Mason Industrial Technology, Inc. - Quarter Report: 2021 June (Form 10-Q)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).     Yes  ☒     No  ☐

As of June 30, 2021, the Company had not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation, its Initial Public Offering (the “IPO”) and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company will generate income in the form of interest income on cash from the proceeds derived from the IPO (see below for more information on the IPO), and recognizes changes in the fair value of warrant liabilitiesas other income (expense).

On February 2, 2021, the Company consummated its IPO of 50,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, raising $500.0 million of gross proceeds. Of the 50,000,000 units issued, 45,000,000 Units were included in the Company’s initial offering, and 5,000,000 Units resulted from the underwriter partially exercising its over- allotment option. The net proceeds of the IPO were $472.1 million, after deducting expenses and underwriting discounts and commissions of approximately $27.9 million, which includes $17.5 million in deferred underwriting commissions (see Note , , for more information).

Each Unit consists of one share of Class A common stock and of one redeemable warrant (each, a “Public Warrant” and, collectively, the “Public Warrants”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. In addition, if (x) the Company issues additional shares of Class A common stock for capital raising purposes in connection with the closing of the Company’s Initial Business Combination at an issue or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or their affiliates, without taking into account any shares of Class B common stock held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the amount that is the total equity proceeds (and interest thereon) , available for the funding of the Initial Business Combination on the date of the consummation (net of redemptions) and (z) the volume- weighted average trading price of the Company’s Class A common stock during the period starting on the trading day prior to the date on which the Company consummates its Initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public Warrants will be adjusted, to the nearest cent, to 115% of the higher of the Newly Issued Price and the Market Value, and the $18.00 per share redemption trigger price described below will be adjusted, to the nearest cent, to be equal to 180% of the higher of the Newly Issued Price and the Market Value.

per Private Placement Warrant, generating gross proceeds of approximately $13.2 million (see Note , , for more information). The Private Placement Warrants are identical to the Warrants included in the Units sold in the IPO, except as otherwise disclosed in the Registration Statement. No underwriting discounts or commissions were paid with respect to such sale.

Simultaneously with the closing of the IPO, the Company entered into a Forward Purchase Agreement (the “FPA”) with the Sponsor, pursuant to which the Sponsor committed that it will purchase up to 8,000,000 forward purchase units (the “FPA Units”), consisting of one share of Class A common stock (the “FPA Share”) and of one warrant to purchase one share of Class A common stock (the “FPA Warrant”) for $10.00 per unit, or an aggregate amount of up to $80,000,000, in a private placement that will close concurrently with the closing of the initial Business Combination (see Note 6, , for more information). In addition, the Sponsor’s commitment under the FPA will be subject to approval, prior to entering into a definitive agreement for the initial Business Combination, of Mason Capital Management LLC, an affiliate of the managing member of the Sponsor. The FPA Shares will be identical to the shares of Class A common stock included in the units being sold in this offering, except that they will be subject to transfer restrictions and registration rights. The FPA Warrants will have the same terms as the Private Placement Warrants so long as they are held by the Sponsor or its permitted assignees and transferees.

Following the closing of the IPO, $500.0 million of the net proceeds of the sale of the Units and the Private Placement Warrants were placed in a trust account (the “Trust Account”). The funds in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred eighty (180) days or less or in money market funds that meet certain conditions under Rule under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.

Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the proceeds from the IPO and the Private Placement will not be released from the Trust Account until the earlier of: (i) the completion of the Company’s Initial Business Combination; (ii) the redemption of any shares of the Public Shares that have been properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of Public Shares if the Company does not complete its Initial Business Combination within 24 months from the closing of the IPO (or 30 months from the closing of the IPO if the Company has executed a letter of intent, agreement in principle or definitive agreement for the initial Business Combination within 24 months from the closing of the IPO but has not completed the initial Business Combination within such 24 month period) (the “Combination Periodor (B) with respect to any other provision relating to stockholders’ right for Business Combination activity; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an initial Business Combination within the Combination Period, subject to the requirements of law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.

The Sponsor and the Company’s directors, director nominees and officers have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below in Note , ) held by them if the Company fails to complete an initial Business Combination within the Combination Period. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the initial Business Combination within the Combination Period.

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and should be read in conjunction with the Company’s financial statements, summary of significant accounting policies and footnotes included in the Company’s Annual Report on Form for the year ended December 31, 2020 (the “2020 Form Accordingly, certain disclosures required by GAAP and normally included in Annual Reports on Form have been condensed or omitted from this report; however, except as disclosed herein, there has been no material change in the information disclosed in the notes to condensed financial statements included in the Company’s 2020 Form

Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g., the model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies. Examples of Level 2 inputs include nonexchange-traded derivatives such as forwards, swaps, and options.

