is no material litigation, arbitration, or governmental proceeding currently pending against the company, its officers or directors in their capacity as such or against any of its property[421] ITEM 4. MINE SAFETY DISCLOSURES. This item is not applicable to the company - This item is not applicable[421] PART II Part II provides information on the company's common equity market, related shareholder matters, and financial condition and results of operations. It includes details on stock trading, equity ownership, dividend policy, and a comprehensive management discussion and analysis of financial performance, liquidity, and critical accounting policies ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. This section provides an overview of the company's securities trading on Nasdaq, details the number of record holders for its units, shares, rights, and warrants, and states that no cash dividends have been paid to date. It also outlines the recent conversion of Class B ordinary shares to Class A ordinary shares and the private placement of warrants Market Information The company's Units, Class A ordinary shares, Rights, and warrants trade on Nasdaq, with units beginning October 13, 2022, and separate trading starting October 28, 2022 - The company's Units, Class A ordinary shares, Rights, and warrants are traded on Nasdaq under symbols "SVIIU," "SVII," "SVIIR," and "SVIIW," respectively[424] - Units commenced public trading on October 13, 2022, and Class A ordinary shares, Rights, and warrants began separate trading on October 28, 2022[424] Holders This section provides a table detailing the number of record holders for the company's various securities as of December 31, 2023 Holders of Record (as of December 31, 2023) | Security | Number of Holders | | :------------------------ | :---------------- | | Units | 1 | | Class A ordinary shares | 1 | | Class B ordinary shares | 4 | | Rights | 1 | | Private placement warrants| 1 | | Public warrants | 1 | Dividends The company has not paid and does not intend to pay cash dividends before a business combination, with future payments contingent on financial performance and debt covenants - The company has not paid any cash dividends on its ordinary shares to date and does not intend to pay cash dividends prior to the completion of its initial business combination[426] - Future dividend payments will depend on revenues, earnings, capital requirements, and financial condition, and may be limited by restrictive covenants from indebtedness[426] Securities Authorized for Issuance Under Equity Compensation Plans. No securities are currently authorized for issuance under equity compensation plans - No securities are authorized for issuance under equity compensation plans[427] Performance Graph This section is not applicable to the company - Not applicable[427] Recent Sales of Unregistered Securities; Use of Proceeds This section details the Sponsor's purchase of founder shares, subsequent conversions to Class A shares, the sale of private placement warrants, and the allocation of IPO proceeds to the Trust Account - On January 26, 2021, the Sponsor paid $25,000 for 5,750,000 Class B ordinary shares (Founder Shares)[428] - On January 25, 2024, the Sponsor and independent directors converted 7,546,666 and 120,000 Class B ordinary shares, respectively, into Class A ordinary shares on a one-for-one basis[428] - Simultaneously with the IPO closing, 13,350,000 private placement warrants were sold to the Sponsor at $1.00 per warrant, generating approximately $13.4 million[429] - Approximately $235.8 million of net proceeds from the IPO and private placement was placed in the Trust Account[430] Purchase of Equity Securities by the Issuer and Affiliated Purchasers There were no purchases of equity securities by the issuer or affiliated purchasers - No purchases of equity securities by the issuer and affiliated purchasers[431] ITEM 6. [RESERVED] This item is intentionally left blank, indicating no information to report - This item is reserved and contains no information[432] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section provides an overview of the company's financial condition and results of operations, emphasizing its status as a blank check company with no operating revenues. It details the IPO, private placement, and the establishment of the trust account. Recent developments include a shareholder-approved extension of the business combination deadline to October 17, 2025, significant redemptions of Class A shares, and the conversion of Class B shares to Class A. The company reported a net income of $10.97 million for 2023, primarily from trust account investments, and discusses its liquidity, going concern considerations, and critical accounting policies Special Note Regarding Forward-Looking Statements This report contains forward-looking statements subject to risks and uncertainties, and the company disclaims any obligation to update them unless legally required - This report includes forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from expectations[434] - The company disclaims any intention or obligation to update or revise any forward-looking statements, except as expressly required by applicable securities law[434] Overview The company, a blank check entity incorporated