SEC Form 10-Q filed by Benessere Capital Acquisition Corp.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

(Mark One)

For the quarterly period ended June 30, 2022

    

    

    

    

    

    

    

    

No. 001-39836

 

Benessere Capital Acquisition Corp.

(Exact name of registrant as specified in its charter)

 

3109 Grand Avenue #440

Miami, FL 33130

(Address of Principal Executive Offices, including zip code)

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

As of August , 2022,

3,000,000 s

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

F-3

F-1

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Benessere Capital Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to ARC Global Investments 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.

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 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 Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the U.S. Securities and Exchange Commission (the “SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph. 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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

We are a blank check company formed under the laws of the State of Delaware on September 25, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our business combination using cash from the proceeds of the initial public offering and the sale of the private placement units, our capital stock, debt or a combination of cash, stock and debt.

On November 23, 2021, we entered into the Agreement and Plan of Merger (as amended on June 5, 2022, and as it may be further amended or supplemented from time to time, the “Businesss Combination Agreement”) , by and among (i) the Company, (ii) BCAC Holdings Inc., a Delaware corporation (“Pubco”), (iii) BCAC Purchaser Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Purchaser Merger Sub”), (iv) BCAC Company Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Pubco (“Company Merger Sub”), (v) BCAC Purchaser Rep LLC, a Delaware limited liability company (the “Purchaser Representative”), in the capacity as the representative for the equity holders of Pubco (other than certain holders of eCombustible securities), (vi) Jorge Arevalo in the capacity as the representative for certain security holders of eCombustible (the “Seller Representative”) and (vii) eCombustible Energy LLC, a Delaware limited liability company (“eCombustible”). Capitalized terms used in this Report but not otherwise defined herein have the meanings given to them in the Businesss Combination Agreement.

 

F-20

The Business Combination Agreement provides for two mergers: (i) the merger of Purchaser Merger Sub with and into Benessere, with Benessere continuing as the surviving entity (the “Purchaser Merger”), and (ii) the merger of Company Merger Sub with and into eCombustible, with eCombustible continuing as the surviving entity (the “Company Merger”, and together and collectively, with the Purchaser Merger, the “Mergers”). As a result of the Mergers, Benessere and eCombustible will become wholly-owned subsidiaries of Pubco, and Pubco will become a publicly traded company.

Subject to the terms and conditions set forth in the Business Combination Agreement, at the effective time of the Mergers (the “Effective Time”), among other things, the following will occur: (a) the holder of each issued and outstanding Benessere unit shall be deemed to hold one (1) share of Benessere common stock and three-fourths (3/4) of one (1) Benessere warrant, and all such Benessere securities shall be converted as provided below; (b) each issued and outstanding share of Benessere common stock will be converted automatically into the right to receive one (1) share of Pubco common stock; (c) each issued and outstanding Benessere warrant shall be automatically converted into one Pubco warrant; (d) each issued and outstanding membership interest unit of eCombustible (each an “eCombustible Unit”) will be converted automatically into the right to receive a pro rata portion of the Merger Consideration (as defined below); and (e) each outstanding eCombustible convertible security that is not a eCombustible Unit, if not exercised or converted prior to the Effective Time, shall be canceled, retired and terminated.

BCAC Purchaser Rep LLC is serving as the Purchaser Representative under the Business Combination Agreement, and in such capacity will represent the interests of Pubco’s stockholders (other than the eCombustible Securityholders) after the Effective Time with respect to certain matters under the Business Combination Agreement, including the determination of any Merger Consideration (as defined below) adjustments, issues regarding the Closing Statement or indemnification claims made against eCombustible and related parties after the Closing. Jorge Arevalo is serving as the Seller Representative under the Business Combination Agreement, and in such capacity will represent the interests of the holders of eCombustible securities (the “eCombustible Securityholders”) with respect to certain matters under the Business Combination Agreement, including the determination of any Merger Consideration adjustments, issues regarding the Closing Statement or indemnification claims made against eCombustible and related parties after the Closing.

of incorporation and by-laws and Benessere’s

to a true-up adjustment

The Merger Consideration will be allocated among the eCombustible Securityholders pro rata based on the number of combustible Units owned by each such holder; provided, however, that the Merger Consideration otherwise payable to the eCombustible Securityholders is subject to purchase price adjustments and also to reduction for indemnification obligations.

during the 30-month period

 

 

If there is a determination that the eCombustible Securityholders are entitled to receive Earnout Shares pursuant to the Business Combination Agreement, such Earnout Shares will be allocated pro rata among the eCombustible Securityholders. The number of shares of Pubco common stock constituting any Earnout Share payments shall be equitably adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like after the Closing.

