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 100% of Blackstone post Business Combination (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. In connection with the proposed Blackstone Business Combination, the Company and Newco entered into subscription
agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”), pursuant to which Newco
agreed to issue and sell to the PIPE Investors approximately 3,100,000 units (the “Newco Units”) for a purchase price of $10.00
per unit, for an aggregate of approximately $31,000,000 and approximately $111,000,000 principal amount of Newco convertible notes immediately
prior to the closing of the proposed Blackstone Business Combination (the “PIPE Investment”). Each Newco Unit consists of
one share of Newco common stock and one-half of a warrant to acquire Newco common stock at an exercise price of $11.50 per share. The
Subscription Agreements provided investors with the right to terminate the Subscription Agreements if the proposed Blackstone Business
Combination was not consummated by June 23, 2022, the date by which the Company were to have originally completed its Initial Business
Combination in accordance with its 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 Newco Units portion of the private placement and to modify certain terms of the convertible notes.
Financing
The
registration statements (“Registration Statements”) for the Company’s initial public offering (“Initial Public
Offering” or “IPO”) were declared effective on December 21, 2020. On December 23, 2020, the Company consummated the
Initial Public Offering of 13,800,000 units (the “Public Units”), which included the full exercise of the underwriter’s
overallotment option, generating gross proceeds of $138,000,000, which is described in Note 3. Each Public Unit consists of (i) one
subunit (the “Public Subunit”), which consists of one share of common stock (the “Public Share”) and one-half
of one redeemable warrant, and (ii) one-half of one redeemable warrant (collectively, the redeemable warrants included in the Public
Units and Public Subunits, the “Public Warrants”). Each whole Public Warrant entitles the holder to purchase one share of
common stock at a price of $11.50 per share.
Simultaneously
with the closing of the IPO, the Company consummated the sale of an aggregate of 539,000 units (the “Private Units”)
at a price of $10.00 per unit in a private placement to the Sponsor and EarlyBirdCapital, Inc. (“EarlyBirdCapital”),
generating gross proceeds of an aggregate of $5,390,000, which is described in Note 4. Each Private Unit consists of (i) one
subunit (the “Private Subunit”), which consists of one share of common stock (the “Private Share”) and one-half
of one redeemable warrant, and (ii) one-half of one redeemable warrant (collectively, the redeemable warrants included in the Private
Units and Private Subunits, the “Private Warrants”). Each whole Private Warrant entitles the holder to purchase one share
of common stock at a price of $11.50 per share.
Trust
Account
Following
the closing of the IPO on December 23, 2020, an amount of $139,380,000 ($10.10 per Unit) from the net proceeds of the sale
of the Public and Private Units in the IPO and private placement was placed in a trust account (“Trust Account”) which is
invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940,
as amended (the “Investment Company Act”), with a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury
obligations, until the earlier of (a) the completion of the Company’s Initial Business Combination, (b) the redemption of any Public
Subunits properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation,
or (c) the redemption of the Company’s Public Subunits if the Company is unable to complete an Initial Business Combination within
the Business Combination Period (as defined below). On December 23, 2021, the Company deposited $1,380,000 into the Trust Account and
extended the period of time to consummate an Initial Business Combination (the “Business Combination Period”) by three months
from December 23, 2021 to March 23, 2022. On March 21, 2022, the Company deposited an additional $1,380,000 into the Trust Account and
further extended the Business Combination Period by an additional three months from March 23, 2022 to June 23, 2022. On June 27, 2022,
the Company deposited an additional $200,000 into the Trust Account and further extended the Business Combination Period by an additional
one month from June 23, 2022 to July 23, 2022. The aggregate of $2,960,000 for the two three-month extensions and the initial three month
extension was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone on December 23, 2021, March 16, 2022,
and June 24, 2022, respectively (See Note 5 and Note 8).
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 $129,279
of interest income from the Trust Account for the payment of the Company’s taxes. The proceeds from this withdrawal were
deposited into the Company’s operating bank account on May 10, 2022. On June 14, 2022, the Company withdrew another $66,000 of
interest income from the Trust Account for the payment of the Company’s taxes.
