References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Ackrell SPAC Partners I Co. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Ackrell SPAC Sponsors I LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and final prospectus for its IPO filed with the SEC. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.





Overview

We are a blank check company formed under the laws of the State of Delaware on September 11, 2018 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our business combination using cash from the proceeds of the IPO and the sale of the private units, our capital stock, debt or a combination of cash, stock and debt.

All activity through June 30, 2022 relates to our formation, IPO, and search for a target for our Initial Business Combination, including Blackstone, and efforts toward consummating the Initial Business Combination.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an Initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an Initial Business Combination.

Proposed Business Combination with Blackstone

On December 22, 2021, we entered into a Business Combination Agreement with Blackstone, among others, pursuant to which we, through a merger of Blackstone with and into NewCo (the "Merger"), our wholly-owned subsidiary, and certain other transactions, would acquire Blackstone (the "Blackstone Business Combination"). The aggregate consideration to be paid in the transactions is based on a pre-money Blackstone equity valuation of approximately $721 million and will be made up of cash consideration and stock consideration as more fully described in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022 (the "Form 10-K") and the Registration Statement on Form S-4 of Newco filed with the SEC on February 15, 2022, as amended (the "Newco Form S-4"). In connection with the proposed Blackstone Business Combination, we and Newco entered into the Subscription Agreements with the PIPE Investors, pursuant to which Newco agreed to issue and sell to the PIPE Investors 3,100,000 units for a purchase price of $10.00 per unit, for an aggregate of approximately $31,000,000, with each unit consisting of one share of Newco common stock and one-half of a warrant to acquire Newco common stock at an exercise price of $11.50 per share and Newco agreed to issue and sell approximately $111,000,000 principal amount of Newco convertible notes immediately prior to closing of the proposed Blackstone Business Combination. For more information on the proposed Blackstone Business Combination, the Business Combination Agreement and related agreements, as well as the PIPE Investment, see "Item 1. Business" in the Form 10-K and the Newco Form S-4.





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Recent Developments

On April 6, 2022, we issued an unsecured promissory note in the principal amount of $115,000 to Blackstone to fund payment of fees due to Nasdaq (See Note 8). On April 27, 2022, we issued an additional unsecured promissory note, the terms of which were later amended and restated on May 11, 2022, in the principal amount of $385,000 to Blackstone to fund our continued operations (See Note 8).

On June 21, 2022, at a Special Meeting of Stockholders, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation to extend on a monthly basis up to three times the period of time for which we are required to consummate a Business Combination (the "Business Combination Period") from June 23, 2022 to not later than September 23, 2022, subject to the approval of our Board of Directors, provided the Sponsor or its designees deposit into the Trust Account for each monthly extension an amount equal to the lesser of $0.043 per share for each Public Subunit that has not been redeemed by June 23, 2022 and $200,000, within seven days after the commencement of each extension period (the "Extension Amendment"). In connection with the vote on the Extension Amendment, an aggregate of 8,645,776 Public Subunits were presented for redemption. We paid cash in the aggregate amount of $89,068,505, or approximately $10.30 per subunit, to redeeming stockholders.

On June 21, 2022, we issued another unsecured promissory note in the principal amount of up to $600,000 to Blackstone. The proceeds of this note will be used to extend the Business Combination Period in accordance with the Extension Amendment. The note is non-interest bearing and payable in cash upon the earlier of (i) the consummation of our Initial Business Combination, and (ii) September 23, 2022 (See Note 8).

On June 27, 2022, we deposited $200,000 into the Trust Account and extended the Business Combination Period by an additional month from June 23, 2022 to July 23, 2022. On July 26, 2022, we deposited an additional $200,000 into the Trust Account and further extended the Business Combination Period by an additional month from July 23, 2022 to August 23, 2022. The aggregate of $3,160,000 for the two three-month extensions and the two monthly extensions was funded by proceeds from the promissory notes issued to the Sponsor and Blackstone (See Note 5, Note 8 and Note 11).

