ITEM 1. BUSINESS
Introduction
We are a blank check company formed under the
laws of the State of Delaware on September 11, 2018. We were formed for the purpose of entering into a merger, share exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which
we refer to as a “target business.” Our initial business combination and value creation strategy is to identify, acquire and,
after our initial business combination, assist in the growth of a branded fast-moving consumer goods business, which we refer to as a
branded “FMCG” business. Our focus is on the alcoholic and non-alcoholic beverage and wellness sectors of the FMCG market.
In addition, we believe that there is an emerging opportunity within these sectors to target businesses that are focused on hemp-based
branded consumer goods. However, we are not limited to the branded FMCG industry and we may pursue a business combination opportunity
in any business or industry we choose and we may pursue a company with operations or opportunities outside of the United States.
Initial Public Offering
On December 23, 2020, we consummated our IPO of
13,800,000 public units, which included the full exercise of the underwriters’ over-allotment option. Each public unit consists
of one public subunit and one-half of one public warrant, with each whole public warrant entitling the holder thereof to purchase one
share of common stock of the Company, par value $0.0001 per share, for $11.50 per share. Each public subunit consists of one share of
common stock and one-half of one public warrant. The public units were sold at a price of $10.00 per unit, generating gross proceeds to
the Company of $138,000,000.
Simultaneously with the closing of the IPO, we
completed the private placement of an aggregate of 539,000 private units to the Sponsor and EarlyBirdCapital, Inc. (“EBC”)
(470,000 private units to the Sponsor and 69,000 private units to EBC) at a purchase price of $10.00 per private unit, generating gross
proceeds to the Company of $5,390,000. The private units (and underlying securities) are identical to the public units (and underlying
securities) sold in the IPO, except as otherwise disclosed in our Registration Statements that became effective on December 21, 2020.
If we are unable to consummate an initial business
combination by June 23, 2022, we will redeem 100% of the public subunits for a pro rata portion of the trust account, equal to the aggregate
amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released
to us, divided by the number of then outstanding public subunits, subject to applicable law and as further described herein. Our public
stockholders were not afforded an opportunity to vote on our extension of time to consummate an initial business combination described
above, and will not be afforded an opportunity to vote on any further extensions, or redeem their subunits in connection with such extensions.
Our management team consists of seasoned professionals
who have experience spanning the FMCG industry, including beverage, wellness and hemp products, product development, sales, marketing
and distribution, mergers and acquisitions, corporate finance, corporate governance and compliance, legal and regulatory matters and investment
management. See “Item 10 Directors, Executive Officers and Corporate Governance” for additional information about our
directors and executive officers. Our management team will be supported by the investment banking team of Ackrell Capital, an affiliate
of our Chairman. We believe that Ackrell Capital’s industry expertise, transaction experience and relationships may provide us with
a substantial number of attractive potential business combination targets.
The Blackstone Merger and Private Placement
The Blackstone Merger Agreement
On December 22, 2021, the Company, North Atlantic
Imports, LLC, Blackstone Products, Inc. (“Newco”), Ackrell Merger Sub Inc. (“Merger Sub”), Roger Dahle, an individual
residing in Utah and holder of certain membership interests in Blackstone (“Dahle”), and North Atlantic Imports, Inc., (“NAI”
and together with Dahle, the “Contributors”), entered into a Business Combination Agreement (the “Blackstone Merger
Agreement”).
Pursuant to the Blackstone
Merger Agreement, subject to the terms and conditions set forth therein, immediately prior to the consummation of the transactions contemplated
by the Blackstone Merger Agreement (the “Closing”), Blackstone will enter into a redemption agreement with Cowell International
Inc., a Utah corporation and a wholly-owned subsidiary of NAI (“Cowell”), and Dahle, pursuant to which Blackstone will
redeem, prior to the Closing, certain of its membership interests held by Cowell in exchange for $100,000,000, which will be funded by
newly-incurred indebtedness for borrowed money of Blackstone in the principal amount of $100,000,000.
Upon the consummation
of the Closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving
corporation in the Merger and a wholly-owned subsidiary of Newco (the “Surviving Corporation”). Immediately following the
effective time of the Merger (the “Effective Time”), (i) NAI will contribute 45 shares of Cowell common stock, par value $1.00
per share (“Cowell Common Stock”) to Newco and 33 shares of Cowell Common Stock to the Company (the “NAI Contributions”),
(ii) Cowell will redeem the remaining 22 shares of Cowell Common Stock (the “NAI Redemption”) and (iii) Dahle will contribute
all of his membership interests in Blackstone to Newco (the “Dahle Contribution”).
The aggregate consideration
to be paid in the Blackstone Merger is based on a pre-money company equity valuation of $721,000,000 and will be made up of cash consideration
and stock consideration.
Specifically, (i) the
Company will pay $150,000,000 to NAI as consideration for the contribution of Cowell Common Stock to the Company; (ii) Cowell will pay
$100,000,000 to NAI as consideration for the NAI Redemption; (iii) Newco will issue and deliver to NAI 20,350,681 shares of Newco common
stock, par value $0.0001 per share (“Newco Common Stock”) calculated based upon NAI’s ownership percentage (on a fully-diluted
basis taking into account the Assumed RSUs (as defined below) and after giving effect to the cash consideration) as of the Closing as
consideration for the contribution of Cowell Common Stock to Newco; and (vi) Newco will issue to Dahle 35,293,854 shares of Newco Common
Stock calculated based upon Dahle’s ownership percentage (on a fully-diluted basis taking into account the Assumed RSUs and after
giving effect to the cash consideration) of the Closing as consideration for the Dahle Contribution. In addition, each contingent
right to receive an equity interest in Blackstone to be issued to Dahle will be assumed by Newco (the “Assumed RSUs”), with
such Assumed RSUs representing the right to acquire a number of shares of Newco Common Stock representing the ownership percentage attributable
to the Assumed RSUs upon the terms (including vesting) set forth in the Assumed RSUs.
At the Effective Time,
by virtue of the Merger and without any action on the part of the Company, Merger Sub, Blackstone, NAI, Dahle or the holders of any of
the following securities:
(a) Each
share of the Company common stock issued and outstanding immediately prior to the Effective Time (subject to certain exceptions pursuant
to the Blackstone Merger Agreement) will be converted into one share of NewCo common stock.
(b) Each
share of the Company common stock held in the treasury of the Company and each share of the Company common stock owned by Merger Sub,
Blackstone or any direct or indirect wholly-owned subsidiary of the Company immediately prior to the Effective Time will be canceled.
(c) Each
share of Merger Sub common stock issued and outstanding immediately prior to the Effective Time will be converted into one share of common
stock of the Surviving Corporation.
