UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the year ended December 31, 2021

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number 001-39821

 

ACKRELL SPAC PARTNERS I CO.

(Exact name of registrant as specified in its charter)

 

Delaware   83-3237047
(State or Other Jurisdiction
of Incorporation)
  (I.R.S. Employer
Identification No.)
     

2093 Philadelphia Pike #1968

Claymont, DE

  19703
(Address of principal executive offices)   (zip code)

 

(650) 560 4753

(Issuer’s Telephone Number, Including Area Code)

 

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 subunit and one-half of one warrant   ACKIU   The Nasdaq Stock Market LLC
Subunits included as part of the units, each consisting of one share of common stock, $.0001 par value, and one-half of one warrant   ACKIT   The Nasdaq Stock Market LLC
Common Stock, par value $0.0001 per share   ACKI   The Nasdaq Stock Market LLC
Redeemable warrants   ACKIW   The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement 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 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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

 

Auditor PCAOB ID Number: 1195 Auditor Name: UHY LLP Auditor Location: New York, New York, United States of America

 

The aggregate market value of the common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for the subunits on June 30, 2021, as reported on the Nasdaq Capital Market was $141,635,060.

 

As of March 30, 2022, 18,169,000 shares of common stock, including shares of common stock underlying the subunits, par value $0.0001 per share, were issued and outstanding.

 

 

 

 

 

ACKRELL SPAC PARTNERS I CO.

FORM 10-K

 

TABLE OF CONTENTS

 

PART I   1
     
  Item 1. Business 1
  Item 1A. Risk Factors 19
  Item 1B. Unresolved Staff Comments 21
  Item 2. Properties 21
  Item 3. Legal Proceedings 21
  Item 4. Mine Safety Disclosures 21
       
PART II   22
  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22
  Item 6. Reserved 23
  Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
  Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
  Item 8. Financial Statements and Supplementary Data 27
  Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 27
  Item 9A.  Controls and Procedures 27
  Item 9B. Other Information 27
  Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 27
       
PART III   28
  Item 10. Directors, Executive Officers and Corporate Governance 28
  Item 11. Executive Compensation 33
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 34
  Item 13. Certain Relationships and Related Transactions, and Director Independence 35
  Item 14. Principal Accountant Fees and Services 37
       
PART IV   38
  Item 15. Exhibit and Financial Statement Schedules 38
  Item 16. Form 10-K Summary 39

 

i

 

 

Unless otherwise stated in this Annual Report on Form 10-K (the “Report”):

 

  “Blackstone” is to North Atlantic Imports, LLC, a Utah limited liability company d/b/a Blackstone Products;
     
  “Blackstone Merger” is to the proposed business combination transaction involving the Company and Blackstone, including all the transactions contemplated by the Blackstone Merger Agreement;
     
  “Blackstone Merger Agreement” refers to the business combination agreement between the Company, North Atlantic Imports, LLC, Blackstone Products, Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Ackrell, Ackrell Merger Sub Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Newco, Roger Dahle, an individual residing in Utah and holder of certain membership interests in North Atlantic Imports, LLC, and North Atlantic Imports, Inc., a business company formed under the laws of the British Virgin Islands;
     
  “Blackstone Registration Statement” are to the Form S-4 filed by Blackstone Products, Inc. with the SEC on February 15, 2022 (File No. 333-262758 );
     
  “board of directors” or “board” are to the board of directors of the Company;

 

  “Company”, “we,” “us,” and “our” refer to Ackrell SPAC Partners I Co.;

 

  “EBC” refers to EarlyBirdCapital, Inc., the representative of the underwriters in our IPO;
     
  “Exchange Act” are to the Securities Exchange Act of 1934, as amended;

 

  “FMCG” refers to fast-moving consumer goods;

 

  “founder shares” refer to the 3,450,000 shares of common stock issued prior to our IPO and owned by our Sponsor, officers and directors;
     
  “initial business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;

 

  “initial stockholders” refer to all holders of our founder shares prior to our IPO;

 

  “IPO” refers to our initial public offering, which we completed on December 23, 2020, where an aggregate of 13,800,000 public units were sold to public investors at a price of $10.00 per unit, generating gross proceeds of $138,000,000 to the Company;

 

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  “private placement” refers to the private placement that occurred simultaneously with the completion of our IPO where an aggregate of 539,000 private units were sold to our Sponsor and EBC (470,000 placement units to our Sponsor and 69,000 to EBC) at a price of $10.00 per unit, generating gross proceeds of $5,390,000 to the Company;

 

  “private shares” refer to the 539,000 shares of common stock underlying our private subunits;

 

  “private subunits” refer to the 539,000 subunits underlying our private units, each private subunit consisting of one private share and one-half of one private warrant;

 

  “private units” refer to the 539,000 units sold to our Sponsor and EBC in the private placement, each private unit consisting of i) one private subunit, which consists of one private share and one-half of one private warrant and ii) one-half of one private warrant, with each whole private warrant exercisable to purchase one share of common stock;

 

  “private warrants” refer to the 539,000 warrants underlying our private units and subunits, with each whole warrant exercisable to purchase one share of common stock;

 

  “public shares” refer to the 13,800,000 shares of common stock underlying our public subunits;

 

  “public subunits” refer to the 13,800,000 subunits underlying our public units, each public subunit consisting of one public share and one-half of one public warrant, with each whole public warrant exercisable to purchase one share of common stock;

 

  “public units” refer to the 13,800,000 units sold in our IPO, each public unit consisting of i) one public subunit, which consists of one public share and one-half of one public warrant and ii) one-half of one public warrant, with each whole warrant exercisable to purchase one share of common stock;

 

  “public warrants” refer to the 13,800,000 warrants underlying our public units and subunits, with each whole warrant exercisable to purchase one share of common stock;

 

  “Registration Statements” refer to, collectively, our registration statement on Form S-1 (No. 333-251060) which was declared effective by the Securities Exchange Commission on December 21, 2020, and registration statement on Form S-1MEF (No. 333-251537) which became effective automatically upon filing on December 21, 2020;

 

  “representative shares” refer to the 380,000 shares of common stock issued to EBC prior to our IPO;

 

  “Sponsor” refers to Ackrell SPAC Sponsors I LLC;
     
  “Securities Act” are to the Securities Act of 1933, as amended;

 

  “trust account” refers to the U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee, where an aggregate of $139,380,000, or $10.10 per public unit sold in our IPO, of our proceeds from our IPO and private placement is deposited upon the completion of our IPO.

 

iii

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

The statements contained in this Report that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, for example, statements about:

 

  our ability to complete our initial business combination in the branded FMCG industry, such as the Blackstone Merger;

 

  our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

 

  our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements and other benefits;

 

  our potential ability to obtain additional financing to complete a business combination in the branded FMCG industry;

 

  our pool of prospective target businesses;

 

  the ability of our officers and directors to generate a number of potential investment opportunities in the branded FMCG industry;

 

  potential changes in control of us if we acquire one or more target businesses for stock;

 

  our public securities’ potential liquidity and trading;

 

  the lack of a market for our securities;

 

  our expectations regarding the time during which we will be an “emerging growth company” under the JOBS Act;

 

  our use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or

 

  our financial performance following our IPO or following our initial business combination.

 

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

 

iv

 

 

PART I

 

ITEM 1. BUSINESS

 

Introduction

 

We are a blank check company formed under the laws of the State of Delaware on September 11, 2018. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” Our initial business combination and value creation strategy is to identify, acquire and, after our initial business combination, assist in the growth of a branded fast-moving consumer goods business, which we refer to as a branded “FMCG” business. Our focus is on the alcoholic and non-alcoholic beverage and wellness sectors of the FMCG market. In addition, we believe that there is an emerging opportunity within these sectors to target businesses that are focused on hemp-based branded consumer goods. However, we are not limited to the branded FMCG industry and we may pursue a business combination opportunity in any business or industry we choose and we may pursue a company with operations or opportunities outside of the United States.

 

Initial Public Offering

 

On December 23, 2020, we consummated our IPO of 13,800,000 public units, which included the full exercise of the underwriters’ over-allotment option. Each public unit consists of one public subunit and one-half of one public warrant, with each whole public warrant entitling the holder thereof to purchase one share of common stock of the Company, par value $0.0001 per share, for $11.50 per share. Each public subunit consists of one share of common stock and one-half of one public warrant. The public units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $138,000,000.

 

Simultaneously with the closing of the IPO, we completed the private placement of an aggregate of 539,000 private units to the Sponsor and EarlyBirdCapital, Inc. (“EBC”) (470,000 private units to the Sponsor and 69,000 private units to EBC) at a purchase price of $10.00 per private unit, generating gross proceeds to the Company of $5,390,000. The private units (and underlying securities) are identical to the public units (and underlying securities) sold in the IPO, except as otherwise disclosed in our Registration Statements that became effective on December 21, 2020.

 

If we are unable to consummate an initial business combination by June 23, 2022, we will redeem 100% of the public subunits for a pro rata portion of the trust account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us, divided by the number of then outstanding public subunits, subject to applicable law and as further described herein. Our public stockholders were not afforded an opportunity to vote on our extension of time to consummate an initial business combination described above, and will not be afforded an opportunity to vote on any further extensions, or redeem their subunits in connection with such extensions.

 

Our management team consists of seasoned professionals who have experience spanning the FMCG industry, including beverage, wellness and hemp products, product development, sales, marketing and distribution, mergers and acquisitions, corporate finance, corporate governance and compliance, legal and regulatory matters and investment management. See “Item 10 Directors, Executive Officers and Corporate Governance” for additional information about our directors and executive officers. Our management team will be supported by the investment banking team of Ackrell Capital, an affiliate of our Chairman. We believe that Ackrell Capital’s industry expertise, transaction experience and relationships may provide us with a substantial number of attractive potential business combination targets.

 

1

 

 

The Blackstone Merger and Private Placement

 

The Blackstone Merger Agreement

 

On December 22, 2021, the Company, North Atlantic Imports, LLC, Blackstone Products, Inc. (“Newco”), Ackrell Merger Sub Inc. (“Merger Sub”), Roger Dahle, an individual residing in Utah and holder of certain membership interests in Blackstone (“Dahle”), and North Atlantic Imports, Inc., (“NAI” and together with Dahle, the “Contributors”), entered into a Business Combination Agreement (the “Blackstone Merger Agreement”).

 

Pursuant to the Blackstone Merger Agreement, subject to the terms and conditions set forth therein, immediately prior to the consummation of the transactions contemplated by the Blackstone Merger Agreement (the “Closing”), Blackstone will enter into a redemption agreement with Cowell International Inc., a Utah corporation and a wholly-owned subsidiary of NAI (“Cowell”), and Dahle, pursuant to which Blackstone will redeem, prior to the Closing, certain of its membership interests held by Cowell in exchange for $100,000,000, which will be funded by newly-incurred indebtedness for borrowed money of Blackstone in the principal amount of $100,000,000.

 

Upon the consummation of the Closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of Newco (the “Surviving Corporation”). Immediately following the effective time of the Merger (the “Effective Time”), (i) NAI will contribute 45 shares of Cowell common stock, par value $1.00 per share (“Cowell Common Stock”) to Newco and 33 shares of Cowell Common Stock to the Company (the “NAI Contributions”), (ii) Cowell will redeem the remaining 22 shares of Cowell Common Stock (the “NAI Redemption”) and (iii) Dahle will contribute all of his membership interests in Blackstone to Newco (the “Dahle Contribution”).

 

The aggregate consideration to be paid in the Blackstone Merger is based on a pre-money company equity valuation of $721,000,000 and will be made up of cash consideration and stock consideration.

 

Specifically, (i) the Company will pay $150,000,000 to NAI as consideration for the contribution of Cowell Common Stock to the Company; (ii) Cowell will pay $100,000,000 to NAI as consideration for the NAI Redemption; (iii) Newco will issue and deliver to NAI 20,350,681 shares of Newco common stock, par value $0.0001 per share (“Newco Common Stock”) calculated based upon NAI’s ownership percentage (on a fully-diluted basis taking into account the Assumed RSUs (as defined below) and after giving effect to the cash consideration) as of the Closing as consideration for the contribution of Cowell Common Stock to Newco; and (vi) Newco will issue to Dahle 35,293,854 shares of Newco Common Stock calculated based upon Dahle’s ownership percentage (on a fully-diluted basis taking into account the Assumed RSUs and after giving effect to the cash consideration) of the Closing as consideration for the Dahle Contribution.  In addition, each contingent right to receive an equity interest in Blackstone to be issued to Dahle will be assumed by Newco (the “Assumed RSUs”), with such Assumed RSUs representing the right to acquire a number of shares of Newco Common Stock representing the ownership percentage attributable to the Assumed RSUs upon the terms (including vesting) set forth in the Assumed RSUs.

 

At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, Blackstone, NAI, Dahle or the holders of any of the following securities:

 

(a) Each share of the Company common stock issued and outstanding immediately prior to the Effective Time (subject to certain exceptions pursuant to the Blackstone Merger Agreement) will be converted into one share of NewCo common stock.

 

(b) Each share of the Company common stock held in the treasury of the Company and each share of the Company common stock owned by Merger Sub, Blackstone or any direct or indirect wholly-owned subsidiary of the Company immediately prior to the Effective Time will be canceled.

 

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(c) Each share of Merger Sub common stock issued and outstanding immediately prior to the Effective Time will be converted into one share of common stock of the Surviving Corporation.

 

(d) Each warrant of the Company that is outstanding immediately prior to the Effective Time will be converted into a right to acquire one share of NewCo common stock on substantially the same terms as were in effect immediately prior to the Effective Time for such warrants of the Company.

 

(e) The Assumed RSUs will be assumed by NewCo.

 

Representations and Warranties; Covenants

 

The Blackstone Merger Agreement contains representations and warranties of each of the parties thereto that are customary for transactions similar to the Blackstone Merger. The Blackstone Merger Agreement also contains certain customary covenants by each of the parties during the period between the signing of the Blackstone Merger Agreement and the earlier of the Closing or the termination of the Blackstone Merger Agreement in accordance with its terms, including with respect to (1) the operation of their respective businesses in the ordinary course of business; (2) the provision of access to the properties, books, personnel, and policies of Blackstone and the Company, respectively; (3) provision of financial statements by Blackstone; (4) the Company’s stock listing; (5) notifications of certain breaches, consent requirements, material adverse changes or other matters; (6) efforts to consummate the Closing and obtain third party and regulatory approvals; (7) tax matters and transfer taxes; (8) further assurances; (9) confidentiality; (10) public announcements; (11) directors’ and officers’ indemnification; and (12) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (if applicable). The parties further agreed to certain customary post-Closing covenants.

 

After the execution of the Blackstone Merger Agreement, the Company and Newco will (with the assistance and cooperation of Blackstone as reasonably requested by the Company), use its commercially reasonable efforts to prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) within 10 business days (subject to certain exceptions) after the Company’s receipt of Blackstone’s PCAOB-compliant audited financial statements from Blackstone a registration statement on Form S-4 in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”) of the Newco common stock, to be issued pursuant to the Blackstone Merger Agreement, which registration statement (the “Blackstone Registration Statement”) will also contain a proxy statement for the Company stockholders and a prospectus.

 

The Company will include provisions in the proxy statement with respect to (i) the approval of the business and the adoption and approval of Blackstone Merger Agreement, (ii) the adoption and approval of the amended and restated Newco certificate of incorporation, (iii) the appointment of the post-Closing Newco board of directors, (iv) the approval and adoption of Newco’s omnibus incentive plan, (v) the approval and adoption of Newco’s employee stock purchase plan, (vi) adjournment of the Company stockholders’ meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to approve and adopt any of the foregoing proposals and (vii) the approval of any other proposals reasonably agreed by the Company and Blackstone to be necessary or appropriate in connection with the transaction contemplated hereby.

 

The parties have also agreed, among other things, to take all action within their power as may be necessary or appropriate such that, effective immediately after the Closing, Newco’s board of directors shall consist of seven directors, which shall be divided into three classes.

 

Closing Conditions

 

The obligations of the parties to complete the Closing are subject to various conditions, including the following mutual conditions of the parties unless waived:

 

the proposals presented at the Company stockholders’ meeting will have been approved and adopted;

 

no governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award after the date of the Blackstone Merger Agreement which is then in effect and has the effect of making the Blackstone Merger, including the Merger, illegal or otherwise prohibiting consummation of the Blackstone Merger, including the Merger;

 

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all required filings under the HSR Act will have been completed and any applicable waiting period (and any extension thereof) applicable to the consummation of the Blackstone Merger under the HSR Act shall have expired or been terminated;

 

the Registration Statement will have been declared effective under the Securities Act, and no stop order suspending the effectiveness, or any proceedings for purposes of suspending the effectiveness, of the Registration Statement will be in effect or will have been initiated or threatened by the SEC;

 

the Newco Common Stock to be issued in connection with the Blackstone Merger will have been approved for listing on Nasdaq, subject only to official notice of issuance thereof; and

 

upon the Closing, after giving effect to the completion of the Redemption, the Company having net tangible assets of at least $5,000,001.

