The accompanying notes are an integral part of these
unaudited condensed financial statements.
The accompanying notes are an integral part
of these unaudited condensed financial statements.
The accompanying notes are an integral part of these
unaudited condensed financial statements.
The accompanying notes are an integral part of these
unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2022
(UNAUDITED)
Note 1 — Organization and Business
Operations
Global System Dynamics, Inc (the "Company",
formally known as Gladstone Acquisition Company) is a blank check company incorporated as a Delaware corporation on January 14, 2021.
The Company was formed for the purpose of acquiring, merging with, engaging in capital stock exchange with, purchasing all or substantially
all of the assets of, engaging in contractual arrangements, or engaging in any other similar business combination with a single operating
entity, or one or more related or unrelated operating entities operating in any sector (a "Business Combination").
The Company will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest, if at all. The Company will generate non-operating
income in the form of interest income from Trust Account (as defined below) from the proceeds derived from its initial public offering
(the "IPO") that was declared effective on August 4, 2021. The Company has selected December 31 as its fiscal year end.
The Company's sponsor is DarkPulse, Inc., a
Delaware corporation (the "New Sponsor", see Note 7).
As described further in Note 4, on January
25, 2021, Gladstone Sponsor, LLC (the “Original Sponsor”) paid , or approximately per share, to cover certain
offering costs in consideration for shares of Class B Common Stock, par value (the "Class B Common Stock").
Up to 375,000 shares of Class B Common Stock were subject to forfeiture to the extent that the over-allotment option was not exercised
in full by the underwriters. The forfeiture would be adjusted to the extent that the over-allotment option was not exercised in full by
the underwriters so that the Class B Common Stock would represent 20% of the Company's issued and outstanding stock after the Company's
IPO.
The registration statement for the Company's
IPO was declared effective on August 4, 2021 (the "Effective Date"). On August 9, 2021, the Company consummated its IPO of 10,000,000
units (each, a "Unit" and collectively, the "Units") at $10.00 per Unit, which is discussed in Note 3, and the sale
of 4,200,000 warrants (the "Private Warrants"), at a price of $1.00 per Private Warrant in a private placement to the Original
Sponsor that closed simultaneously with the IPO. Each Unit consists of one share of Class A Common Stock, par value $0.0001 per share
(the “Class A Common Stock”) and one-half of one redeemable warrant (the “Public Warrants”). Each whole Public
Warrant entitles the holder thereof to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment
as described in the IPO. Only whole warrants are exercisable. On August 18, 2021, the underwriters partially exercised their over-allotment
option and purchased an additional 492,480 Units, generating an aggregate of gross proceeds of $4,924,800.
Simultaneously with the exercise of the underwriters’
over-allotment option, the Original Sponsor purchased an additional 98,496 Private Warrants, generating aggregate gross proceeds of $98,496.
On September 23, 2021 the underwriters' over-allotment option expired and as a result 251,880 shares of Class B Common Stock were forfeited,
resulting in outstanding Class B Common Stock of 2,623,120 shares.
As payment for services, EF Hutton, division
of Benchmark Investments, LLC, the representative of the underwriters in the IPO received 209,850 shares of Class A Common Stock worth
approximately $10.00 per share (the "Representatives' Class A Shares"). Transaction costs related to the IPO and partial over-allotment
exercise amounted to $6,265,859 consisting of $3,672,368 of deferred underwriting commissions, $2,098,500 of fair value of the Representatives'
Class A Shares and $494,991 of other cash offering costs, which were charged to equity.
Currently, the Class A Common Stock is comprised
of the Representatives' Class A Shares (209,850 outstanding) and the "Public Shares" (defined herein as the 10,492,380 shares
of Class A Common Stock sold as part of the Units in the IPO and ensuing over-allotment exercise).