 

F-21

Simultaneously with the execution of the Business Combination Agreement, certain members of eCombustible entered into voting agreements with Benessere and eCombustible (the “Voting Agreement”). Under the Voting Agreement, such Company Unitholders of eCombustible agreed to vote all of their eCombustible Units in favor of the Business Combination Agreement and related transactions. These eCombustible members also agreed to take certain other actions in support of the Business Combination Agreement and related transactions, including cooperation with respect to the Pubco Registration Statement, and to refrain from taking such actions that would adversely impede the ability of the parties to perform the Business Combination Agreement.

The Voting Agreement also prevents transfers, except for certain permitted transfers, of the eCombustible Units held by the eCombustible member party thereto between the date of the Voting Agreement and the date of the Closing or earlier termination of the Mergers.

to a lock-up provision whereby,

a Lock-Up

a Lock-Up Agreement

be locked-up for

The sections above describing the Business Combination Agreement, the Voting Agreement, the Sponsor Support Agreement do not purport, and are not intended, to describe all of the terms and conditions thereof. The foregoing summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, the Voting Agreement and the Sponsor Support Agreement, copies of each of which are attached hereto as Exhibits 2.1, 10.9 and 10.10, respectively.

Form 8-K filed

S-4,

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.

non-interest

 

 

F-22

non-interest

As previously disclosed in the Company’s Preliminary Proxy Statement on Schedule 14A filed on June 8, 2022, Benessere recently received a subpoena from the SEC seeking various documents regarding, among other things, meetings of our Board of Directors; communications with and the evaluation of potential targets, including eCombustible; information relating to eCombustible; and agreements with certain advisors and affiliates. In connection with the foregoing investigation, the SEC has issued an order of examination pursuant to Section 8(e) of the Securities Act with respect to BCAC Holdings ’s Registration Statement relating to the Business Combination, and a further subpoena to each of Benessere and BCAC Holdings in support thereof. Those subpoenas seek additional documents and information with respect to, among other things, our diligence efforts in examining potential targets other than eCombustible, our communications with respect thereto, and relationships between and among certain of BCAC Holdings and our officers and directors, on the one hand, and other entities (including our Sponsor and the underwriter of our initial public offering) on the other. On June 16, 2022, certain directors of Benessere were issued subpoenas by a federal grand jury sitting in the Southern District of New York in connection with an investigation involving Digital World Acquisition Corp. These subpoenas, and the underlying investigations by the Department of Justice and the SEC, can be expected to delay effectiveness of the Registration Statement, which could materially delay, materially impede, or prevent the consummation of the Business Combination. Additionally, any resolution of the investigation could result in the imposition of significant penalties, injunctions, prohibitions on the conduct of our business, damage to our reputation and other sanctions against us.

non-operating

 

F-23

For the three months ended June 30, 2022, we had net income of $1,454,110, which consisted primarily of a $2,320,758 gain from change in fair value of warrant liability partially offset by $939,518 of operating costs.

For the three months ended June 30, 2021, we had a net loss of $941,352, which consisted primarily of a $734,297 loss from change in fair value of warrant liability and operating costs of $143,374.

For the six months ended June 30, 2022, we had net income of $3,043,422, which consisted primarily of a $4,885,481 gain from change in fair value of warrant liability partially offset by $1,908,247 of operating costs.

For the six months ended June 30, 2021, we had net income of $5,215,759, which consisted primarily of a $5,884,933 gain from change in fair value of warrant liability partially offset by $457,302 of operating costs.

Until the consummation of the initial public offering, our only source of liquidity was an initial purchase of Class B common stock by the Sponsor and loans from our Sponsor.

On January 7, 2021, we consummated the initial public offering of 10,000,000 units, at a price of $10.00 per unit, generating gross proceeds of $100,000,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 360,000 private placement units at a price of $10.00 per private placement unit in a private placement to our Sponsor, generating gross proceeds of $3,600,000.