 

Unless waived by the Company, the obligations of the Company, Newco and Merger Sub to consummate the Blackstone Merger, including the Merger, are subject to the satisfaction of certain customary conditions (in addition to customary certificates and other closing deliverables), as well as the following:

 

accuracy of the representations and warranties made by Blackstone in the Blackstone Merger Agreement and material compliance by Blackstone with the covenants in the Blackstone Merger Agreement;

 

absence of any Blackstone Material Adverse Effect with respect to Blackstone between the date of the Blackstone Merger Agreement and the date of the Closing;

 

Blackstone will have delivered to the Company and Newco Blackstone’s PCAOB-compliant audited financials;

 

Cowell will have delivered a properly executed certification that Blackstone shares are not “U.S. real property interests”, together with a notice to the IRS, in accordance with Treasury Regulations;

 

Blackstone will have terminated certain specified related party contracts; and

 

the Manufacturing Supply Agreement between Fugang Technology Inc. and the Company in substantially the form attached to the Blackstone Merger Agreement will remain in effect.

 

Unless waived by Blackstone, the obligations of Blackstone to consummate the Merger are subject to the satisfaction of certain customary additional conditions (in addition to customary certificates and other closing deliverables), as well as the following:

 

accuracy of the representations and warranties made by the Company, Newco and Merger Sub in the Blackstone Merger Agreement and material compliance by the Company, Newco and Merger Sub with the covenants in the Blackstone Merger Agreement;

 

absence of any Company Material Adverse Effect with respect to the Company, Newco or Merger Sub between the date of the Blackstone Merger Agreement and the date of the Closing;

 

all members of the board of directors and all officers of the Company will have executed written resignations effective as of the Effective Time;

 

the aggregate amount of proceeds raised in the PIPE Investment plus the amount of funds in the trust account (after giving effect to any redemption of the Company common stock by the Company’s stockholders) will be at least $150,000,000; and

 

the Newco certificate of incorporation will have been amended and restated by Newco. 

 

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Termination

 

The Blackstone Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including:

 

by mutual written consent of the Company and Blackstone;

 

by either the Company or Blackstone if the Closing has not occurred by the date that is six months after the execution of the Blackstone Merger Agreement, other than as a result of a breach by the party seeking termination, provided, that in the event of an extension of the time for the Company to complete a Merger in accordance with the terms of the Company’s certificate of incorporation, such six month period will automatically be extended by a like period;

 

by either the Company or Blackstone if a governmental authority shall have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting, or if any law is in effect making illegal, the transactions contemplated by the Blackstone Merger Agreement, other than as caused by the breach of the party seeking termination;

 

by either the Company or Blackstone if the Company fails to obtain the required stockholder approvals at the Company’s stockholder meeting;

 

by the Company upon a breach of any representation, warranty, covenant or agreement on the part of Blackstone, NAI or Dahle set forth in the Blackstone Merger Agreement, or if any representation or warranty of Blackstone, NAI or Dahle becomes untrue and is not cured within 20 days;

 

by Blackstone upon a breach of any representation, warranty, covenant or agreement on the part of the Company, Newco or Merger Sub set forth in the Blackstone Merger Agreement, or if any representation or warranty of the Company, Newco or Merger Sub becomes untrue and is not cured within 20 days; and

 

by the Company if Blackstone has not delivered its PCAOB-compliant audited financials on or prior to February 28, 2022.

 

Related Agreements

 

Amended Registration Rights Agreement 

 

Contemporaneously with the execution and delivery of the Blackstone Merger Agreement, the Company, certain stockholders of the Company (collectively, the “Initial Investors”), NAI and Dahle entered into an Amended and Restated Registration Rights Agreement (the “Amended Registration Rights Agreement”). Pursuant to the Amended Registration Rights Agreement, the Initial Investors and the undersigned parties listed under “Holder” on the signature page thereto will be provided the right to demand registrations, piggy-back registrations and shelf registrations with respect to Registrable Securities (as defined in the Amended Registration Rights Agreement). The Amended Registration Rights Agreement would supersede the registration rights agreements between the Company and certain of the Initial Investors. 

 

Lock-Up Agreement 

 

Contemporaneously with the execution and delivery of the Blackstone Merger Agreement, certain Company stockholders, NAI and Dahle entered into a Lock-up Agreement with the Company (each, a “Lock-Up Agreement”). Pursuant to the Lock-Up Agreements, each party thereto has agreed to a 180-day lock-up of its Newco common stock following Closing, subject to (i) early release upon certain corporate transactions and (ii) certain limited permitted transfers where the recipient takes the shares subject to the restrictions in Lock-Up Agreement.

 

Company Stockholder Support Agreement

 

Contemporaneously with the execution and delivery of the Blackstone Merger Agreement, the Company, Blackstone and the Sponsor, holding 21.3% of the outstanding Shares of the Company entitled to vote entered into Stockholder Support Agreement (the “Ackrell Stockholder Support Agreement”). Pursuant the Ackrell Stockholder Support Agreement, the Sponsor has agreed, among other things, to vote its shares of the Company common stock in favor of the adoption an approval of the Blackstone Merger Agreement and the Blackstone Merger.

 

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Private Placement

 

Subscription Agreements

 

In connection with the Blackstone Merger, the Company and Newco entered into subscription agreements (the “Subscription Agreements”) with the investors named therein (the “PIPE Investors”), pursuant to which Newco agreed to issue and sell to the PIPE Investors approximately 3,100,000 units (the “Newco Units”) for a purchase price of $10.00 per unit, for an aggregate of approximately $31,000,000, and approximately $111,000,000 of Newco convertible notes (the “Convertible Notes”) immediately prior to the closing of the Merger (collectively, the “PIPE Investment”). Each Newco Unit consist of one share of Newco common stock and one-half of a warrant to acquire Newco common stock at an exercise price of $11.50 per share. None of the Sponsor, the Company’s directors or officers, or their respective affiliates will participate in the PIPE Investment. The terms of the units issued to the PIPE Investors are similar to the terms of the terms of the Company’s securities included in the private units issued to the Sponsor and EBC in the units private placement, except that the purchasers of the placement shares are not entitled to the Make-Whole Payments pursuant to the Transferor Agreement described below and the placement warrants and warrants included in the private subunits are exercisable on a cashless basis.

 

The PIPE Investment is conditioned on the concurrent closing of the Blackstone Merger, execution of an indenture (the “Indenture”) containing the terms of the Convertible Notes, certain minimum cash and liquidity requirements, absence of a material adverse effect on the Company, Newco or Blackstone, the operation of Blackstone’s business in the ordinary course between the execution of the Subscription Agreements until the consummation of the Blackstone Merger, certain minimum business performance metrics having been met and other customary closing conditions. The proceeds from the PIPE Investment will be used to fund a portion of the cash consideration for the Blackstone Merger. The Subscription Agreements provide for certain customary registration rights for the PIPE Investors.

 

Transferor Agreement

 

As an inducement to enter into the Subscriptions Agreements, certain Company stockholders, NAI and Dahle (the “Transferors”) have agreed, pursuant to a Transferor Agreement entered into contemporaneously with the execution and delivery of the Blackstone Merger Agreement, to effect a transfer of a certain number of shares of Newco Common Stock to purchasers of Newco Units concurrently with the consummation of the purchase of the Newco Units. The Transferors have agreed that a certain number of shares of Newco common stock will be deposited into an escrow fund that will be transferred to the purchasers of Newco Units in the event that the trading price of Newco common stock (the “Trading Price”) during the measurement period specified in the Subscription Agreements is less than $10.00 (the “Make-Whole Payment”). In the event a Make-Whole Payment is required to be made, the number of shares of Newco common stock to be transferred from the escrow fund shall be determined using a formula set forth in the Subscription Agreement; provided that the amount of shares of Newco common stock in the Make-Whole Payment shall be determined based upon a Trading Price between $5.75 and $10.00 per share, with more shares being transferred from the escrow fund as the Trading Price decreases. If the Trading Price is greater than $10.00 per share, no Make-Whole Payment shall be required and if the Trading Price is lower than $5.75 per share no additional Make-Whole Payment shall be required to account for the difference between $5.75 per share and the actual Trading Price. Any shares of Newco common stock remaining in the escrow fund following the Make-Whole Payment will be returned to the Transferors.

 

Warrant Agreement

 

The warrants will be issued pursuant to a warrant agreement to be entered into at the Closing of the Blackstone Merger. Each whole warrant will entitle the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as set forth in the warrant agreement, at any time commencing on the issuance of the warrant until its expiration.

 

The warrants may be called for redemption by Newco if at any time after their issuance until the expiration of the warrants, if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period and if, and only if, there is a current registration statement in effect with respect to the shares of Newco Common Stock underlying such warrants.

 

The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.

 

The terms of the warrants to be issued to the PIPE Investors is similar to the placement warrants and the warrants included in the placement subunits issued to the Sponsor and EBC in the units private placement, except that the placement warrants and warrants included in the private subunits are exercisable on a cashless basis.

 

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Convertible Notes Indenture

 

The Convertible Notes will mature on April 15, 2027, unless earlier repurchased, redeemed or converted in accordance with their terms, and will accrue interest at a rate of 9.875% per annum payable in a combination of cash and “payments-in-kind” (“PIK”). Prior to the second anniversary following the closing date of the Convertible Notes offering, 50% of the interest will be paid in cash with the remaining 50% to be paid in PIK or, at Newco’s option, cash. On and after the second anniversary of the closing date of the Convertible Notes offering, all interest will be paid in cash. However, if any such amount of cash interest is not permitted under the terms of Blackstone’s other credit facilities, the amount of permitted interest shall be paid in cash, and the remaining amount of interest will be paid in PIK. The amount that would otherwise have been paid in cash, but is paid in PIK will be used to repay Blackstone’s other credit facilities.

 

The Convertible Notes may be converted at any time (in whole or in part) into shares of Newco common stock, at the option of the holder of such Convertible Note, at a price equal to the lesser of (i) $11.50 and (ii) 15% premium to the lowest per share price of any equity issued prior to or substantially simultaneously with the closing of the Blackstone Merger (subject to customary adjustments).

 

Newco will have the option to redeem all or any portion of the Convertible Notes after April 15, 2025, if certain conditions (including that the Newco Common Stock is trading at or above $18.00 per share for at least 20 out of any 30-day trading period and the redeemed portion does not exceed a specified level of the Newco Common Stock trading volume over a specified period) are met. The Convertible Notes also contain default provisions, including provisions for potential acceleration of the Convertible Notes.

 

Each holder of a Note will have the right to cause the Newco to repurchase for cash all or a portion of the Notes held by such holder at any time upon the occurrence of a “fundamental change”, a customary definition provided in the Indenture (a “Fundamental Change”), at a price equal to par plus accrued and unpaid interest.

 

In the event of a conversion in connection with a Fundamental Change, the Conversion Price will be adjusted by a usual and customary Fundamental Change make-whole amount to be agreed in the Indenture.

 

The Indenture will include restrictive covenants that, among other things, will limit the ability of Newco to incur indebtedness above certain thresholds (subject to certain exceptions to be set forth in the Indenture), create liens, make certain payments or investments, enter into affiliate transactions, sell certain assets of Newco and its subsidiaries, pay dividends, and complete certain mergers or consolidations.

 

The Indenture also will include customary events of default.

 

Newco has agreed to file a shelf registration statement registering the resale of the shares of Newco common stock contained in the Newco Units and Make-Whole Payment or issuable upon exercise of the warrants or conversion of the Convertible Notes. In certain circumstances, the subscribers have piggy-back registration rights in the event that Newco engages in an underwritten offering of Newco common stock.

 

The Blackstone Merger Agreement and Related Agreements are further described in the Form 8-K filed by the Company on December 23, 2021 and the registration statement on Form S-4 (File No. 333- 262758) filed on February 15, 2022 by Blackstone Products, Inc. in connection with the Blackstone Merger (the “Blackstone Registration Statement”), which includes a proxy statement with respect to our special meeting of stockholders (the “Special Meeting”) to approve the Blackstone Merger, among other matters, that constitutes a prospectus of Blackstone Products, Inc. with respect to the securities to be issued in the Blackstone Merger. The foregoing descriptions of each of the Blackstone Meager Agreement and Related Agreements are qualified in their entirety by reference to such agreement filed as an exhibit to this Report.

 

In the event the Blackstone Merger is not consummated, we will continue to pursue an acquisition opportunity in any business, industry, sector or geographical location with a focus on the branded FMCG industry, including hemp-based branded consumer goods.

 

Other than as specifically discussed herein, this Report does not assume the closing of the Blackstone Merger.

 

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Recent Developments

 

On December 15, 2021, the Company formed Newco, a Delaware corporation that is a wholly-owned subsidiary of the Company, and Merger Sub, a Delaware corporation that is a wholly-owned subsidiary of Newco, for the purpose of executing the Merger Agreement. All activities of Newco and Merger Sub through December 31, 2021 related to executing the Merger Agreement.

 

On December 23, 2021 and March 21, 2022, at the request of our Sponsor, the Company extended the time to consummate a business combination by an aggregate of six months from December 23, 2021 to March 23, 2022 and then further to June 23, 2022 by depositing an aggregate of $2,760,000 into the trust account of the Company for its public stockholders, representing $0.20 per public unit. In connection with such extensions, the Company issued two unsecured promissory notes (collectively, the “Notes”) each in the principal amount of $1,380,000 to the Sponsor and Blackstone, a designee of the Sponsor, respectively. The Notes are non-interest bearing and payable in cash upon the closing of the Company’s initial business combination. All amounts due under the Notes shall be repaid in cash. In the event that a business combination is not consummated within the required timeframe in our amended and restated certificate of incorporation, no payment shall be due hereunder and the principal balance of the Notes shall be forgiven.

 

The Branded Fast-Moving Consumer Goods and Hemp Industries

 

The branded fast-moving consumer goods industry is large and global. It consists of a variety of segments, each with their distinct characteristics. Often, a segment will have a number of brands or companies that have achieved significant market share, with newcomers frequently entering the market. In order to continue to experience growth, brands or companies often must enter new markets or introduce new products with novel features or ingredients. Examples of branded FMCG segments with these characteristics include alcoholic and non-alcoholic beverages and wellness — some of the largest categories in the branded FMCG industry. One such area of growth is the hemp industry, in which numerous mainstream branded FMCG companies have made investments in, and acquisitions of, hemp-related companies.

 

Hemp is cannabis containing no more than 0.3% tetrahydrocannabinol, or THC, the psychoactive compound responsible for the “high” or euphoric feeling commonly associated with cannabis consumption. A cannabis plant can yield more than 100 different compounds known as “cannabinoids,” the two most prevalent of which are typically THC and CBD, which produces a physical effect without the psychoactive effects associated with THC.

 

In 2018, the U.S. Congress passed the Agriculture Improvement Act of 2018 (also known as the Farm Bill), which legalized a significant portion of the hemp industry. With the passage of the Farm Bill, there has been a significant increase in the availability of hemp-derived products, including products containing CBD. Hemp-derived CBD products are now legally available through mainstream distribution channels and retailers. A wide range of CBD-infused products, including lotions, serums, balms, tinctures, shampoos, soaps and pet treats, can now be found online and at a variety of retailers, such as supermarkets, cosmetic stores, beauty salons and pet supply stores. One segment of the hemp sector that continues to have market uncertainty in the U.S. is the CBD-infused food and beverage market, as the U.S. Food & Drug Administration has asserted that the sale of such products violates the U.S. Food, Drug, and Cosmetics Act. However, CBD-infused alcoholic and non-alcohol beverages are starting to be marketed in Europe as the legal framework for hemp in Europe is more permissive than in the United States.

 

Our management team believes that hemp-based consumer goods have the potential for mass consumer appeal around the world. Consumers are beginning to use hemp-based products to treat a variety of medical conditions, including anxiety, insomnia, pain and inflammation. In aggregate, across all state medical hemp laws in the United States, hemp is legally recognized as a form of therapy or medicine for more than 50 medical conditions. Similar to the alcohol and pharmaceutical markets, we believe that the total addressable consumer market for hemp-based products comprises a significant portion of the global adult population and will become an increasingly large and relevant consumer product segment.

 

Business Strategy

 

We believe that there are a range of target businesses that could benefit from our industry knowledge, relationships, capital and public vehicle. Our strategy is to identify and complete our initial business combination with a target operating in the branded FMCG industry. Our focus is on the alcoholic and non-alcoholic beverage and wellness sectors of the FMCG market. In addition, we believe that there is an emerging opportunity within these sectors to target businesses that are focused on hemp-based branded consumer goods. While we intend to initially focus on potential opportunities in the United States, the branded FMCG industry is global and we may pursue opportunities internationally. Notwithstanding the foregoing, we will not invest in, nor consummate a business combination with, a target business that we determine has been operating, or whose business plan is to operate, in violation of the U.S. Controlled Substances Act.

