UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| 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 Redeemable Warrant | ACKIU | The Nasdaq Stock Market LLC | ||
| Subunits included as part of the units, each consisting of one share of common stock, $0.0001 par value, and one-half of one warrant | ACKIT | The Nasdaq Stock Market LLC | ||
| The | ||||
| Redeemable Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 | ACKIW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
| ☒ | ||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As
of August 15, 2022, there were
ACKRELL
SPAC PARTNERS I CO.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ACKRELL
SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)
CONDENSED BALANCE SHEETS
| June 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid assets | ||||||||
| Total Current Assets | ||||||||
| Cash and securities held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| State franchise tax accrual | ||||||||
| Due to related parties | ||||||||
| Promissory note – related party | ||||||||
| Promissory note – Blackstone | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments | ||||||||
| Common stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
1
ACKRELL
SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (loss) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Total other income (loss) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ACKRELL
SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
| Common Stock (1) | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||
| Extension Funds attributable to common stock subject to redemption under ASC 480-10-S99 against additional paid-in-capital (“APIC”) | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on Trust Account) | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Extension Funds attributable to common stock subject to redemption under ASC 480-10-S99 against APIC | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to redemption (interest earned on Trust Account) | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to redemption (withdrawal of funds to reimburse franchise tax) | - | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Total | ||||||||||||||||||||
| Common Stock (1) | Additional Paid-in | Accumulated Earnings | Stockholders’ Equity | |||||||||||||||||
| Shares | Par Value | Capital | (Deficit) | (Deficit) | ||||||||||||||||
| Balance as of December 31, 2020 (Restated) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on Trust Account) | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | - | ||||||||||||||||||
| Balance as of March 31, 2021 (Restated) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Subsequent measurement of common stock subject to possible redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ACKRELL
SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Six Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid assets | ||||||||
| Accounts payable and accrued expense | ( | ) | ||||||
| State franchise tax accrual | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash deposited in Trust Account | ( | ) | ||||||
| Withdrawal of interest from trust account for franchise tax payment | ||||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from Sponsor loan | ||||||||
| Proceeds from promissory note - Blackstone | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Increase (Decrease) in Cash | ( | ) | ||||||
| Cash - Beginning | ||||||||
| Cash - Ending | $ | $ | ||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
| Extension Funds attributable to common stock subject to redemption under ASC 480-10-S99 against APIC | $ | $ | ||||||
| Subsequent measurement of common stock subject to redemption under ASC 480-10-S99 against APIC (interest earned on Trust Account) | $ | $ | ||||||
| Payment from Trust Account in connection with redemption of shares | $ | ( | ) | $ | ||||
| Subsequent measurement of common stock subject to redemption (withdrawal of funds to reimburse franchise tax) | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
ACKRELL
SPAC PARTNERS I CO.
(f.k.a. ABLE ACQUISITION CORP.)
NOTES TO UNAUDITED CONDENSED 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 (a “Business Combination” or an “Initial Business Combination”).
The Company has selected December 31 as its fiscal year end. The Company’s sponsor is Ackrell SPAC Sponsors I LLC (the “Sponsor”), a Delaware limited liability company.
As of June 30, 2022, the Company had not yet commenced any revenue-generating operations. All activity through June 30, 2022 relates to the Company’s formation, the Initial Public Offering (as defined below), the search for a prospective target for Initial Business Combination, and efforts toward consummating an 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 generates non-operating income in the form of interest income on investments held in the Trust Account and will recognize changes in the fair value of warrant liability as other income (expense) (See Note 10).
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 Business Combination Agreement (as defined below). All activities of Newco and Merger Sub through June 30, 2022 related to executing the Business Combination Agreement and SEC filings related to the proposed Blackstone Business Combination (as defined below).