The subscription agreements previously entered into with investors in connection with the private placement of units, consisting of shares of Newco common stock and warrants to purchase additional shares of Newco common stock, and/or Newco convertible notes announced on December 23, 2021 provided investors with the right to terminate their subscription agreements if the proposed Business Combination with Blackstone was not consummated by June 23, 2022, the date by which we were to have originally completed our initial business combination in accordance with our Amended and Restated Certificate of Incorporation. These investors have exercised their right to terminate their subscription agreements. We are engaged in negotiations with those and other investors to modify the terms of the subscription agreements to eliminate the units portion of the private placement and to modify certain terms of the convertible notes.





Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 2022 were organizational activities and those necessary to prepare for the IPO, described below, and searching for a prospective Initial Business Combination, including the proposed Blackstone Business Combination. We do not expect to generate any operating revenues until after the completion of our Initial Business Combination. We generate non-operating income in the form of interest income on cash and marketable securities held in the Trust Account and recognize changes in the fair value of warrant liabilities as other income (expense). We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses related to our search for targets for our Initial Business Combination and our efforts to consummate an Initial Business Combination.

For the three months ended June 30, 2022, we had a net loss of $321,253, which consisted of loss from operations of $588,946, interest income of $171,249 on marketable securities held in the Trust Account, and other income of $96,444 resulting from a decrease in fair value of our warrants.

For the three months ended June 30, 2021, we had a net loss of $353,298, which consisted of operating costs of $284,480, and other loss of $74,089 resulting from an increase in fair value of our warrants, partially offset by interest income of $5,271 on marketable securities held in the Trust Account.

For the six months ended June 30, 2022, we had a net loss of $821,807, which consisted of loss from operations of $1,256,504, other income of $228,411 resulting from a decrease in fair value of our warrants, partially offset by interest income of $206,286 on marketable securities held in the Trust Account.

For the six months ended June 30, 2021, we had a net loss of $233,161, which consisted of operating costs of $484,275, and other income of $221,796 resulting from a decrease in fair value of our warrants, partially offset by interest income of $29,318 on marketable securities held in the Trust Account.





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Liquidity and Capital Resources

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

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

On June 22, 2022, an aggregate of $89,068,505 was released from the Trust Account for the redemption of 8,645,776 Public Subunits held by our public stockholders.

As of June 30, 2022, we had marketable securities held in the Trust Account of $53,345,080 consisting of both cash and money market instruments with a maturity of 185 days or less.

We had $195,111 of cash held outside of the Trust Account as of June 30, 2022. We did not have any cash equivalents held outside of the Trust Account as of June 30, 2022.

Additionally, we received $1,380,000 from the Sponsor Extension Loan (see Note 5), $1,380,000 from the Blackstone Extension Loans (See Note 8), and $200,000 from the Second Blackstone Extension Loan, which we deposited into the Trust Account to extend the period of time to consummate an initial Business Combination from December 23, 2021 to July 23, 2022. On April 6, 2022, we issued an unsecured promissory note in the principal amount of $115,000 to Blackstone to fund payment of fees due to Nasdaq (See Note 8). On April 27, 2022, we issued an unsecured promissory note, the terms of which were later amended and restated on May 11, 2022, in the principal amount of $385,000 to Blackstone to fund our continued operations (see Note 8). On April 28, 2022, pursuant to the trust agreement dated as of December 21, 2020 between us and CST, we issued a request to CST to withdraw $129,279 of interest income from the Trust Account for the payment of our taxes. On June 14, 2022 and August 4, 2022, we withdrew another $66,000 and $90,380 of interest income, respectively, from the Trust Account for the payment of our taxes.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our initial business combination. We may withdraw interest to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, such as Blackstone, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the placement units.