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 $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 monthly extension period. In connection with the extension, an aggregate of 8,645,776 Public Subunits were presented
for redemption. The Company paid cash in the aggregate amount of $89,068,505, or approximately $10.30 per subunit, to redeeming stockholders.
Initial
Business Combination
The
Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80%
of the balance in the Trust Account (net of taxes payable) at the time of the signing an agreement to enter into a Business Combination.
However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or
more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it
not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will
be able to successfully effect a Business Combination. The Company will provide its stockholders with the opportunity to redeem all or
a portion of their Public Subunits included in the Public Units sold in the IPO upon the completion of an Initial Business Combination
either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by
the Company, solely in its discretion. The stockholders will be entitled to redeem their Public Subunits for a pro rata portion of the
amount then on deposit in the Trust Account (approximately $10.35 per subunit as of June 30, 2022, plus any pro rata
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The
Company 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 $1,380,000
($0.10 per unit) for each of the available three-month extensions. On December 23, 2021, the Company deposited $1,380,000 into the Trust
Account and extended the period of time to consummate an Initial Business Combination by three months from December 23, 2021 to March
23, 2022. On March 21, 2022, the Company deposited an additional $1,380,000 into the Trust Account and further extended the period of
time to consummate an Initial Business Combination by an additional three months from March 23, 2022 to June 23, 2022.
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 $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 Extension Amendment, an aggregate of 8,645,776 Public Subunits were presented for redemption.
On June 22, 2022, the Company paid cash in the aggregate amount of $89,068,505, or approximately $10.30 per subunit, to redeeming
stockholders.
On
June 27, 2022, the Company deposited an additional $200,000 into the Trust Account and further extended the period of time to consummate
an Initial Business Combination by an additional month from June 23, 2022 to July 23, 2022. The aggregate of $2,960,000 for the two three-month
extensions and the initial monthly extension was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone on
December 23, 2021, March 16, 2022, and June 24, 2022, respectively (See Note 5 and Note 8).
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 100% of its Public Subunits if the Company does not complete a Business Combination,
unless the Company provides the public stockholders with the opportunity to redeem their Public Subunits in conjunction with any such
amendment.
Liquidation
The holders of the Private Securities will not
participate in any liquidation distribution with respect to such securities. In the event of such distribution, it is possible that the
per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the $10.35
per Public Unit as of June 30, 2022. The Sponsor has agreed that it will be liable to ensure that the proceeds in the Trust Account
are not reduced below $10.10 per Public Subunit by the claims of target businesses or claims of vendors or other entities that are owed
money by the Company for services rendered or contracted for or products sold to the Company. The agreement entered into by the Sponsor
specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to
a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind
they may have in or to any monies held in the Trust Account, or (2) as to any claims for indemnification by the underwriters of the Company’s
IPO against certain liabilities, including liabilities under the Securities Act. The Company has not asked the Sponsor to reserve for
such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity
obligations. The Company believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company believes
it is unlikely that Sponsor will be able to satisfy its indemnification obligations if it is required to do so.
Liquidity and
Going Concern
As of June 30, 2022, the Company had cash outside
the Trust Account of $195,111 available for working capital needs. All remaining cash and securities were held in the Trust Account and
are generally unavailable for the Company’s use prior to an initial business combination (except that the Company may withdraw interest
generated in the Trust Account to pay taxes) and are restricted for use either in a Business Combination or to redeem Public Subunits.
As of June 30, 2022, none of the amounts on deposit in the Trust Account was available to be withdrawn as described above (except $71,099
of interest income that may be withdrawn to pay taxes).
