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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
Commission File
No. 001-39836
 
 
Benessere Capital Acquisition Corp.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
85-3223033
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
3109 Grand Avenue #440
Miami, FL 33130
(Address of Principal Executive Offices, including zip code)
(561)
467-5200
(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:
 
Title of each class
   
Trading
Symbol(s)
   
Name of each exchange
on which registered
Units, each consisting of one share of Class A Common Stock, one Right and three-fourths of one Redeemable Warrant
   
BENEU
   
The Nasdaq Stock Market LLC
Class A Common Stock, par value $0.0001 per share
   
BENE
   
The Nasdaq Stock Market LLC
Rights, exchangeable into
one-tenth
of one share of Class A Common Stock
   
BENER
   
The Nasdaq Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50
   
BENEW
   
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
       
Non-accelerated
filer		   ☒    Smaller reporting company   ☒
       
         Emerging growth company   ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act):    Yes  ☒    No  ☐
As of August
2
4
, 2022,
 there were 10,723,239 shares of Class A common stock and
3,000,000 s
hares of Class B common stock, $0.0001 par value, issued and outstanding.
 
 
 
BENESSERE CAPITAL ACQUISITION CORP.
FORM
10-Q
FOR THE QUARTER ENDED JUNE 30, 2022
TABLE OF CONTENTS
 
        
Page
  
PART 1 — FINANCIAL INFORMATION
   
Item 1.
   Condensed Financial Statements   
  Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021     
F-1
  
  Unaudited Condensed Consolidated Statements of Operations For the Three Months and Six Months Ended June 30, 2022 and 2021     
F-2
  
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit For the Three Months and Six Months Ended June 30, 2022 and 2021     
F-3
  
  Unaudited Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2022 and 2021     
F-4
  
  Notes to Condensed Consolidated Financial Statements (unaudited)     
F-5
  
Item 2.
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     
F-20
  
Item 3.
   Quantitative and Qualitative Disclosures about Market Risk     
F-29
  
Item 4.
   Control and Procedures     
F-29
  
    
F-30
  
Item 1.
   Legal Proceedings     
F-30
  
Item 1A.
   Risk Factors     
F-30
  
Item 2.
   Unregistered Sales of Equity Securities and Use of Proceeds     
F-31
  
Item 3.
   Defaults Upon Senior Securities     
F-31
  
Item 4.
   Mine Safety Disclosures     
F-31
  
Item 5.
   Other Information     
F-31
  
Item 6.
   Exhibits     
F-32
  
 
 
i
Benessere Capital Acquisition Corp.
Condensed Consolidated Balance Sheets
 
     June 30,
2022		     December 31,
2021		  
     (Unaudited)     (Audited)  
ASSETS
                 
Cash
    $ 1,307     $ 117,191  
Prepaid insurance
      2,170       43,266  
    
 
 
    
 
 
  
Total Current Assets
      3,477       160,457  
Cash and marketable securities held in Trust Account
      107,147,089       116,784,563  
    
 
 
    
 
 
  
Total Assets
    $ 107,150,566     $ 116,945,020  
    
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                 
Current Liabilities
                 
Accrued expense
    $ 2,074,522     $ 676,128  
Advances from related party
      364,000          
Promissory Notes — related parties
      2,065,898       —    
Franchise tax payable
      300,000       200,000  
    
 
 
    
 
 
  
Total Current Liabilities
      4,804,420       876,128  
Deferred underwriting commission
      3,450,000       3,450,000  
Warrant liability
      2,140,875       7,026,356  
    
 
 
    
 
 
  
Total Liabilities
      10,395,295       11,352,454  
Commitments and Contingencies
             
Class A common stock subject to possible redemption; 10,329,489 shares and 11,500,000 shares at redemption value at June 30, 2022 and December 31, 2021, respectively
      106,910,211       116,725,000  
Stockholders’ Deficit
                 
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
      —         —    
Class A common share, $0.0001 par value; 100,000,000 shares authorized; 393,750 issued and outstanding, excluding 11,500,000 shares subject to possible redemption
      39       39  
Class B common share, par value $0.0001; 10,000,000 shares authorized; 3,000,000 issued and outstanding
      301       301  
Additional
paid-in
capital
      —         —    
Accumulated deficit
      (10,155,280 )      (11,132,804 ) 
    
 
 
    
 
 
  
Total Stockholders’ Deficit
      (10,154,940 )      (11,132,464 ) 
    
 
 
    
 
 
  
Total Liabilities and Stockholders’ Deficit
    $ 107,150,566     $ 116,945,020  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
F-1
Benessere Capital Acquisition Corp.
Condensed Consolidated Statements of Operations
(unaudited)
 
     Three Months
Ended
June 30, 2022		     Three Months
Ended
June 30, 2021		  
Formation and operating costs
    $ 939,518     $ 143,374  
Franchise tax expense
      50,000       83,333  
    
 
 
    
 
 
  
Loss from operations
      (989,518 )      (226,707 ) 
Other income and expenses:
                 
Change in fair value of warrant liability
      2,320,758       (734,297 ) 
Interest earned on cash and marketable securities held in Trust Account
      133,997       19,652  
    
 
 
    
 
 
  
Other Income (Loss)
      2,454,755       (714,645 ) 
    
 
 
    
 
 
  
Income (Loss) before taxes
      1,465,237       (941,352 ) 
Tax expense
      (11,127 )     —    
Net income (loss)
    $ 1,454,110     $ (941,352 ) 
    
 
 
    
 
 
  
Weighted average shares outstanding of Class A common stock
      11,893,750       11,893,750  
    
 
 
    
 
 
  
Basic and diluted net income (loss) per Class A common stock
    $ 0.10     $ (0.06 ) 
    
 
 
    
 
 
  
Weighted average shares outstanding of Class B common stock
      3,000,000       2,875,000  
    
 
 
    
 
 
  
Basic and diluted net income (loss) per Class B common stock
    $ 0.10     $ (0.06 ) 
    
 
 
    
 
 
  
 
 
  
Six Months
Ended
June 30, 2022
 
 
Six Months
Ended
June 30, 2021
 
Formation and operating costs
    $ 1,908,247     $ 457,302  
Franchise tax expense
      100,000       83,333  
    
 
 
    
 
 
  
