Tristar Acquisition I Corp. - Quarter Report: 2022 March (Form 10-Q)

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Item 1.

Condensed Financial Statements (Unaudited)

		March 31,				December 31,
		2022				2021
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	897,239			$	1,231,992
Prepaid expenses			317,957				307,045
Total current assets			1,215,196				1,539,037
Prepaid expenses, net of current portion			155,776				259,888
Cash held in trust account			232,308,346				232,302,491
TOTAL ASSETS		$	233,679,318			$	234,101,416
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	152,951			$	156,057
Total current liabilities			152,951				156,057
LONGTERM LIABILITIES:
Derivative warrant liabilities			7,538,000				9,684,400
Deferred underwriting fee payable			10,350,000				10,350,000
Total long term liabilities			17,888,000				20,034,400
Total liabilities			18,040,951				20,190,457
Commitments and contingencies
Class A ordinary shares subject to possible redemption, 23,000,000 at $10.10 redemption value			232,300,000				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			(16,662,208	)			(18,389,616	)
Total shareholder’s deficit			(16,661,633	)			(18,389,041	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$	233,679,318			$	234,101,416

		THREE MONTHS ENDED MARCH 31, 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			$	—			$	(18,389,616	)		$	(18,389,041	)
Net income			—				—				—				—				—				1,727,408				1,727,408
Balance—March 31, 2022			—			$	—				5,750,000			$	575			$	—			$	(16,662,208	)		$	(16,661,633	)
		FOR THE PERIOD MARCH 5, 2021 (INCEPTION) THROUGH MARCH 31, 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			—				—				5,750,000				575				24,425				—				25,000
Net income			—				—				—				—				—				(11,304	)			(11,304	)
Balance—March 31, 2021			—			$	—				5,750,000			$	575			$	24,425			$	(11,304	)		$	13,696

		March 31, 2022				For the period from March 5, 2021 (inception) through March 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	1,727,408			$	(11,304)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in derivative warrant liabilities			(2,146,400	)			—
Interest income earned on investment held in Trust Account			(5,855	)			—
Changes in operating assets and liabilities:
Prepaid expenses			93,200				—
Accounts payable and accrued expenses			(3,106	)			500
Net cash used in operating activities			(334,753	)			(10,804	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from promissory note—related party			—				20,804
Proceeds from issuance of Class B ordinary shares to Sponsor			—				25,000
Net cash provided by financing activities			—				45,804
NET (DECREASE) INCREASE IN CASH			(334,753	)			35,000
CASH BEGINNING OF PERIOD			1,231,992				—
CASH END OF PERIOD		$	897,239			$	35,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Deferred offering costs included in accounts payable and accrued expenses		$	—			$	210,000

		For the three months ended March 31, 2022				For the period from March 5, 2021 (inception) to March 31, 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		$	1,381,926			$	—
Denominator: Redeemable Class A ordinary shares,
Basic and diluted weighted average shares outstanding			23,000,00				—
Basic and diluted net income per share, Redeemable Class A ordinary share		$	0.06			$	—
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		$	345,482			$	(11,304	)
Denominator: Weighted Average non-redeemable Class B ordinary shares
Basic and diluted weighted average shares outstanding			5,750,000				5,750,000
Basic and diluted net income (loss) per share		$	0.06			$	—

•

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 within the 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 March 31, 2022
		Level 1				Level 2				Level 3				Total
Assets:
Marketable securities held in Trust Account		$	232,308,346			$	—			$	—			$	232,308,346
Total		$	232,308,346			$	—			$	—			$	232,308,346
		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 March 31, 2022
		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant liability—Public Warrants		$	4,600,000			$	—			$	—			$	4,600,000
Warrant liability—Private Placement Warrants			—				—				2,938,000				2,938,000
Total		$	4,600,000			$	—			$	2,938,000			$	7,538,000
		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

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, 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 income in the form of interest income on cash and cash equivalents. 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.

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) and the net proceeds from the consummation of our initial public offering and the sale of the private placement warrants. The net proceeds from (i) the sale of the units in the initial public offering, after deducting offering expenses of $918,989, 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 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 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The remaining $1,826,011 is not held in the trust account.

Prior to the completion of our initial business combination, we have available to us the $897,239 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 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.

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 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 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.

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 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 debt instruments in lieu of the forward purchase shares, or a combination thereof, for an aggregate purchase price of up to $25,000,000.

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 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 based on whether or not settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

The Company complies with the requirements of ASC and SEC Staff Accounting Bulletin Topic 5A-. 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 $918,989 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.

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 capital and accumulated deficit.

The Company applies the 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 shares of Class A ordinary share in the aggregate.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) Subtopic Subtopic (“ASU 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 is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

As of March 31, 2022, we did not have any sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation 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.

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 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.

We are a smaller reporting company as defined by Rule of the Exchange Act and are not required to provide the information otherwise required under this item. As of March 31, 2022, 2021, 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 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.

There were no changes in our internal control over financial reporting (as such term is defined in Rules and under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.—OTHER INFORMATION

 

None.

 

As of the date of this Quarterly Report on Form there have been no material changes to the risk factors disclosed in our Form filed with the SEC on March 31, 2021, 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 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 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 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 redemption amount received by public shareholders may be less than $10.10 per share.

As of March 31, 2022, we had cash outside the Trust Account of $897,239 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. 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.

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.

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.

 

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 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.

 

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By:		/s/ William M. Mounger II
Name:		William M. Mounger II
Title:		Chief Executive Officer and Chairman of the Board