Through June 30, 2022, the Company’s liquidity needs were satisfied
through receipt of $5,000 from the sale of the Founder Shares (See Note 5), advances from the Sponsor in an aggregate amount of $300,000 which
were repaid upon the IPO, and the remaining net proceeds from the IPO and private placement (See Notes 4 and 5) held outside of the
Trust Account. Additionally, the Company received $1,380,000 from the Sponsor Extension Loan (see Note 5) and another $1,380,000 from
the Blackstone Extension Loan (See Note 8), which the Company deposited into the Trust Account to extend the Business Combination Period
from December 23, 2021 to July 23, 2022. On April 6, 2022, the Company 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, the Company 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 the
Company’s continued operations (see Note 8). On June 21, 2022, the Company issued an unsecured promissory note in the principal
amount of up to $600,000 to Blackstone (the “Second Blackstone Extension Loan”) to extend the period during which the Company
may consummate its initial Business Combination from June 23, 2022 to September 23, 2022 (See Note 8). As of June 30, 2022, the Company
had drawn down $200,000 on the Second Blackstone Extension Loan. On July 22, 2022, the Company drew down an additional $200,000 on the
Second Blackstone Extension Loan, for an aggregate amount of $400,000 (see Note 11). On April 28, 2022, pursuant to the trust agreement
dated as of December 21, 2020 between the Company and CST, the Company withdrew $129,279 of interest income from the Trust Account for
the payment of the Company’s taxes. On June 14, 2022, the Company withdrew another $66,000 of interest income from the Trust Account
for the payment of the Company’s taxes. On August 4, 2022, the Company withdrew an additional $90,380 of interest income from the
Trust Account for the payment of the Company’s taxes (See Note 11).
The
Company’s initial stockholders, officers, directors or their affiliates may, but are not obligated to, loan the Company funds as
may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working
Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only
out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to
repay the Working Capital Loans, other than the interest on such proceeds that may be released for working capital purposes. Except for
the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect
to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at
the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units of the post Business
Combination entity at a price of $10.00 per unit. As of June 30, 2022 and December 31, 2021, no Working Capital Loans were outstanding.
Until
consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working
Capital Loans from the Initial Stockholders, the Sponsor, the Company’s officers and directors, or their respective affiliates,
for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the
Business Combination.
The Company anticipates that the $195,111 outside of the Trust
account as of June 30, 2022 will not be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business
Combination is not consummated during that time. Additionally, the Company may need to obtain additional financing to consummate its
Initial Business Combination but there is no assurance that new financing will be available to the Company on commercially acceptable
terms. Furthermore, if the Company is not able to consummate a business combination by August 23, 2022 or September 23, 2022 if extended,
it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern.
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.
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 $195,111 of cash held outside of the Trust Account as of June 30, 2022 and $86,792 as of December 31, 2021. The Company
did not have any cash equivalents as of June 30, 2022 and December 31, 2021.
Investment
Held in Trust Account
As
of June 30, 2022 and December 31, 2021, the Company had $53,345,080 and $140,822,578, respectively, in the Trust Account which may be
utilized for Business Combination. As of June 30, 2022, investments in the Company’s Trust Account consisted of $61,420 in cash
and $53,283,660 in money market instruments. All of the Company’s money market instruments
held in the Trust Account as of June 30, 2022 are classified as trading securities. Trading securities are presented on the balance sheets
at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust
Account are included in interest income in the accompanying statements of operations. The estimated fair values of investments held in
Trust Account are determined using available market information.
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 $89,068,505 was released from the Trust Account for the Company to redeem 8,645,776 redeemable Public
Subunits held by the Company’s public stockholders.
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.
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 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.