(d) Each
warrant of the Company that is outstanding immediately prior to the Effective Time will be converted into a right to acquire one share
of NewCo common stock on substantially the same terms as were in effect immediately prior to the Effective Time for such warrants of the
Company.
(e) The
Assumed RSUs will be assumed by NewCo.
Representations and
Warranties; Covenants
The Blackstone Merger
Agreement contains representations and warranties of each of the parties thereto that are customary for transactions similar to the Blackstone
Merger. The Blackstone Merger Agreement also contains certain customary covenants by each of the parties during the period between the
signing of the Blackstone Merger Agreement and the earlier of the Closing or the termination of the Blackstone Merger Agreement in accordance
with its terms, including with respect to (1) the operation of their respective businesses in the ordinary course of business; (2) the
provision of access to the properties, books, personnel, and policies of Blackstone and the Company, respectively; (3) provision
of financial statements by Blackstone; (4) the Company’s stock listing; (5) notifications of certain breaches, consent requirements,
material adverse changes or other matters; (6) efforts to consummate the Closing and obtain third party and regulatory approvals; (7)
tax matters and transfer taxes; (8) further assurances; (9) confidentiality; (10) public announcements; (11) directors’ and
officers’ indemnification; and (12) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”) (if applicable). The parties further agreed to certain customary post-Closing covenants.
After the execution of
the Blackstone Merger Agreement, the Company and Newco will (with the assistance and cooperation of Blackstone as reasonably requested
by the Company), use its commercially reasonable efforts to prepare and file with the U.S. Securities and Exchange Commission (the “SEC”)
within 10 business days (subject to certain exceptions) after the Company’s receipt of Blackstone’s PCAOB-compliant audited
financial statements from Blackstone a registration statement on Form S-4 in connection with the registration under the Securities Act
of 1933, as amended (the “Securities Act”) of the Newco common stock, to be issued pursuant to the Blackstone Merger Agreement,
which registration statement (the “Blackstone Registration Statement”) will also contain a proxy statement for the Company
stockholders and a prospectus.
The Company will include
provisions in the proxy statement with respect to (i) the approval of the business and the adoption and approval of Blackstone Merger
Agreement, (ii) the adoption and approval of the amended and restated Newco certificate of incorporation, (iii) the appointment of the
post-Closing Newco board of directors, (iv) the approval and adoption of Newco’s omnibus incentive plan, (v) the approval and adoption
of Newco’s employee stock purchase plan, (vi) adjournment of the Company stockholders’ meeting, if necessary, to permit further
solicitation of proxies because there are not sufficient votes to approve and adopt any of the foregoing proposals and (vii) the approval
of any other proposals reasonably agreed by the Company and Blackstone to be necessary or appropriate in connection with the transaction
contemplated hereby.
The parties have also
agreed, among other things, to take all action within their power as may be necessary or appropriate such that, effective immediately
after the Closing, Newco’s board of directors shall consist of seven directors, which shall be divided into three classes.
Closing Conditions
The obligations of the
parties to complete the Closing are subject to various conditions, including the following mutual conditions of the parties unless waived:
| ● | the proposals presented at the Company stockholders’ meeting will have been approved and adopted; |
| ● | no governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, judgment, decree, executive order or award after the date of the Blackstone Merger Agreement which
is then in effect and has the effect of making the Blackstone Merger, including the Merger, illegal or otherwise prohibiting consummation
of the Blackstone Merger, including the Merger; |
| ● | all required filings under the HSR Act will have been completed and any applicable waiting period (and
any extension thereof) applicable to the consummation of the Blackstone Merger under the HSR Act shall have expired or been terminated; |
| ● | the Registration Statement will have been declared effective under the Securities Act, and no stop order
suspending the effectiveness, or any proceedings for purposes of suspending the effectiveness, of the Registration Statement will be in
effect or will have been initiated or threatened by the SEC; |
| ● | the Newco Common Stock to be issued in connection with the Blackstone Merger will have been approved for
listing on Nasdaq, subject only to official notice of issuance thereof; and |
| ● | upon the Closing, after giving effect to the completion of the Redemption, the Company having net tangible
assets of at least $5,000,001. |
Unless waived by the
Company, the obligations of the Company, Newco and Merger Sub to consummate the Blackstone Merger, including the Merger, are subject to
the satisfaction of certain customary conditions (in addition to customary certificates and other closing deliverables), as well as the
following:
| ● | accuracy of the representations and warranties made by Blackstone in the Blackstone Merger Agreement and
material compliance by Blackstone with the covenants in the Blackstone Merger Agreement; |
| ● | absence of any Blackstone Material Adverse Effect with respect to Blackstone between the date of the Blackstone
Merger Agreement and the date of the Closing; |
| ● | Blackstone will have delivered to the Company and Newco Blackstone’s PCAOB-compliant audited financials; |
| ● | Cowell will have delivered a properly executed certification that Blackstone shares are not “U.S.
real property interests”, together with a notice to the IRS, in accordance with Treasury Regulations; |
| ● | Blackstone will have terminated certain specified related party contracts; and |
| ● | the Manufacturing Supply Agreement between Fugang Technology Inc. and the Company in substantially the
form attached to the Blackstone Merger Agreement will remain in effect. |
Unless waived by Blackstone,
the obligations of Blackstone to consummate the Merger are subject to the satisfaction of certain customary additional conditions (in
addition to customary certificates and other closing deliverables), as well as the following:
| ● | accuracy of the representations and warranties made by the Company, Newco and Merger Sub in the Blackstone
Merger Agreement and material compliance by the Company, Newco and Merger Sub with the covenants in the Blackstone Merger Agreement; |
| ● | absence of any Company Material Adverse Effect with respect to the Company, Newco or Merger Sub between
the date of the Blackstone Merger Agreement and the date of the Closing; |
| ● | all members of the board of directors and all officers of the Company will have executed written resignations
effective as of the Effective Time; |
| ● | the aggregate amount of proceeds raised in the PIPE Investment plus the amount of funds in the trust account
(after giving effect to any redemption of the Company common stock by the Company’s stockholders) will be at least $150,000,000;
and |
| ● | the Newco certificate of incorporation will have been amended and restated by Newco. |
Termination
The Blackstone
Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including:
| ● | by mutual written consent of the Company and Blackstone; |
| ● | by either the Company or Blackstone if the Closing has not occurred by the date that is six months after the execution of the Blackstone
Merger Agreement, other than as a result of a breach by the party seeking termination, provided, that in the event of an extension of
the time for the Company to complete a Merger in accordance with the terms of the Company’s certificate of incorporation, such six
month period will automatically be extended by a like period; |
| ● | by either the Company or Blackstone if a governmental authority shall have issued an order or taken any other action permanently restraining,
enjoining or otherwise prohibiting, or if any law is in effect making illegal, the transactions contemplated by the Blackstone Merger
Agreement, other than as caused by the breach of the party seeking termination; |
| ● | by either the Company or Blackstone if the Company fails to obtain the required stockholder approvals at the Company’s stockholder
meeting; |
| ● | by the Company upon a breach of any representation, warranty, covenant or agreement on the part of Blackstone, NAI or Dahle set forth
in the Blackstone Merger Agreement, or if any representation or warranty of Blackstone, NAI or Dahle becomes untrue and is not cured within
20 days; |
| ● | by Blackstone upon a breach of any representation, warranty, covenant or agreement on the part of the Company, Newco or Merger Sub
set forth in the Blackstone Merger Agreement, or if any representation or warranty of the Company, Newco or Merger Sub becomes untrue
and is not cured within 20 days; and |
| ● | by the Company if Blackstone has not delivered its PCAOB-compliant audited financials on or prior to February 28, 2022. |
Related Agreements
Amended Registration
Rights Agreement
Contemporaneously with
the execution and delivery of the Blackstone Merger Agreement, the Company, certain stockholders of the Company (collectively, the “Initial
Investors”), NAI and Dahle entered into an Amended and Restated Registration Rights Agreement (the “Amended Registration Rights
Agreement”). Pursuant to the Amended Registration Rights Agreement, the Initial Investors and the undersigned parties listed under
“Holder” on the signature page thereto will be provided the right to demand registrations, piggy-back registrations and shelf
registrations with respect to Registrable Securities (as defined in the Amended Registration Rights Agreement). The Amended Registration
Rights Agreement would supersede the registration rights agreements between the Company and certain of the Initial Investors.
