MASON INDUSTRIAL TECHNOLOGY, INC. References to "we," "us," "company" or "our company" are toMason Industrial Technology, Inc. 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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (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 otherU.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as aDelaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Annual Report as our initial business combination. We consummated our initial public offering onFebruary 2, 2021 . We currently intend to concentrate our efforts in identifying businesses in the industrial technology, advanced materials or specialty chemicals industries (collectively, "Advanced Industrials"). A common theme across these sectors is the application of technology to make industrial processes more profitable, faster, more sustainable, less capital-intensive and less complex. Specifically, we intend to identify businesses that apply innovative technology to engineering, production, assembly and manufacturing. These innovations include a wide range of automation, analytics and productivity tools, as well as control systems, high precision technologies, sustainability technologies, high performance computing and robotics. These technologies enable companies to confront numerous challenges inherent in their daily operations, such as rising wage rates, globalization, increased regulation, higher quality standards, heightened focus on sustainability and tighter timelines. We are also interested in companies that participate in market segments that are adjacent to Advanced Industrials. We believe that there are many potential targets within Advanced Industrials that could become attractive public companies. These potential targets exhibit a broad range of business models and financial characteristics, with enterprise values ranging between$1 billion and$3 billion . They span a wide continuum that includes both high growth emerging companies and mature businesses with established growth profiles, recurring revenues and strong cash flows. They are generally characterized by strong intellectual property, differentiated product offerings, compelling customer value propositions and corporate cultures that are data-driven and innovative. We are not, however, required to complete our initial business combination with an Advanced Industrials business and, as a result, we may pursue a business combination outside of this industry. We are seeking to acquire a mature businesses that we believe are fundamentally sound, yet which could benefit from additional financial, operational, strategic or managerial resources to achieve maximum value potential. We are also targeting earlier stage, yet established, companies that exhibit the potential to disrupt the market segments in which they participate through innovation and which offer the potential of sustained high levels of revenue growth. Our sponsor is affiliated with and controlled by Mason Capital, a registered investment adviser under the Investment Advisers Act of 1940, as amended, which was established in 2000 and had over$1.4 billion of assets under management as ofSeptember 30, 2022 . Results of Operations We have neither engaged in any operations nor generated any revenues to date. All activity from our inception through the date of our IPO,February 2, 2021 , was in preparation for our IPO. Since our IPO, our activity has been limited to the evaluation of Business Combination candidates. We do not expect to generate any operating revenues until the closing and completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO. We incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
Comparison of the three months ended
For the three months endedSeptember 30, 2022 , we had a net income of$4,194,536 which was primarily driven by a$2,548,000 gain from changes in fair value of derivative liabilities,$2,260,666 of interest income on marketable securities held in the Trust Account, and a$151,906 gain from change in fair value of the derivativeFPA . This was offset by general and administrative expenses of$251,802 ,$464,234 of income tax expense, and$50,000 of franchise tax expense. 18
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For the three months ended
Comparison of the nine months ended
For the nine months endedSeptember 30, 2022 , we had a net income of$16,902,177 which was primarily driven by a$15,797,600 gain from changes in fair value of derivative liabilities, and$3,011,653 of interest income on marketable securities held in the Trust Account. This was offset by general and administrative expenses of$1,056,207 ,$568,045 of income tax expense,$150,136 of franchise tax expense, and$132,688 loss from changes in fair value of the derivativeFPA . For the nine months endedSeptember 30, 2021 , we had net income of$16,649,091 , which was primarily driven by a$18,374,401 gain from changes in fair value of derivative warrant liabilities, a$462,191 gain from changes in fair value of the derivativeFPA , and$20,040 of interest income on marketable securities held in the Trust Account. This was partially offset by$667,878 in general and administrative expense,$218,310 of franchise tax expense, and$1,321,353 of issuance costs attributed to the Warrants. As described in Note 2, Summary of Significant Accounting Policies, in "Part 1. Financial Information - Item 1. Financial Statements," we account for (i) the Warrants issued in connection with our IPO and Private Placement and (ii) the forward purchase agreement as derivative instruments which were initially recorded at their fair value. These derivative instruments are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations.
Liquidity and Capital Resources
As ofSeptember 30, 2022 , we had cash of$352,615 held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to 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. As ofSeptember 30, 2022 , we had cash and marketable securities in the Trust Account of$502,593,553 . 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 deferred underwriting commissions) to complete our initial Business Combination. To the extent that our capital stock 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.