On December 22, 2021, the Company, Newco and Merger
Sub entered into a business combination agreement (the “Business Combination 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
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
Simultaneously
with the closing of the IPO, the Company consummated the sale of an aggregate of
5
Trust Account
Following
the closing of the IPO on December 23, 2020, an amount of $
On
April 28, 2022, pursuant to the trust agreement dated as of December 21, 2020 between the Company and Continental Stock Transfer
& Trust Company (“CST”), the trustee of the Trust Account, the Company issued a request to CST to withdraw $
On June 21, 2022, the Company’s stockholders
approved an amendment to its Amended and Restated Certificate of Incorporation to further extend the Business Combination Period on a
monthly basis up to three times from June 23, 2022 to not later than September 23, 2022, subject to the approval of the Board of Directors
of the Company, provided the Sponsor or its designees deposit into the trust account for each monthly extension an amount equal to the
lesser of $
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
The
Company initially 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), subject
to the Sponsor and/or its designees depositing into the Trust Account, on or prior to the applicable deadline, additional funds of $
On
June 21, 2022, the Company held a special meeting of stockholders for the approval of an amendment to its Amended and Restated Certificate
of Incorporation to extend on a monthly basis up to three times the Business Combination Period from June 23, 2022 to a date not later
than September 23, 2022, subject to the approval of the Board of Directors of the Company, provided the Sponsor or its designees deposit
into the trust account for each monthly extension an amount equal to the lesser of $
6
On
June 27, 2022, the Company deposited an additional $
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 by the end of the Business
Combination Period, as extended in accordance with its Amended and Restated Certificate of Incorporation, as amended, 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
Liquidation
Liquidity and Going Concern
As of June 30, 2022, the Company had cash outside
the Trust Account of $
Through June 30, 2022, the Company’s liquidity needs were satisfied
through receipt of $
7
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 $
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 $
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 31, 2022, which contained the audited financial statements and notes thereto. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
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.
8
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of 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.
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 had $
Investment Held in Trust Account
As
of June 30, 2022 and December 31, 2021, the Company had $
As of December 31, 2021, 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.
On
June 22, 2022, an aggregate of $
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.
9
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 June 30, 2022 and December 31, 2021, 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 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 loss per redeemable Public Share underlying the Public Subunit and loss per non-redeemable Founder Share
following the two-class method of loss per share. In order to determine the net loss attributable to both the Public Shares and non-redeemable
Founder Shares, the Company first considered the total loss allocable to both sets of shares. This is calculated using the total net
loss less any dividends paid. For purposes of calculating net 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 loss allocable to both sets of shares, the Company split the amount to be allocated using a ratio of
The earnings per share presented in the statements of operations is based on the following:
| For the Three Months Ended | For the Six Months Ended | |||||||
| June 30, 2022 | June 30, 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Attribution of extension funds to redeemable shares | ( | ) | ( | ) | ||||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ||||
| Withdrawal of funds to pay for franchise tax | ||||||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
10
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2022 | |||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Attribution of extension funds to redeemable shares | ||||||||||||||||
| Accretion of temporary equity to redemption value | ||||||||||||||||
| Withdrawal of funds to pay for franchise tax | ( | ) | ( | ) | ||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| For the Three Months Ended | For the Six Months Ended | |||||||
| June 30, 2021 | June 30, 2021 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2021 | June 30, 2021 | |||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of temporary equity to redemption value | ||||||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
As of June 30, 2022 and 2021, 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 periods 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 $
11
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 June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company 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 June 30, 2022 and December 31, 2021.
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.
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 3 — Initial Public Offering
On December 23, 2020, the Company sold
Note 4 — Private Placements
Simultaneously with the closing of the IPO, the
Sponsor and EarlyBirdCapital purchased an aggregate of
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).
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Note 5 — Related Party Transactions
Founder Shares
On September 11, 2018, the Company issued
On November 25, 2020, the Sponsor contributed
back to the Company, for no consideration,
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 Note – Related Party
On December 23, 2021, the Company issued an unsecured
promissory note in the principal amount of $
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 $
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 $
Note 6 — Cash and Securities Held in Trust Account
As of June 30, 2022 and December 31, 2021, cash
and securities held in Trust Account were $
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Note 7 — Stockholders’ Equity
Preferred Stock — The Company
is authorized to issue a total of
Common Stock — The Company
is authorized to issue a total of
On December 23, 2020, the Company sold
On June 22, 2022, an aggregate of $
As of June 30, 2022 and December 31, 2021,
shares of common stock subject to redemption were
Warrants — Each whole warrant
entitles the registered holder to purchase
Note 8 — 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.