Lock-Up Agreement
Contemporaneously with
the execution and delivery of the Blackstone Merger Agreement, certain Company stockholders, NAI and Dahle entered into a Lock-up Agreement
with the Company (each, a “Lock-Up Agreement”). Pursuant to the Lock-Up Agreements, each party thereto has agreed to
a 180-day lock-up of its Newco common stock following Closing, subject to (i) early release upon certain corporate transactions and
(ii) certain limited permitted transfers where the recipient takes the shares subject to the restrictions in Lock-Up Agreement.
Company Stockholder Support Agreement
Contemporaneously
with the execution and delivery of the Blackstone Merger Agreement, the Company, Blackstone and the Sponsor, holding 21.3% of the
outstanding Shares of the Company entitled to vote entered into Stockholder Support Agreement (the “Ackrell Stockholder
Support Agreement”). Pursuant the Ackrell Stockholder Support Agreement, the Sponsor has agreed, among other things, to
vote its shares of the Company common stock in favor of the adoption an approval of the Blackstone Merger Agreement and the
Blackstone Merger.
Private Placement
Subscription Agreements
In connection with the
Blackstone Merger, the Company and Newco entered into subscription agreements (the “Subscription Agreements”) with the investors
named therein (the “PIPE Investors”), pursuant to which Newco agreed to issue and sell to the PIPE Investors approximately
3,100,000 units (the “Newco Units”) for a purchase price of $10.00 per unit, for an aggregate of approximately $31,000,000,
and approximately $111,000,000 of Newco convertible notes (the “Convertible Notes”) immediately prior to the closing of the
Merger (collectively, the “PIPE Investment”). Each Newco Unit consist of one share of Newco common stock and one-half of a
warrant to acquire Newco common stock at an exercise price of $11.50 per share. None of the Sponsor, the Company’s directors or
officers, or their respective affiliates will participate in the PIPE Investment. The terms of the units issued to the PIPE Investors
are similar to the terms of the terms of the Company’s securities included in the private units issued to the Sponsor and EBC in
the units private placement, except that the purchasers of the placement shares are not entitled to the Make-Whole Payments pursuant to
the Transferor Agreement described below and the placement warrants and warrants included in the private subunits are exercisable on a
cashless basis.
The
PIPE Investment is conditioned on the concurrent closing of the Blackstone Merger, execution of an indenture (the “Indenture”)
containing the terms of the Convertible Notes, certain minimum cash and liquidity requirements, absence of a material adverse effect on
the Company, Newco or Blackstone, the operation of Blackstone’s business in the ordinary course between the execution of the Subscription
Agreements until the consummation of the Blackstone Merger, certain minimum business performance metrics having been met and other customary
closing conditions. The proceeds from the PIPE Investment will be used to fund a portion of the cash consideration for the Blackstone
Merger. The Subscription Agreements provide for certain customary registration rights for the PIPE Investors.
Transferor Agreement
As
an inducement to enter into the Subscriptions Agreements, certain Company stockholders, NAI and Dahle (the “Transferors”)
have agreed, pursuant to a Transferor Agreement entered into contemporaneously with the execution and delivery of the Blackstone Merger
Agreement, to effect a transfer of a certain number of shares of Newco Common Stock to purchasers of Newco Units concurrently with the
consummation of the purchase of the Newco Units. The Transferors have agreed that a certain number of shares of Newco common stock will
be deposited into an escrow fund that will be transferred to the purchasers of Newco Units in the event that the trading price of Newco
common stock (the “Trading Price”) during the measurement period specified in the Subscription Agreements is less than $10.00
(the “Make-Whole Payment”). In the event a Make-Whole Payment is required to be made, the number of shares of Newco common
stock to be transferred from the escrow fund shall be determined using a formula set forth in the Subscription Agreement; provided that
the amount of shares of Newco common stock in the Make-Whole Payment shall be determined based upon a Trading Price between $5.75 and
$10.00 per share, with more shares being transferred from the escrow fund as the Trading Price decreases. If the Trading Price is greater
than $10.00 per share, no Make-Whole Payment shall be required and if the Trading Price is lower than $5.75 per share no additional Make-Whole
Payment shall be required to account for the difference between $5.75 per share and the actual Trading Price. Any shares of Newco common
stock remaining in the escrow fund following the Make-Whole Payment will be returned to the Transferors.
Warrant Agreement
The
warrants will be issued pursuant to a warrant agreement to be entered into at the Closing of the Blackstone Merger. Each whole warrant
will entitle the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as set
forth in the warrant agreement, at any time commencing on the issuance of the warrant until its expiration.
The
warrants may be called for redemption by Newco if at any time after their issuance until the expiration of the warrants, if, and only
if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period and if, and only if, there is
a current registration statement in effect with respect to the shares of Newco Common Stock underlying such warrants.
The
exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, except
as described below, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise
prices.
The terms of the
warrants to be issued to the PIPE Investors is similar to the placement warrants and the warrants included in the placement subunits
issued to the Sponsor and EBC in the units private placement, except that the placement warrants and warrants included in the
private subunits are exercisable on a cashless basis.