The Company's management has broad discretion
with respect to the specific application of the net proceeds of the IPO and the Private Warrants, although substantially all of the net
proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will
be able to complete an initial Business Combination successfully. The Company must complete one or more initial Business Combinations
having an aggregate fair market value of at least 80% of the assets held in the Trust Account (net of amounts disbursed to management
for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the agreement
to enter into the initial Business Combination. However, the Company will only complete an initial Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target
sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the "Investment
Company Act").
Following the closing of the IPO on August
9, 2021 and the partial over-allotment exercise on August 18, 2021, $107,023,296 ($10.20 per Unit) from the net proceeds sold in the IPO
and over-allotment, including the proceeds of the sale of the Private Warrants, was deposited in a trust account (the "Trust Account")
which is being invested only in U.S. government securities, with a maturity of 180 days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations,
the proceeds from the IPO will not be released from the Trust Account until the earliest to occur of: (a) the completion of the Company's
initial Business Combination, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend
the Company's amended and restated certificate of incorporation to (i) modify the substance or timing of the Company's obligation to provide
for the redemption of its public stock in connection with an initial Business Combination or to redeem 100% of its public stock if the
Company does not complete its initial Business Combination within 18 months from the closing of the IPO or (ii) with respect to any other
material provisions relating to stockholders' rights or pre-initial Business Combination activity, and (c) the redemption of the Company's
Public Shares if the Company is unable to complete its initial Business Combination within 18 months from the closing of the IPO, subject
to applicable law.
The Company will provide its public stockholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either
(i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer
will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion
of the amount then on deposit in the Trust Account (initially approximately $10.20 per share, plus any pro rata interest earned on the
funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The Class A Common Stock subject to redemption
was recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 480, "Distinguishing Liabilities from
Equity." In such case, the Company will proceed with a Business Combination if the shares of Class A Common Stock are not a “penny
share” upon such consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the issued
and outstanding shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law
and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended
and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange
Commission (the "SEC") and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transactions
is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction,
whether they participate in or abstain from voting or whether they were a stockholder on the record date for the stockholder meeting held
to approve the proposed transaction.
Notwithstanding the foregoing redemption rights,
if the Company seeks stockholder approval of its initial Business Combination and the Company does not conduct redemptions in connection
with its initial Business Combination pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation will provide
that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in
concert or as a "group" (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with
respect to more than an aggregate of 15% of the shares sold in the IPO, without the Company's prior consent. The Original Sponsor, officers
and directors (the "Initial Stockholders") have agreed not to propose any amendment to the Amended and Restated Certificate
of Incorporation (a) that would modify the substance or timing of the Company's obligation to provide for the redemption of its Public
Shares in connection with an initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete its
initial Business Combination within 18 months from the closing of the IPO (the "Combination Period") or (b) with respect to
any other material provisions relating to stockholders' rights or pre-initial Business Combination activity, unless the Company provides
its public stockholders with the opportunity to redeem their Class A Common Stock shares in conjunction with any such amendment.
If the Company is unable to complete its initial
Business Combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account
and not previously released to the Company (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish public stockholders' rights as stockholders (including the right
to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the Company's remaining stockholders and the Company's board of directors, liquidate
and dissolve, subject in the case of clauses (ii) and (iii) to the Company's obligations under the law of the state of Delaware to provide
for claims of creditors and the requirements of other applicable law.
The Company's Initial Stockholders, as well
as holders of Representatives' Class A Shares, agreed to waive their rights to liquidating distributions from the Trust Account with respect
to any Class B Common Shares and Class A Common Shares, respectively, held by them if the Company fails to complete its initial Business
Combination within the Combination Period. However, if the Initial Stockholders acquire Public Shares in or after the IPO, they will be
entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business
Combination during the Combination Period.
Liquidity and Capital Resources
As of September 30, 2022, the Company had $23,519
of cash in its operating bank account and working capital of $239,551, net of franchise tax payable that can be paid with the interest
income earned on Trust Account. The Company will continue to expend working capital for operating costs, which includes costs to identify
a potential target and acquire the business, in addition to accounting, audit, legal, board, franchise tax and other expenses associated
with operating the business during the period through the mandatory date to consummate a Business Combination or liquidate the business.