Loss from operations
      (2,088,247 )     (540,635 ) 
Other income and expenses:
                 
Change in fair value of warrant liability
      4,885,481       5,884,933  
Non-operating cost
      —         (165,900 ) 
Interest earned on cash and marketable securities held in Trust Account
      177,315       37,361  
    
 
 
    
 
 
  
Other Income
      5,062,796       5,756,394  
    
 
 
    
 
 
  
Income before taxes
      3,054,549       5,215,759  
Tax expense
      (11,127 )     —    
Net income
    $ 3,043,422       5,215,759  
    
 
 
    
 
 
  
Weighted average shares outstanding of Class A common stock
      11,893,750       11,378,000  
    
 
 
    
 
 
  
Basic and diluted net income per Class A common stock
    $ 0.20     $ 0.37  
    
 
 
    
 
 
  
Weighted average shares outstanding of Class B common stock
      3,000,000       3,875,000  
    
 
 
    
 
 
  
Basic and diluted net income per Class B common stock
    $ 0.20     $ 0.37  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
F-2
Benessere Capital Acquisition Corp.
Condensed Consolidated Statements of Changes in Stockholders’
Deficit
(unaudited)
 
     Class A
Common Stock		      Class B
Common Stock		      Additional
Paid in
Capital		      Retained
Earnings
(Accumulated
Deficit)		     Total
Stockholders’
Deficit		  
     Shares      Amount      Shares      Amount  
Balance — January 1, 2022
      393,750      $ 39        3,000,000      $ 301      $ —        $ (11,132,804 )    $ (11,132,464 ) 
Remeasurement of redeemable Class A Common Stock
      —          —          —          —          —          (2,065,898 )      (2,065,898 ) 
Net income
      —          —          —          —          —          1,589,312       1,589,312  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance — March 31, 2022 (restated)
(1)
      393,750        39        3,000,000        301      $ —          (11,609,390 )      (11,609,050 ) 
Net income
      —          —          —          —          —          1,454,110       1,454,110  
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Balance – June 30, 2022
      393,750      $ 39        3,000,000      $ 301      $ —        $ (10,155,280 )   $ (10,154,940 )
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
 
     Class A
Common Stock		      Class B
Common Stock		      Additional
Paid in
Capital		     Retained
Earnings
(Accumulated
Deficit)		     Total
Stockholders’
Deficit		  
     Shares      Amount      Shares      Amount  
Balance — January 1, 2021
      —        $ —          3,000,000      $ 301      $ 25,799     $ (38,770 )    $ (12,670 ) 
Sale of units in Initial Public Offering, net
      393,750        39        —          —          3,937,461       —         3,937,500  
Remeasurement of redeemable Class A common stock
      —          —          —          —          (3,963,260 )      (13,151,981 )      (17,115,241 ) 
Net income
      —          —          —          —          —         6,157,112       6,157,112  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance — March 31, 2021
      393,750        39        3,000,000        301        —         (7,033,639 )      (7,033,299 ) 
Net loss
      —          —          —          —          —         (941,352 )      (941,352 ) 
Balance — June 30, 2021
      393,750      $ 39        3,000,000      $ 301      $ —         (7,974,991 )      (7,974,651 ) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
(1)
 
See Note 2.
 
F-3
Benessere Capital Acquisition Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
     Six Months
Ended
June 30, 2022		     Six Months
Ended
June 30, 2021		  
Cash flows from operating activities:
                 
Net income
    $ 3,043,422     $ 5,215,759  
Adjustments to reconcile net income to net cash used in operating activities:
                 
Interest earned on cash and marketable securities held in Trust Account
      (177,315 )     (37,361 ) 
Change in fair value of warrant liability
      (4,885,481 )      (5,884,933 ) 
Changes in operating assets and liabilities:
                 
Prepaid insurance
      41,096       (90,715 ) 
Accrued expenses
      1,398,394       67,628  
Franchise tax payable
      100,000       83,333  
    
 
 
    
 
 
  
Net cash used in operating activities
      (479,884 )      (646,289 ) 
    
 
 
    
 
 
  
Cash flows from investing activities:
                 
Withdraw of cash from Trust Account
      9,814,789       —    
Investment of cash in Trust Account
      —         (116,725,000 ) 
    
 
 
    
 
 
  
Net cash provided by (used in) investing activities
      9,814,789       (116,725,000 ) 
    
 
 
    
 
 
  
Cash flows from financing activities:
                 
Proceeds from sale of Units
      —         115,000,000  
Proceeds from sale of Private Units
      —         3,600,000  
Proceeds from sale of overallotment Private Placement Units
      —         337,500  
Payment of offering costs
      —         (994,282 ) 
Repayment of promissory note
      —         (108,200 ) 
Redemption of redeemable shares
      (11,880,687 )      —    
Proceeds from issuance of debt — related parties
      2,065,898       —    
Proceeds from advances from related party
      364,000       —    
    
 
 
    
 
 
  
Net cash (used in) provided by financing activities
      (9,450,789 )      117,835,018  
    
 
 
    
 
 
  
Net change in cash
      (115,884 )      463,729  
Cash at beginning of period
      117,191       4,858  
    
 
 
    
 
 
  
Cash at end of period
    $ 1,307     $ 468,587  
    
 
 
    
 
 
  
Non-cash
investing and financing activities:
                 
Remeasurement of Class A common stock subject to possible redemption
    $ 2,065,898     $ —    
    
 
 
    
 
 
  
Deferred underwriting fee payable
    $ —       $ 3,450,000  
    
 
 
    
 
 
  
Offering costs charged to additional
paid-in
capital
    $ —       $ 91,550  
Initial classification of warrant liability
    $ —       $ 10,861,980  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
 