Convertible Notes
Indenture
The
Convertible Notes will mature on April 15, 2027, unless earlier repurchased, redeemed or converted in accordance with their terms, and
will accrue interest at a rate of 9.875% per annum payable in a combination of cash and “payments-in-kind” (“PIK”).
Prior to the second anniversary following the closing date of the Convertible Notes offering, 50% of the interest will be paid in cash
with the remaining 50% to be paid in PIK or, at Newco’s option, cash. On and after the second anniversary of the closing date of
the Convertible Notes offering, all interest will be paid in cash. However, if any such amount of cash interest is not permitted under
the terms of Blackstone’s other credit facilities, the amount of permitted interest shall be paid in cash, and the remaining amount
of interest will be paid in PIK. The amount that would otherwise have been paid in cash, but is paid in PIK will be used to repay Blackstone’s
other credit facilities.
The
Convertible Notes may be converted at any time (in whole or in part) into shares of Newco common stock, at the option of the holder of
such Convertible Note, at a price equal to the lesser of (i) $11.50 and (ii) 15% premium to the lowest per share price of any equity issued
prior to or substantially simultaneously with the closing of the Blackstone Merger (subject to customary adjustments).
Newco
will have the option to redeem all or any portion of the Convertible Notes after April 15, 2025, if certain conditions (including that
the Newco Common Stock is trading at or above $18.00 per share for at least 20 out of any 30-day trading period and the redeemed portion
does not exceed a specified level of the Newco Common Stock trading volume over a specified period) are met. The Convertible Notes also
contain default provisions, including provisions for potential acceleration of the Convertible Notes.
Each
holder of a Note will have the right to cause the Newco to repurchase for cash all or a portion of the Notes held by such holder at any
time upon the occurrence of a “fundamental change”, a customary definition provided in the Indenture (a “Fundamental
Change”), at a price equal to par plus accrued and unpaid interest.
In
the event of a conversion in connection with a Fundamental Change, the Conversion Price will be adjusted by a usual and customary Fundamental
Change make-whole amount to be agreed in the Indenture.
The
Indenture will include restrictive covenants that, among other things, will limit the ability of Newco to incur indebtedness above certain
thresholds (subject to certain exceptions to be set forth in the Indenture), create liens, make certain payments or investments, enter
into affiliate transactions, sell certain assets of Newco and its subsidiaries, pay dividends, and complete certain mergers or consolidations.
The
Indenture also will include customary events of default.
Newco
has agreed to file a shelf registration statement registering the resale of the shares of Newco common stock contained in the Newco Units
and Make-Whole Payment or issuable upon exercise of the warrants or conversion of the Convertible Notes. In certain circumstances, the
subscribers have piggy-back registration rights in the event that Newco engages in an underwritten offering of Newco common stock.
The
Blackstone Merger Agreement and Related Agreements are further described in the Form 8-K filed by the Company on December 23, 2021 and
the registration statement on Form S-4 (File No. 333- 262758) filed on February 15, 2022 by Blackstone Products, Inc. in connection with
the Blackstone Merger (the “Blackstone Registration Statement”), which includes a proxy statement with respect to our special
meeting of stockholders (the “Special Meeting”) to approve the Blackstone Merger, among other matters, that constitutes a
prospectus of Blackstone Products, Inc. with respect to the securities to be issued in the Blackstone Merger. The foregoing descriptions
of each of the Blackstone Meager Agreement and Related Agreements are qualified in their entirety by reference to such agreement filed
as an exhibit to this Report.
In
the event the Blackstone Merger is not consummated, we will continue to pursue an acquisition opportunity in any business, industry, sector
or geographical location with a focus on the branded FMCG industry, including hemp-based branded consumer goods.
Other
than as specifically discussed herein, this Report does not assume the closing of the Blackstone Merger.
Recent
Developments
On December 15, 2021, the Company formed Newco,
a Delaware corporation that is a wholly-owned subsidiary of the Company, and Merger Sub, a Delaware corporation that is a wholly-owned
subsidiary of Newco, for the purpose of executing the Merger Agreement. All activities of Newco and Merger Sub through December 31, 2021
related to executing the Merger Agreement.
On December 23, 2021 and March 21, 2022, at the request
of our Sponsor, the Company extended the time to consummate a business combination by an aggregate of six months from December 23, 2021
to March 23, 2022 and then further to June 23, 2022 by depositing an aggregate of $2,760,000 into the trust account of the Company for
its public stockholders, representing $0.20 per public unit. In connection with such extensions, the Company issued two unsecured promissory
notes (collectively, the “Notes”) each in the principal amount of $1,380,000 to the Sponsor and Blackstone, a designee of
the Sponsor, respectively. The Notes are non-interest bearing and payable in cash upon the closing of the Company’s initial business
combination. All amounts due under the Notes shall be repaid in cash. In the event that a business combination is not consummated within
the required timeframe in our amended and restated certificate of incorporation, no payment shall be due hereunder and the principal balance
of the Notes shall be forgiven.
The Branded Fast-Moving Consumer Goods and
Hemp Industries
The branded fast-moving consumer goods industry
is large and global. It consists of a variety of segments, each with their distinct characteristics. Often, a segment will have a number
of brands or companies that have achieved significant market share, with newcomers frequently entering the market. In order to continue
to experience growth, brands or companies often must enter new markets or introduce new products with novel features or ingredients. Examples
of branded FMCG segments with these characteristics include alcoholic and non-alcoholic beverages and wellness — some of the
largest categories in the branded FMCG industry. One such area of growth is the hemp industry, in which numerous mainstream branded FMCG
companies have made investments in, and acquisitions of, hemp-related companies.
Hemp is cannabis containing no more than 0.3%
tetrahydrocannabinol, or THC, the psychoactive compound responsible for the “high” or euphoric feeling commonly associated
with cannabis consumption. A cannabis plant can yield more than 100 different compounds known as “cannabinoids,” the two most
prevalent of which are typically THC and CBD, which produces a physical effect without the psychoactive effects associated with THC.
In 2018, the U.S. Congress passed the Agriculture
Improvement Act of 2018 (also known as the Farm Bill), which legalized a significant portion of the hemp industry. With the passage of
the Farm Bill, there has been a significant increase in the availability of hemp-derived products, including products containing CBD.
Hemp-derived CBD products are now legally available through mainstream distribution channels and retailers. A wide range of CBD-infused
products, including lotions, serums, balms, tinctures, shampoos, soaps and pet treats, can now be found online and at a variety of retailers,
such as supermarkets, cosmetic stores, beauty salons and pet supply stores. One segment of the hemp sector that continues to have market
uncertainty in the U.S. is the CBD-infused food and beverage market, as the U.S. Food & Drug Administration has asserted that the
sale of such products violates the U.S. Food, Drug, and Cosmetics Act. However, CBD-infused alcoholic and non-alcohol beverages are starting
to be marketed in Europe as the legal framework for hemp in Europe is more permissive than in the United States.