Such costs are likely to exceed the amount of cash currently available. To finance working capital needs, New Sponsor or an affiliate
of the New 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 4). As of the issuance date of this Quarterly Report on Form 10-Q, there were no amounts outstanding under any
Working Capital Loans. If the Company is unsuccessful in obtaining additional working capital, it raises substantial doubt as to the Company’s
ability to continue as a going concern, as further discussed below.
Going Concern
The Company has until February 9, 2023 to consummate
a Business. It is uncertain that the Company will be able consummate a Business Combination by either date. If a Business Combination
is not consummated by the required dates, there will be a mandatory liquidation and subsequent dissolution. In connection with the Company’s
assessment of going concern considerations in accordance with the authoritative guidance in ASC Subtopic 205-40, "Presentation of
Financial Statements - Going Concern," management has determined that as a result of the liquidity discussion above and the mandatory
liquidation, and subsequent dissolution, should the Company be unable to complete a business combination, there is substantial doubt about
the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities
should the Company be required to liquidate after February 9, 2023. The Company intends to close on a Business Combination.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”)
for interim financial information and in accordance with Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures
normally included in condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the
rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary
for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented.
The interim condensed financial statements
and notes thereto should be read in conjunction with the financial statements and notes thereto, included in our audited financial statements
included in our Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 29, 2022. The accompanying condensed balance
sheet as of December 31, 2021 has been derived from those audited financial statements. The interim results for the three months and nine
months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or
for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and
proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act
exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Risks and Uncertainties
Management continues 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/or search for a target company, the specific impact is not readily determinable as
of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16,
2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other
things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S.
domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the
repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1%
of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax,
repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock
repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury
(the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or
avoidance of the excise tax.
Any redemption
or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be
subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases
in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and
amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and
other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder,
the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available
on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Use of Estimates
The preparation of unaudited condensed financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the
reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $23,519 and $769,484 in cash
as of September 30, 2022 and December 31, 2021, respectively. There were no cash equivalents as of September 30, 2022 and December 31,
2021.
Cash Held in Trust Account
As of September 30, 2022 and December 31, 2021,
the Company had $107,240,343 and $107,028,738, respectively, in the Trust Account, which was invested in a United States Treasury money
market fund.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Company coverage of $250,000. The Company has not experienced losses on these accounts.
Class A Common Stock Subject to Possible
Redemption
The Company accounts for its 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 the Company’s
control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ deficit.
The Company’s shares of Class A Common Stock sold in the IPO feature certain redemption rights that are considered to be outside
of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2022 and December
31, 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’ deficit section of the Company’s condensed balance sheet. The Representatives' Class A Shares
are not redeemable, and are therefore included in stockholders’ deficit.
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of
each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the subsequent measurement
from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common
stock resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
At September 30, 2022 and December 31, 2021,
the Class A Common Stock reflected in the condensed balance sheets are reconciled in the following table:
| | |
|
| Gross Proceeds | |
$ | 104,924,800 | |
| Less: | |
| | |
| Proceeds allocated to Public Warrants | |
| (1,626,335 | ) |
| Issuance costs related to Class A Common Stock | |
| (5,930,952 | ) |
| Plus: | |
| | |
| Subsequent measurement of carrying value to redemption value | |
| 9,655,783 | |
| Class A Common Stock subject to possible redemption as of December 31, 2021 | |
| 107,023,296 | |
| Plus: | |
| | |
| Remeasurement of carrying value to redemption value | |
| 105,623 | |
| Class A Common Stock subject to possible redemption as of September 30, 2022 | |
$ | 107,128,919 | |
Warrant Instruments
As further discussed in Note 2 to the audited
financial statements for the year ended December 31, 2021, the Company accounts for warrants issued in connection with the IPO and
the Private Placement in accordance with the guidance contained in ASC 480 and ASC 815, “Derivatives and Hedging." Under
that guidance, 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 stockholders' deficit on the
condensed balance sheets. As of each of September 30, 2022 and December 31, 2021, there were 5,246,240 Public Warrants and 4,298,496
Private Warrants outstanding.