F-4
BENESSERE CAPITAL ACQUISITION CORP. NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Benessere Capital Acquisition Corp. (“Bene” or the “Company”) is a blank check company incorporated in the State of Delaware on September 25, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on technology-focused middle market and emerging growth companies in North, Central and South America. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
These consolidated financial statements include Bene, BCAC Holdings Inc., BCAC Purchaser Merger Sub Inc. and BCAC Company Merger Sub LLC (collectively, the “Company”). All intercompany balances and transactions have been eliminated.
On January 7, 2022, the Company filed an amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Extension Amendment”). The Extension Amendment extends the date by which the Company must consummate its initial business combination from January 7, 2022 to July 7, 2022.
As of June 30, 2022, the Company had not commenced any operations. All activity for the period from September 25, 2020 (inception) through June 30, 2022 relates to the Company’s formation, the initial public offering (“IPO”), which is described below, and, subsequent to the IPO, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate
non-operating
income in the form of interest income from the proceeds derived from the IPO.
On November 23, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger 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”).
The registration statement for the Company’s IPO was declared effective on January 7, 2021. On January 7, 2021, the Company consummated its IPO of 10,000,000 Units, at a price of $10.00 per unit, generating gross proceeds of $100,000,000, which is described in Note 3.
Simultaneously with the closing of the IPO, pursuant to a Unit Subscription Agreement, the Company completed the private sale of 360,000 units (the “Private Placement Units”) to ARC Global Investments LLC (the “Sponsor”) at a purchase price of $10.00 per Private Placement Unit, generating gross proceeds to the Company of $3,600,000. In connection with the closing of the purchase of the Over-Allotment Units (as defined in Note 6), the Company sold an additional 33,750 Private Placement Units to the Sponsor at a price of $10.00 per Private Placement Unit, generating an additional $337,500 of gross proceeds, which is described in Note 6.
Following the closing of the IPO on January 7, 2021 and the exercise of the over-allotment in full by the underwriter on January 21, 2021, an amount of $116,725,000 ($10.15 per unit) from the net proceeds of the sale of the Public Units in the IPO and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”), were invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule
2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below, except that interest earned on the Trust Account can be released to the Company to pay its tax obligations (“permitted withdrawals”).
Transaction costs amounted to $4,701,732, consisting of $862,500 of underwriting fees, $3,450,000 deferred underwriting fee and $389,232 of other offering costs. In addition, $468,587 of cash was held outside of the Trust Account and is available for working capital purposes.
 
F-5
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and sale of the Private Placement Units, although substantially all of the net proceeds were placed in the Trust Account and are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned and less any interest earned thereon that is released for taxes) at the time of the signing of an agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination. The Company will provide its Stockholders with the opportunity to redeem all or a portion of their Public Shares (as defined below) upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.15 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The
per-share
amount to be distributed to stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants or rights.
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic
480-10-S99,
redemption provisions not solely within the control of a company require stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the shares of Class A common stock classified as temporary equity was the allocated proceeds determined in accordance with ASC Topic
470-20.
Because of the redemption feature noted above, the shares of Class A common stock are subject to ASC Topic
480-10-S99.
If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional
paid-in
capital). While redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place.
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor has agreed (a) to vote its Class B Common Stock, the Common Stock included in the Private Units (the “Private Shares”) and any Public Shares purchased during or after the IPO in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s
pre-Business
Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Class B Common Stock) and Private Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of
pre-Business
Combination activity and (d) that the Class B Common Stock and Private Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the IPO if the Company fails to complete its Business Combination.
 
F-6
The Company will have until July 7, 2022 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than five business days thereafter, redeem 100% of the outstanding Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable and less interest to pay dissolution expenses up to $50,000), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the IPO price per Unit ($10.00).
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $10.15 per share, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the company’s independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
On January 7, 2022, the Company held a stockholder meeting to extend the date by which the Company has to consummate a business combination from January 7, 2022 to July 7, 2022. As part of the meeting, stockholders redeemed 1,170,511 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $11,886,421 (approximately $10.15 per share) was removed from the Company’s trust account to pay such holders. As part of the extension meeting to extend the liquidation date to July 7, 2022, 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 (“Public Share”) that was not redeemed.
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus
(COVID-19)
as a pandemic which continues to spread throughout the United States and the World. As of the date the financial statement was issued, there was considerable uncertainty around the expected duration of this pandemic. The Company has concluded that while it is reasonably possible that
COVID-19
could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of this financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
 
F-7
Going Concern and Management’s Plans
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to
$1,500,000 of such loans may be convertible into units, at a price of $10.00
per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. 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. 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. On November 11, 2021, the Sponsor provided a commitment to provide a
$1,000,000
non-interest
bearing loan for working capital purpose. There were
$
364,000
and $0 outstanding at June 30, 2022 and December 31, 2021.
The company has incurred and expects to incur significant costs in pursuit of its acquisition plans. We may need to raise additional funds in order to meet the expenditures required for operating our business. Further, if our estimates of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of the IPO and the sale of the placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. While the Company intends to complete the proposed Merger Agreement before July 7, 2022 there are no assurances that this will happen. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
During August 2022, the Company identified an error in its accounting in its March 31, 2022, 10-Q related to the Sponsor and eCombustible each loanin
g
 
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 outstanding. The reclassification of amounts from permanent equity to temporary equity resulted in non-cash financial statement corrections and will have no impact on the Company’s current or previously reported cash position, operating expenses or total operating, investing or financing cash flows. The adjustment is summarized below.
 
 
  
As previously
reported
 
  
Adjustments
 
  
As restated
 
Condensed Consolidated Balance Sheet
  
  
  
Class A common stock subject to possible redemption
    $ 104,844,313      $ 2,065,898      $ 106,910,211  
Accumulated deficit
    $ (9,543,492 )     $ (2,065,898 )     $ (11,609,390 ) 
Total Stockholders’ deficit
    $ (9,543,152 )     $ (2,065,898 )     $  (11,609,050 ) 
Condensed consolidated statement of changes in stockholders’ deficit
                     
 
 
 
Retained earnings (accumulated deficit)
    $ (9,543,492 )     $ (2,065,898 )     $ (11,609,390 ) 
Total stockholders’ deficit
    $ (9,543,152 )     $ (2,065,898 )     $ (11,609,050 ) 
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.
In the opinion of the Company’s management, the unaudited financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the financial position of the Company as of June 30, 2022 and its results of changes in stockholders’ deficit for the three and six months ended June 30, 2022. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2022 or any future interim period.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
 
F-8
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At June 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
Warrant Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480 and ASC Topic
815-15.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period. In accordance with ASC Topic
825-10
“Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred.
The 8,625,000 warrants issued in connection with the IPO (the “Public Warrants”) and the 295,312 Placement Warrants (as defined below) are recognized as derivative liabilities in accordance with ASC
815-40.
Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised. The fair value of the Public Warrants issued in connection with IPO and Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date, except that the Public Warrants are valued based on market prices once publicly traded. Derivative warrant liabilities are classified as
non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as transactions costs incurred in connection with warrants in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of IPO.
 