 

Our management team is in the process of identifying, contacting, and evaluating potential target businesses in the pursuit of a possible business combination, including the Blackstone Merger. In addition, we are communicating the parameters of our search to our network of relationships and transaction sources to help us identify potential target businesses other than Blackstone. We are leveraging our team’s collective experience in the branded FMCG and hemp industries and capital markets to successfully complete a business combination, and then continue to support our target business with our industry relationships, insights and regulatory knowledge, financial expertise and capital resources.

 

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Competitive Strengths

 

We believe that our management team is well positioned to identify attractive target businesses within the branded FMCG industry and to facilitate a successful business combination for the following reasons:

 

Track Record and Transaction Flow within the Branded FMCG Industry.

 

Our management team has a track record of successfully identifying and acquiring brands, products and companies within the branded FMCG industry. Shannon Soqui, our Vice Chairman, and Jason Roth, our Chief Executive Officer, are the current Chief Executive Officer and Chief Strategy Officer, respectively, of Next Frontier Brands. Next Frontier Brands is an international provider of fast-moving consumer goods, including alcoholic and non-alcoholic beverages and wellness products. Next Frontier Brand’s strategy is to acquire brands in both mature and emerging product categories within the beverage and wellness segments of the branded FMCG industry. Our strategy is to identify targets operating in markets similar to those in which Next Frontier Brands participates.

 

Extensive Network within the Hemp Industry.

 

Our management team has an extensive network throughout the hemp industry, including traditional branded FMCG businesses already addressing this market. Michael K. Ackrell, our Chairman, is the founder of Ackrell Capital, one of the few registered broker/dealers in the United States providing services to companies participating in the hemp industry. Ackrell Capital provides M&A advisory and capital raising services to clients in the United States and internationally. Ackrell Capital is a thought leader in the industry, publishing a variety of industry reports and analyses. Shannon Soqui, our Vice Chairman, is the co-founder, Chief Executive Officer and Chairman of the board of directors of Next Frontier Brands. Next Frontier Brands is an international provider of fast-moving consumer goods, including alcoholic and non-alcoholic beverages and hemp-based wellness products. Prior to co-founding Next Frontier Brands, Mr. Soqui served as the head of U.S. cannabis investment banking at Canaccord Genuity, a leading global cannabis investment bank. Jason Roth, our Chief Executive Officer, is the co-founder, the Chief Strategy Officer and a member of the board of directors of Next Frontier Brands. Prior to co-founding Next Frontier Brands, Mr. Roth was the Chief Executive Officer and Chairman of the board of directors of Mile High Labs International, which we believe was one of the world’s largest processors of hemp-derived CBD concentrates in 2019. While at Mile High Labs International, Mr. Roth conducted business with numerous leading alcoholic beverage companies and developed a large network of contacts in the beverage and wellness industries. Our contacts include corporate executives at public and private FMCG and hemp companies, investment professionals at private equity firms and other financial sponsors and industry research analysts, as well as lawyers and accountants serving the FMCG and hemp industries — any of whom could be a source of a lead to a possible target business. Ackrell Capital may receive consulting, success or finder fees in connection with assisting us in the consummation of our initial business combination.

 

Significant Prior SPAC Experience.

 

Our management team possesses a strong understanding of the SPAC structure and market. Our Chief Operating Officer and President, Stephen Cannon, has served as a member of management for seven SPACs that have completed initial public offerings, four of which have consummated initial business combinations. Most recently, Global SPAC Partners Co., which completed its initial public offering in April 2021, Archimedes Tech SPAC Partners Co., which completed its initial public offering in March 2021, Global SPAC Partners Co., and Twelve Seas Investment Company, which completed its initial public offering in June 2018 and its business combination in December 2019. Our Chief Financial Officer, Long Long, has more than a decade of corporate finance experience and has served as the Chief Financial Officer of Global SPAC Partners Co. as well as Archimedes Tech SPAC Partners Co. Mr. Long also oversaw the financial filings, daily operations and due diligence of business combination targets for Twelve Seas Investment Company. 

 

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Less Regulatory Risk due to our Industry Segment Focus.

 

While we may pursue a business combination target in any industry or geographical location, we intend to focus our search for businesses in the branded FMCG industry, including businesses that are focused on alcoholic and non-alcoholic beverages and wellness products, in the event that the Blackstone Merger is not consummated. We will target businesses that are compliant with applicable laws and regulations within the jurisdictions in which they are located or operate. We will not invest in, nor consummate a business combination with, a target business that we determine has been operating, or whose business plan is to operate, in violation of the U.S. Controlled Substances Act. Consequently, we believe that this strategy will reduce the legal and regulatory risks faced by our target businesses and public stockholders after the business combination.

 

Benefits as a Public Company.

 

We believe that our structure makes us an attractive business combination partner to a range of target businesses. A merger with us will offer a target business an alternative process to a public listing rather than the traditional initial public offering process. We believe that target businesses may favor this alternative given the challenges of a traditional initial public offering and our ability to offer greater certainty of execution. Once a proposed business combination, such as the Blackstone Merger, is approved by our stockholders and the transaction is consummated, the target business will have effectively become public. A traditional initial public offering is always subject to the underwriters’ ability to complete the offering, due to general market conditions, lack of investor interest or otherwise. Once public, we believe that the target business will have greater access to capital and a public currency to use for potential acquisitions. In addition, having a public currency provides the target business with an additional means of creating management incentives that may be better aligned with stockholders’ interests than it would have as a private company. Being public can also augment a company’s profile among potential new customers and vendors and aid in attracting talented management.

 

While we believe that our status as a public company makes us an attractive business partner, some potential target businesses may view the inherent limitations in our status as a blank check company as a deterrent and may prefer to effect a business combination with a more established entity or with a private company. These inherent limitations include limitations on our available financial resources, which may be inferior to those of other entities pursuing the acquisition of similar target businesses; the requirement that we seek stockholder approval of a business combination, which may delay the consummation of a transaction; and the existence of our outstanding warrants, which may represent a source of future dilution.

 

Strong Financial Position with Transaction Flexibility.

 

With approximately $140,822,578 held in trust and a public market for our securities as of December 31, 2021, we can offer a target business, such as Blackstone, a variety of financial options to facilitate a business combination and capital to fund the future growth of its business and strengthen its balance sheet. Because we can consummate a business combination using cash, debt, our share capital or a combination of the foregoing, we have the flexibility to tailor the form of the consideration to be paid to the target business to address the needs of the parties.

 

Effecting a Business Combination

 

General 

 

We are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time. We intend to utilize cash derived from the proceeds of our IPO and the private placement, our capital stock, debt or a combination of these in effecting a business combination, such as the Blackstone Merger. A business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations with more than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single business combination.

 

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Sources of Target Businesses 

 

We expect that our principal means of identifying potential target businesses, such as Blackstone, will be through the extensive contacts and relationships of our Sponsor, initial stockholders, officers and directors and their affiliates, including Ackrell Capital. While our officers and directors are not required to commit any specific amount of time in identifying or performing due diligence on potential target businesses, our officers and directors believe that the relationships they have developed over their careers and their access to our Sponsor’s contacts and resources will generate a number of potential business combination opportunities that will warrant further investigation. We also anticipate that target business candidates, such as Blackstone, will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these sources will have read our public filings and know what types of businesses we are targeting. Additionally, Ackrell Capital may be engaged by a target company for M&A services and make an introduction to us, as is the case with Blackstone.

 

Our officers and directors must present to us all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account (excluding taxes payable on the income accrued in the trust account) at the time of the agreement to enter into the initial business combination, subject to any pre-existing fiduciary or contractual obligations. We may also engage the services of professional firms or other individuals that specialize in business acquisitions in which case we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. In addition, we may pay consulting, success or finder fees to our Sponsor, officers, directors, initial stockholders or their affiliates (including Ackrell Capital and its affiliates) in connection with the consummation of our initial business combination. Our audit committee will review and approve all reimbursements and payments made to our Sponsor, officers, directors or their respective affiliates, with any interested director abstaining from such review and approval. 

 

Selection of Target Business and Structuring of a Business Combination 

 

Subject to the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination, as described below in more detail, and that we must acquire a controlling interest in the target business, our management has virtually unrestricted flexibility in identifying and selecting a prospective target business, such as Blackstone. We have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses. In evaluating a prospective target business, our management has considered and may continue to consider a variety of factors, including one or more of the following:

 

  Clear and Sustainable Competitive Advantages;
     
  High Growth Potential and Cash Flow;
     
  Experienced Management Teams;
     
  Attractive Valuations;
     
  Compliant with Laws;
     
  Will Benefit from Being a Public Company;

 

These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination, such as the Blackstone Merger, is based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, such as the Blackstone Merger, we conduct an extensive due diligence review which encompasses, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is made available to us. This due diligence review is conducted either by our management or by unaffiliated third parties we may engage, although we have no current intention to engage any such third parties.

 

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The time and costs required to select and evaluate a target business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination. 

 

We may enter into a business combination with a target business that is affiliated with any of our officers, directors or Sponsor. However, we would only do so if (i) such transaction is approved by a majority of our disinterested independent directors and (ii) we obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated stockholders from a financial point of view. 

 

Fair Market Value of Target Business 

 

Nasdaq listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account (excluding the taxes payable on the interest earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination, such as the Blackstone Merger. Notwithstanding the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.

 

We currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction 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. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test. Based on the valuation analysis of our management and board of directors, we have determined that the fair market value of Blackstone was substantially in excess of 80% of the funds in the trust account and that the 80% test was therefore satisfied.

 

The fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations. If our board is not able to independently determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. Additionally, pursuant to Nasdaq rules, any initial business combination, such as the Blackstone Merger, must be approved by a majority of our independent directors.

 

We are not required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently determines that the target business complies with the 80% threshold. 

 

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Lack of Business Diversification

 

Although this process may entail the simultaneous acquisitions of several operating businesses and we may seek to effect a business combination with more than one target business, we expect to complete our business combination with a single business. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation. Unlike other entities which may have the resources to complete several business combinations of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, our lack of diversification may:

 

  subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination, and

 

  result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services.

 

If we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business.

 

Limited Ability to Evaluate the Target Business’ Management

 

Although we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination, such as the Blackstone Merger, we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated with any certainty. While it is possible that some of our key personnel will remain associated in senior management or advisory positions with us following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a business combination. Moreover, they would only be able to remain with the company after the consummation of a business combination if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the business combination. While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with the company after the consummation of a business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. Additionally, we cannot assure you that our officers and directors will have significant experience or knowledge relating to the operations of the particular target business.

 

Following the Blackstone Merger or any other business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

 

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Stockholders May Not Have the Ability to Approve an Initial Business Combination 

 

In connection with any proposed business combination, such as the Blackstone Merger, we will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their subunits to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender all of his, her or its subunits rather than some pro rata portion of his, her or its subunits. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their subunits to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. If we decide to allow our stockholders to sell their subunits to us in a tender offer, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination.

 

We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act of 1933, as amended. However, if we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible assets either immediately prior to or upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public stockholders may therefore have to wait until June 23, 2022 in order to be able to receive a pro rata share of the trust account.

 

Our Sponsor, initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert any founder shares or subunits in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell any founder shares or subunits in any tender in connection with a proposed initial business combination.

 

None of our officers, directors, Sponsor, initial stockholders or their affiliates had purchased or indicated any intention to purchase units, subunits or warrants in our IPO or from persons in the open market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention to vote, against such proposed business combination, our officers, directors, Sponsor, initial stockholders or their affiliates could make such purchases in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing, our officers, directors, Sponsor, initial stockholders and their affiliates will not make purchases of units, subunits or warrants if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s stock. 

 

See “The Blackstone Merger” above for more information regarding the requisite approvals needed for and purchases related to the Blackstone Merger.

 

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Conversion Rights 

 

At any meeting called to approve an initial business combination, like the Blackstone Merger, public stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less any taxes then due but not yet paid. Alternatively, we may provide our public stockholders with the opportunity to sell their subunits to us through a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.

 

Our Sponsor, initial stockholders and our officers and directors do not have conversion rights with respect to any founder shares or subunits owned by them, directly or indirectly, whether acquired prior to our IPO or purchased by them in the aftermarket. Additionally, the holders of the representative shares do not have conversion rights with respect to the representative shares.

 

Furthermore, public stockholders who redeem or tender their subunits for their pro rata share of the trust account will continue to have the right to exercise any warrants held by them which are not included in a subunit, but will automatically forfeit the warrants included in the redeemed subunits. This is different than other similarly structured blank check companies where a redeeming or tendering stockholder is able to keep any warrants he may still hold, whether included in a unit or held separately. Common stock alone will not be entitled to receive the redemption amount. Accordingly, investors may have a disincentive to exercise the redemption rights because they will automatically forfeit, without the receipt of any additional consideration, the portion of the warrant included in the subunit.

 

We may require public holders of subunits, whether they are a record holder or hold their subunits in “street name,” to either (i) tender their certificates to our transfer agent or (ii) deliver their subunits to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.

 

There is a nominal cost associated with the above-referenced delivery process and the act of certificating the subunits or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker the fee and it would be up to the broker whether or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver subunits is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise conversion rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated this may result in an increased cost to stockholders.

 

Any proxy solicitation materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy statement up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific facts of each transaction. However, as the delivery process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact. Please see the risk factor titled “In connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their subunits in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights” in our Registration Statements for further information on the risks of failing to comply with these requirements.

 

Any request to convert such subunits once made, may be withdrawn at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public subunit delivered his certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically or electronically).

 

If the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert their subunits for the applicable pro rata share of the trust account as of two business days prior to the consummation of the initial business combination. In such case, we will promptly return any subunits delivered by public holders.

 

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Ability to Extend Time to Complete Business Combination

 

We have extended the period of time to consummate a business combination until June 23, 2022. Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement entered between us and Continental Stock Transfer & Trust Company on December 23, 2020, in order for the time available for us to consummate our initial business combination to be extended, our Sponsor or its affiliates or designees must deposit into the trust account $1,380,000 ($0.10 per public subunit), on or prior to the date of the applicable deadline, for each of the available three month extensions providing a total possible business combination period of 18 months, for a total payment of $2,760,000 ($0.20 per public subunit). Any such payments would be made in the form of non-interest bearing loans. On December 23, 2021 and March 21, 2022, at the request of our Sponsor, the Company extended the time to consummate a business combination by an aggregate of six months from December 23, 2021 to March 23, 2022 and then further to June 23, 2022 by depositing an aggregate of $2,760,000 into the trust account of the Company for its public stockholders, representing $0.20 per public unit. In connection with such extensions, the Company issued two unsecured promissory notes (collectively, the “Notes”) each in the principal amount of $1,380,000 to the Sponsor and Blackstone, a designee of the Sponsor, respectively. The Notes are non-interest bearing and payable in cash upon the closing of the Company’s initial business combination. All amounts due under the Notes shall be repaid in cash. In the event that a business combination is not consummated within the required timeframe in our amended and restated certificate of incorporation, no payment shall be due hereunder and the principal balance of the Notes shall be forgiven. Furthermore, the letter agreement with our initial stockholders contains a provision pursuant to which our Sponsor has agreed to waive its right to be repaid for such loans to the extent there is insufficient funds held outside of the trust account in the event that we do not complete a business combination. Our Sponsor and its affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business combination.

 

Liquidation if No Business Combination

 

Our amended and restated certificate of incorporation provides that we have only 12 months from the closing of our IPO (or up to 18 months from the closing of our IPO if we extend the period of time to consummate a business combination) to complete an initial business combination. We have extended the period of time to consummate a business combination until June 23, 2022. If we have not completed an initial business combination by such date, we will (i) cease all operations except for the purpose of winding up and (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public subunits, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public subunits, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law. Public stockholders will also forfeit the one-half of a warrant included in the subunits being redeemed. As promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, we will dissolve and liquidate, subject to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

 

Our Sponsor, initial stockholders, officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their subunits to us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public subunits if we do not complete a business combination within 12 months from the closing of our IPO (or up to 18 months from the closing of our IPO if we extend the period of time to consummate a business combination) unless we provide our public stockholders with the opportunity to convert their subunits upon such approval at a per-subunit price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable, divided by the number of then outstanding public subunits. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our Sponsor, initial stockholders, executive officers, directors or any other person.

 

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Under the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public subunits in the event we do not complete our initial business combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General

 

Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. It is our intention to redeem our public subunit as soon as reasonably possible following our 12th month (if we have not extended the period of time to consummate a business combination), and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

 

Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public subunits in the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.