Material cash requirements
As of
The underwriters are entitled to deferred fee of 3.5% of the gross proceeds of the Public Offering, or$17,500,000 . The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete our initial business combination.
Sources of cash
Prior to the completion of the IPO, our liquidity needs were satisfied through receipt of$25,000 from the sale of Founder Shares toMason Industrial Sponsor LLC , or the "Sponsor". OnFebruary 2, 2021 , we consummated the IPO of 50,000,000 Units at a price of$10.00 per Unit generating net proceeds of$472,096,741 . Transaction costs were$27,903,259 , including$10,000,000 of underwriting fees,$17,500,000 of deferred underwriting fees and$403,259 of other offering costs in connection with the IPO. Simultaneously with the closing of the IPO, we consummated the sale of 8,813,334 Private Placement Warrants to our Sponsor at a price of$1.50 per warrant, generating gross proceeds of$13,220,000 . Following the IPO and the sale of the Private Placement Warrants, a total of$500,000,000 was placed in a Trust Account and following the payment of certain transaction expenses. OnMay 27, 2022 , we borrowed$300,000 under the Working Capital Loans. If we complete an initial Business Combination, we would repay the Working Capital Loans. In the event that the initial Business Combination does not close, we may use a portion of the proceeds held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to$1.5 million of the Working Capital Loans may be convertible into warrants, at a price of$1.50 per warrant at the option of the lender. 19
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In the three months ended
Uses of cash
Nine Months Ended September 30,
2022 2021 Change
Net cash used in operating activities $ (1,370,399 ) $ (1,156,581 ) $ (213,818 )
Net cash provided by (used in) investing
activities $ 447,621 $ (500,000,000 ) $ 500,447,621
Net cash provided by financing
activities $ 300,000 $
502,391,740
For the nine months endedSeptember 30, 2022 , cash used in operating activities was$1,370,399 . Net income of$16,902,177 was impacted by the non-cash changes in fair value of the derivative liabilities of$15,797,600 and forward purchase agreement of ($132,688 ), as well as the interest earned on cash held in trust account of$3,011,653 . Additionally, changes in operating assets and liabilities provided$403,989 of cash used in operating activities. For the nine months endedSeptember 30, 2021 , cash used in operating activities was$1,156,581 . Net income of$16,649,091 was impacted by the non-cash changes in fair value of the derivative warrant liability and forward purchase agreement of$18,374,401 and$462,191 , respectively, the issuance costs attributed to the warrant liabilities of$1,321,353 , and$20,040 of interest income. Additionally, changes in operating assets and liabilities provided$270,393 of cash used in operating activities. In order to fund working capital deficiencies and/or finance transaction costs in connection with an 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 would repay such loaned amounts. 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, at a price of$1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. As ofSeptember 30, 2022 , we had$300,000 of such loans outstanding. As ofSeptember 30, 2022 andDecember 31, 2021 , the Company had$352,615 and$975,393 in cash not held in the Trust Account and available for working capital purposes, respectively. The Company believes it will need to raise additional funds in order to meet the expenditures required for operating the business. If the Company's estimate 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, the Company may have insufficient funds available to operate the business prior to the Initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete the Initial Business Combination or to redeem a significant number of our public shares upon completion of the Initial Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Initial Business Combination. If the Company is unable to complete the Business Combination because it does not have sufficient funds available, the Company will be forced to cease operations and liquidate the Trust Account. In connection with the Company's assessment of going concern considerations in accordance withFinancial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements-Going Concern, the Company has untilFebruary 23, 2023 , to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial statements. Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, 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 afterFebruary 2, 2023 . The Company's sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company's working capital needs.
Related Party Transactions
Please refer to Note 6, Related Party Transactions, in "Part 1. Financial Information - Item 1. Financial Statements" for a discussion of our related party transactions.
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Critical Accounting Policies and Estimates
Our management makes a number of significant estimates, assumptions and judgments in the preparation of our financial statements. See "Note 2-Summary of Significant Account Policies" in our 2021 Form 10-K, for a discussion of the estimates and judgments necessary in our accounting for common stock subject to possible redemption, and net income per common share. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to our condensed financial statements contained in this Quarterly Report on Form 10-Q. The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies, in "Part 1. Financial Information - Item 1. Financial Statements" for a discussion of recent accounting pronouncements and their anticipated effect on our business.
Effects of COVID-19 on Our Business
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company's financial position, results of its operations and search for a target company, the specific impacts are not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. JOBS Act OnApril 5, 2012 , the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. As an "emerging growth company", we are not 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, (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 CEO'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.
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