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Underwriting Agreement
On December 23, 2020, the underwriters were paid
a cash underwriting fee of
In addition, prior to the IPO, the Company issued
to EarlyBirdCapital an aggregate of
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
Capital Markets Advisors Agreements
On April 26, 2021, the Company 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 transaction fee of up to $
Additionally, on September 9, 2021, the Company engaged Nomura and
Barclays Capital Inc. (“Barclays”) to serve as exclusive capital markets advisors and exclusive joint placement agents in
connection with the Company’s proposed Blackstone Business Combination. On May 24, 2022, Barclays resigned as joint capital markets
advisor and co-placement agent to the Company pursuant to the terms of its engagement and waived payment of all fees and reimbursement
of expenses under the engagement. On June 12, 2022, the Company amended the terms of its engagement letter with Nomura, pursuant to which
Nomura agreed to act as placement agent for a private placement of the Company’s securities in connection with the proposed Blackstone
Business Combination until the earlier of (i) June 12, 2023; (ii) the consummation of the private placement; or (iii) the termination
of Nomura’s engagement in accordance with the terms of the engagement letter. Under the PIPE engagement letter the Company agreed
to pay Nomura a fee equal to five percent (
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Additionally, the Company has engaged Telsey Advisory Group (“Telsey”)
to provide capital markets advisory services in connection with the proposed Blackstone Business Combination. The Company will pay Telsey
a fixed fee of $
Consulting Agreements
On December 13, 2021, the Company engaged FS Global
Credit Opportunities Fund (“FS”) to act as consultant with respect to the Newco convertible notes, the terms of which were
amended on December 22, 2021 ("FS Consulting Agreement”). Pursuant to the FS Consulting Agreement, the Company will pay FS
a fixed fee of $
On July 15, 2022, the Company has engaged Ingalls
& Snyder, LLC (“I&S") to provide marketing and consulting services with respect to the Blackstone Business Combination.
The Company will pay I&S a flat fee of $
Promissory Notes - Blackstone
On March 16, 2022, the Company issued an unsecured
promissory note in the principal amount of $
On April 6, 2022, the Company issued another unsecured
promissory note in the principal amount of $
On April 27, 2022, the Company issued another
unsecured promissory note, the terms of which were later amended and restated on May 11, 2022, in the principal amount of $
On June
21, 2022, the Company issued another unsecured promissory note in the principal amount of up to $
Note 9 — 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 June 30, 2022 and 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.
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Recurring Fair Value Measurements
As of June 30, 2022, investment in the Company’s
Trust Account consisted of $
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | 2022 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Cash held in Trust Account | $ | $ | ||||||||||||||
| Money market instruments | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability – Private Warrants | $ | $ | $ | $ | ||||||||||||
As of December 31, 2021, investment in the Company’s
Trust Account consisted of $
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 | $ | $ | ||||||||||||||
| U.S. Treasury Securities held in Trust Account | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability – Private Warrants | $ | $ | $ | $ | ||||||||||||
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 three and six months ended June 30, 2022 and 2021.
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Note 10 — Warrant Liabilities
At June 30, 2022 and December 31, 2021, there
were
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 $
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 June 30, 2022 | As of December 31, 2021 | |||||||
| Stock price | $ | $ | ||||||
| Strike price | $ | $ | ||||||
| Term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
Note 11 — Subsequent Events
The Subscription Agreements for the PIPE Investment provided the PIPE Investors with the right to terminate their subscription agreements if the proposed Blackstone Business Combination was not consummated by June 23, 2022, the date by which Company was to have originally completed its initial business combination in accordance with the Company’s Amended and Restated Certificate of Incorporation. These investors have exercised their right to terminate their Subscription Agreements. The Company is engaged in negotiations with those and other investors to modify the terms of the Subscription Agreements to eliminate the units portion of the private placement and to modify certain terms of the convertible notes.
On July 15, 2022, the Company has engaged I&S
to provide marketing and consulting services with respect to the Blackstone Business Combination. The Company will pay I&S a flat
fee of $
On July 22, 2022, the Company drew down an additional
$
On August 4, 2022, the Company withdrew an additional
$
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued and has concluded that all such events that would require adjustment or disclosure have been recognized or disclosed.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Ackrell SPAC Partners I Co. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Ackrell SPAC Sponsors I LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and final prospectus for its IPO filed with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company 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 IPO and the sale of the private units, our capital stock, debt or a combination of cash, stock and debt.
All activity through June 30, 2022 relates to our formation, IPO, and search for a target for our Initial Business Combination, including Blackstone, and efforts toward consummating the Initial Business Combination.
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.