F-9
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common 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 the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the remeasurement from initial carrying value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional
paid-in
capital and accumulated deficit.
At June 30, 2022, the shares of redeemable class A common stock reflected in the Balance Sheet were reconciled in the following table:
 
         
Gross Proceeds
    $ 115,000,000  
Less:
         
Proceeds allocated to public warrants
      (10,861,980 ) 
Class A common stock issuance costs
      (4,535,832 ) 
Shares redeemed
      (11,880,687 ) 
Plus:
         
Remeasurement adjustment on redeemable common stock
      19,188,710  
Total Class A common stock subject to possible redemption
    $ 106,910,211  
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL”) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Company’s financial position or statement of operations.
The Company has identified the United States and Florida as major tax jurisdictions. The Company is subject to examination by these taxing authorities since inception. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
 
 
F-10
Our effective tax rate was
0.76
% and
0.00
% for the three months ended June 30, 2022 and 2021, respectively, and -
0.36
% and
0.00
% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of
21
% for the three and six months ended June 30, 2022 and 2021, due to changes in Fair Value of Warrant Liabilities and the valuation allowance on the deferred tax assets.
The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended June 30, 2022 and 2021, due to state taxes, offering costs associated with warrants, changes in Fair Value of Warrant Liabilities and the valuation allowance on the deferred tax assets.
Net Income per Common Share
Net income per share is computed by dividing net income by the weighted average number of common stock outstanding for the period. The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the IPO and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The Company applies the
two-class
method in calculating net income per common share. The remeasurement adjustment associated with the redeemable shares of Class A common stock is excluded from net income per common share as the redemption value approximates fair value.
The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
 
     Three Months
Ended
June 30, 2022		  
Basic and diluted net income per common share    Class A      Class B  
Numerator:
                  
Allocation of net income
    $ 1,161,213      $ 292,897  
Denominator:
                  
Basic and diluted weighted average shares outstanding
      11,893,750        3,000,000  
    
 
 
     
 
 
  
Basic and diluted net income per common share
    $ 0.10      $ 0.10  
    
 
 
     
 
 
  
 
     Six Months
Ended
June 30, 2022		  
Basic and diluted net income per common share    Class A      Class B  
Numerator:
                  
Allocation of net income
    $ 2,430,395      $ 613,027  
Denominator:
                  
Basic and diluted weighted average shares outstanding
      11,893,750        3,000,000  
    
 
 
     
 
 
  
Basic and diluted net income per common share
    $ 0.20      $ 0.20  
    
 
 
     
 
 
  
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation maximum coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature, except for the warrant liabilities (see Note 9).
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders’ equity as previously reported.
 
F-11
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update (“ASU”) Topic
2020-06,
“Debt — Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU
2020-06
removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06
is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU
2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards update, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE
4
. INITIAL PUBLIC OFFERING
Pursuant to the IPO, on the Company sold 11,500,000 Units, which includes the full exercise by the underwriter of its over-allotment option on January 21, 2021, in the amount of 1,500,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one common stock, three-fourths of one Public Warrant and one right (“Public Right”). Each whole Public Warrant entitles the holder to purchase one share common stock at an exercise price of $11.50 per whole share (see Note 8). Each Public Right entitles the holder to receive
one-tenth
of one common stock upon completion of the Business Combination (see Note 8).
NOTE
5
. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO on January 7, 2021, and the full exercise by the underwriter of its over-allotment option on January 21, 2021, the initial stockholders purchased an aggregate of 393,750 Placement Units at a price of $10.00 per Placement Unit, ($3,937,500 in the aggregate), from the Company in a private placement. The proceeds from the sale of the Placement Units were added to the net proceeds from the IPO held in the Trust Account. The Placement Units are identical to the Units sold in the IPO, except for the Placement Warrants, as described in Note 6. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Placement Warrants and the rights underlying
the
Placement Units (“Private Rights”) will expire worthless.
NOTE
6
. RELATED PARTY TRANSACTIONS
Class B Common Stock
On October 13, 2020, the Company issued an aggregate of 2,875,000 shares of Class B common stock to the Sponsor for an aggregate purchase price of $25,000 in cash (the “Founder Shares”). In October 2020, the Sponsor transferred 10,000 founder shares to our Chief Financial Officer and 5,000 to each of our four independent director nominees. The fair value of the transferred shares was immaterial. The Class B common stock included an aggregate of up to 375,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Sponsor will collectively own 20% of the Company’s issued and outstanding shares after the IPO (assuming the initial stockholders do not purchase any Public Shares in the IPO and excluding the Placement Units and underlying securities). As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The initial stockholders have agreed not to transfer, assign or sell any of the Class B common stock (except to certain permitted transferees) until, with respect to 50% of the Class B common stock, the earlier of (i) six months after the date of the consummation of a Business Combination, or (ii) the date on which the closing price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any
30-trading
day period commencing after a Business Combination, with respect to the remaining 50% of the Class B common stock, upon six months after the date of the consummation of a Business Combination, or earlier, in each case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
Promissory Note — Related Party
On October 13, 2020, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The note was
non-interest
bearing and payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the IPO. The outstanding balance under the Promissory Note of $108,200 was fully repaid on January 11, 2021.
 
F-12
Administrative Services Arrangement
The Company’s Sponsor has agreed, commencing from the date that the Company’s securities are first listed on Nasdaq through the earlier of the Company’s consummation of a Business Combination and its liquidation, to make available to the Company certain general and administrative services, including office space, utilities and administrative services, as the Company may require from time to time. The Company has agreed to pay the Sponsor $10,000 per month for these services the company incurred $30,000 of and $60,000, respectively, of such fees for the three and six months ended June 30, 2022. As of June 30, 2022, $120,000 of administrative service fees has been incurred and is unpaid.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to and did not commit to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such notes may be converted upon consummation of a Business Combination into additional Private Units at a price of $10.00 per Unit. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
 
As of June 30, 2022, there was $0 outstanding.
On November 1
1
, 2021, the Sponsor provided a firm commitment to provide up to $1,000,000 in
non-interest
bearing loans for working capital purposes. As of June 30, 2022, there were $364,000 of such loans outstanding.
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.
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.
 