 

Because we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.

 

We are required to seek to have all third parties (including any vendors or other entities we engage after our IPO) and any prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders. Nevertheless, UHY LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Our Sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.10 per subunit by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it is required to do so. We have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company. Therefore, we believe it is unlikely that our Sponsor will be able to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement our Sponsor entered into specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-subunit distribution from the trust account could be less than $10.10 due to claims or potential claims of creditors.

 

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We will notify the trustee of the trust account to begin liquidating such assets promptly after June 23, 2022. It will take no more than 10 business days to effectuate such distribution. The holders of the founder shares and private subunits have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares and subunits. There will be no distribution from the trust account with respect to our warrants, which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, our Sponsor has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has contractually agreed not to seek repayment for such expenses.

 

If we are unable to complete an initial business combination, including the Blackstone Merger, and expend all of the net proceeds of our IPO, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the initial per-subunit redemption price would be $10.10. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of public stockholders.

 

Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business combination within the required time period, if the stockholders seek to have us convert or purchase their respective subunits upon a business combination which is actually completed by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.

 

If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least $10.10 per subunit.

 

If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after June 23, 2022, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.  

 

Competition 

 

In identifying, evaluating and selecting a target business, such as Blackstone, we have encountered and may continue to encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there may be numerous potential target businesses, such as Blackstone, that we could acquire with the net proceeds of our IPO, our ability to compete in acquiring certain sizable target businesses may be limited by our available financial resources.

 

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The following also may not be viewed favorably by certain target businesses:

 

  our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction;

 

  our obligation to convert or repurchase subunits held by our public stockholders may reduce the resources available to us for a business combination; and

 

  our outstanding warrants, and the potential future dilution they represent.

 

Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination, such as the Blackstone Merger. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.

 

If we succeed in effecting a business combination, such as the Blackstone Merger, there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively. 

 

Facilities

 

We currently maintain our principal executive offices at 2093 Philadelphia Pike, Claymont, DE 19703. The cost for this space is included in the $10,000 per-month fee that ACVT I, LLC, an affiliate of our Chairman, charges us for general and administrative services commencing on December 21, 2020 pursuant to a letter agreement between ACVT I, LLC and us. We consider our current office space adequate for our current operations.

 

Employees

 

We have three executive officers. These individuals are not obligated to devote any specific number of hours to our matters and devote only as much time as they deem necessary to our affairs. The amount of time they devote in any time period vary based on whether a target business has been selected for the business combination and the stage of the business combination process the company is in. Accordingly, since a suitable target business to acquire has been located, management has spent more time investigating Blackstone’s business and negotiating and processing the business combination (and consequently have spent more time on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full time employees prior to the consummation of a business combination. 

 

ITEM 1A. RISK FACTORS 

 

As a smaller reporting company, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

 

  we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target;

 

  we may not be able to select an appropriate target business or businesses and complete our initial business combination in the prescribed time frame;

 

  our expectations around the performance of a prospective target business or businesses may not be realized;

 

  we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination;

 

  our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination;

 

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  we may not be able to obtain additional financing to complete our initial business combination or reduce the number of stockholders requesting redemption;

 

  we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time;

 

  our Sponsor, officers, directors and EBC may have a conflict of interest in connection with our initial business combination;

 

  you may not be given the opportunity to choose the initial business target or to vote on the initial business combination;

 

  trust account funds may not be protected against third party claims or bankruptcy;

 

  an active market for our public securities’ may not develop and you will have limited liquidity and trading;

 

  the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination;

 

  if the funds held outside of our trust account are insufficient to allow us to operate until at least June 23, 2022 by which a business combination must occur, our ability to fund our search for a target business or businesses or complete an initial business combination may be adversely affected.

 

 

our financial performance following a business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced management;

 

  there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination;

 

  changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination;
  we may engage one or more of our underwriters or one of their respective affiliates to provide additional services to us after the initial public offering, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. Our underwriters are entitled to receive deferred underwriting commissions that will be released from the trust account only upon a completion of an initial business combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to us after the initial public offering, including, for example, in connection with the sourcing and consummation of an initial business combination;
  our warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination;
 

since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public subunits they may acquire during or after our initial public offering), and because our sponsor, officers and directors may profit substantially even under circumstances in which our public stockholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination;

  changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations;
  the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share;
 

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 $10.20 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

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we have identified a material weakness in our internal control over financial reporting as of December 31, 2021. If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

 

 

our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern” given that the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2021 are not sufficient for the Company to operate for the next twelve months. Furthermore, if the Company is unable to complete an initial business combination by June 23, 2022, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete an initial business combination before the mandatory liquidation date. 

 

  our ability to identify a target and to consummate an initial business combination may be adversely affected by economic uncertainty and volatility in the financial markets, including as a result of the military conflict in Ukraine.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable. 

 

ITEM 2. PROPERTIES 

 

We currently maintain our principal executive offices at 2093 Philadelphia Pike #1968, Claymont, DE 19703. The cost for this space is included in the $10,000 per-month fee ACVT I, LLC, an affiliate of our Chairman, charges us for general and administrative services pursuant to a letter agreement between ACVT I, LLC and us. We consider our current office space adequate for our current operations. 

 

ITEM 3. 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. 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information 

 

Our units, subunits and warrants are listed on the Nasdaq Capital Markets (“Nasdaq”) under the symbols ACKIU, ACKIT and ACKIW, respectively.

 

Our units commenced trading on December 21, 2020. On February 4, 2021, the public subunits and public warrants included in the public units began separate trading. Public units not separated will continue to be listed on the Nasdaq Capital Market. 

 

Holders 

 

As of March 30, 2022, there were three holders of record of our units, one holder of record of our subunits, one holder of record of our warrants, and 22 holders of record of our common stock.

 

Dividends 

 

We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

None. 

 

Recent Sales of Unregistered Securities

 

None.

 

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Use of Proceeds from the Initial Public Offering

 

On December 23, 2020, we consummated our IPO of 13,800,000 public units, which included the full exercise of the underwriters’ over-allotment option. Each public unit consists of one public subunit and one-half of one public warrant, with each whole public warrant entitling the holder thereof to purchase one share of common stock of the Company, par value $0.0001 per share, for $11.50 per share. Each public subunit consists of one share of common stock and one-half of one public warrant. The public units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $138,000,000. EBC acted as sole book-running manager and I-Bankers Securities, Inc. acted as co-manager of the offering. The securities sold in the IPO were registered under the Securities Act on registration statement on Form S-1 (No. 333-251060) which was declared effective by the Securities Exchange Commission on December 21, 2020, and a registration statement on Form S-1MEF (No. 333-251537) which became effective automatically upon filing on December 21, 2020.

 

Transaction costs amounted to $4,085,051, consisting of $2,760,000 of underwriting fees and $1,325,051 of other offering costs. In addition, $89,792 of cash was held outside of the trust account as of December 31, 2021 and available for working capital purposes.

 

ITEM 6. RESERVED

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  

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 11, 2018 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 units, our capital stock, debt or a combination of cash, stock and debt.

 

All activity through December 31, 2021 relates to our formation, initial public offering, and search for a target for our initial business combination, including Blackstone.

 

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.

 

Recent Developments

 

On December 22, 2021, the Company entered into the Blackstone Merger Agreement with Blackstone, among others, pursuant to which the two companies agreed to consummate a business combination. The aggregate consideration to be paid in the transactions is based on a pre-money Blackstone equity valuation of approximately $721 million and will be made up of cash consideration and stock consideration as described in this Report. In connection with the Blackstone Merger, the Company and Newco entered into Subscription Agreements with the PIPE Investors, pursuant to which Newco agreed to issue and sell to the PIPE Investors 3,100,000 units for a purchase price of $10.00 per unit, for an aggregate of approximately $31,000,000, with each unit consisting of one share of Newco common stock and one-half of a warrant to acquire Newco common stock at an exercise price of $11.50 per share and Newco agreed to issue and sell approximately $111,000,000 principal amount of Newco convertible notes immediately prior to closing of the Blackstone Merger. For more information on the Blackstone Merger, the Blackstone Merger Agreement and Related Agreements as well as the PIPE Investment, see “Item 1. Business”. 

 

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Results of Operations

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through December 31, 2021 were organizational activities and those necessary to prepare for the initial public offering, described below, and searching for a prospective initial business combination, including the Blackstone Merger. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on marketable securities held after the initial public offering and will recognize changes in the fair value of warrant liability as other income (expense) (See Note 11). 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 related to our search for targets for our initial business combination.

 

For the year ended December 31, 2021, we had a net loss of $1,198,210 which consisted of loss from operations of $1,553,631, interest income of $59,331 on marketable securities held in the trust account, and other income of $296,090 resulting from a decrease in fair value of our warrant liabilities.  

 

For the year ended December 31, 2020, we had a net loss of $121,728 which consisted of loss from operations of $118,791, interest income of $3,247 on marketable securities held in the trust account, and other loss of $6,184 resulting from an increase in fair value of our warrant liabilities. 

 

Liquidity and Capital Resources

 

On December 23, 2020, we consummated the initial public offering of 13,800,000 units, which included the full exercise of the underwriter’s option to purchase up to an additional 1,800,000 units at the initial public offering price to cover over-allotments, at a price of $10.00 per unit, generating gross proceeds of $138,000,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 539,000 placement units at a price of $10.00 per placement unit in a private placement to the Sponsor and EBC, generating gross proceeds of $5,390,000. 

 

Following the initial public offering and the private placement, a total of $139,380,000 was placed in the trust account. We incurred $4,085,051 in transaction costs, including $2,760,000 of underwriting fees and $1,325,051 of other offering costs.

 

As of December 31, 2021, we had marketable securities held in the trust account of $140,822,578 consisting of both cash and U.S. treasury bills with a maturity of 185 days or less.

 

We had $86,792 of cash held outside of the trust account as of December 31, 2021 and $677,130 as of December 31, 2020. We did not have any cash equivalents as of December 31, 2021 and 2020.

 

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. 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.

 

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We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, such as Blackstone, 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.

 

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 placement units.

 

We anticipate that the $86,792 outside of the trust account as of December 31, 2021 will not be sufficient to allow us to operate for at least the next 12 months, assuming that a business combination is not consummated during that time. On December 23, 2021, we deposited $1,380,000 into the trust account, representing $0.10 per unit, and extended the period of time to consummate our initial business combination by three months from December 23, 2021 to March 23, 2022. On March 21, 2022, we deposited an additional $1,380,000 into the trust account, representing $0.10 per public unit, and further extended the period of time we have to consummate its initial business combination by an additional three months from March 23, 2022 to June 23, 2022. The aggregate of $2,760,000 from the above mentioned two extensions was funded by proceeds from the two promissory notes issued to the Sponsor and Blackstone. We may need to obtain additional financing to consummate our initial business combination but there is no assurance that new financing will be available to us on commercially acceptable terms. Furthermore, if we are not able to consummate a business combination by June 23, 2022, it will trigger our automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about our ability to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

The preparation of the unaudited condensed financial statements in conformity with US GAAP requires 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:

 

Common Stock Subject to Possible Redemption

 

We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are 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, common stock is classified as stockholders’ equity. Our common stock feature certain redemption rights that are considered to be outside of our control and subject to the 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 our balance sheet.

 

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Derivative Financial Instruments

 

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our 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 reassessed at the end of each reporting period.

 

Derivative instruments are recorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

 

Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

  

Net Income (Loss) Per Common Share

 

We comply with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statements of operations include a presentation of income (loss) per redeemable public share (underlying the public subunit) and income (loss) per non-redeemable founder share following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the public redeemable shares and founder non-redeemable shares, we first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders.    Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 76% and 9% for the public shares (underlying the public subunits) and 24% and 91% for the non-redeemable founder shares for the year ended December 31, 2021 and 2020, respectively, reflective of the respective participation rights.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of December 31, 2021.

 

Contractual Obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.

 

We have engaged EBC as an advisor in connection with our business combination to assist us in holding meetings with our stockholders to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with our initial business combination, assist us in obtaining stockholder approval for the business combination and assist us with our press releases and public filings in connection with the business combination. We will pay EBC a cash fee of $4,830,000 for such services upon the consummation of our initial business combination (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at our sole discretion to other FINRA members that assist us in identifying or consummating an initial business combination.

 

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 not identified any critical accounting policies.

 

Recent Accounting Standards

 

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

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As of December 31, 2021, we were not subject to any market or interest rate risk. Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the trust account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

This information appears following Item 15 of this Report and is included herein by reference.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A. CONTROL AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2021, as defined in Rules 13a-15I and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, during the period covered by this Report, our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting described below. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

 

Management’s Report on Internal Controls Over Financial Reporting

 

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

 

(1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

 

(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

 

(3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2021. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2021.

 

Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.

 

This Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

 

Changes in Internal Control over Financial Reporting

 

During the most recently completed fiscal quarter ended December 31, 2021, we have improved our internal controls over financial reporting relating to classification of warrants, classification of redeemable equity instruments, and fair value of representative shares through enhanced education of our accountants and retention of third-party valuation professionals to conduct periodic fair value assessments of our complex financial instruments. We believe our efforts are effective in identifying and appropriately applying applicable accounting requirements but we believe we will need additional time to monitor and assess our efforts to evaluate their ultimate effectiveness. There have been no changes in our internal controls over financial reporting, except as previously noted, that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

Not applicable.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

Our current directors and executive officers are as follows:

 

Name   Age   Position
Michael K. Ackrell   55   Chairman of the Board
Shannon Soqui   54   Non-Executive Vice Chairman of the Board
Jason M. Roth   47   Chief Executive Officer
Stephen N. Cannon   54   Chief Operating Officer and President
Long Long   37   Chief Financial Officer
William A. Lamkin   62   Director
Daniel L. Sheehan   67   Director

 

Michael K. Ackrell has been our Chairman since October 2019. Since 2003, Mr. Ackrell has been the Chief Executive Officer and Chairman of the board of directors of Ackrell Capital, a U.S. registered broker-dealer focused on providing M&A and capital raising services to the consumer, technology, digital and hemp industries. Prior to this, Mr. Ackrell was the Senior Managing Director in charge of the U.S. Technology Investment Banking Group of ABN AMRO, from 2000 to 2001, and Head of Investment Banking at WR Hambrecht+Co., a San Francisco, CA-based investment bank specializing in the technology sector, from 1999 to 2000. Previously, Mr. Ackrell worked for Donaldson, Lufkin & Jenrette in New York, Menlo Park and San Francisco, CA as a Senior Vice President in the Technology Investment Banking Group from 1988 to 1999. Mr. Ackrell graduated from the Wharton School of the University of Pennsylvania with a Bachelor of Science degree in Economics (summa cum laude), with majors in Finance and Accounting. In the last five years, Mr. Ackrell has been a director of a number of private companies, including Stable Technologies, Inc., a manufacturer of water-soluble CBD products, CMLM Holdings, Inc., doing business as QIND, a branded retailer of CBD products, American Giant, Inc., a U.S.-based manufacturer of apparel and active wear, Vator, Inc., a professional network for entrepreneurs, and Scrubbed.net, LLC, an online accounting and bookkeeping services company. CMLM Holdings, Inc. was acquired by Next Frontier Holdings, Inc. in August 2020. We believe that Mr. Ackrell is well-qualified to serve as a director of the company given his extensive finance, investment banking and consumer and hemp industry experience.

 

Shannon Soqui has been our Non-Executive Vice Chairman since December 2020. Since June 2021, Mr. Soqui has served as the Executive Chairman of Next Frontier Holdings, Inc., doing business as Next Frontier Brands, and previously was its Chief Executive Officer and Chairman of the board of directors since April 2020. Next Frontier Brands is a holding company with a beverage business unit and a pharmaceutical business unit From 2018 to 2020, Mr. Soqui was the Chief Executive Officer of CMLM Holdings, Inc., prior to its acquisition by Next Frontier Brands. From 2017 to 2018, Mr. Soqui was the head of U.S. cannabis investment banking at Canaccord Genuity, a leading global cannabis investment bank. From 2015 to 2017, Mr. Soqui was the Head of Cannabis Investment Banking at Ackrell Capital. Prior to Ackrell Capital, Mr. Soqui spent more than fifteen years in investment banking with: Clark Dodge & Co (2013 to 2014); Advanced Equities, Inc. (2010 to 2012); Pacific Crest Securities (November 2003 to April 2010); UBS Warburg (2001 to 2002); and Donaldson, Lufkin & Jenrette and Credit Suisse (1997 to 2000). Prior to his career in investment banking, Mr. Soqui was a securities lawyer with Brobeck, Phleger & Harrison and Gunderson Dettmer, and was a Certified Public Accountant with KPMG. Mr. Soqui received his Bachelor of Arts in Economics with an emphasis in Accounting from the University of California, Santa Barbara, and a J.D. (magna cum laude) from the Santa Clara University School of Law. We believe that Mr. Soqui is well-qualified to serve as a director of the company given his considerable experience with FMCG and hemp-related companies, financial and capital markets, internal controls, corporate accounting and governance, mergers and acquisitions, corporate operations, and numerous years of experience in advising publicly traded companies and their management teams and boards of directors.