Proposed Business Combination with Blackstone
On December 22, 2021, we entered into a Business Combination Agreement with Blackstone, among others, pursuant to which we, through a merger of Blackstone with and into NewCo (the "Merger"), our wholly-owned subsidiary, and certain other transactions, would acquire Blackstone (the “Blackstone 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 more fully described in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022 (the “Form 10-K”) and the Registration Statement on Form S-4 of Newco filed with the SEC on February 15, 2022, as amended (the "Newco Form S-4"). In connection with the proposed Blackstone Business Combination, we and Newco entered into the 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 proposed Blackstone Business Combination. For more information on the proposed Blackstone Business Combination, the Business Combination Agreement and related agreements, as well as the PIPE Investment, see “Item 1. Business” in the Form 10-K and the Newco Form S-4.
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Recent Developments
On April 6, 2022, we issued an unsecured promissory note in the principal amount of $115,000 to Blackstone to fund payment of fees due to Nasdaq (See Note 8). On April 27, 2022, we issued an additional unsecured promissory note, the terms of which were later amended and restated on May 11, 2022, in the principal amount of $385,000 to Blackstone to fund our continued operations (See Note 8).
On June 21, 2022, at a Special Meeting of Stockholders, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation to extend on a monthly basis up to three times the period of time for which we are required to consummate a Business Combination (the “Business Combination Period”) from June 23, 2022 to not later than September 23, 2022, subject to the approval of our Board of Directors, provided the Sponsor or its designees deposit into the Trust Account for each monthly extension an amount equal to the lesser of $0.043 per share for each Public Subunit that has not been redeemed by June 23, 2022 and $200,000, within seven days after the commencement of each extension period (the “Extension Amendment”). In connection with the vote on the Extension Amendment, an aggregate of 8,645,776 Public Subunits were presented for redemption. We paid cash in the aggregate amount of $89,068,505, or approximately $10.30 per subunit, to redeeming stockholders.
On June 21, 2022, we issued another unsecured promissory note in the principal amount of up to $600,000 to Blackstone. The proceeds of this note will be used to extend the Business Combination Period in accordance with the Extension Amendment. The note is non-interest bearing and payable in cash upon the earlier of (i) the consummation of our Initial Business Combination, and (ii) September 23, 2022 (See Note 8).
On June 27, 2022, we deposited $200,000 into the Trust Account and extended the Business Combination Period by an additional month from June 23, 2022 to July 23, 2022. On July 26, 2022, we deposited an additional $200,000 into the Trust Account and further extended the Business Combination Period by an additional month from July 23, 2022 to August 23, 2022. The aggregate of $3,160,000 for the two three-month extensions and the two monthly extensions was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone (See Note 5, Note 8 and Note 11).
The subscription agreements previously entered into with investors in connection with the private placement of units, consisting of shares of Newco common stock and warrants to purchase additional shares of Newco common stock, and/or Newco convertible notes announced on December 23, 2021 provided investors with the right to terminate their subscription agreements if the proposed Business Combination with Blackstone was not consummated by June 23, 2022, the date by which we were to have originally completed our initial business combination in accordance with our Amended and Restated Certificate of Incorporation. These investors have exercised their right to terminate their subscription agreements. We are engaged in negotiations with those and other investors to modify the terms of the subscription agreements to eliminate the units portion of the private placement and to modify certain terms of the convertible notes.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 2022 were organizational activities and those necessary to prepare for the IPO, described below, and searching for a prospective Initial Business Combination, including the proposed Blackstone Business Combination. 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 cash and marketable securities held in the Trust Account and recognize changes in the fair value of warrant liabilities as other income (expense). 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 and our efforts to consummate an Initial Business Combination.
For the three months ended June 30, 2022, we had a net loss of $321,253, which consisted of loss from operations of $588,946, interest income of $171,249 on marketable securities held in the Trust Account, and other income of $96,444 resulting from a decrease in fair value of our warrants.
For the three months ended June 30, 2021, we had a net loss of $353,298, which consisted of operating costs of $284,480, and other loss of $74,089 resulting from an increase in fair value of our warrants, partially offset by interest income of $5,271 on marketable securities held in the Trust Account.
For the six months ended June 30, 2022, we had a net loss of $821,807, which consisted of loss from operations of $1,256,504, other income of $228,411 resulting from a decrease in fair value of our warrants, partially offset by interest income of $206,286 on marketable securities held in the Trust Account.
For the six months ended June 30, 2021, we had a net loss of $233,161, which consisted of operating costs of $484,275, and other income of $221,796 resulting from a decrease in fair value of our warrants, partially offset by interest income of $29,318 on marketable securities held in the Trust Account.
