| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Cayman Islands | 001-40905 | 98-1587643 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
2870 Peachtree Road, NW Suite 509 Atlanta, Georgia | 30305 | |
(Address Of Principal Executive Offices) | (Zip Code) |
Title of Each Class: | Trading Symbol: | Name of Each Exchange on Which Registered: | ||
Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of one redeemable warrant | TRIS.U | The New York Stock Exchange | ||
Class A ordinary shares included as part of the units | TRIS | The New York Stock Exchange | ||
Redeemable warrants included as part of the units | TRIS.WS | The New York Stock Exchange |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
TRISTAR ACQUISITION I CORP.
Form 10-Q
Table of Contents
i
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 678,654 | $ | 1,231,992 | ||||
Prepaid expenses | 334,075 | 307,045 | ||||||
Total current assets | 1,012,729 | 1,539,037 | ||||||
Prepaid expenses, net of current portion | 10,176 | 259,888 | ||||||
| Investments held in trust account | 233,830,420 | 232,302,491 | ||||||
TOTAL ASSETS | $ | 234,853,325 | $ | 234,101,416 | ||||
LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 30,777 | $ | 131,541 | ||||
Accrued expenses | 114,516 | 127,875 | ||||||
Total current liabilities | 145,293 | 259,416 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Derivative warrant liabilities | 1,507,600 | 9,684,400 | ||||||
Deferred underwriting fee payable | 10,350,000 | 10,350,000 | ||||||
Total long term liabilities | 11,857,600 | 20,034,400 | ||||||
Total liabilities | 12,002,893 | 20,293,816 | ||||||
| Commitments and contingencies (Note 6) | ||||||||
Class A ordinary shares subject to possible redemption, 23,000,000 at $10.17 and $10.10 redemption value as of September 30, 2022 and December 31, 2021 respectively | 233,827,929 | 232,300,000 | ||||||
Shareholders’ deficit: | ||||||||
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Class A ordinary shares, $0.0001 par value; 90,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Class B ordinary shares, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding | 575 | 575 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (10,978,072 | ) | (18,492,975 | ) | ||||
Total shareholder’s deficit | (10,977,497 | ) | (18,492,400 | ) | ||||
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ DEFICIT | $ | 234,853,325 | $ | 234,101,416 | ||||
Three Months September 30, 2022 | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2022 | For the period from March 5, 2021 (inception) through September 30, 2021 | |||||||||||||
General and administrative expenses | $ | (214,892 | ) | $ | (32,464 | ) | $ | (664,263 | ) | $ | (153,530 | ) | ||||
Loss from operations | (214,892 | ) | (32,464 | ) | (664,263 | ) | $ | (153,530 | ) | |||||||
Other income | ||||||||||||||||
Interest income | 2,002 | — | 2,366 | — | ||||||||||||
| Interest income - investments held in trust | 1,368,643 | — | 1,527,929 | — | ||||||||||||
Change in fair value of warrant liability | 753,800 | — | 8,176,800 | — | ||||||||||||
Total other income | 2,124,445 | — | 9,707,095 | — | ||||||||||||
Net income (loss) | $ | 1,909,553 | $ | (32,464 | ) | $ | 9,042,832 | $ | (153,530 | ) | ||||||
Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to redemption | 23,000,000 | — | 23,000,000 | — | ||||||||||||
Basic and diluted net income (loss) per share, Class A ordinary shares subject to redemption | $ | 0.07 | $ | — | $ | 0.31 | $ | — | ||||||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares (1) | 5,750,000 | 5,000,000 | 5,750,000 | 5,000,000 | ||||||||||||
Basic and diluted net income (loss) per share, Class B ordinary shares | $ | 0.07 | $ | (0.01 | ) | $ | 0.31 | $ | (0.03 | ) | ||||||
| (1) | The 2021 number excludes an aggregate of up to 750,000 Class B ordinary shares subject to forfeiture if the over-allotment was not exercised in full or in part by the underwriters. On November 3, 2021, the underwriters exercised the full over-allotment. |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 | ||||||||||||||||||||||||||||
Ordinary Shares | Additional Paid-in Capital | Total Shareholder’s Deficit | ||||||||||||||||||||||||||
Class A | Class B | Accumulated Deficit | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance - January 1, 2022 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (18,492,975 | ) | $ | (18,492,400 | ) | ||||||||||||||
Net income | — | — | — | — | — | 1,894,517 | 1,894,517 | |||||||||||||||||||||