The Company evaluated the Public Warrants, the Private Placement Warrants, and the FPA (which are discussed in Note , Note and Note ) in accordance with ASC and concluded that each contained provisions related to certain tender or exchange offers which precludes them

from being accounted for as a component of equity. As the Warrants and FPA meet the definition of a derivative as contemplated in ASC 815, the Warrants and FPA were measured at fair value at inception (on the date of the IPO) and recorded as assets or liabilities on the condensed balance sheets. The Warrants and FPA are subject to remeasurement at each reporting date until exercised in accordance with ASC 820, , with changes in fair value recognized on the statement of operation in the period of change. See Note , for more information regarding the methods used to fair value the Warrants and the FPA.

The Company accounts for the allocation of its issuance costs to its Warrants using the guidance in ASC applied by analogy. Under this guidance, if debt or stock is issued with detachable warrants, the proceeds need to be allocated to the two instruments using either the fair value method, the relative fair value method, or the residual value method. The guidance also requires companies to use a consistent approach in allocating issuance costs between the instruments. Accordingly, the Company allocated its issuance costs of $27,903,259—consisting of $10,000,000 of underwriting fees, $17,500,000 of deferred underwriting commissions, and $403,259 of other offering costs—to the issuance of its Class A shares and Warrants in the amount of $26,581,907 and $1,321,352, respectively. Issuance costs attributed to the Warrants were expensed to the condensed statement of operations.

At June 30, 2021, the investments held in Trust Account were entirely comprised of U.S. Treasury Bills. During the three and six months ended June 30, 2021, the Company did not withdraw any interest income from the Trust Account.

The Warrants are accounted for as liabilities in accordance with ASC and are presented within derivative warrant liabilities on the condensed balance sheets. The derivative warrant liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statement of operations.

The estimated fair value of the Public Warrants and the Private Warrants on February 2, 2021 was estimated using a Binomial Lattice and modified valuation model, respectively. At their initial measurement, the Warrants were classified as Level 3 inputs due to the use of unobservable inputs.

The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of June 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker MIT.W. The fair value of the Private Warrants continues to be estimated using a modified valuation model and is classified as Level 3 due to the use of unobservable inputs.

The FPA is accounted for as a derivative instrument in accordance with ASC and is presented as a derivative forward purchase agreement asset or liability on the condensed balance sheets. The FPA was measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of forward purchase agreement in the condensed statement of operations.

— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.

— The Company is authorized to issue 400,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of June 30, 2021, there were 4,303,749 shares of Class A common stock issued and outstanding (excluding 45,696,251 shares of Class A common stock subject to possible redemption).

In addition, 45,696,251 shares of Class A common stock are redeemable upon the consummation of the Company’s initial Business Combination, subject to limitation described in Note 1 In addition, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will cease all operations except for the purpose of winding up and redeem the shares of Class A common stock at a price equal to the aggregate amount then on deposit in the Trust Account, divided by the number of then outstanding Public Shares (see Note 1, , for more information). The Company classified the shares of Class A common stock subject to redemption rights as temporary equity in the event of the consummation of the Company’s initial Business Combination is not solely within the control of the Company.

— The Company is authorized to issue 50,000,000 shares of Class B common stock with a par value of $0.0001 per share. At December 31, 2020, 12,937,500 shares of Class B common stock were issued and outstanding, of which 1,687,500 shares were subject to forfeiture to the extent that the underwriters’ option was not exercised. These amounts have been retroactively adjusted to reflect the January 28, 2021 stock dividend of 0.125 shares, described in Note , .

— Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the U.S Securities and Exchange Commission a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Founder Shares are identical to the Class A common stock included in the Units being sold in the IPO except that the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s initial Business Combination, on a basis, subject to adjustments pursuant to certain anti-dilution rights, and the Founder Shares are subject to certain transfer restrictions.

The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any day period commencing at least 180 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

As described in Note 1, , the Company sold Private Placement Warrants simultaneously with the closing of the IPO. Each whole Private Placement Warrant is exercisable for one whole share of the Company’s Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants were added to the proceeds from the IPO to be held in the Trust Account. If the initial Business Combination is not completed within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

The Private Placement Warrants are and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. The Private Placement Warrants are not transferrable, assignable or salable until 30 days after the completion of the initial Business Combination.