Our management team believes that hemp-based consumer
goods have the potential for mass consumer appeal around the world. Consumers are beginning to use hemp-based products to treat a variety
of medical conditions, including anxiety, insomnia, pain and inflammation. In aggregate, across all state medical hemp laws in the United
States, hemp is legally recognized as a form of therapy or medicine for more than 50 medical conditions. Similar to the alcohol and pharmaceutical
markets, we believe that the total addressable consumer market for hemp-based products comprises a significant portion of the global adult
population and will become an increasingly large and relevant consumer product segment.
Business Strategy
We believe that there are a range of target businesses
that could benefit from our industry knowledge, relationships, capital and public vehicle. Our strategy is to identify and complete our
initial business combination with a target operating in the branded FMCG industry. Our focus is on the alcoholic and non-alcoholic beverage
and wellness sectors of the FMCG market. In addition, we believe that there is an emerging opportunity within these sectors to target
businesses that are focused on hemp-based branded consumer goods. While we intend to initially focus on potential opportunities in the
United States, the branded FMCG industry is global and we may pursue opportunities internationally. Notwithstanding the foregoing, we
will not invest in, nor consummate a business combination with, a target business that we determine has been operating, or whose business
plan is to operate, in violation of the U.S. Controlled Substances Act.
Our management team is in the process of identifying,
contacting, and evaluating potential target businesses in the pursuit of a possible business combination, including the Blackstone Merger.
In addition, we are communicating the parameters of our search to our network of relationships and transaction sources to help us identify
potential target businesses other than Blackstone. We are leveraging our team’s collective experience in the branded FMCG and hemp
industries and capital markets to successfully complete a business combination, and then continue to support our target business with
our industry relationships, insights and regulatory knowledge, financial expertise and capital resources.
Competitive Strengths
We believe that our management team is well positioned
to identify attractive target businesses within the branded FMCG industry and to facilitate a successful business combination for the
following reasons:
Track Record and Transaction Flow within
the Branded FMCG Industry.
Our management team has a track record of successfully
identifying and acquiring brands, products and companies within the branded FMCG industry. Shannon Soqui, our Vice Chairman, and Jason
Roth, our Chief Executive Officer, are the current Chief Executive Officer and Chief Strategy Officer, respectively, of Next Frontier
Brands. Next Frontier Brands is an international provider of fast-moving consumer goods, including alcoholic and non-alcoholic beverages
and wellness products. Next Frontier Brand’s strategy is to acquire brands in both mature and emerging product categories within
the beverage and wellness segments of the branded FMCG industry. Our strategy is to identify targets operating in markets similar to those
in which Next Frontier Brands participates.
Extensive Network within the Hemp Industry.
Our management team has an extensive network throughout
the hemp industry, including traditional branded FMCG businesses already addressing this market. Michael K. Ackrell, our Chairman, is
the founder of Ackrell Capital, one of the few registered broker/dealers in the United States providing services to companies participating
in the hemp industry. Ackrell Capital provides M&A advisory and capital raising services to clients in the United States and internationally.
Ackrell Capital is a thought leader in the industry, publishing a variety of industry reports and analyses. Shannon Soqui, our Vice Chairman,
is the co-founder, Chief Executive Officer and Chairman of the board of directors of Next Frontier Brands. Next Frontier Brands is an
international provider of fast-moving consumer goods, including alcoholic and non-alcoholic beverages and hemp-based wellness products.
Prior to co-founding Next Frontier Brands, Mr. Soqui served as the head of U.S. cannabis investment banking at Canaccord Genuity, a leading
global cannabis investment bank. Jason Roth, our Chief Executive Officer, is the co-founder, the Chief Strategy Officer and a member of
the board of directors of Next Frontier Brands. Prior to co-founding Next Frontier Brands, Mr. Roth was the Chief Executive Officer and
Chairman of the board of directors of Mile High Labs International, which we believe was one of the world’s largest processors of
hemp-derived CBD concentrates in 2019. While at Mile High Labs International, Mr. Roth conducted business with numerous leading alcoholic
beverage companies and developed a large network of contacts in the beverage and wellness industries. Our contacts include corporate executives
at public and private FMCG and hemp companies, investment professionals at private equity firms and other financial sponsors and industry
research analysts, as well as lawyers and accountants serving the FMCG and hemp industries — any of whom could be a source of a
lead to a possible target business. Ackrell Capital may receive consulting, success or finder fees in connection with assisting us in
the consummation of our initial business combination.
Significant Prior SPAC Experience.
Our management team possesses a strong understanding
of the SPAC structure and market. Our Chief Operating Officer and President, Stephen Cannon, has served as a member of management for
seven SPACs that have completed initial public offerings, four of which have consummated initial business combinations. Most recently,
Global SPAC Partners Co., which completed its initial public offering in April 2021, Archimedes Tech SPAC Partners Co., which completed
its initial public offering in March 2021, Global SPAC Partners Co., and Twelve Seas Investment Company, which completed its initial public
offering in June 2018 and its business combination in December 2019. Our Chief Financial Officer, Long Long, has more than a decade of
corporate finance experience and has served as the Chief Financial Officer of Global SPAC Partners Co. as well as Archimedes Tech SPAC
Partners Co. Mr. Long also oversaw the financial filings, daily operations and due diligence of business combination targets for Twelve
Seas Investment Company.
Less Regulatory Risk due to our Industry
Segment Focus.
While we may pursue a business combination target
in any industry or geographical location, we intend to focus our search for businesses in the branded FMCG industry, including businesses
that are focused on alcoholic and non-alcoholic beverages and wellness products, in the event that the Blackstone Merger is not consummated.
We will target businesses that are compliant with applicable laws and regulations within the jurisdictions in which they are located or
operate. We will not invest in, nor consummate a business combination with, a target business that we determine has been operating, or
whose business plan is to operate, in violation of the U.S. Controlled Substances Act. Consequently, we believe that this strategy will
reduce the legal and regulatory risks faced by our target businesses and public stockholders after the business combination.
Benefits as a Public Company.
We believe that our structure makes us an attractive
business combination partner to a range of target businesses. A merger with us will offer a target business an alternative process to
a public listing rather than the traditional initial public offering process. We believe that target businesses may favor this alternative
given the challenges of a traditional initial public offering and our ability to offer greater certainty of execution. Once a proposed
business combination, such as the Blackstone Merger, is approved by our stockholders and the transaction is consummated, the target business
will have effectively become public. A traditional initial public offering is always subject to the underwriters’ ability to complete
the offering, due to general market conditions, lack of investor interest or otherwise. Once public, we believe that the target business
will have greater access to capital and a public currency to use for potential acquisitions. In addition, having a public currency provides
the target business with an additional means of creating management incentives that may be better aligned with stockholders’ interests
than it would have as a private company. Being public can also augment a company’s profile among potential new customers and vendors
and aid in attracting talented management.