Balance - March 31, 2022 | — | — | 5,750,000 | 575 | — | (16,598,458 | ) | (16,597,883 | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (159,286 | ) | (159,286 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 5,238,762 | 5,238,762 | |||||||||||||||||||||
Balance - June 30, 2022 | — | — | 5,750,000 | 575 | — | (11,518,982 | ) | (11,518,407 | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (1,368,643 | ) | (1,368,643 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 1,909,553 | 1,909,553 | |||||||||||||||||||||
Balance September 30, 2022 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (10,978,072 | ) | $ | (10,977,497 | ) | ||||||||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND FOR THE PERIOD MARCH 5, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021 | ||||||||||||||||||||||||||||
Ordinary Shares | Additional Paid-in Capital | Total Shareholder’s Deficit | ||||||||||||||||||||||||||
Class A | Class B | Accumulated Deficit | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance -March 5, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B ordinary shares (1) | — | — | 5,750,000 | 575 | 24,425 | — | 25,000 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (11,304 | ) | (11,304 | ) | |||||||||||||||||||
Balance -March 31, 2021 | — | — | 5,750,000 | 575 | 24,425 | (11,304 | ) | 13,696 | ||||||||||||||||||||
Net loss | — | — | — | — | — | (109,762 | ) | (109,762 | ) | |||||||||||||||||||
Balance - June 30, 2021 | — | — | 5,750,000 | 575 | 24,425 | (121,066 | ) | (96,066 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (32,464 | ) | (32,464 | ) | |||||||||||||||||||
Balance - September 30, 2021 | — | $ | — | 5,750,000 | $ | 575 | $ | 24,425 | $ | (153,530 | ) | $ | (128,530 | ) | ||||||||||||||
| (1) | This number includes an aggregate of up to 750,000 Class B ordinary shares subject to forfeiture if the over-allotment was not exercised in full or in part by the underwriters. On November 3, 2021, the underwriters exercised the full over-allotment. |
For the nine months ended September 30, 2022 | For the period from March 5, 2021 (inception) through September 30, 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 9,042,832 | $ | (153,530 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Change in derivative warrant liabilities | (8,176,800 | ) | — | |||||
Interest income earned on investment held in Trust Account | (1,527,929 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 222,682 | (14,950 | ) | |||||
Deferred offering costs | — | — | ||||||
Accounts payable | (100,764 | ) | 6,381 | |||||
Accrued expenses | (13,359 | ) | — | |||||
Net cash used in operating activities | (553,338 | ) | (162,099 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from promissory note - related party | — | 252,717 | ||||||
Proceeds from issuance of Class B ordinary shares to Sponsor | — | 25,000 | ||||||
Payment of offering costs | — | (114,797 | ) | |||||
Net cash provided by financing activities | — | 162,920 | ||||||
NET (DECREASE) INCREASE IN CASH | (553,338 | ) | 821 | |||||
CASH BEGINNING OF PERIOD | 1,231,992 | — | ||||||
CASH END OF PERIOD | $ | 678,654 | $ | 821 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
Deferred offering costs included in accounts payable and accrued expenses | $ | — | $ | 532,592 | ||||
Remeasurement of Class A ordinary shares to redemption amount as of September 30, 2022 | $ | 1,527,929 | $ | — | ||||
Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||
Ordinary shares subject to possible redemption | ||||||||
Numerator: Earnings allocable to Redeemable Class A ordinary shares | ||||||||
Net income allocable to Class A ordinary shares subject to possible redemption | $ | 1,527,642 | $ | — | ||||
Denominator: Redeemable Class A ordinary shares, | ||||||||
Basic and diluted weighted average shares outstanding | 23,000,000 | — | ||||||
Basic and diluted net income per share, Redeemable Class A ordinary share | $ | 0.07 | $ | — | ||||
Non-redeemable ordinary shares | ||||||||
Numerator: Net income allocable to Class B ordinary shares not subject to redemption | ||||||||
Net income (loss) allocable to Class B ordinary shares not subject to redemption | $ | 381,911 | $ | (32,464 | ) | |||
Denominator: Weighted Average non-redeemable Class B ordinary shares | ||||||||
Basic and diluted weighted average shares outstanding | 5,750,000 | 5,000,000 | ||||||
Basic and diluted net income (loss) per share | $ | 0.07 | $ | (0.01 | ) | |||