 

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Jason M. Roth has been our Chief Executive Officer since December 2020. Since April 2020, Mr. Roth has served as Chief Strategy Officer and a member of the board of directors of Next Frontier Brands. From 2018 to 2019, Mr. Roth was the Chief Executive Officer and Chairman of the board of directors of Mile High Labs International, which we believe was one of the world’s largest processors of hemp-derived CBD concentrates in 2019. From 2014 to 2018, Mr. Roth was the Chief Executive Officer of Incense Specialties Inc., a vaporizer device company. From 2010 to 2015, Mr. Roth was a founder and Senior Vice President, Commercial Director, Compliance Director and member of the board of directors of Brooklands Inc., a medical device manufacturer. From 1998 to 2014, Mr. Roth was a founder, Chief Executive Officer and Chairman of the board of directors of Safeguard Medical Technologies LLC, a medical device manufacturer.

 

Stephen N. Cannon has been our Chief Operating Officer since December 2020, our President since August 2019, our Chief Executive Officer from August 2019 until December 2020 and our Director from August 2019 to September 2020. Since September 2020, Mr. Cannon has been the Chief Executive Officer and President of Archimedes Tech SPAC Partners Co., a blank check company with $133 million held in trust that completed its IPO in March 2021 and which, on November 16, 2021, announced that it had entered into a business combination agreement with SoundHound Inc., a company that focuses on voice AI technology. Since August 2020, Mr. Cannon has been the Chief Operating Officer and President of Global SPAC Partners Co, a proposed blank check company which filed a registration statement with the SEC on October 13, 2020 for a $200 million IPO and which, on December 22, 2021, announced that it had entered into a business combination agreement with Gorilla Technology Group Inc., a company that focuses on Edge analytics AI solutions. Since 2014, Mr. Cannon has been President of Everest Partners Limited, a privately-owned investment firm focused on Asian private investments. From 2017 until 2019, Mr. Cannon was the Chief Financial Officer of Twelve Seas Investment Company, a blank check company with $207 million held in trust that consummated its initial business combination with BPGIC Ltd, a petroleum and gas company located in the United Arab Emirates, in December, 2019. From 2017 until 2019, Mr. Cannon was the President, Chief Financial Officer and a director of CM Seven Star, a Nasdaq-listed SPAC, sponsored by a leading Chinese private investment firm, which consummated its business combination with Kaixin Auto Holdings in April 2019. From 2014 until 2016, Mr. Cannon was Chief Executive Officer and a director of DT Asia Acquisition Corp, a Nasdaq-listed SPAC, which consummated its business combination with China Direct Lending Corp. in July 2016. From 2010 until 2014, Mr. Cannon was a Partner and Head of China for RedBridge Group Ltd., a boutique merchant banking firm focused on Chinese and Arabian Gulf cross-border investments. From 2009 until 2014, Mr. Cannon was a registered representative of, and senior advisor to, Ackrell Capital. From 2007 until 2010, Mr. Cannon served in various capacities with Hambrecht Asia Acquisition Corp., a Nasdaq-listed SPAC, as a co-founder, initial Chief Financial Officer and a director, and then Vice President of Acquisitions. Hambrecht Asia Acquisition Corp. merged with SGOCO Ltd, a Chinese company, in April 2010. From 2005 until 2008, Mr. Cannon served as a Managing Director of Asian investment banking for WR Hambrecht+Co. Prior to WR Hambrecht + Co., Mr. Cannon worked at ABN AMRO, Donaldson, Lufkin& Jenrette, Smith Barney Shearson and Salomon Brothers. Mr. Cannon currently serves on the board of the Cambodian Hotel Association. Mr. Cannon graduated from the University of Notre Dame with a Bachelor of Arts degree in Economics and a Bachelor of Science degree, majoring in Mechanical Engineering.

 

Long Long has been our Chief Financial Officer since October 2019. Since September 2020, Mr. Long has been the Chief Financial Officer of Archimedes Tech SPAC Partners Co. Since August 2020, Mr. Long has been the Chief Financial Officer of Global SPAC Partners Co. From 2017 to 2019, Mr. Long was Vice President of Twelve Seas Sponsors I LLC, sponsor of Twelve Seas Investment Company. From 2006 to 2016, Mr. Long worked for IBM in a variety of Corporate Finance, Audit, and Managerial roles, both within the US and internationally. From 2015 to 2016, Mr. Long served as Finance Controller for IBM China’s Consulting Business Unit and Sales Channels. From 2013 to 2014, Mr. Long served as the Strategy and Planning Manager for IBM China and, from January 2012 to December 2012, as a Senior Finance Analyst for IBM China. From 2010 to 2011, Mr. Long served as Internal Auditor for IBM’s Asia Pacific region and, from 2006 to 2009, as a financial analyst for IBM’s worldwide operations. Mr. Long graduated from Washington University in St. Louis with a Bachelor of Science and Business Administration degree, majoring in Finance and a Bachelor of Science degree, majoring in Electrical Engineering.

 

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William A. Lamkin has served as a member of our Board of Directors since December 2020. From 2004 to 2019, Mr. Lamkin was a Managing Director and registered representative of Ackrell Capital. Prior to that, Mr. Lamkin served in various capacities as a technology investment banker with ABN AMRO; Donaldson, Lufkin& Jenrette; KidderPeabody; and PaineWebber. Prior to his investment banking career, Mr. Lamkin practiced law with the firm of Broad, Schulz, Larson and Wineberg. Mr. Lamkin currently serves as an independent Trustee and Chair of the Audit Committee for two real estate investment trusts, Office Properties Income Trust (since 2019) and Service Properties Trust (since 2007). He also currently serves as an independent Trustee for Seven Hills Realty Trust (since September 2021), a commercial real estate finance company. He previously served as an independent trustee for Tremont Mortgage Trust (2020 to 2021) and as an independent Trustee and Chair of the Audit Committee for Select Income REIT (2012 to 2019) and Commonwealth REIT (now Equity Commonwealth; 2006 to 2014). Mr. Lamkin has also served as an independent Director and Chair of the Audit Committee of a private insurance company, Affiliates Insurance Company. Mr. Lamkin holds a Bachelor of Arts from Westmont College where he majored in both business administration and psychology, a Master of Business Administration from the University of California, Berkeley Haas School of Business and a Juris Doctor from the University of California, Hastings College of the Law. We believe that Mr. Lamkin is well-qualified to serve as a director of the company given his investment banking and legal background and extensive experience serving on publicly-listed and private company boards.

 

Daniel L. Sheehan has served as a member of our Board of Directors since December 2020. Since March 2021, Mr. Sheehan has been the Chief Operating Officer of Archimedes Tech SPAC Partners Co. Since 1995, Mr. Sheehan has been an attorney licensed in the State of California. From 2004 to the present, Mr. Sheehan has been the founder and managing partner of Silicon Valley Wealth Law, a law firm specializing in estate planning, tax planning, business planning, and special needs planning. Mr. Sheehan has designed and drafted over 1,000 estate plans for clients throughout Silicon Valley. Mr. Sheehan has expertise in handling federal and state income tax matters and disputes, in the formation and operation of business entities, and has provided strategic planning and technology enhancement guidance to new business ventures and established companies. Mr. Sheehan has senior management experience with companies in a range of industries, including computer-aided manufacturing, real estate development, health care, mining, and law. Mr. Sheehan has frequently consulted with venture capitalists to review and advise them about investment opportunities. From 2011 to 2013, Mr. Sheehan was Chief Executive Officer of North Star Resources, a provider of technology for the extraction and refining of precious and strategic metals. From 1996 to 2004, Mr. Sheehan was a partner in the law firm of Davidson, Sheehan & Jewel. In 2010, Mr. Sheehan filed for personal bankruptcy under Chapter 13, which was completed in May 2014 with no debts being discharged. Mr. Sheehan graduated from St. Mary’s College of California with a Bachelor of Arts degree in Business Management with honors. Mr. Sheehan received his Juris Doctor from the University of San Francisco School of Law. We believe that Mr. Sheehan is well-qualified to serve as a director of the company given his lengthy legal career and experience as a senior executive.

 

Director Independence

 

Nasdaq rules require that a majority of the board of directors of a company listed on Nasdaq must be composed of “independent directors.” An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have determined that Messrs. Soqui, Lamkin and Sheehan are independent directors under the Nasdaq Listing rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

 

Any affiliated transactions will be on terms no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.

 

Committees of the Board of Directors

 

We have three standing committees: an audit committee, a nominating committee, and a compensation committee. Each such committee is composed of solely independent directors

 

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Audit Committee

 

We have established an audit committee of the board of directors, which consists of Messrs. Soqui, Lamkin and Sheehan, each of whom is an independent director under Nasdaq’s listing standards. Mr. Soqui serves as chairman of the audit committee. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:

 

  reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;

 

  discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

 

  discussing with management major risk assessment and risk management policies;

 

  monitoring the independence of the independent auditor;

 

  verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;

 

  reviewing and approving all related-party transactions;

 

  inquiring and discussing with management our compliance with applicable laws and regulations;

 

  pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;

 

  appointing or replacing the independent auditor;

 

  determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;

 

  establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and

 

  approving reimbursement of expenses incurred by our management team in identifying potential target businesses.

 

During the fiscal year ended December 31, 2021, our audit committee held four meetings, which include meetings that were held by means of a conference telephone call, but do not include actions taken by unanimous written consent. Each of the audit committee members attended all of the meetings of the audit committee in fiscal year 2021.

 

Financial Experts on Audit Committee 

 

The audit committee will at all times be composed exclusively of “independent directors” who are “financially literate” as defined under Nasdaq’s listing standards. Nasdaq’s standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.

 

In addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The board of directors has determined that Mr. Soqui and Mr. Lamkin each qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.

 

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Nominating Committee

 

We have established a nominating committee of the board of directors, which consists of Messrs. Soqui, Lamkin and Sheehan. Messrs. Soqui, Lamkin and Sheehan are each an independent director under Nasdaq’s listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.

 

During the fiscal year ended December 31, 2021, the nominating committee did not hold any meetings.

 

Guidelines for Selecting Director Nominees

 

The guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to be nominated:

 

  should have demonstrated notable or significant achievements in business, education or public service;

 

  should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and

 

  should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.

 

The Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.

 

Compensation Committee

 

We have established a compensation committee of the board of directors, which consists of Messrs. Soqui and Lamkin, each of whom is an independent director under Nasdaq’s listing standards. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:

 

  reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

 

  reviewing and approving the compensation of all of our other executive officers;

 

  reviewing our executive compensation policies and plans;

 

  implementing and administering our incentive compensation equity-based remuneration plans;

 

  assisting management in complying with our proxy statement and annual report disclosure requirements;

 

  approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;

 

  if required, producing a report on executive compensation to be included in our annual proxy statement; and

 

  reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

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Notwithstanding the foregoing, as indicated below, other than the $10,000 per month administrative fee and the payment of consulting, success or finder fees in connection with the consummation of our initial business combination, no compensation of any kind will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.

 

During the fiscal year ended December 31, 2021, the compensation committee did not hold any meetings.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all of our executive officers, directors, and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business. Our code of ethics was publicly filed as an exhibit to our Registration Statement and can be found on the SEC EDGAR website. A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that during the year ended December 31, 2021, all reports applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.

 

 

ITEM 11. EXECUTIVE COMPENSATION

 

Executive Compensation

 

No executive officer has received any cash compensation for services rendered to us. Until we consummate the acquisition of a target business, such as Blackstone, we will pay ACVT I, LLC, an affiliate of our Chairman, an aggregate fee of $10,000 per month for providing us with office space and certain office and secretarial services. However, this arrangement is solely for our benefit and is not intended to provide our Chairman compensation in lieu of a salary.

 

Other than the $10,000 per month administrative fee, the payment of consulting, success or finder fees to our Sponsor, officers, directors, initial stockholders or their affiliates (including Ackrell Capital and its affiliates) in connection with the consummation of our initial business combination and the repayment of loans from our Sponsor to us, no compensation or fees of any kind will be paid to our Sponsor, initial stockholders, members of our management team or their respective affiliates for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is). However, they will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.

 

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After our initial business combination, such as Blackstone Merger, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of a stockholder meeting held to consider an initial business combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K, as required by the SEC.

 

Since our formation, we have not granted any stock options or stock appreciation rights or any other awards under long-term incentive plans to any of our executive officers or directors.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information regarding the beneficial ownership of our shares of common stock as of March 30, 2022, by:

 

  each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

 

  each of our officers and directors; and

 

  all of our officers and directors as a group.

 

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record of beneficial ownership of the warrants included in the units sold in our IPO or the private warrants as these warrants are not exercisable within 60 days of the date of this Report.

 

Name and Address of Beneficial Owner(1)   Amount and
Nature of
Beneficial
Ownership
    Approximate
Percentage of
Outstanding
Shares of
Common
Stock
 
Michael K. Ackrell(2)            
Shannon Soqui(2)            
Jason M. Roth(2)            
Stephen N. Cannon(3)     3,870,000       21.3 %
Long Long(2)            
William A. Lamkin     25,000       *  
Daniel L. Sheehan(2)     25,000       *  
All directors and executive officers as a group (seven individuals)     3,920,000 (3)       21.6 %
5% and Greater Beneficial Owners                
Ackrell SPAC Sponsors I LLC(3)     3,870,000       21.3 %
Mizuho Financial Group, Inc. (4)     1,150,000       6.33 %
Basso SPAC Fund LLC(5)     994,246       5.47 %
Feis Equities LLC(6)     1,183,825       6.52 %

 

*Less than 1%.

(1)Unless otherwise indicated, the business address of each of the individuals is 2093 Philadelphia Pike #1968, Claymont, DE 19703.

(2)Does not include any securities held by Ackrell SPAC Sponsors I LLC, of which each person is a direct or indirect member. Each such person disclaims beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein.

(3)Represents securities held by Ackrell SPAC Sponsors I LLC, our Sponsor, of which Stephen N. Cannon is sole managing member. Mr. Cannon disclaims beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein.

(4)According to a Schedule 13G filed with the SEC on February 14, 2022, the listed securities are owned by Mizuho Financial Group, Inc., a Japanese corporation, with three subsidiaries, Mizuho Bank, Ltd, Mizuho Americas LLC, and Mizuho Securities USA LLC. Shigeru Umekawa is the managing director. The business address of each such person is 1–5–5, Otemachi, Chiyoda–ku, Tokyo 100–8176, Japan.

(5)According to a Schedule 13G/A filed with the SEC on February 11, 2022, the listed securities are owned by one or more private funds, including Basso SPAC Fund LLC (“Basso SPAC”), managed by Basso Management, LLC (“Basso Management”). Basso Capital Management, L.P. (“BCM”) serves as the investment manager of Basso SPAC. Basso GP, LLC (“Basso GP”) is the general partner of BCM. Mr. Howard I. Fischer is the principal portfolio manager for Basso SPAC, the chief executive officer and a founding managing partner of BCM, and a member of each of Basso Management and Basso GP. The business address of each such person is 1266 East Main Street, Fourth Floor, Stamford, Connecticut 06902.
(6)

According to a Schedule 13G filed with the SEC on March 2, 2022, the listed securities are owned by Feis Equities LLC, a limited liability company organized in the State of Illinois, USA. Lawrence M. Feis is the managing member. The business address of each such person is 20 North Wacker Drive, Suite 2115, Chicago, Illinois 60606.

 

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All of the issued and outstanding founder shares are placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until six months after the date of the consummation of our initial business combination or earlier if, subsequent to our initial business combination, we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

 

During the escrow period, the holders of these shares will not be able to sell or transfer their securities except for transfers, assignments or sales (i) among our initial stockholders or to our initial stockholders’ members, officers, directors, consultants or their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders, including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable to effect a business combination and liquidate, there will be no liquidation distribution with respect to the founder shares. 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

On September 11, 2018, we issued 1,437,500 founder shares to Able SPAC Holdings LLC, an affiliate of EBC, for $5,000 in cash, at a purchase price of approximately $0.0035 per share, in connection with our formation. On August 22, 2019, we effected a stock dividend of 1.6 shares of common stock for every share of common stock outstanding, resulting in an aggregate of 3,737,500 founder shares outstanding.

 

On September 30, 2019 and November 25, 2020, our Sponsor purchased 2,616,250 founder shares and 1,121,250 founder shares from Able SPAC Holdings LLC, respectively, for an aggregate purchase price of $3,500 and $1,500, respectively, or approximately $0.0013 per share in both cases, which was the same effective purchase price per share Able SPAC Holdings LLC originally paid, as adjusted for the stock dividend in August 2019.