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Liquidity and Capital Resources
On December 23, 2020, we consummated our IPO 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 IPO 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 IPO, 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 EarlyBirdCapital, generating gross proceeds of $5,390,000.
Following the IPO 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.
On June 22, 2022, an aggregate of $89,068,505 was released from the Trust Account for the redemption of 8,645,776 Public Subunits held by our public stockholders.
As of June 30, 2022, we had marketable securities held in the Trust Account of $53,345,080 consisting of both cash and money market instruments with a maturity of 185 days or less.
We had $195,111 of cash held outside of the Trust Account as of June 30, 2022. We did not have any cash equivalents held outside of the Trust Account as of June 30, 2022.
Additionally, we received $1,380,000 from the Sponsor Extension Loan (see Note 5), $1,380,000 from the Blackstone Extension Loans (See Note 8), and $200,000 from the Second Blackstone Extension Loan, which we deposited into the Trust Account to extend the period of time to consummate an initial Business Combination from December 23, 2021 to July 23, 2022. On April 6, 2022, we issued an unsecured promissory note in the principal amount of $115,000 to Blackstone to fund payment of fees due to Nasdaq (See Note 8). On April 27, 2022, we issued an unsecured promissory note, the terms of which were later amended and restated on May 11, 2022, in the principal amount of $385,000 to Blackstone to fund our continued operations (see Note 8). On April 28, 2022, pursuant to the trust agreement dated as of December 21, 2020 between us and CST, we issued a request to CST to withdraw $129,279 of interest income from the Trust Account for the payment of our taxes. On June 14, 2022 and August 4, 2022, we withdrew another $66,000 and $90,380 of interest income, respectively, from the Trust Account for the payment of our taxes.
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 initial 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.
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 $195,111 outside of the Trust Account as of June 30, 2022 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.
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 August 23, 2022, or September 23, 2022 if we further extend the period by which we must complete our initial Business Combination in accordance with the terms of the Extension Amendment, it will trigger our automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about our ability to continue as a going concern.
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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.
One of the more significant accounting estimates included in these financial statements is the determination of the fair value of our warrant liability. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates (See Note 10).
We have identified the following as our critical accounting policies:
Common Stock (underlying the Public Subunits) Subject to Possible Redemption
We account for common stock underlying the Public Subunits 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) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock underlying the Public Subunits (including common stock underlying the Public Subunits 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 underlying the Public Subunits is classified as stockholders’ equity. Our common stock underlying the Public Subunits 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 underlying the Public Subunits subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.
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 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 loss per redeemable Public Share (underlying the Public Subunit) and loss per non-redeemable Founder Share following the two-class method of loss per share. In order to determine the net loss attributable to both the redeemable Public Subunits and non-redeemable Founder Shares, we first considered the total loss allocable to both sets of shares. This is calculated using the total net loss less any dividends paid. For purposes of calculating net 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 loss allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 75% for the Public Shares (underlying the Public Subunits) and 25% for the non-redeemable Founder Shares for the three and six months ended June 30, 2022, reflective of the respective participation rights, and a ratio of 76% for the Public Shares and 24% for the non-redeemable Founder Shares for the three and six months ended June 30, 2021, reflective of the respective participation rights.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
We have engaged EarlyBirdCapital 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 EarlyBirdCapital 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.
On April 26, 2021, the Company engaged 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 transaction fee of up to $10 million based on the transaction value of the Business Combination, with a minimum transaction fee of $5 million which may be reduced by up to $750,000 to cover the Company’s costs to obtain fairness opinion(s).
Additionally, on September 9, 2021, the Company engaged Barclays to serve as exclusive capital markets advisors and exclusive joint placement agents in connection with the Company’s proposed Blackstone Business Combination. On May 24, 2022, Barclays resigned as joint capital markets advisor and co-placement agent to the Company pursuant to the terms of its engagement and waived payment of all fees and reimbursement of expenses under the engagement. On June 12, 2022, the Company amended the terms of its engagement letter with Nomura, pursuant to which Nomura agreed to act as placement agent for a private placement of the Company’s securities in connection with the proposed Blackstone Business Combination until the earlier of (i) June 12, 2023; (ii) the consummation of the private placement; or (iii) the termination of Nomura’s engagement in accordance with the terms of the engagement letter. Under the PIPE engagement letter the Company agreed to pay Nomura a fee equal to five percent (5%) of the gross proceeds from the sale of securities in the private placement to investors introduced by Nomura (excluding those covered by the original engagement letter) and to reimburse Nomura’s expenses (including counsel fees) up to an aggregate of $250,000 upon the earlier of the consummation of the proposed Blackstone Business Combination, the liquidation and dissolution of the Company in accordance with its governing documents and termination of the engagement letter in accordance with its terms.