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 | |
$ | (321,253 | ) | |
$ | (821,807 | ) |
Attribution of extension funds to redeemable shares | |
| (200,000 | ) | |
| (1,580,000 | ) |
Accretion of temporary equity to redemption value | |
| (171,249 | ) | |
| (206,286 | ) |
Withdrawal of funds to pay for franchise tax | |
| 195,279 | | |
| 195,279 | |
Net loss including accretion of temporary equity to redemption value | |
$ | (497,223 | ) | |
$ | (2,412,814 | ) |
| |
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 | |
$ | (371,754 | ) | |
$ | (125,469 | ) | |
$ | (1,818,557 | ) | |
$ | (594,257 | ) |
Attribution of extension funds to redeemable shares | |
| 200,000 | | |
| — | | |
| 1,580,000 | | |
| — | |
Accretion of temporary equity to redemption value | |
| 171,249 | | |
| — | | |
| 206,286 | | |
| — | |
Withdrawal of funds to pay for franchise tax | |
| (195,279 | ) | |
| — | | |
| (195,279 | ) | |
| — | |
Allocation of net loss | |
$ | (195,784 | ) | |
$ | (125,469 | ) | |
$ | (227,550 | ) | |
$ | (594,257 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 12,944,923 | | |
| 4,369,000 | | |
| 13,370,100 | | |
| 4,369,000 | |
Basic and diluted net loss per share | |
$ | (0.02 | ) | |
$ | (0.03 | ) | |
$ | (0.02 | ) | |
$ | (0.14 | ) |
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
June 30, 2021 | | |
June 30, 2021 | |
Net loss | |
$ | (353,298 | ) | |
$ | (233,161 | ) |
Accretion of temporary equity to redemption value | |
| (5,271 | ) | |
| (29,318 | ) |
Net loss including accretion of temporary equity to redemption value | |
$ | (358,569 | ) | |
$ | (262,479 | ) |
| |
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 | |
$ | (272,346 | ) | |
$ | (86,223 | ) | |
$ | (199,362 | ) | |
$ | (63,117 | ) |
Accretion of temporary equity to redemption value | |
| 5,271 | | |
| — | | |
| 29,318 | | |
| — | |
Allocation of net loss | |
$ | (267,075 | ) | |
$ | (86,223 | ) | |
$ | (170,044 | ) | |
$ | (63,117 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 13,800,000 | | |
| 4,369,000 | | |
| 13,800,000 | | |
| 4,369,000 | |
Basic and diluted net loss per share | |
$ | (0.02 | ) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
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 $250,000. The Company has not experienced losses on these accounts and management believes the Company
is not exposed to significant risks on such accounts.
Income Taxes
The Company accounts for income taxes under ASC
740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when
it is more likely than not that all or a portion of deferred tax assets will not be realized. ASC 740 also clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740
also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of 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 13,800,000 Public
Units at a price of $10.00 per Public Unit, including the issuance of 1,800,000 Public Units as a result of the underwriters’
full exercise of their over-allotment option. Each Public Unit consists of (i) one Public Subunit, which consists of one Public
Share and one-half of one Public Warrant, and (ii) one-half of one Public Warrant. Each whole warrant entitles the holder to purchase
one share of common stock at a price of $11.50 per share. (See Note 7).
Note 4 — Private Placements
Simultaneously with the closing of the IPO, the
Sponsor and EarlyBirdCapital purchased an aggregate of 539,000 Private Units, at a price of $10.00 per unit, for an aggregate
purchase price of $5,390,000. A portion of the proceeds from the sale of Private Units were added to the net proceeds from the IPO held
in the Trust Account.
The Private Units and their underlying securities
are identical to the units sold in the Initial Public Offering except the Private Warrants will be non-redeemable and may be exercised
on a cashless basis. The purchasers of the Private Units have agreed not to transfer, assign or sell any of the Private Units or underlying
securities (except to the same permitted transferees as the Founder Shares) until the completion of the Business Combination.
If the Company does not complete a Business Combination
within the Extended Combination Period, the proceeds of the sale of the Private Units will be used to fund the redemption of the Public
Subunits (subject to the requirements of applicable law).
Note 5 — Related Party Transactions
Founder Shares
On September 11, 2018, the Company issued 3,737,500 shares
of common stock (the “Founder Shares”) to its initial stockholder, Able SPAC Holding LLC, for $5,000 in cash, or approximately
$0.0013 per share, in connection with formation.
On November 25, 2020, the Sponsor contributed
back to the Company, for no consideration, 862,500 Founder Shares for cancellation, resulting in an aggregate of 2,875,000 Founder
Shares outstanding.
On December 21, 2020, the Company effected a stock
dividend of 0.2 shares of common stock for every share of common stock outstanding, resulting in an aggregate of 3,450,000 Founder Shares
outstanding.