On January 27, 2021, we sold an additional 1,500,000 units for total gross proceeds of $15,000,000 in connection with the underwriters’ full exercise of their over-allotment option. Simultaneously with the closing of the over-allotment option, we also consummated the sale of an additional 33,750 private placement units at $10.00 per private placement unit, generating additional proceeds of $337,500.

Following the initial public offering, the partial exercise of the over-allotment option, and the sale of the private placement units, a total of $116,725,000 was placed in the trust account. We incurred $4,701,732 in transaction costs, including $862,500 of underwriting fees, $3,450,000 of deferred underwriting fees and $468,587 of other offering costs.

For the six months ended June 30, 2022, net change in cash was a decrease of $115,884. Cash used in operating activities was $479,884. Net income of $3,138,555 was impacted primarily by change in warrant liability and changes in operating assets and liabilities. Cash provided by investing activities was $9,814,789 related to withdraw of funds from the trust account. Cash used in financing activities was $9,450,789 and includes redemption of redeemable shares partially offset by proceeds for related party financing.

As of June 30, 2022, we had cash and marketable securities of $107,071,029 held in the Trust Account. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our business combination. We may withdraw interest to pay taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock currently authorized and outstanding, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from this IPO held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our 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.

On February 11, 2022, the Company paid $99,200 to the SEC as a filing fee for the filing of the Pubco Registration Statement.

On March 24, 2022, the Company paid $62,500, representing 50% of the fee required under the Hart-Scott-Rodino (“HSR”) Act and the rules of the Federal Trade Commission (the “FTC”), to the FTC, for purposes of a premerger notification and HSR filing under these rules, which is customary for business combinations and required in connection with the eCombustible Business Combination. eCombustible paid the remainder of this fee to the FTC. As of June 30, 2022, we had cash of $1,307 outside of the Trust Account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.

 

F-24

In order to fund working capital deficiencies or finance transaction costs in connection with a 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 a business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the private placement units.

On November 11, 2021, the Sponsor committed to providing an aggregate of up to $1,000,000 to the Company in order to finance working capital costs of the Company (the “Working Capital Loan”). As of June 30, 2022 and December 31, 2021, we had borrowed $364,000 and $0, respectively, under the Working Capital Loan.

On January 12, 2022, the Company issued promissory notes (the “January Extension Notes”) in the aggregate principal amount of $2,065,898 to each of the Sponsor and eCombustible Energy LLC (“eCombustible”), pursuant to which each of the Sponsor and eCombustible loaned to the Company $1,032,949 to deposit into the Company’s trust account for each share of the Company’s Class A common stock that was not redeemed in connection with the extension of the Company’s termination date from January 7, 2022 to July 7, 2022. The Company deposited the funds into the Company’s trust account and such amount will be distributed either to: (i) all of the holders of Public Shares upon the Company’s liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of the Company’s initial business combination. The January Extension Notes bear no interest and are repayable in full upon the earlier of (a) the date of the consummation of the Company’s initial business combination, or (b) the date of the liquidation of the Company.

On July 15, 2022, we issued a promissory note (the “July Extension Note,” and together with the January Extension Notes, the “Extension Notes”) in the aggregate principal amount of $1,384,161 to the Sponsor, pursuant to which the Sponsor committed to loan to the Company an aggregate amount of $1,384,161, in equal monthly draws until January 7, 2023, to deposit into the Company’s trust account for each Public Share that was not redeemed in connection with the July Extension Meeting.

The proceeds of the Extension Notes, along with the other funds in the trust account will be distributed either to: (i) all of the holders of Public Shares upon our liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of our initial Business Combination.

The Extension Notes bear no interest and are repayable in full upon the earlier of (a) the date of the consummation of our initial Business Combination, or (b) the date of our liquidation. The issuance of the Extension Notes was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

On June 24, 2022, we entered into an amendment (the “Amendment to the Insider Letter”) to that certain letter agreement, dated January 4, 2021 (“Insider Letter”), with the Sponsor and our directors, officers or other initial stockholders named therein (the “Insiders”). Pursuant to the Insider Letter, among other matters, the Sponsor and the Insiders agreed in Section 9 thereof, that the Sponsor, an affiliate of the Sponsor or certain of our officers and directors may make non-interest bearing loans to us to finance transaction costs in connection with our Business Combination and that, at the option of the lender, up to $1,500,000 of such loans may be convertible into our units, at a price of $10.00 per unit, upon consummation of the Business Combination. Under the Amendment to the Insider Letter, each of the Sponsor and the Insiders have agreed to revise the terms of the Insider Letter to increase the aggregate principal amount of loans by the Sponsor, its affiliates or our officers and directors that can be converted into our units from $1,500,000 to $5,000,000. The securities issuable upon conversion of such loans are subject to stockholder approval at the special meeting of BENE stockholders to be held to approve the Business Combination.

Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. Additionally, we have the ability to draw on the Working Capital Loan (as defined below) from our sponsor. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

a non-interest

undertaking in-depth

non-interest

 

F-25

On September 30, 2020, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. On October 10, 2020, our sponsor transferred 10,000 founder shares to our Chief Financial Officer and 5,000 to each of our four independent directors. On November 27, 2020, our sponsor transferred 10,000 founder shares to our Chief Operating Officer and 5,000 to each of our two special advisors. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of the IPO (excluding the representative shares and the placement units and underlying securities). The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number of founder shares issued. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.

Until the earlier of the Company’s consummation of a Business Combination and its liquidation, we pay Benessere Enterprises Inc., an affiliate of our sponsor, a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

non-interest

In January and July, 2022, we issued the Extension Notes, described below in Related Party Loans.

one-tenth

Our initial stockholders have agreed to waive their redemption rights with respect to their founder shares and placement shares (i) in connection with the consummation of a business combination, (ii) in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination by January 7, 2023 and (iii) if we fail to consummate a business combination by January 7, 2023 or if we liquidate prior to by January 7, 2023 period. However, our initial stockholders will be entitled to redemption rights with respect to any public shares held by them if we fail to consummate a business combination or liquidate by January 7, 2023. In addition, the holders of the representative shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the trust account with respect to such shares if we fail to complete our initial business combination by January 7, 2023.

 

F-26

Pursuant to a registration rights agreement entered into on January 4, 2021, we may be required to register certain securities for sale under the Securities Act. These holders (including the holders of representative shares), and holders of units issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements.

Sheet Arrangements

off-balance

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay our Sponsor, and since January 2021, an affiliate of our Sponsor a monthly fee of $10,000 for office space, administrative and support services to us. We began incurring these fees on January 21, 2021 and will continue to incur these fees monthly until the earlier of the completion of our initial Business Combination and our liquidation.

The underwriters are entitled to a deferred fee of $0.30 per unit, or $3,450,000 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement.

On November 11, 2021, the Sponsor committed to providing an aggregate of up to $1,000,000 to the Company in order to finance working capital costs of the Company (the “Working Capital Loan”). As of June 30, 2022 and December 31, 2021, we had borrowed $364,000 and $0, respectively, under the Working Capital Loan.

On January 12, 2022, we issued promissory notes (the “January Extension Notes”) in the aggregate principal amount of $2,065,898 to the Sponsor and eCombustible, pursuant to which each of the Sponsor and eCombustible loaned to the Company $1,032,949 to deposit into the Company’s trust account for each Public Share that was not redeemed in connection with the January Extension Meeting.

On July 15, 2022, we issued a promissory note (the “July Extension Note,” and together with the January Extension Notes, the “Extension Notes”) in the aggregate principal amount of $1,384,161 to the Sponsor, pursuant to which the Sponsor committed to loan to the Company an aggregate amount of $1,384,161, in equal monthly draws until January 7, 2023, to deposit into the Company’s trust account for each Public Share that was not redeemed in connection with the July Extension Meeting.

The proceeds of the Extension Notes, along with the other funds in the trust account will be distributed either to: (i) all of the holders of Public Shares upon our liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of our initial Business Combination.

The Extension Notes bear no interest and are repayable in full upon the earlier of (a) the date of the consummation of our initial Business Combination, or (b) the date of our liquidation.

 

F-27

The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:

two-class

No. 2020-06,

470-20)

815-40):

2020-06”),

2020-06

2020-06

2020-06

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

 

F-28

815-15.

re-assessed

825-10

re-measurement

We account for our shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable stock (including stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, stock is classified as stockholders’ equity. Our shares of Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, our Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed interim balance sheets.

COVID-19

Not required for smaller reporting companies.