While we believe that our status as a public company
makes us an attractive business partner, some potential target businesses may view the inherent limitations in our status as a blank check
company as a deterrent and may prefer to effect a business combination with a more established entity or with a private company. These
inherent limitations include limitations on our available financial resources, which may be inferior to those of other entities pursuing
the acquisition of similar target businesses; the requirement that we seek stockholder approval of a business combination, which may delay
the consummation of a transaction; and the existence of our outstanding warrants, which may represent a source of future dilution.
Strong Financial Position with Transaction
Flexibility.
With approximately $140,822,578 held in trust
and a public market for our securities as of December 31, 2021, we can offer a target business, such as Blackstone, a variety of financial
options to facilitate a business combination and capital to fund the future growth of its business and strengthen its balance sheet. Because
we can consummate a business combination using cash, debt, our share capital or a combination of the foregoing, we have the flexibility
to tailor the form of the consideration to be paid to the target business to address the needs of the parties.
Effecting a Business Combination
General
We are not presently engaged in, and we will not
engage in, any substantive commercial business for an indefinite period of time. We intend to utilize cash derived from the proceeds of
our IPO and the private placement, our capital stock, debt or a combination of these in effecting a business combination, such as the
Blackstone Merger. A business combination may involve the acquisition of, or merger with, a company which does not need substantial additional
capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences
of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various
federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations with more than
one target business, we will probably have the ability, as a result of our limited resources, to effect only a single business combination.
Sources of Target Businesses
We expect that our principal means of identifying
potential target businesses, such as Blackstone, will be through the extensive contacts and relationships of our Sponsor, initial stockholders,
officers and directors and their affiliates, including Ackrell Capital. While our officers and directors are not required to commit any
specific amount of time in identifying or performing due diligence on potential target businesses, our officers and directors believe
that the relationships they have developed over their careers and their access to our Sponsor’s contacts and resources will generate
a number of potential business combination opportunities that will warrant further investigation. We also anticipate that target business
candidates, such as Blackstone, will be brought to our attention from various unaffiliated sources, including investment bankers, venture
capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target
businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings.
These sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these
sources will have read our public filings and know what types of businesses we are targeting. Additionally, Ackrell Capital may be engaged
by a target company for M&A services and make an introduction to us, as is the case with Blackstone.
Our officers and directors must present to us
all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account (excluding taxes
payable on the income accrued in the trust account) at the time of the agreement to enter into the initial business combination, subject
to any pre-existing fiduciary or contractual obligations. We may also engage the services of professional firms or other individuals that
specialize in business acquisitions in which case we may pay a finder’s fee, consulting fee or other compensation to be determined
in an arm’s length negotiation based on the terms of the transaction. In addition, we may pay consulting, success or finder fees
to our Sponsor, officers, directors, initial stockholders or their affiliates (including Ackrell Capital and its affiliates) in connection
with the consummation of our initial business combination. Our audit committee will review and approve all reimbursements and payments
made to our Sponsor, officers, directors or their respective affiliates, with any interested director abstaining from such review and
approval.
Selection of Target Business and Structuring of a Business Combination
Subject to the limitations that a target business
have a fair market value of at least 80% of the balance in the trust account (excluding taxes payable on the income earned on the trust
account) at the time of the execution of a definitive agreement for our initial business combination, as described below in more detail,
and that we must acquire a controlling interest in the target business, our management has virtually unrestricted flexibility in identifying
and selecting a prospective target business, such as Blackstone. We have not established any specific attributes or criteria (financial
or otherwise) for prospective target businesses. In evaluating a prospective target business, our management has considered and may continue
to consider a variety of factors, including one or more of the following:
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Clear and Sustainable Competitive Advantages; |
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High Growth Potential and Cash Flow; |
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Experienced Management Teams; |
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Attractive Valuations; |
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Compliant with Laws; |
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Will Benefit from Being a Public Company; |
These criteria are not intended to be exhaustive.
Any evaluation relating to the merits of a particular business combination, such as the Blackstone Merger, is based, to the extent relevant,
on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent
with our business objective. In evaluating a prospective target business, such as the Blackstone Merger, we conduct an extensive due diligence
review which encompasses, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial
and other information which is made available to us. This due diligence review is conducted either by our management or by unaffiliated
third parties we may engage, although we have no current intention to engage any such third parties.
The time and costs required to select and evaluate
a target business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty.
Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
We may enter into a business combination with
a target business that is affiliated with any of our officers, directors or Sponsor. However, we would only do so if (i) such transaction
is approved by a majority of our disinterested independent directors and (ii) we obtain an opinion from an independent investment banking
firm, or another independent entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated
stockholders from a financial point of view.
Fair Market Value of Target Business
Nasdaq listing rules require that the target business
or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust
account (excluding the taxes payable on the interest earned on the trust account) at the time of the execution of a definitive agreement
for our initial business combination, such as the Blackstone Merger. Notwithstanding the foregoing, if we are not then listed on Nasdaq
for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
We currently anticipate structuring a business
combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of
the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will
only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of
the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company,
depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction
in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we
could acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our
stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent
to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned
or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued
for purposes of the 80% of trust account balance test. Based on the valuation analysis of our management and board of directors, we have
determined that the fair market value of Blackstone was substantially in excess of 80% of the funds in the trust account and that the
80% test was therefore satisfied.
The fair market value of the target will be determined
by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with
any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well as
the basis for our determinations. If our board is not able to independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly
renders valuation opinions, with respect to the satisfaction of such criteria. Additionally, pursuant to Nasdaq rules, any initial business
combination, such as the Blackstone Merger, must be approved by a majority of our independent directors.
We are not required to obtain an opinion from
an investment banking firm as to the fair market value if our board of directors independently determines that the target business complies
with the 80% threshold.
Lack of Business Diversification
Although this process may entail the simultaneous
acquisitions of several operating businesses and we may seek to effect a business combination with more than one target business, we expect
to complete our business combination with a single business. Therefore, at least initially, the prospects for our success may be entirely
dependent upon the future performance of a single business operation. Unlike other entities which may have the resources to complete several
business combinations of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will
not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating
a business combination with only a single entity, our lack of diversification may:
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If we determine to simultaneously acquire several
businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its
business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our
ability, to complete the business combination. With multiple acquisitions, we could also face additional risks, including additional burdens
and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional
risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating
business.