 

On October 14, 2019 and November 25, 2020, we issued to EBC 200,000 and 150,000 representative shares, respectively, at $0.0001 per share, for an aggregate of 350,000 representative shares.

 

On November 20, 2019, the Sponsor sold 25,000 founder shares each to Mr. Lamkin and Mr. Sheehan, our directors, at approximately $0.0013 per share, the same effective purchase price per share that our Sponsor originally paid.

 

On November 25, 2020, our Sponsor returned to us for cancellation, at no cost, an aggregate of 862,500 founder shares, resulting in an aggregate of 3,225,000 shares of common stock outstanding, consisting of 2,875,000 founder shares and 350,000 representative shares.

 

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On December 21, 2020, we effected a stock dividend of 0.2 shares of common stock for every share of common stock outstanding, resulting in an aggregate of 3,450,000 founder shares outstanding and an aggregate of 420,000 representative shares outstanding. After the aforementioned stock dividend, EBC returned to us for cancellation, at no cost, 40,000 representative shares, resulting in an aggregate of 380,000 representative shares outstanding.

 

ACVT I, LLC, an affiliate of our Chairman, has agreed that, until earlier of our consummation of our initial business combination or our liquidation, it will make available to us certain general and administrative services, including office space, utilities and administrative support, as we may require from time to time. We have agreed to pay ACVT I, LLC $10,000 per month for these servicesWe believe that the fee charged by ACVT I, LLC is at least as favorable as we could have obtained from an unaffiliated person.

 

Other than the $10,000 per month administrative fee, the payment of consulting, success or finder fees to our Sponsor, officers, directors, initial stockholders or their affiliates (including Ackrell Capital and its affiliates) in connection with the consummation of our initial business combination and the repayment of loans from our Sponsor to us, no compensation or fees of any kind will be paid to our Sponsor, initial stockholders, members of our management team or their respective affiliates for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is). However, they will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.

 

On December 23, 2020, we consummated our initial public offering of an aggregate of 13,800,000 units at $10.00 per unit for gross proceeds of $138 million. We paid EBC an underwriting commission of $2,760,000. Simultaneously with the consummation of the IPO, we completed the private placement of an aggregate of 539,000 private units to our Sponsor and EBC (470,000 private units to the Sponsor and 69,000 private units to EBC) at a purchase price of $10.00 private units, generating gross proceeds to the Company of $5,390,000.

 

In addition, we entered into a business combination marketing agreement, pursuant to which we engaged EBC as an advisor in connection with our business combination to assist us in holding meetings with our stockholders to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with our initial business combination, assist us in obtaining stockholder approval for the business combination and assist us with our press releases and public filings in connection with the initial business combination. We will pay EBC a cash fee for such services upon the consummation of our initial business combination in an amount equal to 3.5% of the gross proceeds of the IPO (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at our sole discretion to other FINRA members (including, with EBC’s prior consent which shall not be unreasonably withheld, companies affiliated with us or our officers or directors, including Ackrell Capital) that assist us in identifying or consummating an initial business combination.

 

On December 23, 2021, the Company issued an unsecured promissory note in the principal amount of $1,380,000 to the Sponsor. The promissory note is non-interest bearing and payable in cash upon the closing of the Company’s initial business combination. In the event the Company fails to complete an initial business combination prior to the deadline set forth in its governing document, no payment will be due under the promissory note and the principal balance of this promissory note will be forgiven.

  

On December 22, 2021, the Company entered into the Blackstone Merger Agreement. Michael Ackrell, the Company’s Chairman, is the founder and managing member of Ackrell Capital, which serves as a financial advisor to Blackstone and will receive a fee in the amount of approximately $24.6 million of which 50% may be paid in the form of shares of NewCo common stock upon the Closing.

 

Commencing on the effective date of the Registration Statements, the Company has agreed to pay an affiliate of the Company’s Chairman an aggregate fee of $10,000 per month for providing the Company with office space and certain office and secretarial services. This arrangement will terminate upon completion of the Company’s Initial Business Combination or the distribution of the Trust Account to the Company’s public stockholders. As of December 31, 2021, the Company has accrued $123,548 of administrative fees as a due to related party.

 

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In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, provide the Company Working Capital Loans. If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. 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, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. As of December 31, 2021 and 2020, no Working Capital Loans were outstanding.

 

Director Independence

 

Currently Messrs. Soqui, Lamkin and Sheehan would each be considered an “independent director” under the Nasdaq listing rules, which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of our board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following is a summary of fees paid or to be paid to UHY LLP, or UHY, for services rendered.

 

Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by UHY LLP in connection with regulatory filings. The aggregate fees due to UHY LLP for professional services rendered in connection with our IPO, our annual audit and our quarterly reviews was $108,657 and $80,645 for the fiscal years ended December 31, 2021 and December 31, 2020, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.

 

Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay UHY LLP for consultations concerning financial accounting and reporting standards for the fiscal years ended December 31, 2021 and 2020. 

 

Tax Fees. We paid UHY LLP $6,150 for tax planning and tax advice for the fiscal year ended December 31, 2021. We did not pay UHY LLP for tax-related services for the fiscal year ended December 31, 2020.

   

All Other Fees. We did not pay UHY LLP for other services for the fiscal years ended December 31, 2021 and 2020. 

 

Pre-Approval Policy

 

Our audit committee was formed upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

 

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, AND SCHEDULES

 

(a) The following documents are filed as part of this report:

 

  (1) Financial Statements:

 

Description   Page
     
Report of Independent Registered Public Accounting Firm (Firm ID: 1195)   F-2
Balance Sheets   F-3
Statements of Operations   F-4
Statements of Changes in Stockholders’ Equity   F-5
Statements of Cash Flows   F-6
Notes to Financial Statements   F-7 to F-21 

 

  (2) Financial Statement Schedules:

 

None.

 

(b) The following Exhibits are filed as part of this report:

 

Exhibit No.   Description
1.1   Underwriting Agreement, dated December 21, 2020, by and between the Company and EBC, as representative of the several underwriters. (1)
2.1+  

Business Combination Agreement dated as of December 22, 2021 by and among Ackrell SPAC Partners I Co., Blackstone Products, Inc., Ackrell Merger Sub, Inc., North Atlantic Imports, LLC, Roger Dahle, and North Atlantic Imports, Inc. (6)

3.1   Amended and Restated Certificate of Incorporation.(1)
3.2   Certificate of Correction to the Amended and Restated Certificate of Incorporation.(2)
3.3   Bylaws.(3)
4.1   Specimen Unit Certificate.(4)
4.2   Specimen Common Stock Certificate.(4)
4.3   Specimen Warrant Certificate.(4)
4.4   Specimen Subunit Certificate.(4)
4.5   Warrant Agreement, dated December 21, 2020, by and between Continental Stock Transfer & Trust Company and the Registrant.(1)
4.6   Description of Registered Securities.(5)
10.1   Letter Agreement, dated December 21, 2020, by and among the Registrant , the initial stockholders, officers and directors.(1)
10.2   Investment Management Trust Agreement, dated December 21, 2020, by and between Continental Stock Transfer & Trust Company and the Registrant.(1)
10.3   Registration Rights Agreement, dated December 21, 2020, by and between the Company, the Sponsor and EBC.(1)
10.4   Stock Escrow Agreement between Continental Stock Transfer & Trust Company and the Registrant. (1)
10.5.1   Private Placement Unit Purchase Agreement, dated December 21, 2020, by and between the Company and the Sponsor.(1)
10.5.2   Private Placement Unit Purchase Agreement, dated December 21, 2020, by and between the Company and EBC.(1)
10.6   Administrative Support Agreement, dated December 21, 2020, by and between the Company and ACVT I, LLC.(1)
10.7   Business Combination Marketing Agreement, dated December 21, 2020, by and between the Company and EBC.(1)

 

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10.8   Promissory Note, dated December 23, 2021, issued by Ackrell SPAC Partners I Co. to Ackrell SPAC Sponsors I LLC. (7)
10.9   Form of Amended and Restated Registration Rights Agreement. (6)
10.10   Form of Lock-Up Agreement. (6)
10.11   Form of Stockholder Ackrell Support Agreement. (6)
10.12   Form of Subscription Agreement. (6)
10.13   Form of Transferor Agreement. (6)
10.14   Promissory Note, dated March 16, 2022, issued by Ackrell SPAC Partners I Co. to North Atlantic Imports, LLC. (8)
14   Code of Ethics.(4)
21   Subsidiaries of the Company*
31.1   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2   Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1   Certification Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2   Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS   Inline XBRL Instance Document.*
101.SCH   Inline XBRL Taxonomy Extension Schema Document.*
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104   Cover Page Interactive Data File (Embedded as Inline XBRL document and contained in Exhibit 101).*

 

* Filed herewith.

 

** Furnished herewith.
+ Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
(1) Incorporated herein by reference to relevant exhibits the Registrant’s Current Report on Form 8-K filed December 28, 2020.
(2) Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed December 30, 2020.
(3) Incorporated herein by reference to relevant exhibits to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-251060) filed December 1, 2020.
(4) Incorporated herein by reference to relevant exhibits to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-251060) filed December 10, 2020.
(5) Incorporated herein by reference to Exhibit 4.6 to the Registrant’s Annual Report on Form 10-K filed March 31, 2021.
(6) Incorporated herein by reference to relevant exhibits to the Registrant’s Current Report on Form 8-K filed December 23, 2021
(7) Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 28, 2021
(8) Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 21, 2022

 

Item 16. Form 10-K Summary

 

Not applicable.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

March 31, 2022 ACKRELL SPAC PARTNERS I CO.
     
  By: /s/ Jason Roth
  Name:   Jason Roth
  Title: Chief Executive Officer
(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Position   Date
     
/s/ Jason Roth   Chief Executive Officer   March 31, 2022
Jason Roth   (Principal Executive Officer)    
     
/s/ Long Long   Chief Financial Officer   March 31, 2022
Long Long   (Principal Financial and Accounting Officer)    
     
/s/ Michael K. Ackrell   Chairman   March 31, 2022
Michael K. Ackrell        
     
/s/ Shannon Soqui   Vice Chairman   March 31, 2022
Shannon Soqui        
     
/s/ Daniel L. Sheehan   Director   March 31, 2022
Daniel L. Sheehan        
     
/s/ William A. Lamkin   Director   March 31, 2022
William A. Lamkin        

 

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ACKRELL SPAC PARTNERS I CO.

TABLE OF CONTENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
Financial Statements:  
Balance Sheets F-3
Statements of Operations F-4
Statements of Changes in Stockholders’ Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 to F-21

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and
Stockholders of Ackrell SPAC Partners I Co.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Ackrell SPAC Partners I Co. (the Company) as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021 and 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, as of December 31, 2021, the Company had $86,792 outside of the trust account and if the Company is not able to consummate an initial business combination by June 23, 2022, it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to address this uncertainty through a proposed business combination as discussed in Note 1. There is no assurance that the Company’s plans to consummate a business combination will be successful on or before June 23, 2022. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

 

Material Misstatement in Previously Issued Financial Statements

 

As discussed in Note 2, the Company identified the errors of the misclassification of its redeemable Common Stock, the misclassification of stock warrants liability, and the valuation of the share-based payment issued to its underwriter (the Representative Shares). The Company corrected the identified errors in its previously issued financial statements as identified in Note 2.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ UHY LLP
   

We have served as the Company’s auditor since 2019.

   
New York, New York
   
March 31, 2022  

 

F-2

 

 

ACKRELL SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)

BALANCE SHEETS

 

   December 31, 
   2021   2020 
       As Restated 
Assets        
Cash  $86,792   $677,130 
Prepaid assets   72,172    226,723 
Total Current Assets   158,964    903,853 
           
Cash and securities held in Trust Account   140,822,578    139,383,247 
Total assets  $140,981,542   $140,287,100 
           
Liabilities and Stockholders’ (Deficit) Equity          
Accounts payable and accrued expense  $793,237   $292,965 
State franchise tax accrual   195,695    7,225 
Due to related parties   123,548    3,548 
Promissory note – related party   1,380,000    
-
 
Total current liabilities   2,492,480    303,738 
Warrant liabilities   284,770    580,860 
Total liabilities   2,777,250    884,598 
           
Commitments   
 
    
 
 
Common stock subject to possible redemption, 13,800,000 shares (at redemption value of approximately $10.20 and $10.10 per share) at December 31, 2021 and 2020, respectively   140,822,578    139,383,247 
           
Stockholders’ (Deficit) Equity:          
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding   
-
    
-
 
Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,369,000 shares (excluding 13,800,000 shares subject to possible redemption) issued and outstanding at December 31, 2021 and 2020, respectively   437    437 
Additional paid-in capital   -    144,300 
Accumulated deficit   (2,618,723)   (125,482)
Total stockholders’ (deficit) equity   (2,618,286)   19,255 
           
Total Liabilities and Stockholders’ (Deficit) Equity  $140,981,542   $140,287,100 

 

The accompanying notes are an integral part of these financial statements.

 

F-3

 

 

ACKRELL SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)

STATEMENTS OF OPERATIONS

 

   For the
Year Ended
   For the
Year Ended
 
   December 31,
2021
   December 31,
2020
 
       As Restated 
Formation and operating costs  $1,553,631   $118,791 
Loss from operations   (1,553,631)   (118,791)
           
Other income (loss)          
Interest income   59,331    3,247 
Change in fair value of warrant liabilities   296,090    (6,184)
Total other income (loss)   355,421    (2,937)
           
Net loss  $(1,198,210)  $(121,728)
           
Basic and diluted weighted average shares outstanding, common stock subject to redemption   13,800,000    339,344 
Basic and diluted net (loss) income per share attributable to common stock subject to redemption  $(0.04)  $52.43 
Basic and diluted weighted average shares outstanding, common stock   4,369,000    3,429,593 
           
Basic and diluted net loss per share attributable to common stockholders  $(0.15)  $(5.22)

 

The accompanying notes are an integral part of these financial statements.

 

F-4

 

 

ACKRELL SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

    Common Stock (1)     Additional Paid-in     Share
Subscription
    Accumulated
Earnings
    Total
Stockholders’
Equity
 
    Shares     Par Value     Capital     Receivable     (Deficit)     (Deficit)  
                                     
Balance as of December 31, 2019     3,937,500     $ 394     $ 4,874     $
               -
    $ (3,755 )   $        1,513  
                                                 
Issuance of representative shares on November 25, 2020     150,000       15       792,428      
-
     
-
      792,443  
                                                 
Return of Insider Shares in connection with the downsized offering on November 25, 2020     (862,500 )     (86 )     86      
-
     
-
     
-
 
                                                 
Effectuation of a 1.2-for-1 stock dividend in connection with the upsized offering on December 21, 2020     645,000       64       (64 )    
-
     
-
     
-
 
                                                 
Return of representative shares on December 21, 2020     (40,000 )     (4 )     4      
-
     
-
     
-
 
                                                 
Sale of 13,800,000 Units on December 23, 2020 through public offering     13,800,000       1,380       137,998,620      
-
     
-
      138,000,000  
                                                 
Sale of 539,000 Private Placement Units on December 23, 2020     539,000       54       5,389,946      
-
     
-
      5,390,000  
                                                 
Underwriters’ discount     -      
-
      (2,760,000 )    
-
     
-
      (2,760,000 )
                                                 
Initial Value of private warrants     -      
-
      (574,676 )    
-
     
-
      (574,676 )
                                                 
Reclassification of offering costs related to public shares     -      
-
      3,655,046      
-
     
-
      3,655,046  
                                                 
Other offering expenses     -      
-
      (1,325,051 )    
-
     
-
      (1,325,051 )
                                                 
Net loss     -      
-
     
-
     
-
      (121,727 )     (121,727 )
                                                 
Maximum number of redeemable shares     (13,800,000 )     (1,380 )     (123,471,861 )    
-
     
-
      (123,473,241 )
                                                 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid in capital     -      
-
      (19,561,805 )    
-
     
-
      (19,561,805 )
                                                 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid in capital (interest earned on trust account)     -      
-
      (3,247 )    
-
     
-
      (3,247 )
                                                 
Balance as of December 31, 2020     4,369,000     $ 437     $ 144,300     $ -     $ (125,482 )   $ 19,255  
                                                 
Net loss     -      
-
     
-
     
-
      (1,198,210 )     (1,198,210 )
                                                 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid in capital     -      
-
      (84,969 )    
-
      (1,295,031 )     (1,380,000 )
                                                 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid in capital (interest earned on trust account)     -      
-
      (59,331 )    
-
     
-
      (59,331 )
                                                 
Balance as of December 31, 2021     4,369,000     $ 437     $ -     $ -     $ (2,618,723 )   $ (2,618,286 )

 

(1) This number excludes 13,800,000 and 0 common stock subject to possible redemption at December 31, 2021 and 2020, respectively.