F-13
NOTE
7
. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on January 4, 2021, the holders of the Founder Shares, Placement units, and Representative Shares are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. Notwithstanding the foregoing, the underwriters may not exercise its demand and “piggyback” registration rights after five and seven years, respectively, after the effective date of the IPO. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a
45-day
option to purchase up to 1,500,000 additional Units to cover over-allotments at the IPO price, less the underwriting discounts and commissions. On January 19, 2021, the Underwriters exercised their over-allotment option in full, and the closing of the issuance and sale of the additional 1,500,000 Units (“the Over-Allotment Units”) occurred on January 21, 2021, generating gross proceeds of $15,000,000. The Underwriters were paid a cash underwriting discount of $862,500. $3,450,000 will be payable to the underwriters for deferred underwriting commissions. The deferred fee became payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Right of First Refusal
For a period beginning on January 7, 2021 and ending 12 months from the closing of a business combination, the Company has granted the underwriters a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private or public equity, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the Company’s registration statement in connection with its IPO.
Merger Agreement — Ancillary Agreements
Capitalized terms used in this section but not otherwise defined have the meanings given to them in the Merger Agreement. Simultaneously with the execution of the Merger 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 Merger Agreement and related transactions. These eCombustible members also agreed to take certain other actions in support of the Merger Agreement and related transactions, including cooperation with respect to the eCombustible Registration Statement, and to refrain from taking such actions that would adversely impede the ability of the parties to perform the Merger 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.
 
F-1
4
Simultaneously with the execution of the Merger Agreement, Benessere, Pubco, eCombustible and the sponsor, entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) pursuant to which the sponsor agreed to support the Mergers and to vote all of its shares of Class A common stock (and all other Benessere securities owned by the Sponsor, including founder shares consisting of Class B common stock, private rights and private warrants) in favor of the Merger Agreement and related transactions. The sponsor also agreed to take certain other actions in support of the Merger Agreement and related transactions and to refrain from taking such actions that would adversely impede the ability of the parties to perform the Merger Agreement. The Sponsor Support Agreement also prevents transfers, except for certain permitted transfers, between the date of the Sponsor Support Agreement and the date of the Closing or earlier termination of the Mergers. The sponsor also agreed to a
lock-up
provision whereby, subject to limited specified exceptions, the sponsor will not for six months from the Closing (or, if earlier, (i) the date on which the closing sale price of a share of Pubco common stock equals or exceeds $12.00 per share for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing or (ii) the date post-Closing on which Pubco consummates a liquidation, merger, capital stock exchange, reorganization or other similar transaction with an unaffiliated third party resulting in all of Pubco’s stockholders having the right to exchange their equity holdings in Pubco for cash, securities or other property) engage in any direct or indirect transfer or disposition of Pubco securities or Benessere securities or publicly disclose the intention to do so.
On January 7, 2022, the Company held a stockholder meeting to extend the date by which the Company has to consummate a business combination from January 7, 2022 to July 7, 2022. As part of the meeting, stockholders redeemed 1,170,511 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $11,886,421 (approximately $10.15 per share) was removed from the Company’s trust account to pay such holders. As part of the extension meeting to extend the liquidation date to July 7, 2022, the Sponsor and eCombustible each 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 (“Public Share”) that was not redeemed. The Contributions were
non-interest
bearing and repayable on the consummation of the Company’s business combination.
Prior to the Closing, certain persons and entities who will be affiliates of Pubco upon the Closing and certain other stockholders of Pubco are expected to enter into a Registration Rights Agreement and a
Lock-Up
Agreement. Pursuant to the terms of such agreements, Pubco will be obligated to file a registration statement to register the resale of certain securities held by such holders, subject to certain requirements and customary conditions. In addition, Significant Company Holders will be required to enter into a
Lock-Up
Agreement as a condition to the Closing, providing that the securities of Pubco held by such holders will be
locked-up
for a period of time following the Closing.
NOTE
8
. WARRANT LIABILITY
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of its initial Business Combination, it will use its commercially reasonable efforts to file with the SEC a post-effective amendment to the registration statement or a new registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the Company’s initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, it may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event it does not so elect, it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
 
F-15
Redemption of warrants when the price per Class A common stock equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the Public Warrants:
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per warrant;
 
  •  
upon a minimum of 30 days’ prior written notice of redemption, or the
30-day
redemption period, to each warrant holder; and
 
  •  
if, and only if, the closing price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Window and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants are not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be
non-redeemable
so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company accounted for the 8,920,313 warrants issued in connection with the IPO (comprised of 8,625,000 Public Warrants and 295,312 Private Placement Warrants) in accordance with the guidance contained in ASC Topic
815-40.
Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability due to the existence of provisions whereby adjustments to the exercise price of the warrants is based on a variable that is not an input to the fair value of a
“fixed-for-fixed”
option and the existence of the potential for net cash settlement for the warrant holders (but not all common stockholders) in the event of a tender offer.
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the IPO. Accordingly, the Company classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject to remeasurement at each balance sheet date. With each such
re-measurement,
the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE
9
. STOCKHOLDERS’ DEFICIT
Class A Common Stock — The Company was authorized to issue 100,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. Holders of the Company’s Class A Common Stock are entitled to one vote for each share. At June 30, 2022 and December 31, 2021, there were 393,750 shares of Class A Common Stock issued and outstanding, excluding 10,329,489 and 11,500,000 shares of Class A Common Stock subject to possible redemption at June 30, 2022 and December 31, 2021.
 