Additionally, the Company has engaged Telsey to provide capital markets advisory services in connection with the proposed Blackstone Business Combination. The Company will pay Telsey a fixed fee of $650,000, of which $50,000 is payable within thirty days of Telsey completing its capital markets advisory services and the remaining $600,000 is payable upon the consummation of the proposed Blackstone Business Combination.
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Recent Accounting Standards
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. We plan to adopt this standard in the first quarter of 2023 and do not expect the adoption will have a significant impact on our financial statements and related disclosures.
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 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that, as of June 30, 2022, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter ended June 30, 2022, we have enhanced our internal controls over financial reporting relating to Private Warrants, redeemable equity instruments and Representative Shares by continuing to regularly assess the fair value of our Private Warrants, recognizing all Public Subunits as temporary equity and adopting a more robust approach to assessing the fair value of our equity instruments. We further improved this process by expanding and improving our review for complex securities and related accounting standards, enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. 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.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Except as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our final prospectus as filed with the SEC on December 9, 2020, our Annual Report on Form 10-K for the year ended December 31, 2021, our quarterly reports on Form 10-Q/A for the quarters ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively, and our quarterly report on Form 10-Q for the quarter ended March 31, 2022. For risk factors relating to Blackstone and the Blackstone Business Combination, please see the proxy statement/prospectus included in the Newco Form S-4, as amended. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
We cannot assure you that we will be able to complete a business combination prior to August 23, 2022 or September 23, 2022 if we extend, the date by which we are required to complete our initial business combination or be forced to liquidate.
We cannot assure you that the proposed Blackstone Business Combination will be consummated prior to August 23, 2022 or September 23, 2022 if extended, the date by which we are required to complete our initial business combination or be forced to liquidate. Our ability to consummate any business combination is dependent on a variety of factors, many of which are beyond our control. Although we are required to offer stockholders redemption rights in connection with any stockholder vote to approve a business combination, or if we seek to further extend the date by which we are required to complete our initial business combination at a Special Meeting of Stockholders to vote upon an amendment to our Amended and Restated Certificate of Incorporation for such further extension (a “Further Extension”), there may be no Special Meeting of Stockholders to vote upon our initial business combination or a Further Extension before September 23, 2022. Even if the proposed Blackstone Business Combination or a Further Extension is approved by our stockholders, it is possible that redemptions will leave us with insufficient cash to consummate a Business Combination on commercially acceptable terms, or at all. The fact that we will have separate redemption periods in connection with a stockholder vote upon a Further Extension and vote upon the Business Combination could exacerbate these risks. Other than in connection with a redemption offer or liquidation, our stockholders may be unable to recover their investment, except through sales of our securities on the open market. The price of our securities may be volatile, and there can be no assurance that stockholders will be able to dispose of our securities at favorable prices, or at all.
Changes in laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our Initial Business Combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments, and potentially, non-U.S. jurisdictions. In particular, we are required to comply with certain SEC and potentially other legal and regulatory requirements, and our consummation of an initial business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with, and monitoring of, the foregoing may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.
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The SEC has recently issued proposed rules relating to certain activities of special purpose acquisition companies (“SPACs”). Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our initial business combination and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the Trust Account or liquidate our company at an earlier time than we might otherwise choose.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating, among other items, to disclosures in business combination transactions between SPACS such as us and private operating companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. The SPAC Rule Proposals have not yet been adopted, and may be adopted in the proposed form or in a different form that could impose additional regulatory requirements on SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an initial business combination, and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the Trust Account or liquidate our company at an earlier time than we might otherwise choose.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the Company.
As described further above, the SPAC Rule Proposals relate, among other matters, to the circumstances in which SPACs, including companies like ours, could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for a business combination no later than 18 months after the effective date of its registration statement for its initial public offering. The company would then be required to complete its initial business combination no later than 24 months after the effective date of the registration statement for its initial public offering.