Limited Ability to Evaluate the Target Business’
Management
Although we intend to scrutinize the management
of a prospective target business when evaluating the desirability of effecting a business combination, such as the Blackstone Merger,
we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure
you that the future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the
future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated
with any certainty. While it is possible that some of our key personnel will remain associated in senior management or advisory positions
with us following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a
business combination. Moreover, they would only be able to remain with the company after the consummation of a business combination if
they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take
place simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form of
cash payments and/or our securities for services they would render to the company after the consummation of the business combination.
While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target business,
their ability to remain with the company after the consummation of a business combination will not be the determining factor in our decision
as to whether or not we will proceed with any potential business combination. Additionally, we cannot assure you that our officers and
directors will have significant experience or knowledge relating to the operations of the particular target business.
Following the Blackstone Merger or any other business
combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure
you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite
skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to
Approve an Initial Business Combination
In connection with any proposed business combination,
such as the Blackstone Merger, we will either (1) seek stockholder approval of our initial business combination at a meeting called for
such purpose at which stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business
combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes
payable), or (2) provide our stockholders with the opportunity to sell their subunits to us by means of a tender offer (and thereby avoid
the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account
(net of taxes payable), in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender
offer will be structured so that each stockholder may tender all of his, her or its subunits rather than some pro rata portion of his,
her or its subunits. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders
to sell their subunits to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval.
If we decide to allow our stockholders to sell their subunits to us in a tender offer, we will file tender offer documents with the SEC
which will contain substantially the same financial and other information about the initial business combination as is required under
the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001
either immediately prior to or upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common
stock voted are voted in favor of the business combination.
We chose our net tangible asset threshold of $5,000,001
to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act of 1933, as amended. However, if we seek
to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires
us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination, we may need
to have more than $5,000,001 in net tangible assets either immediately prior to or upon consummation and this may force us to seek third
party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial
business combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public stockholders
may therefore have to wait until June 23, 2022 in order to be able to receive a pro rata share of the trust account.
Our Sponsor, initial stockholders, officers and
directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert
any founder shares or subunits in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell
any founder shares or subunits in any tender in connection with a proposed initial business combination.
None of our officers, directors, Sponsor, initial
stockholders or their affiliates had purchased or indicated any intention to purchase units, subunits or warrants in our IPO or from persons
in the open market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a significant
number of stockholders vote, or indicate an intention to vote, against such proposed business combination, our officers, directors, Sponsor,
initial stockholders or their affiliates could make such purchases in the open market or in private transactions in order to influence
the vote. Notwithstanding the foregoing, our officers, directors, Sponsor, initial stockholders and their affiliates will not make purchases
of units, subunits or warrants if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules
designed to stop potential manipulation of a company’s stock.
See “The Blackstone Merger” above
for more information regarding the requisite approvals needed for and purchases related to the Blackstone Merger.
Conversion Rights
At any meeting called to approve an initial business
combination, like the Blackstone Merger, public stockholders may seek to convert their subunits, regardless of whether they vote for or
against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in
the trust account as of two business days prior to the consummation of the initial business combination, less any taxes then due but not
yet paid. Alternatively, we may provide our public stockholders with the opportunity to sell their subunits to us through a tender offer
(and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit
in the trust account, less any taxes then due but not yet paid.
Our Sponsor, initial stockholders and our officers
and directors do not have conversion rights with respect to any founder shares or subunits owned by them, directly or indirectly, whether
acquired prior to our IPO or purchased by them in the aftermarket. Additionally, the holders of the representative shares do not have
conversion rights with respect to the representative shares.
Furthermore, public stockholders who redeem or
tender their subunits for their pro rata share of the trust account will continue to have the right to exercise any warrants held by them
which are not included in a subunit, but will automatically forfeit the warrants included in the redeemed subunits. This is different
than other similarly structured blank check companies where a redeeming or tendering stockholder is able to keep any warrants he may still
hold, whether included in a unit or held separately. Common stock alone will not be entitled to receive the redemption amount. Accordingly,
investors may have a disincentive to exercise the redemption rights because they will automatically forfeit, without the receipt of any
additional consideration, the portion of the warrant included in the subunit.
We may require public holders of subunits, whether
they are a record holder or hold their subunits in “street name,” to either (i) tender their certificates to our transfer
agent or (ii) deliver their subunits to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with
the proposal to approve the business combination.
There is a nominal cost associated with the above-referenced
delivery process and the act of certificating the subunits or delivering them through the DWAC System. The transfer agent will typically
charge the tendering broker the fee and it would be up to the broker whether or not to pass this cost on to the holder. However, this
fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver subunits
is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event
we require stockholders seeking to exercise conversion rights prior to the consummation of the proposed business combination and the proposed
business combination is not consummated this may result in an increased cost to stockholders.
Any proxy solicitation materials we furnish to
stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy
such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy statement
up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek to exercise his conversion
rights. This time period varies depending on the specific facts of each transaction. However, as the delivery process can be accomplished
by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by
simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe this time
period is sufficient for an average investor. However, we cannot assure you of this fact. Please see the risk factor titled “In
connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders who wish
to convert their subunits in connection with a proposed business combination to comply with specific requirements for conversion that
may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights” in
our Registration Statements for further information on the risks of failing to comply with these requirements.
Any request to convert such subunits once made,
may be withdrawn at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public subunit delivered
his certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect
to exercise such rights, he may simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert
their subunits for the applicable pro rata share of the trust account as of two business days prior to the consummation of the initial
business combination. In such case, we will promptly return any subunits delivered by public holders.
Ability to Extend Time to Complete Business
Combination
We have extended the period of time to consummate
a business combination until June 23, 2022. Pursuant to the terms of our amended and restated certificate of incorporation and the trust
agreement entered between us and Continental Stock Transfer & Trust Company on December 23, 2020, in order for the time available
for us to consummate our initial business combination to be extended, our Sponsor or its affiliates or designees must deposit into the
trust account $1,380,000 ($0.10 per public subunit), on or prior to the date of the applicable deadline, for each of the available three
month extensions providing a total possible business combination period of 18 months, for a total payment of $2,760,000 ($0.20 per public
subunit). Any such payments would be made in the form of non-interest bearing loans. On December 23, 2021 and March 21, 2022, at the request
of our Sponsor, the Company extended the time to consummate a business combination by an aggregate of six months from December 23, 2021
to March 23, 2022 and then further to June 23, 2022 by depositing an aggregate of $2,760,000 into the trust account of the Company for
its public stockholders, representing $0.20 per public unit. In connection with such extensions, the Company issued two unsecured promissory
notes (collectively, the “Notes”) each in the principal amount of $1,380,000 to the Sponsor and Blackstone, a designee of
the Sponsor, respectively. The Notes are non-interest bearing and payable in cash upon the closing of the Company’s initial business
combination. All amounts due under the Notes shall be repaid in cash. In the event that a business combination is not consummated within
the required timeframe in our amended and restated certificate of incorporation, no payment shall be due hereunder and the principal balance
of the Notes shall be forgiven. Furthermore, the letter agreement with our initial stockholders contains a provision pursuant to which
our Sponsor has agreed to waive its right to be repaid for such loans to the extent there is insufficient funds held outside of the trust
account in the event that we do not complete a business combination. Our Sponsor and its affiliates or designees are not obligated to
fund the trust account to extend the time for us to complete our initial business combination.