F-16
On January 7, 2022, the Company held a stockholder meeting to extend the date by which the Company has to consummate a business combination from January 7, 2022 to July 7, 2022. As part of the meeting, stockholders redeemed 1,170,511 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $11,886,421 (approximately $10.15 per share) was removed from the Company’s trust account to pay such holders. As part of the extension meeting to extend the liquidation date to July 7, 2022, the Sponsor and eCombustible each 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 (“Public Share”) that was not redeemed. The Contributions were
non-interest
bearing and repayable on the consummation of the Company’s business combination.
Class B Common Stock — The Company was authorized to issue 10,000,000 shares of Class B Common Stock with a par value of $0.0001 per share. Holders of the Company’s Class B Common Stock are entitled to one vote for each share. At June 30, 2022 and December 31, 2021, there were 3,000,000 shares of Class B Common Stock issued and outstanding, including 125,000 Representative Shares (as defined and described below).
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a
one-for-one
basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in IPO and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of the Class B common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an
as-converted
basis, 20% of the total number of all shares of common stock outstanding upon completion of the IPO plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination.
Preferred Shares — The Company was authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share. At June 30, 2022 and December 31, 2021, there were no preferred shares issued or outstanding.
Rights
Each holder of a right will receive
one-tenth
(1/10) of one Class A common stock upon consummation of a Business Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the unit purchase price paid for by investors in the IPO. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders of the Class A common stock will receive in the transaction on an
as-converted
into Class A common stock basis and each holder of a right will be required to affirmatively convert its rights in order to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company).
Representative Shares
On October 10, 2020, we issued 125,000 shares of Class B common stock to the representative for nominal consideration (the “Representative Shares”). The Company accounted for the Representative Shares as an offering cost of the IPO, with a corresponding credit to stockholders’ equity. The Company estimated the fair value of Representative Shares to be $1,100 based upon the price of the Founder Shares issued to the Sponsor. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a
lock-up
for a period of 180 days immediately following the effective date of the registration statement related to the IPO pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the IPO except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners.
 
F-17
NOTE
10
. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are
re-measured
and reported at fair value at each reporting period, and
non-financial
assets and liabilities that are
re-measured
and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
 
Level 1:    Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2:    Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
   
Level 3:    Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about the Company’s derivative warrant liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
 
Description
    Quoted Prices in
Active Markets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant Other
Unobservable Inputs
(Level 3)		  
Asset:
                           
Marketable securities held in Trust Account
    $ 107,150,566      $ —        $ —    
Warrant Liabilities:
                           
Public Warrants
    $ 2,070,000      $ —        $ —    
Private Placement Warrants
    $ —        $ —        $ 70,875  
The following table presents information about the Company’s derivative warrant liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
 
Description
    Quoted Prices in
Active Markets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant Other
Unobservable Inputs
(Level 3)		  
Asset:
                           
Marketable securities held in Trust Account
    $ 116,784,563      $ —        $ —    
Warrant Liabilities:
                           
Public Warrants
    $ 6,727,500      $ —        $ —    
Private Placement Warrants
    $ —        $ —        $ 298,856  
At June 30, 2022 and December 31, 2021, assets held in the Trust Account were primarily invested in U.S. Treasury Securities.
The Company utilizes a modified Monte Carlo simulation to estimate the fair value of the private warrants and quoted prices in active markets for the public warrants at each reporting period.
 
F-18
The estimated fair value of the private placement warrant liabilities is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk- free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
 
     January 7, 2021     December 31, 2021     June 30, 2022  
     (Public Warrants)     (Private Warrants)     (Private Warrants)     (Private Warrants)  
Exercise price
    $ 11.50     $ 11.50     $ 11.50     $ 11.50  
Share price
    $ 10.00     $ 10.00     $ 10.00     $ 10.00  
Expected term (years)
      6.00       6.00       5.52       5.52  
Probability of Acquisition
      80.0 %      80.0 %      80.0 %      80.0 % 
Volatility
      5.0 %      5.0 %      5.0 %      n/a  
Risk-free rate
      0.11 %      0.11 %      0.06 %      3.02 % 
Dividend yield (per share)
      0.00 %      0.00 %      0.00 %      0.00 % 
The Public Warrants were initially valued using Level 3 fair value measurements as noted above until March 24, 2021 when they separated from the units and began trading on NASDAQ. At March 24, 2021 and through June 30, 2022 they were valued using Level 1 fair value measurements.
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period from January 7, 2021 through June 30, 2022.
 
     Fair Value
Measurement
Using Level 3
Inputs Total		  
Balance, January 7, 2021
    $ —    
Derivative liabilities recorded on issuance of derivative warrants
      10,861,980  
Transfer of public warrants from Level 3 to Level 1
      (6,727,500 ) 
Change in fair value of derivative liabilities
      (4,163,605 ) 
Balance, June 30, 2022
    $ 70,875  
NOTE 11. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred up to August 23, 2022 the date the financial statements were available to issue. Based upon this review, the Company did not identify any subsequent events, except as noted below, that would have required adjustment or disclosure in the condensed financial statements.
On July 8, 2022, the Company filed an amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Extension Amendment”). The Extension Amendment extends the date by which the Company must consummate its initial business combination from July 7, 2022 to January 7, 2023, or such earlier date as determined by the Company’s board of directors.
On July 14, 2022, stockholders holding 3,408,684 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $35,279,879 (approximately $10.35 per share) was removed from the Company’s trust account to pay such holders.
 
F-19
On July 15, 2022, the Company issued a promissory note (the “Note”) in the principal amount of up to $1,384,161 to the Sponsor, pursuant to which the Sponsor loaned to the Company up to $1,384,161 (the “Extension Funds”) to deposit into the Company’s trust account for each share of the Company’s Class A common stock (“Public Shares”) that was not redeemed in connection with the
e
xtension.
The Company caused the Extension Funds to be deposited into the Trust Account, which equates to approximately $0.033 per remaining Public Share, for each month past July 7, 2022 until January 7, 2023 that the Company needs to complete an initial business combination (the “Initial Business Combination”), 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 Initial Business Combination. As of July 15, 2022, an aggregate of $228,387 had been deposited into trust to support the first month of
e
xtension.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the 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.
Overview
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.
eCombustible Business Combination
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.
The aggregate merger consideration to be paid pursuant to the Business Combination Agreement to the eCombustible Securityholders as of the Effective Time will be an amount equal to $805,000,000, subject to adjustments for eCombustible’s closing debt, net of adjustments for working capital, net debt and transaction expenses (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares (as defined below) after the Closing, as described below. The Merger Consideration to be paid to the eCombustible Securityholders will be paid solely by the delivery of new shares of Pubco common stock, with each valued at the price per share (the “Redemption Price”) at which each share of Benessere common stock is redeemed or converted pursuant to the redemption by Benessere of its public stockholders in connection with Benessere’s initial business combination, as required by Benessere’s amended and restated certificate
of incorporation and by-laws and Benessere’s
initial public offering prospectus (the “Redemption”). The Merger Consideration will be subject
to a true-up adjustment
procedure commencing within 90 days after the Closing.
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.
In addition to the Merger Consideration set forth above, the eCombustible Securityholders will also have a contingent right to receive up to an additional 59,000,000 shares of Pubco common stock (the “Earnout Shares”) after the Closing based on the price performance of the Pubco common stock
during the 30-month period
following the Closing Date (the “Earnout Period”). The Earnout Shares shall be earned and payable during the Earnout Period as follows:
 