Founder Shares, subject to certain limited exceptions
contained in the Registration Statements, will not be transferred, assigned, sold or released from escrow for a period ending on the six-month anniversary
of the date of the consummation of the Initial Business Combination or earlier if, subsequent to its Initial Business Combination, the
Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having
the right to exchange
Promissory Note – Related Party
On December 23, 2021, the Company issued an unsecured
promissory note in the principal amount of $1,380,000 to the Sponsor (the “Sponsor Extension Loan”). As of December 31, 2021,
the Company had drawn down the full $1,380,000 on the Sponsor Extension Loan. The Sponsor Extension Loan is non-interest bearing and payable
in cash upon the closing of the Company’s Initial Business Combination. In the event the Company fails to complete an Initial Business
Combination prior to the deadline set forth in its governing document, no payment will be due under the Sponsor Extension Loan and the
principal balance of the Sponsor Extension Loan will be forgiven.
Administrative Services Agreement
Commencing on the effective date of the Registration
Statements, the Company has agreed to pay an affiliate of the Company’s Chairman an aggregate fee of $10,000 per month for
providing the Company with office space and certain office and secretarial services. This arrangement will terminate upon completion of
the Company’s Initial Business Combination or the distribution of the Trust Account to the Company’s public stockholders.
As of June 30, 2022 and December 31, 2021, the Company has accrued $183,548 and $123,548, respectively, of administrative fees as
a due to related party.
Working Capital Loans
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor may, but is not obligated to, provide the Company Working Capital Loans. If the
Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released
to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that
a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans, other than the interest on such proceeds
that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not
been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. As of June 30, 2022 and December
31, 2021, no Working Capital Loans were outstanding.
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 $53,345,080 and $140,822,578, respectively, and will not be released until the earlier of (a)
the completion of the Company’s Initial Business Combination, (b) the redemption of any Public Subunits properly submitted in connection
with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, or (c) the redemption of the Company’s
Public Subunits if the Company is unable to complete the Initial Business Combination within the Extended Combination Period.
Note 7 — Stockholders’ Equity
Preferred Stock — The Company
is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At June 30, 2022 and
December 31, 2021, there were no shares of preferred stock issued or outstanding.
Common Stock — The Company
is authorized to issue a total of 100,000,000 shares of common stock at par value of $0.0001 each.
On December 23, 2020, the Company sold 13,800,000 shares
of common stock as part of units sold in the IPO. Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 539,000 shares
of common stock as part of the Private Units.
On June 22, 2022, an aggregate of $89,068,505
was released from the Trust Account for the Company to redeem 8,645,776 redeemable Public Subunits held by the Company’s public
stockholders.
As of June 30, 2022 and December 31, 2021,
shares of common stock subject to redemption were 5,154,224 and 13,800,000, respectively. The total number of shares of common
stock not subject to redemption outstanding at June 30, 2022 and December 31, 2021 was 4,369,000.
Warrants — Each whole warrant
entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed
below, at any time commencing on the later of 30 days after the completion of an Initial Business Combination or 12 months from the
closing of the Company’s IPO and will expire on the fifth anniversary of the completion of an Initial Business Combination, or earlier
upon redemption or liquidation. However, no warrants will be exercisable for cash unless the Company has an effective and current registration
statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares
of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise
of the Public Warrants is not effective within a specified period following the consummation of Initial Business Combination, warrant
holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed
to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9)
of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will
not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares
of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market
value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average
reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise.
The warrants will expire on the fifth anniversary of completion of an Initial Business Combination, at 5:00 p.m., New York City time,
or earlier upon redemption or liquidation. The Private Warrants, as well as any warrants underlying additional units the Company may issue
to Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made to us, will be identical to the warrants
underlying the units sold in the Company’s IPO except that such warrants will be exercisable for cash or on a cashless basis, at
the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the Sponsor, EarlyBirdCapital
or their permitted transferees.
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.