Nine Months Ended September 30, 2022 | For the period from March 5, 2021 (inception) to September 30, 2021 | |||||||
Ordinary shares subject to possible redemption | ||||||||
Numerator: Earnings allocable to Redeemable Class A ordinary shares | ||||||||
Net income allocable to Class A ordinary shares subject to possible redemption | $ | 7,234,266 | $ | — | ||||
Denominator: Redeemable Class A ordinary shares, | ||||||||
Basic and diluted weighted average shares outstanding | 23,000,000 | — | ||||||
Basic and diluted net income per share, Redeemable Class A ordinary share | $ | 0.31 | $ | — | ||||
Non-redeemable ordinary shares | ||||||||
Numerator: Net income allocable to Class B ordinary shares not subject to redemption | ||||||||
Net income (loss) allocable to Class B ordinary shares not subject to redemption | $ | 1,808,566 | $ | (153,530 | ) | |||
Denominator: Weighted Average non-redeemable Class B ordinary shares | ||||||||
Basic and diluted weighted average shares outstanding | 5,750,000 | 5,000,000 | ||||||
Basic and diluted net income (loss) per share | $ | 0.31 | $ | (0.03 | ) | |||
| • | in whole and not in part; |
| • | at a price of $0.01 per warrant; |
| • | upon a minimum of 30 days’ prior written notice of redemption; and |
| • | if, and only if, the last reported sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for split-up of ordinary shares, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days withinthe 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
As of September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable securities held in Trust Account | $ | 233,830,420 | $ | — | $ | — | $ | 233,830,420 | ||||||||
Total | $ | 233,830,420 | $ | — | $ | — | $ | 233,830,420 | ||||||||
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable securities held in Trust Account | $ | 232,302,491 | $ | — | $ | — | $ | 232,302,491 | ||||||||
Total | $ | 232,302,491 | $ | — | $ | — | $ | 232,302,491 | ||||||||
As of September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Warrant liability – Public Warrants | $ | 920,000 | $ | — | $ | — | $ | 920,000 | ||||||||
Warrant liability - Private Placement Warrants | — | — | 587,600 | 587,600 | ||||||||||||
Total | $ | 920,000 | $ | — | $ | 587,600 | $ | 1,507,600 | ||||||||
As of December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Warrant liability – Public Warrants | $ | 5,865,000 | $ | — | $ | — | $ | 5,865,000 | ||||||||
Warrant liability - Private Placement Warrants | — | — | 3,819,400 | 3,819,400 | ||||||||||||
Total | $ | 5,865,000 | $ | — | $ | 3,819,400 | $ | 9,684,400 | ||||||||
September 30, 2022 | December 31, 2021 | |||||||
Stock price | $ | 9.91 | $ | 9.76 | ||||
Exercise price | $ | 11.50 | $ | 11.50 | ||||
Dividend yield | — | % | — | % | ||||
Expected term (in years) | 5 | 5 | ||||||
Volatility | 2.3 | % | 12 | % | ||||
Risk-free rate | 4.06 | % | 1.26 | % | ||||
Fair value | $ | 0.08 | $ | 0.52 | ||||
Private Placement | Public | Warrant Liabilities | ||||||||||
Fair value at December 31, 2021 | $ | 3,819,400 | $ | — | $ | 3,819,400 | ||||||
Change in fair value of Private Warrants | (3,231,800 | ) | (3,231,800 | ) | ||||||||
Fair value at September 30, 2022 | $ | 587,600 | $ | — | $ | 587,600 | ||||||
Allocated Fair Value of Proceeds | $ | 219,305,000 | ||
Less: | ||||
Issuance costs allocated to Class A ordinary shares | (24,414,399 | ) | ||
Plus: | ||||
Initial remeasurement of carrying value to redemption value | 37,409,399 | |||
Class A ordinary shares subject to possible redemption as of December 31, 2021 | $ | 232,300,000 | ||
Plus: | ||||
Remeasurement of carrying value to redemption value as of June 30, 2022 | 159,286 | |||
Remeasurement of carrying value to redemption value as of September 30, 2022 | 1,368,643 | |||
Class A ordinary shares subject to possible redemption as of September 30, 2022 | $ | 233,827,929 | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Tristar” “our,” “us” or “we” refer to Tristar Acquisition I Corp. 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 report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated on March 5, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase or similar business combination with one or more businesses or entities. We have not yet selected any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of the initial public offering (as defined below) and the private placement of the Private Placement Warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing or other sources.