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 officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

F-29

 

 

 

 

 

 

 

 

 

 

10-Q

To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property, except as described below.

As of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement for our initial public offering (“IPO Registration Statement”, (ii) Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 12, 2022 and (iii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the SEC on May 16, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and, potentially, non-U.S. jurisdictions. In particular, we are required to comply with certain SEC and potentially other legal and regulatory requirements, and our consummation of an initial business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with, and monitoring of, the foregoing may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.

On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating, among other items, to disclosures in SEC filings in connection with business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, as proposed or as adopted, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.

Recent increases in inflation and interest rates in the United States and elsewhere may lead to increased price volatility for publicly traded securities, including ours, and may lead to other national, regional and international economic disruptions, any of which could make it more difficult for us to consummate an initial business combination.

Military conflict in Ukraine or elsewhere may lead to increased and price volatility for publicly traded securities, including ours, and to other national, regional and international economic disruptions and economic uncertainty, any of which could make it more difficult for us to identify a business combination target and consummate an initial business combination on acceptable commercial terms or at all.

We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons, including those beyond our control. Any such event will result in a loss to us of the related costs incurred, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our rights and warrants will expire worthless.

In recent years, the number of SPACs that have been formed has increased substantially. Many companies have entered into business combinations with SPACs, and there are still many SPACs seeking targets for their initial business combination, as well as additional SPACs currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, effort and resources to identify a suitable target for an initial business combination.

In addition, because there are a large number of SPACs seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause target companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find a suitable target for and/or complete our initial business combination and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.

On March 30, 2022, the SEC issued the SPAC Rule Proposals relating, among other items, to disclosures in business combination transactions between SPACS such as us and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. The SPAC Rule Proposals have not yet been adopted, and may be adopted in the proposed form or in a different form that could impose additional regulatory requirements on SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an initial business combination, and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the trust account or liquidate the Company at an earlier time than we might otherwise choose.

As described further above, the SPAC Rule Proposals relate, among other matters, to the circumstances in which SPACs such as the Company could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for a business combination no later than 18 months after the effective date of its IPO Registration Statement. The company would then be required to complete its initial business combination no later than 24 months after the effective date of the IPO Registration Statement.

Because the SPAC Rule Proposals have not yet been adopted, there is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours that does not complete its business combination within 24 months after the effective date of the IPO Registration Statement.

If we are deemed to be an investment company under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to burdensome compliance requirements. We do not believe that our principal activities will subject us to regulation as an investment company under the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the Company.

The funds in the trust account have, since our initial public offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, and we expect that we will, on or prior to the 24-month anniversary of the effective date of the Registration Statement, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the trust account, to liquidate the U.S. government treasury obligations or money market funds held in the trust account and thereafter to hold all funds in the trust account in cash until the earlier of consummation of our initial business combination or liquidation of the Company. Following such liquidation, we would likely receive minimal interest, if any, on the funds held in the trust account. However, interest previously earned on the funds held in the trust account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the trust account and thereafter to hold all funds in the trust account in cash would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.

In addition, even prior to the 24-month anniversary of the effective date of the IPO Registration Statement, we may be deemed to be an investment company. The longer that the funds in the trust account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities held in the trust account at any time, even prior to the 24-month anniversary, and instead hold all funds in the trust account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.

In connection with the Company’s assessment of going concern considerations under applicable accounting standards, management has determined that our possible need for additional financing to enable us to negotiate and complete our initial business combination, as well as the deadline by which we may be required to liquidate our trust account, raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date the financial statements included elsewhere in this Report were issued.

Certain federally licensed businesses in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be a “foreign person” under such rules and regulations, any proposed business combination between us and a U.S. business engaged in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial business combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate an initial business combination with such business. In addition, if our potential business combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. CFIUS may decide to block or delay our initial business combination, impose conditions to mitigate national security concerns with respect to such initial business combination or order us to divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance. The foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial business combination opportunities that we believe would otherwise be beneficial to us and our shareholders. A s a result, the pool of potential targets with which we could complete an initial business combination may be limited and we may be adversely affected in terms of competing with other special purpose acquisition companies which do not have similar foreign ownership issues.

Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive $10.00 per share, and our warrants and rights will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.

 

F-30

None.

None.

Not Applicable.

None.

 

F-31

10-Q.

 

 

 

F-32