All statements other than statements of historical fact included in this Annual Report including, without limitation, statements under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Annual Report, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or the Company's management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with theSEC . The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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$1.7 billion of assets under management as ofDecember 31, 2021 . 57
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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. For the year endedDecember 31, 2021 , we had net income of$17,631,175 , which was primarily driven by a$20,102,701 gain from changes in fair value of derivative liabilities,$430,057 gain from changes in fair value of the derivativeFPA , and$29,521 of interest income on marketable securities held in the Trust Account. This was partially offset by$1,423,720 of general and administrative expenses,$1,321,353 of issuance costs attributable to derivative liabilities, and$186,031 of franchise tax expense.
For the year ended
As described in Note 2,
Summary of Significant Accounting Policies , in the financial statements included elsewhere in this report, 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 ofDecember 31, 2021 , we had cash of$975,393 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 ofDecember 31, 2021 , we had cash and marketable securities in the Trust Account of$500,029,521 . 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.
Material cash requirements
As of
The underwriters are entitled to deferred fee of 3.5% of the gross proceeds of the IPO, or$17.5 million . 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". In addition, we drew$300,000 on an unsecured and non-interest-bearing promissory note from our 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$500,000,000 was placed in a Trust Account and following the payment of certain transaction expenses. 58
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Table of Contents Uses of cash August 31, 2020 Year Ended (inception) through December 31, 2021 December 31, 2020 Change Net cash used in operating activities$ (1,858,013 ) $ (8,334 )$ (1,849,679 ) Net cash used in investing activities$ (500,000,000 ) $ -$ (500,000,000 ) Net cash provided by financing activities$ 502,666,182 $
175,558
For the year endedDecember 31, 2021 , cash used in operating activities was$1,858,013 . Net income of$17,631,175 was impacted by the non-cash changes in fair value of the derivative liabilities and forward purchase agreement of$20,102,701 and$430,057 , respectively, the issuance costs attributed to the derivative liabilities of$1,321,353 . Additionally, changes in operating assets and liabilities provided$248,262 of cash used in operating activities, and interest earned on marketable securities held in the Trust Account of$29,521 . Cash used in investing activities was impacted by$500,000,000 of cash invested in the trust account. Cash provided by financing activities was impacted by$489,746,182 of proceeds from the sale of units, net of underwriting discounts paid, and$13,220,000 of proceeds from the sale of private placement warrants partially offset by$300,000 repayment of the related party note to our Sponsor. For the period fromAugust 31, 2020 (inception) throughDecember 31, 2020 , cash used in operating activities was$8,334 . Net loss of$83,334 was impacted by changes in operating assets and liabilities provided$75,000 of cash used in operating activities. Cash provided by financing activities was$175,558 for the period fromAugust 31, 2020 (inception) throughDecember 31, 2020 , and was impacted by$300,000 of proceeds from issuance of a related party note,$25,000 of proceeds from issuance of Class B common stock partially offset by$149,442 in payments of deferred offering costs. 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 ofDecember 31, 2021 , we had no such loans outstanding. 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 23, 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. 59
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Table of Contents Related Party Transactions Please refer to Note 6, Related Party Transactions , to our financial statements included elsewhere in this report for a discussion of our related party transactions.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with GAAP. In applying GAAP, we make significant estimates and judgments that affect our reported amounts of assets, liabilities, and expenses, as well as disclosure of contingent assets and liabilities. We believe that our accounting estimates and judgments are reasonable when made, but in many instances, alternative estimates and judgments would also be acceptable. In addition, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on historical experience and other assumptions that we believe are reasonable, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which are discussed further below. Derivative Liabilities and Forward Purchase Agreement. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company accounts for derivative liabilities as either equity-classified or liability-classified instruments based on an assessment of the derivative liabilitie's specific terms and applicable authoritative guidance in Accounting Standards Codification ("ASC") 480, Distinguishing liabilities from equity ("ASC 480"), and ASC 815, Derivatives and hedging ("ASC 815"). The assessment considers whether the derivative liabilities are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the derivative liabilities meet all of the requirements for equity classification under ASC 815, including whether the derivative liabilities are indexed to the Company's own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of derivative liability issuance and as of each subsequent reporting period end date while the derivative liabilities are outstanding. The Company evaluated the Public Warrants, the Private Placement Warrants, Over-allotment option, and theFPA (which are discussed in Note 3, Fair Value Measurements , Note 4, Stockholders' Deficit and Note 6, Related Party Transactions ) in accordance with ASC 815-40, Contracts in an entity's own equity ("ASC 815-40"), 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, Over-allotment option, andFPA meet the definition of a derivative as contemplated in ASC 815, the Warrants, Over-allotment option, andFPA were measured at fair value at inception (on the date of the IPO) and recorded as assets or liabilities on the balance sheets. The Warrants, Over-allotment option, andFPA are subject to remeasurement at each reporting date until exercised in accordance with ASC 820, Fair Value Measurement ("ASC 820"), with changes in fair value recognized on the statements of operation in the period of change. Subsequent to becoming publicly traded onMarch 22, 2021 , the fair value of the Public Warrants was determined based on their quoted trading price. Prior to being publicly traded, the fair value of the Public Warrants was estimated using a Binomial Lattice valuation model, while the fair value of the Over-allotment option, Private Placement Warrants, andFPA are estimated using a modified Black-Scholes and adjusted net assets valuation model, respectively. See Note 3 , Fair Value Measurements,
for more information regarding the methods used to fair value the derivative
liabilities and the
Class
A Common Stock Subject to Possible Redemption . The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features 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) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's Class A common stock features certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, atDecember 31, 2021 and 2020, 50,000,000 and 0 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's balance sheets. Immediately upon the closing of the IPO, the Company recognized the remeasurement from initial book value to redemption amount, which approximates fair value. The change in the carrying value of Class A common stock subject to possible redemption resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit and Class A common stock. 60
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Net Income (Loss) Per Common Share . Net income (loss) per share of common stock is computed by dividing net income (loss), on a pro rata basis, by the weighted average number of common shares outstanding during the period. We apply the two-class method in calculating earnings per share. The remeasurement associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value. As ofDecember 31, 2021 and 2020, we had outstanding warrants to purchase of up to 25,480,001 and 0 shares of Class A common stock, respectively. The weighted average of these shares was excluded from the calculation of diluted net income (loss) per share of common stock since the exercise of the warrants is contingent upon the occurrence of future events. As ofDecember 31, 2021 , we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in our earnings.
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies , to the financial statements included elsewhere in this report for a discussion of recent accounting pronouncements and their anticipated effect on our business.
Going Concern
In connection with the Company's assessment of going concern considerations in accordance with 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 23, 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.
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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