The issuance of additional shares in a business combination:
• may significantly dilute the equity interest of investors; |
• may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
• could cause a change in control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
• may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; |
• may adversely affect prevailing market prices for our Units, Class A ordinary shares and/or warrants; and |
• may not result in adjustment to the exercise price of our warrants. |
Similarly, if we issue debt or otherwise incur significant debt, it could result in:
• default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
• acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
• our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
• our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
• our inability to pay dividends on our Class A ordinary shares; |
• using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
• limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
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| • | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying condensed financial statements, as of September 30, 2022, we had $678,654 of cash, and no deferred offering costs. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations and Known Trends or Future Events
Our only activities since inception have been organizational activities, those necessary to prepare for our Initial Public Offering, which was consummated on October 18, 2021 (the “Initial Public Offering”), and since the Initial Public Offering, searching for a prospective initial business combination. We will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents and investments held in trust account. Other income also consists of changes in the fair value of our warrant liability. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements.
Liquidity, Capital Resources and Going Concern
Our liquidity needs have been satisfied through (i) $25,000 paid by our Sponsor to cover certain of our offering costs in exchange for the issuance of the Founder Shares to our Sponsor, (ii) the receipt of loans to us of $300,000 by our Sponsor under an unsecured promissory note, (iii) the net proceeds from the consummation of our Initial Public Offering and the sale of the Private Placement Warrants, and (iv) $1,015,850 paid by certain anchor investors in exchange for Founder Shares. The net proceeds from (i) the sale of the Units in the Initial Public Offering, after deducting estimated non-reimbursed offering expenses of $1,003,989, underwriting commissions of $4,600,000 (excluding deferred underwriting commissions of $10,350,000), and (ii) the sale of the Private Placement Warrants for a purchase price of $7,345,000 was $234,126,011. Of this amount, $232,300,000, plus interest earned on the trust account of $159,286 was placed in the trust account, which includes the deferred underwriting commissions described above. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The remaining $1,741,011 was not held in the trust account.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less taxes payable and deferred underwriting commissions), to complete our initial business combination. We may withdraw interest income (if any) to pay income taxes, if any. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest income earned on the amount in the trust account (if any) will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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.
Prior to the completion of our initial business combination, we have available to us the $678,654 of proceeds held outside the trust account, as well as potential funds from loans from our Sponsor, its affiliates or members of our management team. We will use these funds to primarily identify and evaluate target businesses, 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.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination, other than funds available from loans from our Sponsor, its affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial 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 our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that our initial 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 warrants of the post-business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our Sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
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We expect our primary liquidity requirements during that period to include approximately $582,400 for directors and officers insurance premiums, $700,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $200,000 for legal and accounting fees related to regulatory reporting obligations; $10,000 per month (or up to $180,000 in total) for office space and administrative and support services; $85,000 for the NYSE continued listing fees; and $425,000 for general working capital that will be used for miscellaneous expenses and reserves.
These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until April 13, 2023 to consummate a Business Combination, or July 13, 2023 if the Company has executed a letter of intent, agreement in principle or definitive agreement for an initial Business Combination by April 13, 2023. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 13, 2023.