Net Income (Loss) Per Common Share
The Company applies the two-class method in
calculating earnings per share. Net income (loss) per share of common stock is computed by dividing the pro rata net income (loss) allocated
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 income (loss) per
share does not consider the effect of the warrants and redemption 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.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | |
For
the Three Months ended September 30, | |
| |
|
| | |
2022 | |
2021 | |
For the Nine
Months ended
September
30, 2022 | |
For the period from January 14, 2021
(inception) to
September 30, 2021 |
| Common
Stock subject to possible redemption | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | |
| Net
(loss) income allocable to Class A Common Stock subject to possible redemption | |
$ | 31,033 | | |
$ | (244,918 | ) | |
$ | (496,569 | ) | |
$ | (164,497 | ) |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
| Weighted
Average Redeemable shares of Class A Common Stock, Basic and Diluted | |
| 10,492,480 | | |
| 5,996,403 | | |
| 10,492,480 | | |
| 2,215,539 | |
| Basic
and Diluted (loss) income per share, Redeemable Class A common stock | |
$ | 0.00 | | |
$ | (0.04 | ) | |
$ | (0.05 | ) | |
$ | (0.07 | ) |
| Non-Redeemable
common stock | |
| | | |
| | | |
| | | |
| | |
| Numerator: | |
| | | |
| | | |
| | | |
| | |
| Net
loss allocable to Class A and Class B Common Stock not subject to redemption | |
$ | 8,379 | | |
$ | (109,414 | ) | |
$ | (134,074 | ) | |
$ | (190,523 | ) |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
| Weighted
Average Non-Redeemable Class A and Class B Common Stock, Basic and Diluted | |
| 2,832,970 | | |
| 2,678,812 | | |
| 2,832,970 | | |
| 2,566,067 | |
| Basic
and diluted net (loss) income per share, Non-Redeemable common stock | |
$ | 0.00 | | |
$ | (0.04 | ) | |
$ | (0.05 | ) | |
$ | (0.07 | ) |
Income Taxes
The tax (or benefit) related to ordinary income
(or loss) for interim periods presented is computed using an estimated annual effective tax rate and the tax (or benefit) related to
all other items is individually computed and recognized when the items occur. The Company follows the asset and liability
method of accounting for income taxes under ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in statement of operations in the period that
included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes was deemed to be immaterial for the three and nine months ended September
30, 2022, for the three months ended September 30, 2021 and for the period from January 14, 2021 (inception) through September 30,
2021. The Company did not record a tax benefit and deferred tax asset on the losses recorded in the interim periods presented
because future realization was not more likely than not in the interim periods of occurrence.
ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of September 30, 2022 and December 31, 2021. The Company’s management determined
that the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related
to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties for the three and
nine months ended September 30, 2022, for the three months ended September 30, 2021 and for the period from January 14, 2021 (inception)
through September 30, 2021.
The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income
tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting
Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion
features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts
in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments
that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments. The Company adopted ASU 2020-06 effective as of January
1, 2022 on a full retrospective basis. The adoption of ASU 2020-06 did not have an impact on the Company's unaudited condensed financial
statements.
Management does not believe that any other
recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s
unaudited condensed financial statements.
Note 3 — Initial Public Offering
On August 9, 2021, the Company consummated
its IPO of 10,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $100,000,000. Each Unit consists of one share
of Class A Common Stock and one-half of one Public Warrant. Each whole Public Warrant entitles the holder to purchase one share of Class
A Common Stock at a price of $11.50 per share. Each whole Public Warrant will become exercisable the later of 30 days after the completion
of the Initial Business Combination or 12 months from the closing of the IPO, and will expire five years after the completion of the Initial
Business Combination, or earlier upon redemption or liquidation (see Note 6).
