ACQUISITION OF GLADSTONE: Management report and analysis of financial position and operating results (Form 10-Q)
References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to
Gladstone Acquisition Corporation. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Gladstone Sponsor, LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the completion of the Proposed Business Combination (as defined below), the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's final prospectus for its IPO filed with the U.S. Securities and Exchange Commission(the "SEC"). The Company's securities filings can be accessed on the EDGAR section of the SEC'swebsite at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview We are a blank check company formed under the laws of the State of Delawareon January 14, 2021for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses ("Business Combination"). We intend to effectuate our Business Combination using cash from the proceeds of the IPO and the sale of the Private Warrants, our capital stock, debt or a combination of cash, stock and debt. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful. Results of Operations As of June 30, 2021, the Company had not commenced any operations. All activity for the period from January 14, 2021(inception) through June 30, 2021relates to the Company's formation and preparation for the IPO. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31as its fiscal year end. For the three months ended June 30, 2021, we had a net loss of $0. For the six months ended June 30, 2021, we had a net loss of $688relating to formation costs. 17 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources As of June 30, 2021, the Company had $12,347of cash in its operating bank account and a working capital deficit of $441,006. The Company's liquidity needs up to June 30, 2021had been satisfied through a payment from the Sponsor of $25,000(see Note 5 to the financial statements) for the Founder Shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $240,000(see Note 5 to the financial statements). In addition, in order to finance transaction costs in connection with a Business Combination, the Company's Sponsor or an affiliate of the Sponsor or certain of the Company's officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 5 to the financial statements). As of June 30, 2021, there were no amounts outstanding under any Working Capital Loans. On August 9, 2021, the Company consummated its IPO of 10,000,000 Units at $10.00per Unit, which is discussed in Note 3 to the financial statements, and the sale of 4,200,000 Private Warrants which is discussed in Note 4 to the financial statements, at a price of $1.00in a private placement to the Sponsor that closed simultaneously with the IPO. On August 18, 2021, the underwriter of the IPO partially exercised their over-allotment option and purchased an additional 492,480 Units, generating an aggregate of gross proceeds of $4,924,800(see Note 8 to the financial statements). Simultaneously with the exercise of the underwriters' over-allotment option, the Sponsor of the Company purchased an additional 98,496 Private Warrants, generating aggregate gross proceeds of $98,496(see Note 8 to the financial statements). As payment for services including the exercise of the over-allotment option, the underwriters received 209,850 Representative Sharesfor nominal consideration. Transaction costs related to the IPO and partial over-allotment exercise and the over-allotment amounted to $6,265,859consisting of $3,672,368of deferred underwriting commissions, $2,098,500of fair value of the Representative Shares and $494,991of other cash offering costs. After consummation of the IPO on August 9, 2021, and the partial over-allotment exercise on August 18, 2021, the Company had $2,023,122in its operating bank account, and working capital of $1,475,504. Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination. Off-Balance Sheet Arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. Contractual Obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000for general and administrative services, including office space, utilities and administrative support. We began incurring these fees on August 5, 2021and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation. 18 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies: Common Stock Subject to Possible Redemption We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption is classified as a liability instrument and 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 our control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' equity section of our condensed balance sheets. Net Loss Per Common Share Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 375,000 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised by the underwriters (see Note 5 to the financial statements). As of June 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per common share is the same as basic loss per common share for the period presented. Recent Accounting Standards Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC'srules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'srules and forms. 19 -------------------------------------------------------------------------------- Table of Contents Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2021covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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