 

The accompanying notes are an integral part of these financial statements.

 

F-5

 

 

ACKRELL SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)

STATEMENTS OF CASH FLOWS 

 

   For the Year   For the Year 
   Ended   Ended 
   December 31,   December 31, 
   2021   2020 
Cash Flows from Operating Activities:      As Restated 
Net loss  $(1,198,210)  $(121,727)
Adjustments to reconcile net loss to net cash provided by/(used in)    operating activities:          
Interest earned on investment held in Trust Account   (59,331)   (3,247)
Change in fair value of warrants   (296,090)   6,184 
Changes in current assets and current liabilities:          
Deferred offering costs   
-
    207,325 
Prepaid assets   154,551    (226,723)
Accounts payable and accrued expense   500,272    223,905 
State franchise tax accrual   188,470    7,225 
Due to related parties   120,000    3,548 
Net cash provided by/(used in) operating activities   (590,338)   96,490 
           
Cash Flows from Investing Activities:          
Cash deposited in Trust Account   (1,380,000)   (139,380,000)
Net cash used in investing activities   (1,380,000)   (139,380,000)
           
Cash Flows from Financing Activities:          
Proceeds from issuance of 150,000 representative shares   
-
    15 
Proceeds from initial public offering, net of underwriters’ discount   
-
    135,240,000 
Proceeds from private placement   
-
    5,390,000 
Proceeds from Sponsor loan   1,380,000    150,000 
Repayment of Sponsor loan   
-
    (300,000)
Payments of offering costs   
-
    (532,623)
Net cash provided by financing activities   1,380,000    139,947,392 
           
Net Increase in Cash   (590,338)   663,882 
Cash - Beginning   677,130    13,248 
Cash - Ending  $89,792   $677,130 
           
Supplemental Disclosure of Non-cash Financing Activities:          
Sponsor shares surrendered as part of downsizing  $
-
   $(86)
1 for 1.2 stock dividend as part of upsizing  $
-
   $64 
Shares surrendered by Underwriter for no consideration  $
-
   $(4)
Initial value of warrant liabilities  $
-
   $574,676 
Initial value of common stock subject to possible redemption  $
-
   $123,473,241 
Reclassification of offering costs related to public shares  $
-
   $(3,655,046)
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid-in-capital (“APIC”)  $1,380,000   $19,561,805 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on trust account)  $59,331   $3,247 

 

The accompanying notes are an integral part of these financial statements.

 

F-6

 

 

ACKRELL SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)

NOTES TO THE FINANCIAL STATEMENTS 

 

Note 1 — Organization and Business Operations

 

Organization and General

 

Ackrell SPAC Partners I Co. (the “Company”) is a blank check company formed under the laws of the State of Delaware on September 11, 2018. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination” or “Initial Business Combination”). 

 

The Company has selected December 31 as its fiscal year end. The Company’s sponsor is Ackrell SPAC Sponsors I LLC, a Delaware limited liability company.

 

As of December 31, 2021, the Company had not yet commenced any revenue-generating operations. All activity through December 31, 2021 relates to the Company’s formation, the Initial Public Offering (as defined below), the search for a prospective Initial Business Combination, and efforts toward consummating the Initial Business Combination. The Company will not generate any operating revenues until after the completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in the fair value of warrant liability as other income (expense) (See Note 11).

 

On December 15, 2021, the Company formed Blackstone Products, Inc. (“Newco”), a Delaware corporation that is a wholly-owned subsidiary of the Company, and Ackrell Merger Sub Inc. (“Merger Sub”), a Delaware corporation that is a wholly-owned subsidiary of Newco, for the purpose of executing the Merger Agreement (as defined below). All activities of Newco and Merger Sub through December 31, 2021 related to executing the Merger Agreement.

 

On December 22, 2021, the Company, Newco and Merger Sub entered into a business combination agreement (the “Merger Agreement”) with North Atlantic Imports, LLC, an innovative griddle company d/b/a Blackstone Products (“Blackstone”), pursuant to which the two companies agreed to consummate a Business Combination where the combined company will own 100% of Blackstone post Business Combination. The aggregate consideration to be paid in the transactions is based on a pre-money Blackstone equity valuation of approximately $721 million. In connection with the Business Combination, the Company and Newco entered into subscription agreements with certain investors (the “PIPE Investors”), pursuant to which Newco agreed to issue and sell to the PIPE Investors approximately 3,100,000 units (the “Newco Units”) for a purchase price of $10.00 per unit, for an aggregate of approximately $31,000,000 and approximately $111,000,000 principal amount of Newco convertible notes immediately prior to the closing of the Business Combination. Each Newco Unit consists of one share of Newco common stock and one-half of a warrant to acquire Newco common stock at an exercise price of $11.50 per share.

 

Financing

 

The registration statements (“Registration Statements”) for the Company’s initial public offering (“Initial Public Offering” or “IPO”) were declared effective on December 21, 2020. On December 23, 2020, the Company consummated the Initial Public Offering of 13,800,000 units (the “Public Units”), which included the full exercise of the underwriter’s overallotment option, generating gross proceeds of $138,000,000, which is described in Note 3. Each Public Unit consists of (i) one subunit (the “Public Subunit”), which consists of one share of common stock (the “Public Share”) and one-half of one redeemable warrant, and (ii) one-half of one redeemable warrant (collectively, the redeemable warrants included in the Public Units and Public Subunits, the “Public Warrants”). Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share.

 

Simultaneously with the closing of the IPO, the Company consummated the sale of 539,000 units (the “Private Units”) at a price of $10.00 per unit in a private placement to Ackrell SPAC Sponsors I LLC (the “Sponsor”), the Company’s sponsor, and EarlyBirdCapital, Inc. (“EarlyBirdCapital”), generating gross proceeds of $5,390,000, which is described in Note 4. Each Private Unit consists of (i) one subunit (the “Private Subunit”), which consists of one share of common stock (the “Private Share”) and one-half of one redeemable warrant, and (ii) one-half of one redeemable warrant (collectively, the redeemable warrants included in the Private Units and Private Subunits, the “Private Warrants”). Each whole Private Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share.

 

F-7

 

 

Trust Account

 

Following the closing of the IPO on December 23, 2020, an amount of $139,380,000 ($10.10 per Unit) from the net proceeds of the sale of the Public and Private Units in the IPO and private placement was placed in a trust account (“Trust Account”) which will be 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 money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, until the earlier of (a) the completion of the Company’s Initial Business Combination, (b) the redemption of any Public Subunits properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, or (c) the redemption of the Company’s Public Subunits if the Company is unable to complete the Initial Business Combination within the Combination Period (as defined below). On December 23, 2021, the Company deposited $1,380,000 into the Trust Account and extended the period of time to consummate the Initial Business Combination by three months from December 23, 2021 to March 23, 2022. On March 21, 2022, the Company deposited an additional $1,380,000 into the Trust Account and further extended the period of time to consummate the Initial Business Combination by an additional three months from March 23, 2022 to June 23, 2022 (the “Extended Combination Period”). The aggregate of $2,760,000 from the above mentioned two extensions was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone on December 23, 2021 and March 16, 2022, respectively (See Note 6 and Note 13).

 

Initial Business Combination

 

The Company’s 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 (net of taxes payable) at the time of the signing an agreement to enter into a Business Combination. However, 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 Subunits included in the Public Units sold in the IPO 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. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their Public Subunits for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $10.10 per subunit, 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 Company had 12 months from the closing of the IPO to consummate a Business Combination with an opportunity to extend the period of time up to two times each by an additional three months (for a total of up to 18 months to complete a business combination) (the “Combination Period”), subject to the Sponsor depositing into the Trust Account, on or prior to the applicable deadline, additional funds of $1,380,000 ($0.10 per unit) for each of the available three-month extensions. On December 23, 2021, the Company deposited $1,380,000 into the Trust Account and extended the period of time to consummate the Initial Business Combination by three months from December 23, 2021 to March 23, 2022. On March 21, 2022, the Company deposited an additional $1,380,000 into the Trust Account and further extended the period of time to consummate the Initial Business Combination by an additional three months from March 23, 2022 to June 23, 2022 (the “Extended Combination Period”). The aggregate of $2,760,000 from the above mentioned two extensions was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone on December 23, 2021 and March 16, 2022, respectively (See Note 6 and Note 13).

 

The Sponsor, EarlyBirdCapital and the Company’s officer and directors have agreed to (i) waive their conversion rights with respect to their Founder Shares (See Note 5), Representative Shares (See Note 8) and Private Subunits (collectively, the “Private Securities”) in connection with the consummation of a Business Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Private Securities if the Company fails to consummate a Business Combination within the Extended Combination Period and (iii) not to propose an amendment to the Company’s amended and restated certificate of incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Subunits if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Subunits in conjunction with any such amendment. 

 

F-8

 

 

Liquidation

 

The holders of the Private Securities will not participate in any liquidation distribution with respect to such securities. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the $10.10 per Public Unit in the IPO. The Sponsor has agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.10 per Public Subunit by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company. The agreement entered into by the Sponsor specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of the Company’s IPO against certain liabilities, including liabilities under the Securities Act. The Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. The Company believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company believes it is unlikely that Sponsor will be able to satisfy its indemnification obligations if it is required to do so.

 

Liquidity and Going Concern

 

As of December 31, 2021, the Company had cash outside the Trust Account of $86,792 available for working capital needs. All remaining cash and securities were held in the Trust Account and are generally unavailable for the Company’s use prior to an Initial Business Combination and are restricted for use either in a Business Combination or to redeem Public Subunits. As of December 31, 2021, none of the amount on deposit in the Trust Account was available to be withdrawn as described above.

 

Through December 31, 2021, the Company’s liquidity needs were satisfied through receipt of $5,000 from the sale of the Founder Shares (See Note 6), advances from the Sponsor in an aggregate amount of $300,000 which were repaid upon the IPO, and the remaining net proceeds from the IPO and private placement (See Note 4 and 5) held outside of the Trust Account.

 

The Company’s initial stockholders, officers, directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. 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, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. As of December 31, 2021 and 2020, no Working Capital Loans were outstanding. 

 

Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans from the Initial Stockholders, the Sponsor, the Company’s officers and directors, or their respective affiliates, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

 

The Company anticipates that the $86,792 outside of the Trust account as of December 31, 2021 will not be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. On December 23, 2021, the Company deposited $1,380,000 into the Trust Account and extended the period of time to consummate the Initial Business Combination by three months from December 23, 2021 to March 23, 2022. On March 21, 2022, the Company deposited an additional $1,380,000 into the Trust Account and further extended the period of time to consummate the Initial Business Combination by an additional three months from March 23, 2022 to June 23, 2022 (the “Extended Combination Period”). The aggregate of $2,760,000 from the above mentioned two extensions was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone on December 23, 2021 and March 16, 2022, respectively (See Note 6 and Note 13). The Company may need to obtain additional financing to consummate its Initial Business Combination but there is no assurance that new financing will be available to the Company on commercially acceptable terms. Furthermore, if the Company is not able to consummate a business combination by June 23, 2022, it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

F-9

 

 

Note 2 – Restatement of Financial Statements

 

Redeemable Equity Instruments

 

As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, the Company revisited its application of ASC 480-10-S99 on the Company’s financial statements. The Company had previously classified a portion of its public subunits (and the underlying shares of common stock) in permanent equity. Subsequent to the re-evaluation, the Company’s management concluded that all of its public subunits should be classified as temporary equity. The identified errors impacted the Company’s Current Report on Form 8-K on December 30, 2020 containing the IPO balance sheet as of December 23, 2020, Annual Report on Form 10-K on March 31, 2021 containing the Company’s financial statements for the fiscal year ended December 31, 2020, Quarterly Report on Form 10-Q on May 24, 2021 containing financial statements as of March 31, 2021, Quarterly Report on Form 10-Q on August 23, 2021 containing financial statements as of June 30, 2021, and Quarterly Report on Form 10-Q on November 15, 2021 containing financial statements as of September 30, 2021. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the errors and has determined that the related impacts were qualitatively immaterial but quantitatively material to the aforementioned 8-K, 10-K and 10-Q filings, and concluded that the impacted financial statements should be restated to correct the errors.

 

Warrants & Fair Value of Representative Shares

 

On April 12, 2021, the Staff of the SEC issued a statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies.” In the statement, the SEC Staff, among other things, highlighted potential accounting implications of certain terms that are common in warrants issued in connection with the initial public offerings of special purpose acquisition companies such as the Company. As a result of the Staff statement and in light of evolving views as to certain provisions commonly included in warrants issued by special purpose acquisition companies, the Company re-evaluated the accounting for its public warrants and private warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that the private warrants do not meet the criteria to be classified in stockholders’ equity, since the private warrants meet the definition of a derivative under ASC 815-40. Additionally, the Company re-evaluated the fair value of the representative shares and concluded that the fair value previously used for the representative shares was incorrect. The identified errors impacted the Company’s Form 8-K filing on December 30, 2020 containing the IPO balance sheet as of December 23, 2020 and the Company’s Form 10-K filing on March 31, 2021 containing the Company’s 2020 annual financial statements. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the errors and has determined that the related impacts were qualitatively immaterial to the aforementioned 8-K and 10-K filings but, in consideration that the Company is restating the financial statements contained in the aforementioned filings to correct the classification of public subunits as temporary equity, the Company concluded that the impacted financial statements should also be restated to correct the identified errors related to classification of private warrants and the fair value of representative shares.

 

F-10

 

 

Impact of the Restatement

 

The impact of the restatement on the audited balance sheet as of December 23, 2020 and audited financial statements as of and for the year ended December 31, 2020 are presented below.

 

   As Previously
Reported
   Adjustments   As Restated 
Audited Balance Sheet at December 23, 2020            
Warrant Liabilities  $
-
   $574,676   $574,676 
Total Liabilities   
-
    574,676    574,676 
Shares Subject to Possible Redemption   135,094,307    4,285,693    139,380,000 
Common Stock   479    (42)   437 
Additional paid-in capital   5,007,859    (4,860,327)   147,532 
Total Stockholders’ Equity   5,000,008    (4,860,369)   139,639 
                
Audited Balance Sheet at December 31, 2020               
Warrant Liabilities  $
-
   $580,860   $580,860 
Total Liabilities   303,738    580,860    884,598 
Shares Subject to Possible Redemption   134,983,359    4,399,888    139,383,247 
Common Stock   480    (43)   437 
Additional paid-in capital   5,118,821    (4,974,521)   144,300 
Accumulated Deficit   (119,298)   (6,184)   (125,482)
Total Stockholders’ Equity   5,000,003    (4,980,748)   19,255 
                
Audited Statement of Operations for the year ended December 31, 2020               
Change in Fair Value of Warrants  $
-
   $(6,184)  $(6,184)
Weighted average shares outstanding, basic and diluted   4,198,081    (4,198,081)   
-
 
Basic and diluted weighted average shares outstanding, common stock subject to redemption   
-
    339,344    339,344 
Basic and diluted weighted average shares outstanding, common stock not subject to redemption   
-
    3,429,593    3,429,593 
Basic and diluted net income (loss) per share   (0.03)   0.03    
-
 
Basic and diluted net income (loss) per share, common stock subject to redemption   
-
    52.43    52.43 
Basic and diluted net income (loss) per share, common stock not subject to redemption   
-
    (5.22)   (5.22)
                
Audited Statement of Changes in Stockholders’ Equity for the year ended December, 2020               
Issuance of Representative Shares on November 25, 2020 - Additional Paid-in-Capital  $
-
   $792,428   $792,428 
Issuance of Representative Shares on November 25, 2020 - Stockholders’ Equity (Deficit)   15    792,428    792,443 
Initial Value of Private Warrants   
-
    (574,676)   (574,676)
Reclassification of offering costs related to public shares   
-
    3,655,046    3,655,046 
Other Offering Expenses   (532,623)   (792,428)   (1,325,051)
Net Loss   (155,543)   (6,184)   (121,727)
Maximum number of redeemable shares - Shares   (13,364,689)   (435,311)   (13,800,000)
Maximum number of redeemable shares - Par Value   (1,336)   (44)   (1,380)
Maximum number of redeemable shares - Paid-in-Capital   (134,982,023)   11,510,162    (123,471,861)
Maximum number of redeemable shares - Stockholders’ Equity (Deficit)   (134,983,359)   11,510,118    (123,473,241)
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC   
-
    (19,561,805)   (19,561,805)
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on trust account)   
-
    (3,247)   (3,247)
                
Audited Statement of Cash Flows for the year ended December 31, 2020               
Net Loss  $(115,543)  $(6,184)  $(121,727)
Change in fair value of warrant liabilities   
-
    6,184    6,184 
Initial value of warrant liabilities   
-
    574,676    574,676 
Initial value of common stock subject to possible redemption   135,094,307    (11,621,066)   123,473,241 
Reclassification of offering costs related to public shares   
-
    (3,655,046)   (3,655,046)
Change in value of common stock subject to possible redemption   (110,948)   110,948    
-
 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC   
-
    19,561,805    19,561,805 
Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on trust account)   
-
    3,247    3,247 

 

F-11

 

 

Note 3 — Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows.