On August 18, 2021, the underwriters partially exercised
the over-allotment option for up to an additional 1,500,000 Units and purchased an additional 492,480
over-allotment Units, generating an aggregate of gross proceeds of $4,924,800.
The IPO and overallotment generated total gross proceeds of $107,023,296.
As payment for services, the underwriters received 209,850
Representatives' Class A Shares at fair value of approximately $10.00
per share which have been accounted for as offering costs related to the IPO.
Note 4 — Related Party Transactions
Class B Common Stock
On January 25, 2021, the Original Sponsor paid
, or approximately per share, to cover certain offering costs in consideration for shares of Class B Common Stock.
Up to 375,000 shares of Class B Common Stock were subject to forfeiture to the extent that the over-allotment option was not exercised
in full by the underwriters. The forfeiture would adjust to the extent that the over-allotment option was not exercised in full by the
underwriters so that the Class B Common Stock represents 20% of the Company's issued and outstanding stock after the IPO. On August 18,
2021, the underwriters partially exercised their over-allotment option which left 123,120 shares of the Class B Common Stock no longer
subject to forfeiture. On September 23, 2021 the underwriters’ over-allotment option expired and as a result
251,880 shares of Class B Common Stock were forfeited, resulting in outstanding Class B Common Stock of 2,623,120 as of each of September
30, 2022 and December 31, 2021.
The Initial Stockholders agreed, subject to
limited exceptions, not to transfer, assign or sell any of their Class B Common Stock until the earlier to occur of: (i) one year after
the completion of the initial Business Combination, or (ii) the date on which the Company completes a liquidation, merger, share exchange
or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the
right to exchange their Class A Common Stock for cash, securities or other property; except to certain permitted transferees and under
certain circumstances (the “lock-up”).
Notwithstanding the foregoing, if (1) the
closing price of Class A Common Stock equals or exceeds
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any
trading days within any trading day period commencing at least after the initial Business Combination or (2) if the Company consummates a transaction after the initial Business
Combination which results in the Company’s stockholders having the right to exchange their shares for cash, securities or
other property, the Class B Common Stock will be released from the lock-up.
Promissory Note — Related Party
The Original Sponsor agreed to loan the Company
an aggregate of up to to cover expenses related to the IPO pursuant to a promissory note (the “Note”). This loan
was non-interest bearing and payable on the earlier of December 31, 2021 or the completion of the IPO. As of September 30, 2021, the Company
had borrowed under the Note, which it repaid on September 2, 2021. As of September 30, 2022 and December 31, 2021, the Company
has borrowings under the Note.
Working Capital Loans
To finance transaction costs in connection
with a Business Combination, the New Sponsor or an affiliate of the New Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes
a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the
Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust
Account would be used to repay the Working Capital Loans.
Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital
Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to
$1.5 million of such Working Capital Loans may be convertible into Private Warrants at a price of $1.00 per Private Warrant. As of the
issuance date of this Quarterly Report on Form 10-Q and December 31, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative Service Fee
Commencing on August 4, 2021, which was the
date of the final prospectus, the Company agreed to pay the Original Sponsor a total of $10,000 per month for office space, secretarial
and administrative services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will
cease paying these monthly fees. The Company recorded an expense for administrative services of $30,000 and $90,000 for the three and
nine month periods ended September 30, 2022, respectively, for the three months ended September 30, 2021 and for the period from January
14, 2021 (inception) through September 30, 2021, the Company recorded an expense for administrative services of $18,710. As of September
30, 2022 and December 31, 2021, and , respectively, were due to a related party for administrative service fees and reimbursement
to Original Sponsor for out-of-pocket expenses.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of the Class B Common Stock, Representatives'
Class A Shares and Private Warrants (including securities contained therein), including warrants that may be issued upon conversion of
Working Capital Loans, and any shares of Class A Common Stock issuable upon the exercise of the Private Warrants and any shares of Class
A Common Stock and warrants (and underlying Class A Common Stock) that may be issued upon conversion of the warrants issued as part of
the Working Capital Loans and Class A Common Stock issuable upon conversion of the Class B Common Stock, are entitled to registration
rights pursuant to a registration rights agreement requiring us to register such securities for resale (in the case of the Class B Common
Stock, only after conversion to our Class A Common Stock). The holders of the majority of these securities are entitled to make up to
three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to our completion of our initial Business Combination and
rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement
does not contain liquidated damages or other cash settlement provisions
resulting from delays in registering our securities. The Company bears the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day
option to purchase up to 1,500,000 additional Units to cover over-allotments, if any, at the price paid by the underwriters in the IPO.