 
•
 
if the dollar volume-weighted average price (“VWAP”) of Pubco’s common stock equals or exceeds $12.50 per share for any 20 out of any 30 consecutive trading days, Pubco shall issue to the eCombustible Securityholders Holders an aggregate of 29,500,000 Earnout Shares; and
 
 
•
 
if the VWAP of Pubco’s common stock equals or exceeds $15.00 per share for any 20 out of any 30 consecutive trading days, the Pubco shall issue to the eCombustible Securityholders an aggregate of an additional 29,500,000 Earnout Shares.
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
Ancillary Agreements
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.
Simultaneously with the execution of the Business Combination Agreement, Benessere, Pubco, eCombustible and the sponsor, entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) pursuant to which the sponsor agreed to support the Mergers and to vote all of its shares of Class A common stock (and all other Benessere securities owned by the Sponsor, including founder shares consisting of Class B common stock, private rights and private warrants) in favor of the Business Combination Agreement and related transactions. The sponsor also agreed to take certain other actions in support of the Business Combination Agreement and related transactions and to refrain from taking such actions that would adversely impede the ability of the parties to perform the Business Combination Agreement. The Sponsor Support Agreement also prevents transfers, except for certain permitted transfers, between the date of the Sponsor Support Agreement and the date of the Closing or earlier termination of the Mergers. The sponsor also agreed
to a lock-up provision whereby,
subject to limited specified exceptions, the sponsor will not for six months from the Closing (or, if earlier, (i) the date on which the closing sale price of a share of Pubco common stock equals or exceeds $12.00 per share for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing or (ii) the date post-Closing on which Pubco consummates a liquidation, merger, capital stock exchange, reorganization or other similar transaction with an unaffiliated third party resulting in all of Pubco’s stockholders having the right to exchange their equity holdings in Pubco for cash, securities or other property) engage in any direct or indirect transfer or disposition of Pubco securities or Benessere securities or publicly disclose the intention to do so.
Prior to the Closing, certain persons and entities who will be affiliates of Pubco upon the Closing and certain other stockholders of Pubco are expected to enter into a Registration Rights Agreement and
a Lock-Up
Agreement. Pursuant to the terms of such agreements, Pubco will be obligated to file a registration statement to register the resale of certain securities held by such holders, subject to certain requirements and customary conditions. In addition, Significant Company Holders will be required to enter into
a Lock-Up Agreement
as a condition to the Closing, providing that the securities of Pubco held by such holders will
be locked-up for
a period of time following the Closing.
Qualified Summary
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.
For more information relating to the eCombustible Business Combination and the agreements described above, please see the
Form 8-K filed
by the Company on November 30, 2021 and the Registration Statement on Form
S-4,
filed with the SEC by Pubco on February 11, 2022, as amended on April 22, 2022 and on May 16, 2022, and as may be further amended from time to time;.
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.
Recent Developments
Extensions and Extension Notes
On January 7, 2022, the Company held a stockholder meeting (the “January Extension Meeting”) to extend the date by which the Company has to consummate a business combination from January 7, 2022 to July 7, 2022. As part of the meeting, stockholders redeemed 1,170,511 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $11,886,421 (approximately $10.15 per share) was removed from the Company’s trust account to pay such holders. As part of the extension meeting to extend the liquidation date to July 7, 2022, the Sponsor and eCombustible each 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 (“Public Share”) that was not redeemed (the “January Extension Notes”). The January Extension Notes were
non-interest
bearing and repayable on the earlier of the consummation of the Company’s business combination or the Company’s liquidation.
 
 
F-22
On July 7, 2022, the Company held a stockholder meeting (the “July Extension Meeting”) to extend the date by which the Company has to consummate a business combination from July 7, 2022 to January 7, 2023. As part of the meeting, stockholders redeemed 3,408,684 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, approximately $35,279,879 (approximately $10.35 per share) was removed from the Company’s trust account to pay such holders. As part of the extension meeting to extend the liquidation date to January 7, 2023, on July 15, 2022, the Sponsor agreed to loan to the Company an aggregate of up to $1,032,949 to deposit into the Company’s trust account for each Public Share that was not redeemed (the “July Extension Note”). The July Extension Note is
non-interest
bearing and repayable on the earlier of the consummation of the Company’s business combination or the Company’s liquidation.
Regulatory Matters
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.
Business Combination Agreement Amendment
On June 5, 2022, Benessere, BCAC Holdings, eCombustible and the other parties to the Business Combination Agreement entered into the First Amendment to Agreement and Plan of Merger (the “
Amendment
”). The Amendment amends the Business Combination Agreement to, among other things, provide that the number of shares of BCAC Holdings Class A common stock to be issued to the equityholders of eCombustible as Merger Consideration (as such term is defined in the Businesss Combination Agreement) will be based on a per share price of $10.00 rather the price at which Benessere redeems it public stockholders upon the Redemption (as such term is defined in the Businesss Combination Agreement).
The Amendment also adds a minimum cash closing condition requiring that, upon the closing of the transactions contemplated by the Business Combination Agreement (the “
Closing
”), Benessere shall have cash and cash equivalents, including funds remaining in its trust account (after giving effect to the completion and payment of the Redemption) and the proceeds of any PIPE investment, or any other alternative financing arrangement mutual agreed upon by the parties, after giving effect to the payment of unpaid expenses and liabilities, at least equal to Twenty-Five Million U.S. Dollars ($25,000,000).
Further, the Amendment extends the date by which the closing of the transactions contemplated by the Business Combination Agreement must occur, from May 23, 2022 to October 7, 2022 (the “
Outside Date
”). If the Closing has not occurred on or prior to the Outside Date, the Business Combination Agreement may be terminated by written notice by either Benessere or eCombustible.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 2022 were organizational activities and those necessary to prepare for the initial public offering, described below and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate
non-operating
income in the form of interest income on marketable securities held after the initial public offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
 