 

Emerging Growth Company Status

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

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 financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ 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 has $86,792 of cash held outside of the Trust Account as of December 31, 2021 and $677,130 as of December 31, 2020. The Company did not have any cash equivalents as of December 31, 2021 and 2020. 

 

Investment Held in Trust Account

 

As of December 31, 2021, the Company had $140,822,578 in the Trust Account which may be utilized for Business Combination. As of December 31, 2021 and 2020, the Trust Account consisted of both cash and Treasury securities. The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments – Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.

 

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the condensed statements of operations. Interest income is recognized when earned.

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.

 

F-12

 

 

Common Stock (underlying the Public Subunits) Subject to Possible Redemption

 

The Company accounts for its common stock underlying the Public Subunits that are subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock underlying the Public Subunits subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock underlying Public Subunits (including common stock underlying Public Subunits that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock underlying the Public Subunits are classified as stockholders’ equity. The Company’s common stock underlying the Public Subunits feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2021 and 2020, common stock underlying the Public Subunits subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.  

 

Derivative Financial Instruments

 

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 reassessed at the end of each reporting period.

 

Derivative instruments are recorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

 

Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

 

Net Income (Loss) Per Common Share

 

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statements of operations include a presentation of income (loss) per redeemable Public Share underlying the Public Subunit and income (loss) per non-redeemable founder share following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the public redeemable shares and founder non-redeemable shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 76% and 9% for the Public Shares underlying the Public Subunits and 24% and 91% for the non-redeemable founder shares for the year ended December 31, 2021 and 2020, respectively, reflective of the respective participation rights.

 

The earnings per share presented in the statements of operations is based on the following  :

 

   For the
year ended
   For the
year ended
 
   December 31,
2021
   December 31,
2020
 
Net loss  $(1,198,210)  $(121,728)
Accretion of temporary equity to redemption value   (1,439,331)   (19,565,052)
Net loss including accretion of temporary equity to redemption value  $(2,637,541)  $(19,686,780)

 

F-13

 

 

    For the year ended      For the year ended  
    December 31, 2021     December 31, 2020  
    Redeemable     Non-redeemable      Redeemable     Non-redeemable  
Basic and diluted net loss per share:                        
Numerator:                        
Allocation of net loss including accretion of temporary equity   $ (2,003,306 )   $ (634,235 )   $ (1,772,541 )   $ (17,914,239 )
Accretion of temporary equity to redemption value     1,439,331      
      19,565,052      
 
Allocation of net loss   $ (563,975 )   $ (634,235 )   $ 17,792,511     $ (17,914,239 )
                                 
Denominator:                                
Weighted-average shares outstanding     13,800,000       4,369,000       339,344       3,429,593  
Basic and diluted net loss per share   $ (0.04 )   $ (0.15 )   $ 52.43     $ (5.22 )

 

As of December 31, 2021 and 2020, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the Company’s earnings. As a result, diluted loss per share is the same as basic loss per share for the years presented.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. 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 December 31, 2021 and 2020. 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 has identified the United States as its only “major” tax jurisdiction. The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state 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. The provision for income taxes was deemed to be immaterial as of December 31, 2021 and 2020.

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard in the first quarter of 2023 and does not expect the adoption will have a significant impact on its financial statements and related disclosures.

 

F-14

 

 

Other than as noted above, Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

 

Note 4 — Initial Public Offering

 

On December 23, 2020, the Company sold 13,800,000 Public Units at a price of $10.00 per Public Unit, including the issuance of 1,800,000 Public Units as a result of the underwriters’ full exercise of their over-allotment option. Each Public Unit consists of (i) one Public Subunit, which consists of one Public Share and one-half of one Public Warrant, and (ii) one-half of one Public Warrant. Each whole warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share. (See Note 8).

 

Note 5 — Private Placements

 

Simultaneously with the closing of the IPO, the Sponsor and EarlyBirdCapital purchased an aggregate of 539,000 Private Units, at a price of $10.00 per unit, for an aggregate purchase price of $5,390,000. A portion of the proceeds from the sale of Private Units were added to the net proceeds from the IPO held in the Trust Account.

 

The Private Units and their underlying securities are identical to the units sold in the Initial Public Offering except the Private Warrants will be non-redeemable and may be exercised on a cashless basis. The purchasers of the Private Units have agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to the same permitted transferees as the Founder Shares) until the completion of the Business Combination.

 

If the Company does not complete a Business Combination within the Extended Combination Period, the proceeds of the sale of the Private Units will be used to fund the redemption of the Public Subunits (subject to the requirements of applicable law).

 

Note 6 — Related Party Transactions

 

Founder Shares

 

On September 11, 2018, the Company issued 3,737,500 shares of common stock (the “Founder Shares”) to its initial stockholder, Able SPAC Holding LLC, for $5,000 in cash, or approximately $0.0013 per share, in connection with formation.

 

On November 25, 2020, the Sponsor contributed back to the Company, for no consideration, 862,500 Founder Shares for cancellation, resulting in an aggregate of 2,875,000 Founder Shares outstanding.

 

On December 21, 2020, the Company effected a stock dividend of 0.2 shares of common stock for every share of common stock outstanding, resulting in an aggregate of 3,450,000 Founder Shares outstanding.

 

Founder Shares, subject to certain limited exceptions contained in the Registration Statements, will not be transferred, assigned, sold or released from escrow for a period ending on the six-month anniversary of the date of the consummation of the Initial Business Combination or earlier if, subsequent to its Initial Business Combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange

 

Promissory Notes – Related Party

 

On December 23, 2021, the Company issued an unsecured promissory note in the principal amount of $1,380,000 to the Sponsor. On March 16, 2022, the Company issued another unsecured promissory note in the principal amount of $1,380,000 to Blackstone (See Note 13). As of March 31, 2022, the Company had drawn down the full $2,760,000 on the two promissory notes. The promissory notes are non-interest bearing and payable in cash upon the closing of the Company’s initial business combination. In the event the Company fails to complete an initial business combination prior to the deadline set forth in its governing document, no payment will be due under the promissory notes and the principal balance of these promissory notes will be forgiven.

 

F-15

 

 

Administrative Services Agreement

 

Commencing on the effective date of the Registration Statements, the Company has agreed to pay an affiliate of the Company’s Chairman an aggregate fee of $10,000 per month for providing the Company with office space and certain office and secretarial services. This arrangement will terminate upon completion of the Company’s Initial Business Combination or the distribution of the Trust Account to the Company’s public stockholders. As of December 31, 2021, the Company has accrued $123,548 of administrative fees as a due to related party.

 

Working Capital Loans

 

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, provide the Company Working Capital Loans. If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. 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, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. As of December 31, 2021 and 2020, no Working Capital Loans were outstanding.

  

Note 7 — Cash and Securities Held in Trust Account

 

As of December 31, 2021 and 2020, cash and securities held in trust account are $140,822,578 and $139,383,247, respectively, and will not be released until the earlier of (a) the completion of the Company’s Initial Business Combination, (b) the redemption of any Public Subunits properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, or (c) the redemption of the Company’s Public Subunits if the Company is unable to complete the Initial Business Combination within the Extended Combination Period.

 

Note 8 — Stockholders’ Equity

 

Preferred Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At December 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.

 

Common Stock — The Company is authorized to issue a total of 100,000,000 shares of common stock at par value of $0.0001 each.

 

On December 23, 2020, the Company sold 13,800,000 shares of common stock as part of units sold in the IPO. Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 539,000 shares of common stock as part of the Private Units.

 

As of December 31, 2021 and 2020, shares of common stock subject to redemption were 13,800,000. The total number of shares of common stock outstanding at December 31, 2021 and 2020 was 4,369,000.

 

Warrants — Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of the Company’s IPO and will expire on the fifth anniversary of the completion of an Initial Business Combination, or earlier upon redemption or liquidation. However, no warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of Initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise. The warrants will expire on the fifth anniversary of completion of an Initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The Private Warrants, as well as any warrants underlying additional units the Company may issue to Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made to us, will be identical to the warrants underlying the units sold in the Company’s IPO except that such warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the Sponsor, EarlyBirdCapital or their permitted transferees.

 

F-16

 

 

Note 9 — Commitments & Contingencies    

 

Registration Rights

 

The holders of the Founder Shares, Private Units (and their underlying securities), Representative Shares (As defined below) and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying securities) will be entitled to registration rights pursuant to an agreement signed on the effective date of the Registration Statements. The holders of a majority of these securities will be entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Units and units issued in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates an Initial Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s consummation of an Initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriting Agreement

 

The Company granted the underwriters a 45-day option to purchase up to 1,800,000 additional Public Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. On December 23, 2020, the underwriters exercised its full over-allotment option of 1,800,000 units.

  

On December 23, 2020, the underwriters were paid a cash underwriting fee of 2% of the gross proceeds of the IPO, totaling $2,760,000. 

 

In addition, prior to the IPO, the Company issued to EarlyBirdCapital an aggregate of 380,000 shares of common stock (the “Representative Shares”) at approximately $0.0001 per share.

 

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 date of the effectiveness of the Registration Statements pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or 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, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.

 

Business Combination Marketing Agreement

 

The Company has engaged EarlyBirdCapital as an advisor in connection with the Company’s business combination to assist the Company in holding meetings with the Company’s stockholders to discuss the potential business combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the Company’s Initial Business Combination, assist the Company in obtaining stockholder approval for the business combination and assist the Company with its press releases and public filings in connection with the Initial Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of the Company’s Initial Business Combination in an amount equal to 3.5% of the gross proceeds of the IPO (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at the Company’s sole discretion to other FINRA members (including, with EarlyBirdCapital’s prior consent which shall not be unreasonably withheld, companies affiliated with the Company or the Company’s officers or directors, including Ackrell Capital) that assist the Company in identifying or consummating an Initial Business Combination.

 

F-17

 

 

Capital Markets Advisors Agreements

 

The Company has engaged Nomura Securities International, Inc. (“Nomura”) as an advisor to assist the Company with identifying and assessing potential Business Combination targets. Upon the closing of the Business Combination, the Company will pay Nomura a variable fee of up to $10 million based on the transaction value of the Business Combination, with a minimum variable fee of $5 million which may be reduced by up to $750,000 to cover the Company’s costs to obtain fairness opinion(s) on Business Combination target(s).

 

Additionally, the Company has engaged Nomura and Barclays Capital Inc. (“Barclays”) (collectively, the “Blackstone Advisors”) to serve as advisors and placement agents in connection with the Company’s Business Combination with Blackstone. Upon the consummation of the Company’s Business Combination with Blackstone, the Company will pay the Blackstone Advisors a fixed fee of $1.5 million and a variable fee equal to 5.0% of the gross proceeds received by the Company from any private placements arranged by the Advisors in connection with the Company’s Business Combination with Blackstone, with a minimum variable fee of $6.0 million.

 

Note 10 — Fair Value Measurements

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

  Level 1 - defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
     
  Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses, due to related parties are estimated to approximate the carrying values as of December 31, 2021 due to the short maturities of such instruments. 

 

Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

  

Non-Recurring Fair Value Measurements

 

The following table presents information about the Company’s 150,000 Representative Shares that were issued on and measured at fair value on a non-recurring basis as of November 25, 2020 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

 

   November 25,   Quoted
Prices In
Active
Markets
   Significant
Other
Observable
Inputs
   Significant
Other
Unobservable
Inputs
 
   2020   (Level 1)   (Level 2)   (Level 3) 
Stockholders’ Equity:                
Representative Shares  $792,443   $              $
          -
   $792,443 
   $792,443   $    $
 
  $792,443 

 

F-18

 

 

The estimated fair value of the Representative Shares on November 25, 2020, the date the Representative Shares were issued, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model utilizing the probability weighted expected return method are assumptions related to the expected stock-price volatility (pre-merger), the risk-free interest rate, and the expected restricted term. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected restricted term of the Representative Shares. The expected restricted term of the Representative Shares is simulated based on management assumptions regarding the timing and likelihood of completing the IPO and a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

 

The key inputs into the Monte Carlo simulation model for the Representative Shares were as follows at November 25, 2020:

 

Input  November 25,
2020
 
Restricted term (years)      1.02 
Expected volatility   11.8%
Risk-free interest rate   0.11%
Stock price  $9.14 
Dividend yield   0%

 

Recurring Fair Value Measurements

 

As of December 31, 2021, investment in the Company’s Trust Account consisted of $1,895 in cash and $140,820,683 in U.S. Treasury Securities. The value of the cash held in Trust Account, U.S. Treasury Securities held in Trust Account and Private Warrant liability was determined by quoted prices in active markets (Level 1), significant other observable inputs (Level 2) and significant other unobservable inputs (Level 3), respectively, as of December 31, 2021.

 

The following table presents information about the Company’s assets and 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 inputs the Company utilized to determine such fair value:

 

   December 31,   Quoted
Prices In
Active
Markets
   Significant
Other
Observable
Inputs
   Significant
Other
Unobservable
Inputs
 
Description  2021   (Level 1)   (Level 2)   (Level 3) 
Assets:                
Cash held in Trust Account  $1,895    1,895    
-
   $
-
 
U.S. Treasury Securities held in Trust Account   140,820,683    
-
    140,820,683    
-
 
    140,822,578    1,895    140,820,683    
-
 
                     
Liabilities:                    
Warrant Liability – Private Warrants  $284,770   $
-
   $
-
   $284,770 

 

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the nine months ended December 31, 2021.

 

F-19

 

 

Note 11 — Warrant Liabilities

 

At December 31, 2021 and 2020, there were 539,000 Private Warrants outstanding, which the Company accounts for as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued by the Company in connection Private Placement has been estimated using Monte Carlo simulations at each measurement date.

 

The Company utilizes a Monte Carlo simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Monte Carol simulation model are assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility 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 simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Once the warrants become exercisable, the Company may redeem the outstanding warrants when the price per share of common stock equals or exceeds $18.00. The assumptions used in calculating the estimated fair values at the end of the reporting period represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

  

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

  

The following table provides quantitative information regarding Level 3 fair value measurements of the Private Warrants:

 

   As of
December 31,
2021
   
   As of December 31, 2020 
Stock price  $9.86   $9.22 
Strike price  $11.50   $11.50 
Term (in years)   5.43    5.92 
Volatility   9.2%   24.2%
Risk-free rate   1.30%   0.49%
Dividend yield   0.0%   0.0%

 

Note 12 — Income Tax

 

The Company’s net deferred tax assets are as follows:

 

   December 31,
2021
   December 31,
2020
 
Deferred tax asset        
Organizational costs/Startup expenses  $85,724   $21,957 
Capitalized costs related to merger   62,605    
 
Federal Net Operating loss   34,987    2,307 
Total deferred tax asset   183,315    24,264 
Valuation allowance   (183,315)   (24,264)
Deferred tax asset, net of allowance  $
   $
 

 

F-20

 

  

The income tax provision consists of the following:

 

   December 31,
2021
   December 31,
2020
 
Federal        
Current  $
   $
 
Deferred   159,051    24,264 
           
State          
Current   
    
 
Deferred   
    
 
Change in valuation allowance   (159,051)   (24,264)
Income tax provision  $
   $
 

 

As of December 31, 2021 and 2020, the Company had $166,603 and $10,988 U.S. federal net operating loss carryovers available to offset future taxable income.

 

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year December 31, 2021 and 2020, the change in the valuation allowance was $159,051 and $24,264, respectively.

 

Reconciliations of the federal income tax rate to the Company’s effective tax rate at December 31, 2021 and 2020 are as follows:

 

   December 31,
2021
   December 31,
2020
 
Statutory federal income tax rate   21.0%   21.0%
State taxes, net of federal tax benefit   0.0%   0.0%
Permanent book/tax differences   -7.7%   0.0%
Change in valuation allowance   -13.3%   -21.0%
Income tax provision   
%   
%

 

The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.

 

Note 13 — Subsequent Events 

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued and has concluded that all such events that would require adjustment or disclosure have been recognized or disclosed.

 

On February 15, 2022, Newco filed a Form S-4 with the SEC relating to the proposed Business Combination.

 

On March 16, 2022, the Company issued an unsecured promissory note in the principal amount of $1,380,000 to Blackstone. The promissory note is non-interest bearing and payable in cash upon the closing of the Company’s Initial Business Combination. In the event the Company fails to complete an Initial Business Combination, no payment will be due under the promissory note and the principal balance of this promissory note will be forgiven. As of March 31, 2022, the Company had drawn down the full $1,380,000 on the promissory note.

 

 

 

F-21

 

 

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