Underwriting Agreement
The Company granted the underwriters a 45-day
option to purchase up to 1,800,000 additional Public Units to cover over-allotments at the Initial Public Offering price, less the underwriting
discounts and commissions. On December 23, 2020, the underwriters exercised its full over-allotment option of 1,800,000 units.
On December 23, 2020, the underwriters were paid
a cash underwriting fee of 2% of the gross proceeds of the IPO, totaling $2,760,000.
In addition, prior to the IPO, the Company issued
to EarlyBirdCapital an aggregate of 380,000 shares of common stock (the “Representative Shares”) at approximately
$0.0001 per share.
The Representative Shares have been deemed compensation
by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the Registration
Statements pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during
the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put
or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately
following the effective date of the Registration Statements, except to any underwriter and selected dealer participating in the offering
and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for
the remainder of the time period.
Business Combination Marketing Agreement
The Company has engaged EarlyBirdCapital as an
advisor in connection with the Company’s business combination to assist the Company in holding meetings with the Company’s
stockholders to discuss the potential business combination and the target business’ attributes, introduce the Company to potential
investors that are interested in purchasing the Company’s securities in connection with the Company’s Initial Business Combination,
assist the Company in obtaining stockholder approval for the business combination and assist the Company with its press releases and public
filings in connection with the Initial Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the
consummation of the Company’s Initial Business Combination in an amount equal to 3.5% of the gross proceeds of the IPO (exclusive
of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at the Company’s
sole discretion to other FINRA members (including, with EarlyBirdCapital’s prior consent which shall not be unreasonably withheld,
companies affiliated with the Company or the Company’s officers or directors, including Ackrell Capital) that assist the Company
in identifying or consummating an Initial Business Combination.
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 $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 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 (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 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 $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.
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 $1,750,000 no later than the closing date of the Blackstone Business Combination, provided that no fee shall be payable
if the Company requests FS to purchase up to $50,000,000 of Newco convertible notes on the terms set forth in the Subscription Agreement
and FS does not purchase such Newco convertible notes. At the option of FS, all or any portion of such fee may be structured as original
issue discount against the purchase price to be paid for the Newco convertible notes that may be purchased by FS or its affiliates. Additionally,
the Company will reimburse FS’ for all reasonable and documented out-of-pocket costs and expenses, including counsel fees.
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 $240,000 upon satisfactory completion of the marketing and consulting services but in any event
no later than September 23, 2022. The Company shall not be obligated to reimburse I&S for any out-of-pocket expenses.
Promissory Notes - Blackstone
On March 16, 2022, the Company issued an unsecured
promissory note in the principal amount of $1,380,000 to Blackstone (the “Blackstone Extension Loan”). As of June 30, 2022,
the Company had drawn down the full $1,380,000 on the Blackstone Extension Loan. The Blackstone Extension Loan is non-interest bearing
and payable in cash upon the closing of the Company’s Initial Business Combination. In the event the Company fails to complete an
Initial Business Combination prior to the deadline set forth in its governing document, no payment will be due under the Blackstone Extension
Loan and the principal balance of the Blackstone Extension Loan will be forgiven.
On April 6, 2022, the Company issued another unsecured
promissory note in the principal amount of $115,000 to Blackstone. The proceeds of this note were used to pay outstanding Nasdaq fees
owed by the Company. The note is non-interest bearing and payable in cash upon the closing of the Company’s Initial Business Combination.
In the event that the Company fails to complete an Initial Business Combination prior to the deadline set forth in its governing document,
no payment will be due under the note and the principal balance of the note will be forgiven.
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 $385,000 to
Blackstone. The proceeds of this note will be used as working capital to fund the continued operations of the Company. The note is non-interest
bearing and payable in cash upon the earlier of i) the closing of the Company’s Initial Business Combination, or ii) September 23,
2022.
On June
21, 2022, the Company issued another unsecured promissory note in the principal amount of up to $600,000 to Blackstone (the “Second
Blackstone Extension Loan”). The proceeds of this note will be used to extend the period during which the Company may consummate
its initial Business Combination from June 23, 2022 to September 23, 2022. The note is non-interest bearing and payable in cash upon the
earlier of i) the consummation of the Company’s Initial Business Combination, or ii) September 23, 2022. As of June
30, 2022, the Company had drawn down $200,000 on this promissory note. On July 22, 2022, the Company drew down an additional $200,000
on this promissory note, for an aggregate amount of $400,000 (see Note 11).