Liquidation if No Business Combination
Our amended and restated certificate of incorporation
provides that we have only 12 months from the closing of our IPO (or up to 18 months from the closing of our IPO if we extend the period
of time to consummate a business combination) to complete an initial business combination. We have extended the period of time to consummate
a business combination until June 23, 2022. If we have not completed an initial business combination by such date, we will (i) cease all
operations except for the purpose of winding up and (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem 100% of the outstanding public subunits, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding
public subunits, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidation distributions, if any), subject to applicable law. Public stockholders will also forfeit the one-half of a
warrant included in the subunits being redeemed. As promptly as reasonably possible following such redemption, subject to the approval
of our remaining stockholders and our board of directors, we will dissolve and liquidate, subject to our obligations under Delaware law
to provide for claims of creditors and the requirements of other applicable law.
Our Sponsor, initial stockholders, officers and
directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect
our public stockholders’ ability to convert or sell their subunits to us in connection with a business combination as described
herein or affect the substance or timing of our obligation to redeem 100% of our public subunits if we do not complete a business combination
within 12 months from the closing of our IPO (or up to 18 months from the closing of our IPO if we extend the period of time to consummate
a business combination) unless we provide our public stockholders with the opportunity to convert their subunits upon such approval at
a per-subunit price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously
released to us but net of franchise and income taxes payable, divided by the number of then outstanding public subunits. This redemption
right shall apply in the event of the approval of any such amendment, whether proposed by our Sponsor, initial stockholders, executive
officers, directors or any other person.
Under the Delaware General Corporation Law, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public
subunits in the event we do not complete our initial business combination within the required time period may be considered a liquidation
distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General
Corporation Law intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against
the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period
before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution
is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution. It is our intention to redeem our public
subunit as soon as reasonably possible following our 12th month (if we have not extended the period of time to consummate a
business combination), and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be
liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well
beyond the third anniversary of such date.
Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of 100% of our public subunits in the event we do not complete our
initial business combination within the required time period is not considered a liquidation distribution under Delaware law and such
redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of
limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in
the case of a liquidation distribution.
Because we will not be complying with Section
280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based
on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially
brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and
our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from
our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We are required to seek to have all third parties
(including any vendors or other entities we engage after our IPO) and any prospective target businesses enter into agreements with us
waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the
claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending
to the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact
on our ability to distribute the funds in the trust account to our public stockholders. Nevertheless, UHY LLP, our independent registered
public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held
in the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will
execute such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against
the trust account. Our Sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below
$10.10 per subunit by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered
or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if
it is required to do so. We have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified
whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities
of our company. Therefore, we believe it is unlikely that our Sponsor will be able to satisfy its indemnification obligations if it is
required to do so. Additionally, the agreement our Sponsor entered into specifically provides for two exceptions to the indemnity it has
given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an
agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account,
or (2) as to any claims for indemnification by the underwriters of our IPO against certain liabilities, including liabilities under the
Securities Act. As a result, if we liquidate, the per-subunit distribution from the trust account could be less than $10.10 due to claims
or potential claims of creditors.
We will notify the trustee of the trust account to begin liquidating
such assets promptly after June 23, 2022. It will take no more than 10 business days to effectuate such distribution. The holders of the
founder shares and private subunits have waived their rights to participate in any liquidation distribution from the trust account with
respect to such shares and subunits. There will be no distribution from the trust account with respect to our warrants, which will expire
worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are
insufficient, our Sponsor has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated
to be no more than approximately $15,000) and has contractually agreed not to seek repayment for such expenses.
If we are unable to complete an initial business
combination, including the Blackstone Merger, and expend all of the net proceeds of our IPO, other than the proceeds deposited in the
trust account, and without taking into account interest, if any, earned on the trust account, the initial per-subunit redemption price
would be $10.10. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference
to the claims of public stockholders.
Our public stockholders shall be entitled to receive
funds from the trust account only in the event of our failure to complete a business combination within the required time period, if the
stockholders seek to have us convert or purchase their respective subunits upon a business combination which is actually completed by
us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination.
In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over
the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to
return to our public stockholders at least $10.10 per subunit.
If we are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor
and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy
court could seek to recover all amounts received by our stockholders. Furthermore, because we intend to distribute the proceeds held in
the trust account to our public stockholders promptly after June 23, 2022, this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may
be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and
our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
We cannot assure you that claims will not be brought against us for these reasons.
Competition
In identifying, evaluating and selecting a target
business, such as Blackstone, we have encountered and may continue to encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and
our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there
may be numerous potential target businesses, such as Blackstone, that we could acquire with the net proceeds of our IPO, our ability to
compete in acquiring certain sizable target businesses may be limited by our available financial resources.
The following also may not be viewed favorably
by certain target businesses:
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our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction; |
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our obligation to convert or repurchase subunits held by our public stockholders may reduce the resources available to us for a business combination; and |
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our outstanding warrants, and the potential future dilution they represent. |
Any of these factors may place us at a competitive
disadvantage in successfully negotiating a business combination, such as the Blackstone Merger. Our management believes, however, that
our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential on
favorable terms.
If we succeed in effecting a business combination,
such as the Blackstone Merger, there will be, in all likelihood, intense competition from competitors of the target business. We cannot
assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively.
Facilities
We currently maintain our principal executive
offices at 2093 Philadelphia Pike, Claymont, DE 19703. The cost for this space is included in the $10,000 per-month fee that ACVT I, LLC,
an affiliate of our Chairman, charges us for general and administrative services commencing on December 21, 2020 pursuant to a letter
agreement between ACVT I, LLC and us. We consider our current office space adequate for our current operations.
Employees
We have three executive officers. These individuals are not obligated
to devote any specific number of hours to our matters and devote only as much time as they deem necessary to our affairs. The amount of
time they devote in any time period vary based on whether a target business has been selected for the business combination and the stage
of the business combination process the company is in. Accordingly, since a suitable target business to acquire has been located, management
has spent more time investigating Blackstone’s business and negotiating and processing the business combination (and consequently
have spent more time on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive
officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full time
employees prior to the consummation of a business combination.