in 2021, generated $230.0 million from its 2022 IPO, placing $235.8 million in a trust account, with a business combination deadline extended to October 17, 2025 - The company is a blank check company incorporated on January 19, 2021, with no operations or operating revenues to date, generating non-operating income from trust account investments[435][436] - The Initial Public Offering (IPO) was consummated on October 17, 2022, raising approximately $230.0 million gross proceeds from 23,000,000 units[437] - Approximately $235.8 million ($10.25 per Unit) of net proceeds from the IPO and private placement was placed in a trust account, invested in U.S. government securities or money market funds[440] - The business combination deadline was extended to October 17, 2025, or an earlier date determined by the board[444] Recent Developments Recent developments include shareholder approval to extend the business combination deadline to October 17, 2025, significant Class A share redemptions, Class B share conversions, and the Sponsor's commitment to monthly trust account deposits - On January 10, 2024, shareholders approved amendments to the company's memorandum and articles of association, including extending the business combination deadline to October 17, 2025[446] - Shareholders holding 8,362,234 Class A ordinary shares exercised redemption rights for approximately $90.7 million, leaving $158.8 million in the Trust Account[446] - On January 25, 2024, the Sponsor converted 7,546,666 Class B ordinary shares to Class A, and independent directors converted 120,000 Class B shares to Class A[447] - The Sponsor agreed to make monthly deposits of $150,000 into the trust account, up to a maximum of $3,150,000, starting January 11, 2024[448] Results of Operations The company reported a significant increase in net income for 2023, primarily due to higher income from trust account investments, partially offset by general and administrative expenses Net Income and Expenses | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------ | :---------------------- | :---------------------- | | Net income | $10,971,101 | $1,439,171 | | Income from investments held in Trust Account | $11,815,666 | $1,688,356 | | General and administrative expenses | $875,462 | $249,185 | - Net income for 2023 was primarily driven by $11.85 million in income from investments held in the Trust Account, offset by $820,457 in general and administrative expenses[452] Going Concern Consideration The company's liquidity, including $1.2 million cash and $1.1 million working capital, is deemed sufficient by management through the liquidation date or business combination, supported by Sponsor financing Liquidity (as of December 31, 2023) | Item | Amount | | :-------------------------------- | :------------- | | Cash held outside Trust Account | $1.2 million | | Working capital | $1.1 million | - Management believes that current measures and expected financing from the Sponsor or its affiliates will provide sufficient liquidity through the mandatory liquidation date of October 17, 2025, or the completion of an initial business combination[457] Off-Balance Sheet Arrangements and Contractual Obligations As of December 31, 2023, the company had no off-balance sheet arrangements or contractual obligations - As of December 31, 2023, the company did not have any off-balance sheet arrangements or any commitments or contractual obligations[458] Risks and Uncertainties Global military conflicts and economic sanctions create uncertainty, potentially impacting the company's ability to complete a business combination and its financial condition, with the full impact yet unknown - The ongoing military actions (Russia-Ukraine, Israel-Hamas) and related economic sanctions create global economic uncertainty, which could materially and adversely affect the company's ability to consummate a business combination or the operations of a target business[459][460][461] - The impact on the company's financial condition, results of operations, cash flows, and ability to raise equity and debt financing is not yet determinable[461] Contractual Obligations The company pays its Sponsor $10,000 monthly for administrative services and reimburses out-of-pocket expenses incurred by the Sponsor, officers, and directors for target business identification - The company has an Administrative Services Agreement to pay its Sponsor $10,000 per month for office space and administrative support[462] Administrative Services Fees Incurred | Year Ended | Amount Incurred | | :----------- | :-------------- | | Dec 31, 2023 | $120,000 | | Dec 31, 2022 | $30,000 | - The Sponsor, executive officers, and directors are reimbursed for out-of-pocket expenses incurred in identifying and investigating target businesses[463] Shareholder and Registration Rights Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants possess registration rights, with the company covering associated filing expenses - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans are entitled to registration rights[464] - The company will bear the expenses incurred in connection with the filing of any such registration statements[464] Underwriting Agreement Approximately $8.1 million in deferred underwriting commissions is payable from the Trust