On August 18, 2021, the underwriters partially exercised their over-allotment option and purchased an additional 492,480 Units. On September
18, 2021 the over-allotment option expired and the remainder of the 1,007,520 Units available were forfeited.
The underwriters are entitled to a deferred
underwriting discount of $0.35 per unit, or $3,672,368 in the aggregate, which is payable to the underwriters from the amounts held in
the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Representatives' Class A Common Stock
In connection with the consummation of the
IPO, the Company issued the Representatives' Class A Shares (200,000 shares of Class A Common Stock) to EF Hutton, division of Benchmark
Investments, LLC, the representative of the underwriters in the IPO, for nominal consideration. In connection with the underwriters' partial
exercise of their over-allotment option, an additional 9,850 Representatives' Class A Shares were issued for a total number of Representatives'
Class A Shares of 209,850.
The holders of the Representatives' Class A
Shares have agreed not to transfer, assign or sell any such shares without the Company's prior consent until the completion of the Initial
Business Combination. In addition, the holders of the Representatives' Class A Shares have agreed (i) to waive their redemption rights
(or right to participate in any tender offer) with respect to such shares in connection with the completion of the Initial Business Combination;
(ii) waive their redemption rights with respect to any such shares held by them in connection with a stockholder vote to approve an amendment
to the Company's Amended and Restated Certificate of Incorporation (A) to modify the substance or timing of the obligation to allow redemption
in connection with the Initial Business Combination or certain amendments to the charter prior thereto or to redeem 100% of the Public
Shares if the Company does not complete the Initial Business Combination within 15 months from the closing of the IPO (or 18 months from
the closing of the IPO, if the Company extends the period of time to consummate a Business Combination, subject to the New Sponsor depositing
additional funds into the Trust Account or (B) with respect to any other provision relating to stockholders' rights or pre-Initial Business
Combination activity and (iii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if
the Company fails to complete the Initial Business Combination within 15 months from the closing of the IPO (or 18 months from the closing
of the IPO, if the Company extends the period of time to consummate a Business Combination, subject to the New Sponsor depositing additional
funds into the Trust Account. The Representatives' Class A Shares are deemed to be underwriters' compensation by FINRA pursuant to FINRA
Rule 5110.
Note 6 — Stockholders’ Deficit
Preferred Stock
The Company is authorized to issue 1,000,000
shares of preferred stock with a par value of $0.0001 and with such designations, voting and other rights and preferences as may be determined
from time to time by the Company's board of directors. As of both September 30, 2022 and December 31, 2021, there was no preferred stock
issued or outstanding.
Class A Common Stock
The Company is authorized to issue 200,000,000
shares of Class A Common Stock with a par value of $0.0001 per share. As of both September 30, 2022 and December 31, 2021, there were
209,850 shares of Class A Common Stock issued and outstanding excluding the 10,492,480 shares of Class A Common Stock subject to possible
redemption.