Moreover, we may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we have not consummated our initial business combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of the Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to consummation of a Business Combination. The Company bears the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company paid an underwriting discount of $0.20 per Public Unit Offering price to the underwriters at the closing of the Initial Public Offering and over-allotment option. The underwriting discount was paid in cash. In addition, the Company has agreed to pay deferred underwriting commissions of $0.45 per Public Unit, or $10,350,000 in the aggregate. The deferred underwriting commission will become payable to the underwriters from the amount held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement, including the performance of services specified therein.
Forward Purchase Agreement
On June 21, 2021 and July 26, 2021, respectively, the Company entered into forward purchase agreements pursuant to which one anchor investor and one institutional accredited investor that are not affiliated with the Sponsor or any member of the Company’s management, have subscribed to purchase from the Company an aggregate of 4,500,000 Class A ordinary shares at a price of $10.00
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per share as described in the forward purchase agreements, each in a private placement that will close immediately prior to the closing of our initial Business Combination. The terms of the forward purchase shares will generally be identical to the Class A ordinary shares included in the Units sold in the Initial Public Offering, except that they will have registration rights and rights of first refusal with respect to any business combination financing, as described in the forward purchase agreements. One of the forward purchase investors may elect, in its sole discretion, to purchase convertible debt securities or non-convertible debt instruments in lieu of the forward purchase shares, or a combination thereof, for an aggregate purchase price of up to $25,000,000.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Derivative instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date 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.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”), in accordance with ASC 815-40, “Derivatives and Hedging-Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A-Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $25,910,754, consisting of $4,600,000 of underwriting fees, $10,350,000 of deferred underwriting fees, $12,546,764 for the fair value of the Founder Shares attributable to the anchor investors (see Note 5), and $1,003,989 of offering costs, partially offset by the reimbursement of $2,505,000 of offering expenses by the underwriters. Of the $25,910,754 in offering costs, $24,329,399 were charged to shareholders’ deficit, and $1,581,355 were expensed immediately.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Ordinary Shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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 the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Class A ordinary shares are affected by charges against additional paid-in capital and accumulated deficit.
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Net Income (loss) per Ordinary Shares
The Company applies the two-class method in calculating net loss per ordinary share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of ordinary share. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net loss per ordinary share is computed by dividing the pro rata net loss between the Class A ordinary share and the Class B ordinary share by the weighted average number of ordinary shares outstanding. The calculation of diluted loss per ordinary share does not consider the effect of the warrants and rights issued in connection with the Public Offering since the exercise of the warrants and rights are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants and rights are exercisable for 18,845,000 Class A ordinary shares in the aggregate.
Recent Issued Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Our management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this Annual Report as we have not conducted any operations to date.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the principal executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As of September 30, 2022, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
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We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2022, due solely to the material weaknesses in our internal control over financial reporting related the unrecorded liability totaling $103,359 from the New York Stock Exchange for the annual listing fee. As a result, we performed additional analyses as deemed necessary to ensure that our financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control over Financial Reporting
Except as set forth below, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter of 2022 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
While we have processes to identify and appropriately apply applicable accounting requirements, in light of the material weakness identified and the resulting restatements, our principal executive officer and principal financial and accounting officer performed additional accounting and financial analyses to ensure all accruals have been captured in the financial statements. Management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. We have enhanced and plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult. As we continue to evaluate and improve our financial reporting process, we may take additional actions to modify certain of these remediation measures. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.
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PART II.—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Form 10-K/A filed with the SEC on August 19, 2022, except for the below risk factors. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.10 per share.
The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public shareholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.10 per share.
There is substantial doubt about our ability to continue as a “going concern.”
As of September 30, 2022 and December 31, 2021, we had cash outside the Trust Account of $678,654 and $1,231,992 available for working capital needs, respectively. We have incurred, and expect to continue to incur, significant costs in pursuit of an initial Business Combination. Our plans to raise capital and to consummate our initial Business Combination may not be successful. The initial deadline for us to complete our initial business combination is April 13, 2023, or July 13, 2023 if we have executed a letter of intent, agreement in principle or definitive agreement for an initial Business Combination by April 13, 2023. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension is not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern through April 13, 2023, the scheduled liquidation date of the Company if it does not complete a Business Combination prior to such date, or July 13, 2023, the scheduled liquidation date of the Company if it has executed a letter of intent, agreement in principle or definitive agreement for an Initial Business Combination by April 13, 2023, but has not completed a Business Combination.