Account to underwriters upon completing an initial business combination - An additional fee of approximately $8.1 million in deferred underwriting commissions is payable to the underwriters from the Trust Account upon completion of an initial business combination[465] Deferred Legal Fees Deferred legal fees, totaling $1,054,000 as of December 31, 2023, are payable only upon the completion of a business combination Deferred Legal Fees | As of December 31, | Amount | | :----------------- | :------------- | | 2023 | $1,054,000 | | 2022 | $743,000 | - Deferred legal fees become payable solely upon the completion of a business combination[467][667] Critical Accounting Policies and Estimates Financial statement preparation involves management estimates and assumptions, with critical policies covering Redeemable Class A Ordinary Shares, Net Income (Loss) per Ordinary Share, and Derivative Financial Instruments - The preparation of financial statements requires management to make estimates and assumptions, which could differ materially from actual results[468] - Critical accounting policies include Redeemable Class A Ordinary Shares, Net Income (Loss) per Ordinary Share, and Derivative Financial Instruments[469][470][472] Redeemable Class A Ordinary Shares Class A ordinary shares from the IPO are classified as redeemable equity, with redemption value changes immediately recognized and adjusted each reporting period - All Class A ordinary shares sold in the IPO contain a redemption feature and are classified outside of permanent equity[469] - Changes in redemption value are recognized immediately and adjusted to the carrying value of redeemable ordinary shares at each reporting period end[469] Net Income (Loss) per Ordinary Share Net income (loss) per ordinary share is calculated by dividing net income by weighted-average shares, with income shared pro rata, and contingent warrants/rights excluded from diluted EPS - Net income (loss) per ordinary share is computed by dividing net income by the weighted-average number of ordinary shares outstanding, with income shared pro rata between Class A and Class B shares[470][471] - The effect of the exercise of Public Warrants, Private Placement Warrants, and Rights is excluded from diluted EPS calculation due to contingent exercise[471] Derivative Financial Instruments Equity-linked instruments like Rights and warrants are evaluated for derivative classification, initially measured at fair value, with no subsequent fair value changes recognized while equity-classified - Equity-linked financial instruments (Rights and warrants) are evaluated for derivative classification under ASC Topic 815[472] - Rights and warrants are equity-classified, initially measured at fair value, and subsequent changes in fair value are not recognized as long as they remain equity-classified[473] Recent Accounting Pronouncements The company adopted ASU 2021-08 and ASU 2016-13 with no material impact, anticipates no material impact from ASU 2022-03 or ASU 2023-09, and is evaluating ASU 2023-07 - The company adopted ASU 2021-08 (Business Combinations) and ASU 2016-13 (Credit Losses) on January 1, 2023, with no material impact on financial statements[476][477] - The company does not currently expect ASU 2022-03 (Fair Value Measurement) or ASU 2023-09 (Income Taxes) to have a material impact on its financial position and results of operations[478][480] - The company is evaluating the impact of ASU 2023-07 (Segment Reporting), effective for its 2024 fiscal year[479] JOBS Act As an "emerging growth company" under the JOBS Act, the company benefits from relaxed reporting requirements, delayed accounting standard adoption, and exemptions from certain audit and disclosure rules - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to take advantage of relaxed reporting requirements[482] - The company elected to delay the adoption of new or revised accounting standards, aligning with private company effective dates[482] - Exemptions include not providing an auditor's attestation report on internal controls, reduced executive compensation disclosure, and exemption from certain PCAOB requirements[483] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[486] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. This item indicates that the required financial statements and supplementary data are provided elsewhere in the report, specifically following Item 15 - Financial statements and supplementary data appear following Item 15 of this Report and are incorporated herein by reference[487] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The company reports that there have been no changes in or disagreements with its accountants regarding accounting and financial disclosure - There have been no changes in and disagreements with accountants on accounting and financial disclosure[487] ITEM 9A. CONTROLS AND PROCEDURES. This section confirms that the company's disclosure controls and procedures were effective as of December 31, 2023, based on management's evaluation. It also states that management is responsible for maintaining adequate internal control over financial reporting, which was assessed as effective for the same period. As an emerging growth company, the company is exempt from the independent registered public accounting