Class B Common Stock
The Company is authorized to issue 20,000,000
shares of Class B Common Stock with a par value of $0.0001 per share. Holders are entitled to one vote for each share of Class B Common
Stock. As of both September 30, 2022 and December 31, 2021, there were 2,623,120 shares of Class B Common Stock issued and outstanding.
Holders of the Class A Common Stock and holders
of the Class B Common Stock will vote together as a single class on all matters submitted to a vote of our stockholders, except as required
by law or stock exchange rule; provided that only holders of the Class B Common Stock have the right to vote on the election of the Company's
directors prior to the initial Business Combination and holders of a majority of the Company's Class B Common Stock may remove a member
of the board of directors for any reason.
The Class B Common Stock will automatically
convert into Class A Common Stock at the time of the consummation of the initial Business Combination at a ratio such that the number
of Class A Common Stock issuable upon conversion of all Class B Common Stock will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (a) the total number of all shares of Class A Common Stock issued and outstanding (including any shares of Class
A Common Stock issued pursuant to the underwriter's over-allotment option) upon the consummation of the IPO, plus (b) the sum of all shares
of Class A Common Stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued
or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination (including
any shares of Class A Common Stock issued pursuant to a forward purchase agreement), excluding the Representatives; Class A Shares and
any shares of Class A Common Stock or equity-linked securities or rights exercisable for or convertible into Class A Common Stock issued,
deemed issued, or to be issued, to any seller in the initial Business Combination and any Class B Common Stock issued to the New Sponsor,
members of the Company's management team or any of their affiliates upon conversion of Working Capital Loans, minus (c) the number of
shares of Class A Common Stock redeemed in connection with the initial Business Combination, provided that such conversion of shares of
Class B Common Stock shall never be less than the initial conversion ratio. In no event will the Class B Common Stock convert into Class
A Common Stock at a rate of less than one-to-one.
Public Warrants
As of both September 30, 2022 and December
31, 2021 there were 5,246,240 Public Warrants outstanding. The Public Warrants become exercisable on the later of (a) the completion of
an initial 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 Class A Common Stock issuable upon exercise of the warrants and a current
prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis and such cashless
exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later
than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC
and have an effective registration statement covering the Class A Common Stock issuable upon exercise of the warrants and to maintain
a current prospectus relating to those Class A Common Stock until the Public Warrants expire or are redeemed, as specified in the warrant
agreement.
If a registration statement covering the Class
A Common Stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business
Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company
will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with
Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s Class A Common Stock are
at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise
their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the
Company so elect, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company
does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent
an exemption is not available. The warrants expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
The Company may call the Public Warrants for
redemption:
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in whole and not in part; |
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at a price of
$0.01 per warrant; |
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upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
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if, and only
if, the reported closing price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before
the Company sends the notice of redemption to the warrant holders. |
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”,
as described in the warrant agreement. Additionally, in no event will the Company be required to net cash settle any Public Warrants.
If the Company is unable to complete the initial Business Combination within the Combination Period and the Company liquidates the funds
held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly,
the warrants may expire worthless.
If (x) the Company issues additional Class
A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination
at an issue price or effective issue price of less than $9.20 per share of Class A Common Stock (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 Initial Stockholders
or their affiliates, without taking into account any Class B Common Stock held by the Initial Stockholders 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 total equity proceeds, and interest thereon, available for the funding of the initial Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Class A Common Stock during the 20 trading day period
starting on the trading day prior to the day 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 warrants will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be
adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Private Placement Warrants
Except as described below, the private placement
warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in our initial public offering,
including as to exercise price, exercisability and exercise period. The private placement warrants (including the Class A common stock
issuable upon exercise of the private placement warrants) are not be transferable, assignable or salable until after the completion of
our initial business combination (except, among other limited exceptions as described under the section of the Annual Report entitled
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholders — Restrictions on Transfers of Founder
Shares and Private Placement Warrants,” to our officers and directors and other persons or entities affiliated with our New Sponsor).