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.
Liquidity, Capital Resources and Going Concern
Until the consummation of the initial public offering, our only source of liquidity was an initial purchase of Class B 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.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on
a non-interest
bring basis as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. 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 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.
The company has incurred and expects to incur significant costs in pursuit of its acquisition plans. We may need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business,
undertaking in-depth
due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of the IPO and the sale of the placement units, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. While the company intends to complete the proposed Business Combination before July 7, 2023 there are no assurances that this will happen. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.
Related Party Transactions
The Sponsor advanced the Company an aggregate of $108,200 to cover expenses related to the IPO. The advances were
non-interest
bearing and due on demand. The outstanding balance under the Promissory Note of $108,200 was fully repaid on January 11, 2021.
 
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.
Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of
out-of-pocket
expenses incurred by such persons in connection with activities on our behalf.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. 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. 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. On November 11, 2021, the Sponsor provided a commitment to provide a $1,000,000
non-interest
bearing loan for working capital purpose. There were no amounts outstanding at December 31, 2021.
In January and July, 2022, we issued the Extension Notes, described below in Related Party Loans.
Upon the IPO, our sponsor purchased an aggregate of 360,000 placement units at a price of $10.00 per unit for an aggregate purchase price of $3,600,000. The over-allotment option has been exercised in full, the amount of placement units sold was 393,750 for an aggregate purchase price of $3,937,500. Each placement unit consists of one share of Class A common stock and three-fourths of one warrant. Each whole warrant is exercisable to purchase one whole share of common stock at $11.50 per share. Each right entitles the holder thereof to receive
one-tenth
(1/10) of one Class A common stock upon consummation of our initial business combination, so you must hold rights in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares, the representative shares, the placement shares, placement warrants or the placement rights, which will expire worthless if we do not consummate a business combination by January 7, 2023. The placement units are identical to the units sold in the IPO except that (a) the placement units and their component securities will not be transferable, assignable or saleable until 30 days after the consummation of our initial business combination except to permitted transferees, (b) the placement warrants, so long as they are held by our sponsor or its permitted transferees, (i) will not be redeemable by us, (ii) may be exercised by the holders on a cashless basis, and (iii) will be entitled to registration rights.
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.
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of June 30, 2022.
Contractual Obligations
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.
Related Party Loans
Working Capital Loan
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.
Extension Notes
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
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the 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:
Net loss per common share
We apply the
two-class
method in calculating earnings per share. Common stock subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.
Recent Accounting Standards
In August 2020, the FASB issued ASU
No. 2020-06,
“Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU
2020-06
removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06
is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU
2020-06
would have on its financial position, results of operations or cash flows.
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
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC
815-15.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period. In accordance with ASC
825-10
“Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred.
We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of warrants were estimated using a Modified Monte Carlo Simulation.
Class A Common Stock Subject to Possible Redemption
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.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the
COVID-19
pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial 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
As required by Rules
 
13a-15
 
and
 
15d-15
 
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the Company’s material weaknesses in accounting for complex financial instruments and accruals, the Company’s disclosure controls and procedures (as defined in Rules
 
13a-15
 
(e) and
 
15d-15
 
(e) under the Exchange Act) were not effective as of June 30, 2022.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the evaluation of the SEC Statement and management’s subsequent
 
re-evaluation
 
of its Prior Financial Statements, the Company determined that there were errors in its accounting for its warrants and redeemable shares. Management concluded that a material weakness in internal control over financial reporting existed relating to the accounting treatment for complex financial instruments and that the failure to properly account for such instruments constituted a material weakness. This material weakness resulted in the need to restate the Prior Financial Statements. Additionally, the Company subsequently identified a material weakness related to accruals.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2022 covered by this Quarterly Report on Form
10-Q
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, with the exception of the below.
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for the Public Warrants and Private Placement Warrants and the restatement of the Prior Financials and accruals. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of the material weaknesses and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. Further, while we have processes to properly identify and record accruals we have adjusted our processes to increase communication and review amongst company employees.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
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 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€ 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.
Item 1A. Risk Factors.
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.
Changes to laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our initial business combination.
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 could make it more difficult for us to consummate 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, 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.
Resources could be wasted in researching acquisitions that are not completed, 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 than such amount in certain circumstances, on the liquidation of our trust account and our rights and warrants will expire worthless.
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.
There may be significant competition for us to find an attractive target for an initial business combination. This could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target for our initial business combination.
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.
The SEC has recently issued proposed rules relating to certain activities of special purpose acquisition companies (“SPACs”). Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our 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.
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.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted. As a result, in such circumstances, 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.
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.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the trust account and instead to hold the funds in the trust account in cash until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of securities in the trust account, we would likely receive minimal interest, if any, on the funds held in the trust account, which would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of 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.
There is substantial doubt about our ability to continue as a “going concern.”
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.
We may not be able to complete an initial business combination with a U.S. target company since such initial business combination may be subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (“CFIUS”), or ultimately prohibited.
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
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
 
F-31
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form
10-Q.
 
No.
  
Description of Exhibit
2.1
  
3.1
  
10.1
  
10.2*
  
31.1*
  
31.2*
  
32.1**
  
32.2**
  
101.INS*
  
Inline XBRL Instance Document
101.CAL*
  
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*
  
Inline XBRL Taxonomy Extension Schema Document
101.DEF*
  
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
  
Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*
  
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
  
Cover Page Interactive File
 
*
Filed herewith.
**
Furnished.
 
F-32
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
BENESSERE CAPITAL ACQUISITION CORP.
Date: August 24, 2022     By:  
/s/ Patrick Orlando
    Name:   Patrick Orlando
    Title:   Chief Executive Officer
      (Principal Executive Officer)
Date: August 24, 2022     By:  
/s/ Francisco O. Flores
    Name:   Francisco O. Flores
    Title:   Chief Financial Officer
      (Principal Accounting and Financial Officer)
 
F-33
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