Because the SPAC Rule Proposals have not yet been adopted, there is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours that does not complete its business combination within 24 months after the effective date of the registration statement for its initial public offering.
If we are deemed to be an investment company under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to burdensome compliance requirements. We do not believe that our principal activities will subject us to regulation as an investment company under the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the Company.
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To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of securities in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
The funds in the Trust Account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, and we expect that we will, on or prior to the 24-month anniversary of the effective date of the Registration Statement, instruct Continental Stock Transfer & Trust Company (the "CST”), the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash until the earlier of consummation of our initial business combination or liquidation of the Company. Following such liquidation, we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the Trust Account and thereafter to hold all funds in the Trust Account in cash would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
In addition, even prior to the 24-month anniversary of the effective date of the Registration Statement, we may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
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 Business Combination Period, our public stockholders may receive only approximately $10.35 per public subunit, or less than such amount in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, such as the proposed Blackstone Business Combination, we may fail to complete our initial business combination for any number of reasons, including those beyond our control. Any such event will result in a loss to us of the related costs incurred, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the Combination Period, our public stockholders may receive only approximately $10.35 per subunit, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
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There may be significant competition for us to find an attractive target for an initial business combination. This could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target for our initial business combination.
In recent years, the number of SPACs that have been formed has increased substantially. Many companies have entered into business combinations with SPACs, and there are still many SPACs seeking targets for their initial business combination, as well as additional SPACs currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, effort and resources to identify a suitable target for an initial business combination.
In addition, because there are a large number of SPACs seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause target companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find a suitable target for and/or complete our initial business combination and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
There is substantial doubt about our ability to continue as a “going concern.”
In connection with the Company’s assessment of going concern considerations under applicable accounting standards, management has determined that our possible need for additional financing to enable us to negotiate and complete our initial business combination, as well as the deadline by which we may be required to liquidate our Trust Account, raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date the financial statements included elsewhere in this Quarterly Report were issued.
Recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination.
Recent increases in inflation and interest rates in the United States and elsewhere may lead to increased price volatility for publicly traded securities, including ours, and may lead to other national, regional and international economic disruptions, any of which could make it more difficult for us to consummate an initial business combination.
Military conflict in Ukraine or elsewhere may lead to increased and price volatility for publicly traded securities, which could make it more difficult for us to consummate an initial business combination.
Military conflict in Ukraine or elsewhere may lead to increased and price volatility for publicly traded securities, including ours, and to other national, regional and international economic disruptions and economic uncertainty, any of which could make it more difficult for us to identify a business combination target and consummate an initial business combination on acceptable commercial terms or at all.
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Were we considered to be a “foreign person,” we might not be able to complete an initial business combination with a U.S. target company if such initial business combination is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (“CFIUS”), or ultimately prohibited.
Certain federally licensed businesses in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be a “foreign person” under such rules and regulations, any proposed business combination between us and a U.S. business engaged in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial business combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate an initial business combination with such business. In addition, if our potential business combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. Our Sponsor is a U.S. entity, and the managing member of our Sponsor is a U.S. person. However, if CFIUS has jurisdiction over our initial business combination, CFIUS may decide to block or delay our initial business combination, impose conditions to mitigate national security concerns with respect to such initial business combination or order us to divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance. If we were considered to be a “foreign person,” the foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial business combination opportunities that we believe would otherwise be beneficial to us and our shareholders. A s a result, in such circumstances, the pool of potential targets with which we could complete an initial business combination could be limited and we may be adversely affected in terms of competing with other SPACs which do not have similar foreign ownership issues.
Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive $10.10 per share, and our warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For a description of the use of the proceeds generated in our IPO, see Part II, Item 2 of the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021. There has been no material change in the planned use of the proceeds from the Company’s IPO and private placement as is described in the Company’s final prospectus, dated December 21, 2020.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 28, 2020. |
| (2) | Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 30, 2020. |
| (3) | Incorporated herein by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1 filed on December 1, 2020. |
| (4) | Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 21, 2022. |
| (5) | Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 7, 2022. |
| (6) | Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 10-Q filed on May 16, 2022. |
| (7) | Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 3, 2022. |
| (8) | Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 21, 2022. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ACKRELL SPAC PARTNERS I CO. | ||
| Date: August 15, 2022 | By: | /s/ Jason Roth |
| Name: | Jason Roth | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 15, 2022 | By: | /s/ Long Long |
| Name: | Long Long | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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