Certain of our warrants are accounted for as a warrant liability and will be recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our ordinary shares or may make it more difficult for us to consummate an initial business combination.
Our Sponsor holds 7,345,000 Private Placement Warrants. We expect to account for these as a warrant liability and will record at fair value upon issuance any changes in fair value each period reported in earnings as determined by the company based upon a valuation report obtained from its independent third party valuation firm. The impact of changes in fair value on earnings may have an adverse effect on the market price of our ordinary shares. In addition, potential targets may seek a SPAC that does not have warrants that are accounted for as a warrant liability, which may make it more difficult for us to consummate an initial business combination with a target business.
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Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination, and results of operations.
On March 30, 2022, the U.S. Securities and Exchange Commission (the “SEC”) issued proposed rules relating to, among other items, increasing disclosures in business combination transactions involving special purpose acquisition companies (SPACs) and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; changing the treatment of financial projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and a proposed safe harbor for SPACs under the Investment Company Act (including certain time limits to announce and consummate a business combination). These proposed rules, if adopted, whether in the form proposed or in revised form, may materially impact our ability to negotiate and complete our initial business combination and may increase the costs and time related thereto.
A new 1% U.S. federal excise tax could be imposed on us in the event of a liquidation or in connection with redemptions of our common stock after December 31, 2022.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”), which, among other things, imposes a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations that occur after December 31, 2022 (the “Excise Tax”). The Excise Tax is imposed on the repurchasing corporation itself, not the shareholders from which shares are repurchased. The amount of the Excise Tax is generally 1% of the fair market value of the repurchased stock at the time of the repurchase. For purposes of calculating the Excise Tax, however, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. Further, the application of the Excise Tax in the event of a liquidation is uncertain. In addition, certain exceptions apply to the Excise Tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the Excise Tax. Although we are not a U.S. corporation, we may enter into a business combination with a domestic corporation or become a U.S. corporation in the future. Because the interpretation and application of the Excise Tax is still uncertain and subject to change, it is possible that the Excise Tax may apply to future redemptions of our stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In March 2021, our Sponsor paid $25,000, or approximately $0.0035 per share, to cover certain offering costs on our behalf in consideration of 7,187,500 Class B ordinary shares, par value $0.0001. Also in March 2021, our Sponsor transferred 50,000 of such shares (25,000 shares each) to Timothy Dawson, our Chief Financial Officer, and Cathy-Ann Martine-Dolecki, our Chief Operating Officer, in each case, at their original purchase price. In August 2021, the initial shareholders forfeited 1,437,500 of such Class B ordinary shares in the aggregate for no consideration. In November 2021, our Sponsor transferred 150,000 of such Founder Shares (25,000 shares each) to David Barksdale, Greg Boyd, David Jones, Alex Parker, Steven Rogers, and Robert Willis, each a director of the Company, in each case for their par value.
Such securities were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The total number of Class B ordinary shares outstanding equal 20.0% of the total number of Class A ordinary shares and Class B ordinary shares outstanding. The Class B ordinary shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of our initial business combination, or earlier at the option of the holder thereof as described in the prospectus.
Our Sponsor has purchased an aggregate of 7,345,000 Private Placement Warrants, each exercisable to purchase one ordinary share at $11.50 per share, subject to adjustment, at a price of $1.00 per warrant $7,345,000 in the aggregate), in a private placement that closed simultaneously with the closing of the Initial Public Offering. This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
No underwriting discounts or commissions were paid with respect to such sales.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
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| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL. | |
* These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 14, 2022 | TRISTAR ACQUISITION I CORP.
By: /s/ William M. Mounger II Name: William M. Mounger II Title: Chief Executive Officer and Chairman of the Board |
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