References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer toGladstone Acquisition Corporation . References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer toGladstone 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 theSEC . The Company's securities filings can be accessed on the EDGAR section of theSEC's website 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 theState of Delaware onJanuary 14, 2021 for the purpose of effecting a 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 For the three months endedSeptember 30, 2021 , we had a net loss of$354,965 , which was primarily related to formation and operating costs. For the period fromJanuary 14, 2021 (inception) toSeptember 30, 2021 , we had a net loss of$355,653 which was primarily related to formation and operating costs. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generated non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO of$633 . The Company has selectedDecember 31 as its fiscal year end. 16 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources The Company's liquidity needs up toAugust 9, 2021 had been satisfied through a payment from the Sponsor of$25,000 (see Note 6 to the financial statements) for the Class B Common Stock to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of$390,000 (see Note 6 to the financial statements). In addition, to finance transaction costs in connection with a Business Combination, 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 with Working Capital Loans (see Note 6 to the financial statements). As ofSeptember 30, 2021 , there were no amounts outstanding under any Working Capital Loans. OnAugust 9, 2021 , the Company consummated its IPO of 10,000,000 Units at$10.00 per Unit, which is discussed in Note 4 to the financial statements, and the sale of 4,200,000 Private Warrants which is discussed in Note 5 to the financial statements, at a price of$1.00 per Private Warrant in a private placement to the Sponsor that closed simultaneously with the IPO. OnAugust 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 4 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 5 to the financial statements). As payment for services including the exercise of the over-allotment option, the underwriters received 209,850Representative Shares for nominal consideration. Transaction costs related to the IPO and partial over-allotment exercise and the over-allotment amounted to$6,265,859 consisting of$3,672,368 of deferred underwriting commissions,$2,098,500 of fair value of the Representative Shares and$494,991 of other cash offering costs. After consummation of the IPO onAugust 9, 2021 , and the partial over-allotment exercise onAugust 18, 2021 , the Company had$2,023,122 in its operating bank account, and working capital of$1,475,504 . As ofSeptember 30, 2021 , the Company had$1,089,377 of cash in its operating bank account and working capital of$1,232,438 . 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 an initial 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 in connection with travel to and from the offices, farms or similar locations of prospective target businesses or their representatives or owners, 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 ofSeptember 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$10,000 for general and administrative services, including office space, utilities and administrative support. We began incurring these fees onAugust 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the initial Business Combination or our liquidation. 17 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America requires 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 shares of Class A Common Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A Common Stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including 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 our control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders' equity. Our shares of Class A Common Stock sold in the IPO feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as ofSeptember 30, 2021 , 10,492,480 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 our condensed balance sheet. Warrant Instruments The Company accounts for warrants issued in connection with the IPO and the Private Placement in accordance with the guidance contained in ASC 815, "Derivatives and Hedging". Under that provision, warrants that do not meet the criteria for equity treatment would be classified as liabilities. The Public Warrants and Private Warrants do meet the criteria for equity treatment, and therefore are included as part of stockholder's equity on the balance sheet. As ofSeptember 30, 2021 , there were 5,246,240 Public Warrants and 4,298,496 Private Warrants outstanding. Net Loss Per Common Share The Company applies the two-class method in calculating earnings per share. Net loss per share of common stock is computed by dividing the pro rata net loss between the redeemable shares of Class A Common Stock and the non-redeemable shares of Class A Common Stock and Class B Common Stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the warrants and rights issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for 9,544,736 shares of Class A Common Stock in the aggregate. Shares subject to forfeiture are not included in weighted-average shares outstanding until the forfeiture restriction lapses. Subsequent measurement of the Class A Common Stock to redemption value is not considered in the calculation because redemption value closely approximates fair value. 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 theSEC's rules 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 endedSeptember 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 not effective due solely to the material weakness in our internal control over financial reporting described below in "Changes in Internal Control over Financial Reporting." Changes in Internal Control over Financial Reporting Except as set forth below, there was no change in our internal control over financial reporting that occurred during the quarter endedSeptember 30, 2021 covered 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. Our internal control over financial reporting did not result in the proper classification of all redeemable public shares as temporary equity within our previously issued audited balance sheet, as ofAugust 9, 2021 (the "August Balance Sheet"), filed with theSEC in Form 8-Ks onAugust 13, 2021 andAugust 19, 2021 . Historically, a portion of our public shares was classified as permanent equity to maintain stockholders' equity greater than$5,000,000 on the basis that we will consummate our initial Business Combination only if we have net tangible assets of at least$5,000,001 . In light of recent comment letters issued by theSEC to several SPACs, our management re-evaluated our application of ASC 480-10-S99-3A to our accounting classification of public shares and determined that our public shares include certain provisions that require classification of the public shares as temporary equity regardless of the minimum net tangible assets required to complete our initial Business Combination. Therefore, in consultation with the audit committee of our board of directors, onNovember 15, 2021 , we concluded that our previously issued August Balance Sheet should be restated to report all public shares as temporary equity and should no longer be relied upon. As such, we have restated the August Balance Sheet in this Quarterly Report, as described in Note 2 of the notes to the financial statements included herein. Notwithstanding the identified material weaknesses, management believes that the financial statements and related financial information included in this Quarterly Report fairly present, in all material respects, our balance sheets, statements of operations and cash flows as of and for the periods presented. 18 -------------------------------------------------------------------------------- Table of Contents Remediation Plan Following the identification of the material weakness described above with respect to the accounting treatment of our public shares, our principal executive officer and principal financial and accounting officer begin working to implement additional accounting and financial analyses related to the classification of our Public Shares as temporary equity versus permanent equity, including consulting with subject matter experts. We are in the process of evaluating whether additional remediation measures should be implemented with respect to such material weakness. As we continue to evaluate and improve our financial reporting process, we may take additional actions to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.
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