As described in Note 1, , the Company entered into an FPA with the Sponsor simultaneously with the closing of the IPO, pursuant to which the Sponsor committed that it will purchase up to 8,000,000 FPA Units, consisting of one share of Class A common stock and of one warrant to purchase one share of Class A common stock for $10.00 per unit, or an aggregate amount of up to $80,000,000, in a private placement that will close concurrently with the closing of the initial Business Combination. In addition, the Sponsor’s commitment under the FPA will be subject to approval, prior to entering into a definitive agreement for the initial Business Combination, of Mason Capital Management LLC, an affiliate of the managing member of the Sponsor. The proceeds from the sale of the FPA Units, together with the amounts available to the Company from the Trust Account (after giving effect to any redemptions of Public Shares) and any other equity or debt financing obtained by the Company in connection with the initial Business Combination, will be used to satisfy the cash requirements of the initial Business Combination, including funding the purchase price and paying expenses and retaining specified amounts to be used by the post-business combination company for working capital or other purposes. To the extent that the amounts available from the Trust Account and other financing are sufficient for such cash requirements, the Sponsor may purchase less than 8,000,000 FPA Units. In addition, the Sponsor’s commitment under the FPA will be subject to approval, prior to entering into a definitive agreement for the initial Business Combination, of Mason Capital Management LLC, an affiliate of the managing member of the Sponsor. The FPA Shares will be identical to the shares of Class A common stock included in the units being sold in this offering, except that they will be subject to transfer restrictions and registration rights. The FPA Warrants will have the same terms as the Private Placement Warrants so long as they are held by the Sponsor or its permitted assignees and transferees.

The Company applies the method in calculating earnings per share. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The calculation of diluted income (loss) per share does not consider the effect of warrants sold in the IPO and Private Placement since their inclusion would be anti-dilutive under the method. As a result, diluted earnings per share is the same as basic earnings per share for the period presented. The Warrants are exercisable to purchase 25,480,001 shares of Class A common stock.

The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to redemption in a manner similar to the method of income (loss) per share. Net income (loss) per common share, basic and diluted, for redeemable Class A common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of redeemable Class A common stock outstanding since original issuance.

Net income (loss) per common share, basic and diluted, for Class A and Class B common stock is calculated by dividing the net income (loss), adjusted for income or loss attributable to redeemable Class A common stock, by the weighted average number of Class A and Class B common stock outstanding for the period. Class B common stock includes the Founder Shares, defined below, as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

As described in Note 2, , 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.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. 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 Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Please refer to Note 5, , in “Part 1. Financial Information – Item 1. Financial Statements” for a discussion of our related party transactions.

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 2020 Form for a discussion of the estimates and judgments necessary in our accounting for common stock subject to possible redemption, and net income (loss) 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 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.

Please refer to Note 2, , in “Part 1. Financial Information – Item 1. Financial Statements” for a discussion of recent accounting pronouncements and their anticipated effect on our business.

On April 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 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 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.

As of June 30, 2021, we were not subject to any significant market or interest rate risk. The net proceeds of the Initial Public Offering and Over- Allotment, respectively, included in the Trust Account, have been invested in cash and may 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.

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 of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules and under the Exchange Act. Based on this evaluation, and in light of the material weakness in internal controls described below, our principal executive officer and principal financial and accounting officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of June 30, 2021.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2021 covered by this Quarterly Report on Form that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, with the exception of the below.

None.

As of the date of this Quarterly Report on Form there have been no material changes to the risk factors disclosed in our annual report on Form filed with the SEC on March 17, 2021, except for the below risk factor. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

In connection with the consummation of our initial public offering, our sponsor entered into a forward purchase agreement with us pursuant to which our sponsor committed to purchase from us up to 8,000,000 forward purchase units, consisting of one share of Class A common stock (the “forward purchase shares”) and of one warrant to purchase one share of Class A common stock (the “forward purchase warrants”), for $10.00 per unit, or an aggregate amount of up to $80,000,000, in a private placement that will close concurrently with the closing of our initial business combination. In addition, the Sponsor’s commitment under the FPA will be subject to approval, prior to entering into a definitive agreement for the initial Business Combination, of Mason Capital Management LLC, an affiliate of the managing member of the Sponsor. The proceeds from the sale of these forward purchase units, together with the amounts available to us from the trust account (after giving effect to any redemptions of public shares) and any other equity or debt financing obtained by us in connection with the business combination, will be used to satisfy the cash requirements of the

On February 2, 2021, we consummated our initial public offering of 50,000,000 units, including 5,000,000 units from the underwriters’ partial exercise of the over-allotment option, at $10.00 per unit, generating gross proceeds of $500.0 million. Citigroup Global Markets Inc. and Jefferies LLC acted as the representatives of the several underwriters in the initial public offering. The securities sold in the initial public offering were registered under the Securities Act on a registration statement on Form (No. and a registration statement on Form The SEC declared the registration statement on Form effective on January 28, 2021.