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.
Recurring Fair Value Measurements
As of June 30, 2022, investment in the Company’s
Trust Account consisted of $61,420 in cash and $53,283,660 in money market instruments. As of June 30, 2022, the value of cash and money
market instruments held in Trust Account were determined by quoted prices in active markets (Level 1), and the value of Private Warrant
liability was determined by significant other unobservable inputs (Level 3).
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 | |
$ | 61,420 | | |
| 61,420 | | |
| - | | |
$ | - | |
Money market instruments | |
| 53,283,660 | | |
| 53,283,660 | | |
| - | | |
| - | |
| |
| 53,345,080 | | |
| 53,345,080 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability – Private Warrants | |
$ | 56,359 | | |
$ | - | | |
$ | - | | |
$ | 56,359 | |
As of December 31, 2021, investment in the Company’s
Trust Account consisted of $1,895 in cash and $140,820,683 in U.S. Treasury Securities. The value of the cash held in Trust
Account, U.S. Treasury Securities held in Trust Account and Private Warrant liability was determined by quoted prices in active markets
(Level 1), significant other observable inputs (Level 2) and significant other unobservable inputs (Level 3), respectively, as of December
31, 2021.
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| |
December 31, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
Description | |
2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Cash held in Trust Account | |
$ | 1,895 | | |
| 1,895 | | |
| - | | |
$ | - | |
U.S. Treasury Securities held in Trust Account | |
| 140,820,683 | | |
| - | | |
| 140,820,683 | | |
| - | |
| |
| 140,822,578 | | |
| 1,895 | | |
| 140,820,683 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability – Private Warrants | |
$ | 284,770 | | |
$ | - | | |
$ | - | | |
$ | 284,770 | |
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period. There were no transfers between levels for the three and six months ended June 30, 2022 and 2021.
Note 10 — Warrant Liabilities
At June 30, 2022 and December 31, 2021, there
were 539,000 Private Warrants outstanding, which the Company accounts for as derivative warrant liabilities in accordance with
ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair
value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change
in fair value is recognized in the Company’s statement of operations. The fair value of the Private Warrants has been estimated
using Monte Carlo simulations at each measurement date.
The Company utilizes a Monte Carlo simulation
model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated
fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Monte Carol simulation model are assumptions
related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its shares of common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest
rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of
the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing
a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Once the warrants
become exercisable, the Company may redeem the outstanding warrants when the price per share of common stock equals or exceeds $18.00.
The assumptions used in calculating the estimated fair values at the end of the reporting period represent the Company’s best estimate.
However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The aforementioned warrant liabilities are not
subject to qualified hedge accounting.
The following table provides quantitative information
regarding Level 3 fair value measurements of the Private Warrants:
| |
As of June 30, 2022 | | |
As of December 31, 2021 | |
Stock price | |
$ | 10.24 | | |
$ | 9.86 | |
Strike price | |
$ | 11.50 | | |
$ | 11.50 | |
Term (in years) | |
| 5.22 | | |
| 5.43 | |
Volatility | |
| 8.8 | % | |
| 9.2 | % |
Risk-free rate | |
| 3.01 | % | |
| 1.30 | % |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % |
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 $240,000 upon satisfactory completion of the marketing and consulting services but in any event no later than September 23, 2022.
The Company shall not be obligated to reimburse I&S for any out-of-pocket expenses.
On July 22, 2022, the Company drew down an additional
$200,000 on the Second Blackstone Extension Loan, which the Company deposited into the Trust Account on July 26, 2022 to further extended
the Business Combination Period by an additional month from July 23, 2022 to August 23, 2022.
On August 4, 2022, the Company withdrew an additional
$90,380 of interest income from the Trust Account for the payment of the Company’s taxes.
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.