In addition, holders of our private placement
warrants are entitled to certain registration rights. In order to finance transaction costs in connection with an intended initial business
combination, our New Sponsor or an affiliate of our New Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at
the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the private placement
warrants. However, as the units would not be issued until consummation of our initial business combination, any warrant underlying such
units would not be able to be voted on an amendment to the warrant agreement in connection with such business combination.
Note 7 — Subsequent Events
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date up to the date that these unaudited condensed financial statements were issued.
Based on this, besides the below, the Company did not identify any subsequent events that would require additional adjustment or disclosure
in the unaudited condensed financial statements.
On October 12, 2022 (the “Closing Date”),
the Company entered into and closed a Purchase Agreement (the “Agreement”) with Gladstone Sponsor, LLC, a Delaware limited
liability company ("Original Sponsor"), and DarkPulse, Inc., a Delaware corporation (the “New Sponsor”), pursuant
to which the New Sponsor purchased from the Original Sponsor 2,623,120 shares of Class B common stock of the Company, par value $0.0001
per share, and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A common stock of the
Company, par value $0.0001 per share, for an aggregate purchase price of $1,500,000 (the “Purchase Price”).
In addition to the payment of the Purchase
Price, the New Sponsor also assumed the following obligations: (i) responsibility for all of Company’s public company reporting
obligations, (ii) the right to provide an extension payment and extend the deadline of the Company to complete an initial business combination
from 15 months from August 9, 2021 to 18 months for an additional $1,150,000, and (iii) all other obligations and liabilities of the Original
Sponsor related to the Company.
Pursuant to the Agreement, the New Sponsor
has replaced the Company’s current directors and officers with directors and officers of the Company selected in its sole discretion.
In connection with the closing of the Agreement, the Company has changed its name to “Global System Dynamics, Inc.”
In addition to the Agreement, the New Sponsor
also entered into the Assignment, Assumption, Release and Waiver of the Letter Agreement pursuant to which the Original Sponsor and each
of the parties to the Letter Agreement (defined below) agreed that all rights, interests and obligations of the Original Sponsor under
the Letter Agreement (as defined below) were hereby assigned to the New Sponsor and that the Original Sponsor will have no further rights,
interests or obligations under the Letter Agreement as of the Closing Date.
The letter agreement dated August 4, 2021 (the
“Letter Agreement”), was by and among the Original Sponsor, et. al., and delivered to the Company in accordance with an Underwriting
Agreement, dated August 4, 2021 (the “Underwriting Agreement”), entered into by and among the Company and EF Hutton, division
of Benchmark Investments, LLC, as representative of the underwriters, et. al.
Finally, in addition to the Agreement, the
New Sponsor entered into the Joinder to the Registration Rights Agreement pursuant to which the Company agreed to become a party to the
Registration Rights Agreement dated as of August 4, 2021 by and among the Company, the Original Sponsor, et. al.
The Agreement contains customary representations
and warranties of the parties, including, among others, with respect to corporate organization, corporate authority, and compliance with
applicable laws. The representations and warranties of each party set forth in the Agreement were made solely for the benefit of the other
parties to the Agreement, and investors are not third-party beneficiaries of the Purchase Agreement. In addition, such representations
and warranties (a) are subject to materiality and other qualifications contained in the Agreement, which may differ from what may be viewed
as material by investors, (b) were made only as of the date of the Agreement or such other date as is specified in the Agreement and (c)
may have been included in the Agreement for the purpose of allocating risk between the parties rather than establishing matters as facts.
Accordingly, the Agreement is included with this filing only to provide investors with information regarding the terms of the Agreement,
and not to provide investors with any other factual information regarding any of the parties or their respective businesses.
Lastly, on November 2, 2022, the Company issued a promissory
note in the aggregate principal amount of $1,150,000 to DarkPulse, Inc., the New Sponsor, in connection with the extension of the termination
date for the Company’s initial business combination (the “Initial Business Combination”) from November 9, 2022 to February
9, 2023.