We anticipate that the $195,111 outside of the Trust Account as of June 30, 2022 will not be sufficient to allow us to operate for at least the next 12 months, assuming that a business combination is not consummated during that time.

We may need to obtain additional financing to consummate our initial Business Combination but there is no assurance that new financing will be available to us on commercially acceptable terms. Furthermore, if we are not able to consummate a Business Combination by August 23, 2022, or September 23, 2022 if we further extend the period by which we must complete our initial Business Combination in accordance with the terms of the Extension Amendment, it will trigger our automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about our ability to continue as a going concern.





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Critical Accounting Policies and Estimates

The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

One of the more significant accounting estimates included in these financial statements is the determination of the fair value of our warrant liability. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates (See Note 10).

We have identified the following as our critical accounting policies:

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

We account for common stock underlying the Public Subunits subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Common stock underlying the Public Subunits subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock underlying the Public Subunits (including common stock underlying the Public Subunits that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock underlying the Public Subunits is classified as stockholders' equity. Our common stock underlying the Public Subunits feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, common stock underlying the Public Subunits subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' equity section of our balance sheet.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

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

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





Net Loss Per Common Share

We comply with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statements of operations include a presentation of loss per redeemable Public Share (underlying the Public Subunit) and loss per non-redeemable Founder Share following the two-class method of loss per share. In order to determine the net loss attributable to both the redeemable Public Subunits and non-redeemable Founder Shares, we first considered the total loss allocable to both sets of shares. This is calculated using the total net loss less any dividends paid. For purposes of calculating net loss per share, any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. Subsequent to calculating the total loss allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 75% for the Public Shares (underlying the Public Subunits) and 25% for the non-redeemable Founder Shares for the three and six months ended June 30, 2022, reflective of the respective participation rights, and a ratio of 76% for the Public Shares and 24% for the non-redeemable Founder Shares for the three and six months ended June 30, 2021, reflective of the respective participation rights.





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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2022.





Contractual Obligations

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

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

On April 26, 2021, the Company engaged Nomura as an advisor to assist the Company with identifying and assessing potential Business Combination targets. Upon the closing of the Business Combination, the Company will pay Nomura a variable transaction fee of up to $10 million based on the transaction value of the Business Combination, with a minimum transaction fee of $5 million which may be reduced by up to $750,000 to cover the Company's costs to obtain fairness opinion(s).

Additionally, on September 9, 2021, the Company engaged Barclays to serve as exclusive capital markets advisors and exclusive joint placement agents in connection with the Company's proposed Blackstone Business Combination. On May 24, 2022, Barclays resigned as joint capital markets advisor and co-placement agent to the Company pursuant to the terms of its engagement and waived payment of all fees and reimbursement of expenses under the engagement. On June 12, 2022, the Company amended the terms of its engagement letter with Nomura, pursuant to which Nomura agreed to act as placement agent for a private placement of the Company's securities in connection with the proposed Blackstone Business Combination until the earlier of (i) June 12, 2023; (ii) the consummation of the private placement; or (iii) the termination of Nomura's engagement in accordance with the terms of the engagement letter. Under the PIPE engagement letter the Company agreed to pay Nomura a fee equal to five percent (5%) of the gross proceeds from the sale of securities in the private placement to investors introduced by Nomura (excluding those covered by the original engagement letter) and to reimburse Nomura's expenses (including counsel fees) up to an aggregate of $250,000 upon the earlier of the consummation of the proposed Blackstone Business Combination, the liquidation and dissolution of the Company in accordance with its governing documents and termination of the engagement letter in accordance with its terms.

Additionally, the Company has engaged Telsey to provide capital markets advisory services in connection with the proposed Blackstone Business Combination. The Company will pay Telsey a fixed fee of $650,000, of which $50,000 is payable within thirty days of Telsey completing its capital markets advisory services and the remaining $600,000 is payable upon the consummation of the proposed Blackstone Business Combination.





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Recent Accounting Standards

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

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

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