firm attestation report on internal controls Evaluation of Disclosure Controls and Procedures Management assessed the company's disclosure controls and procedures as effective as of December 31, 2023, acknowledging their inherent limitations in providing absolute assurance - As of December 31, 2023, the company's disclosure controls and procedures were evaluated as effective by management[488] - Disclosure controls and procedures provide reasonable, not absolute, assurance that objectives are met, acknowledging inherent limitations and resource constraints[489] Management's Report on Internal Controls Over Financial Reporting Management is responsible for and assessed the effectiveness of internal control over financial reporting as of December 31, 2023, with no auditor attestation due to emerging growth company status - Management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding reliability of financial reporting[490] - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2023, and determined it was effective[493] - This report does not include an attestation report from the independent registered public accounting firm due to the company's status as an emerging growth company[494] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the most recent fiscal quarter - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[495] ITEM 9B. OTHER INFORMATION. This section states that no director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the three and twelve months ended December 31, 2023 Trading Arrangements No directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three and twelve months ended December 31, 2023 - No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement during the three and twelve months ended December 31, 2023[497] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. This item is not applicable to the company - This item is not applicable[497] PART III Part III details the company's corporate governance, including information on its directors and executive officers, their compensation, security ownership, and related party transactions. It also covers the company's policies on conflicts of interest, indemnification, and auditor fees ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. This section provides details on the company's executive officers and directors, their experience, and the structure of the board. It outlines the board's classification, director independence, and the responsibilities of its audit, nominating, and compensation committees. The section also addresses the company's Code of Ethics, potential conflicts of interest arising from management's other affiliations, and policies on indemnification and insider trading Officers and Directors This section lists the company's officers and directors, highlighting their extensive experience in sustainability, investment banking, and technology sectors Officers and Directors | Name | Age | Position | | :----------------- | :-- | :---------------------------------------- | | Christopher Sorrells | 55 | Chief Executive Officer and Chairman | | Robert Kaplan | 50 | Chief Financial Officer and Vice President of Business Development | | David Buzby | 63 | Director | | Richard Thompson | 74 | Director | | David Levinson | 51 | Director | | Kevin Pohler | 32 | Director | | Sharon Youngblood | 70 | Director | - Christopher Sorrells has over 20 years of experience as an investor, operator, advisor, and board member in the Sustainability industry, including leadership roles at Renewable Energy Group, Inc. and NGP ETP[499] - Robert Kaplan has over 20 years of investment banking experience in the Sustainability industry, including as Managing Director of Clean Technologies/Renewables at Stifel[500] - David Buzby has over 30 years of experience in sustainability, renewable energy, and technology, including founding SunEdison and serving on the board of Stem, Inc. and Sunrun Inc[501] - Richard Thompson has over 35 years of international business experience in renewable energy, power electronics, and semiconductors, including leadership roles at Power-One, Inc. and American Power Conversion Corporation[502] - Sharon Youngblood is a biologist with 20 years of scientific research experience and has served on boards focused on wildlife, conservation, sustainability, and education, including WWF[503] - David Levinson is a Managing Director and Chief Operating Officer of Pearl, focusing on transaction due diligence and execution, and compliance[504][506] - Kevin Pohler is a Vice President of Pearl, concentrating on investment strategy, sourcing, due diligence, and investor relations[507] Number and Terms of Office of Officers and Directors The board is classified into three-year terms, with founder shareholders controlling director votes pre-combination, and the Sponsor nominating three directors post-combination - The board of directors is divided into three classes, with one class appointed each year for a three-year term[508] - Prior to an initial business combination, only holders of founder shares have the right to vote on director appointments and removals[509] - Upon consummation of an initial business combination, the Sponsor will be entitled to nominate three individuals for appointment to the board[510] [Director Independence]