References in this Quarterly Report on Form 10-Q (this "Quarterly Report") to
"we," "us" or the "Company" refer to New Providence Acquisition Corp. II.
References to our "management" or our "management team" refer to our officers
and directors, and references to the "Sponsor" refer to New Providence
Acquisition II LLC. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the condensed 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, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report including, without limitation, statements in
this "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. 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. 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 Annual Report on Form 10-K for the period ended December 31, 2021, as
filed with the U.S. Securities and Exchange Commission (the "SEC") on March 24,
2022. The Company's securities filings can be accessed on the EDGAR section of
the SEC'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 incorporated under the laws of the State of
Delaware on November 16, 2020 for the purpose of effectuating a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination with one or more businesses. We intend to
effectuate our business combination using cash from the proceeds of our initial
public offering and our private placement warrants, our capital stock, debt or a
combination of cash, stock and debt.
On November 9, 2021, we consummated the initial public offering of 25,000,000
units ("Units"), which includes the partial exercise by the underwriter of its
over-allotment option in the amount of 2,500,000 Units, at $10.00 per Unit,
generating gross proceeds of $250,000,000. Simultaneously with the closing of
the initial public offering, we consummated the sale of 8,000,000 private
placement warrants (the "private placement warrants") at a price of $1.50 per
private placement warrant in a private placement (the "private placement") to
our Sponsor, generating gross proceeds of $12,000,000.
Following our initial public offering and the private placement, a total of
$255,000,000 was placed in our trust account. We incurred $14,566,172 in initial
public offering related costs, including $5,000,000 of underwriting fees,
$8,750,000 of deferred underwriting fees, and $816,172 of other offering costs.
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
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through June 30, 2022 were organizational activities, those
necessary to prepare for our initial public offering, described below, and
identifying a target company for a business combination. We do not expect to
generate any operating revenues until after the completion of our business
combination. We generate non-operating income in the form of interest income on
marketable securities held in our trust account established for the benefit of
our public stockholders (the "trust account"). We incur expenses as a result of
being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence and other expenses in connection with
searching for, and completing, a business combination.
For the three months ended June 30, 2022, we had net loss of $136,544, which
consisted of operating and formation costs of $310,187, unrealized loss on
marketable securities held in the trust account of $41,103 and provision for
income taxes of $34,154, offset by interest income on marketable securities held
in the trust account of $248,900.
For the six months ended June 30, 2022, we had net loss of $457,845, which
consisted of operating and formation costs of $654,445, unrealized loss on
marketable securities held in the trust account of $82,700 and provision for
income taxes of $34,154, offset by interest income on marketable securities held
in the trust account of $313,454.
For the three months ended June 30, 2021, we had net loss of $65, which
consisted of operating and formation costs.
For the period from January 1, 2021 (commencement of operations) through June
30, 2021, we had net loss of $1,065, which consisted of operating and formation
costs.
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Liquidity and Going Concern
For the six months ended June 30, 2022, cash used in operating activities was
$309,286. Net loss of $457,845 was affected by an unrealized loss on marketable
securities held in trust account of $82,700 and interest income on marketable
securities held in the trust account of $313,454. Changes in operating assets
and liabilities provided $379,313 of cash for operating activities.
For the period from January 1, 2021 (commencement of operations) through June
30, 2021, cash used in operating activities was $0. Net loss of $1,065 was
affected by changes in operating assets and liabilities provided $1,065 of cash
for operating activities.
As of June 30, 2022, we had marketable securities held in the trust account of
$255,223,647 (including approximately $223,647 of interest income) consisting of
U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the
balance in the trust account may be used by us to pay taxes. Through June 30,
2022, we have not withdrawn any interest earned from the trust account.
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
income taxes payable), to complete our business combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our business combination, the remaining proceeds held in the trust
account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of June 30, 2022, we had cash held outside the trust account of $772,239. 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a business combination, we would repay such
loaned amounts. In the event that a 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 working capital loans may be
convertible into warrants of the post-business combination entity at a price of
$1.50 per warrant. Any warrants issued upon conversion of the working capital
loans would be identical to the private placement warrants.
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We may need to raise additional capital through loans or additional investments
from our Sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and our Sponsor may, but are not obligated to, loan us funds
as may be required. Accordingly, we may not be able to obtain additional
financing. If we are unable to raise additional capital, it may be required to
take additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of a
potential transaction, and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to it on commercially acceptable
terms, if at all. In addition, in connection with the Company's assessment of
going concern considerations in accordance with Financial Accounting Standard
Board's ("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern," the
Company has until May 9, 2023 to consummate the proposed Business Combination.
It is uncertain that the Company will be able to consummate the proposed
Business Combination by this time. These conditions raise substantial doubt
about our ability to continue as a going concern for at least one year from the
date that the condensed financial statements included in this Report were
issued. These condensed financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should we be unable to continue as a going
concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2022. 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 our Sponsor
a total of up to $20,000 per month for, among other things, the provision of the
services of one or more investment professionals, who may be related parties of
our Sponsor or of one of our executive officers. An affiliate of our Sponsor has
entered into an employment arrangement with James Bradley, our chief financial
officer, pursuant to which Mr. Bradley is compensated for, among other things,
transaction management and negotiation services, which include, but are not
limited to, his services to our Sponsor. Mr. Bradley is paid by this affiliate
$12,500 per month, and a portion of the $20,000 monthly fee paid to our Sponsor
is allocated to the reimbursement of Mr. Bradley's monthly salary. Mr. Bradley
and each of the professionals will be paid at or below market rates for their
services. We began incurring these fees on November 4, 2021 and will continue to
incur these fees monthly until the earlier of the completion of the business
combination and our liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $8,750,000
in the aggregate. The deferred fee will become payable to the underwriter from
the amounts held in the trust account solely in the event that we complete a
business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
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:
Warrant Liabilities
We account for our warrants as either equity-classified or liability-classified
instruments based on an assessment of the instruments' specific terms and
applicable authoritative guidance in FASB Accounting Standards Codification
("ASC") 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815,
Derivatives and Hedging ("ASC 815"). The assessment considers whether the
instruments are freestanding financial instruments pursuant to ASC 480, meet the
definition of a liability pursuant to ASC 480, and whether the instruments meet
all of the requirements for equity classification under ASC 815, including
whether the instruments are indexed to our own common shares and whether the
instrument holders could potentially require "net cash settlement" in a
circumstance outside of our control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the instruments are outstanding. Upon review of
the warrant agreement, management concluded that the public warrants and private
placement warrants issued pursuant to the warrant agreement qualify for equity
accounting treatment.
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Class A 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' deficit section of our condensed balance sheet.
Net Loss per Common Stock
Net loss per common stock is computed by dividing net loss by the weighted
average number of common stock outstanding for the period. We apply the
two-class method in calculating losses per share. Accretion associated with the
redeemable shares of Class A common stock is excluded from net loss per share as
the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our unaudited condensed financial statements.
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