References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to New Providence Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to New Providence Management 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
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 filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC'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 the State of Delaware on
May 28, 2019 for the purpose of effecting 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 the Initial Public Offering and the
sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
The issuance of additional shares of our stock in a Business Combination:
? may significantly dilute the equity interest of investors in our Initial
Public Offering;
? may subordinate the rights of holders of common stock if preferred stock is
issued with rights senior to those afforded our common stock;
? could cause a change of control if a substantial number of shares of our
common stock are issued, which may affect, among other things, our ability to
use our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors; and
? may adversely affect prevailing market prices for our Units, Class A common
stock and/or warrants.
Similarly, if we issue debt securities, it could result in:
? default and foreclosure on our assets if our operating revenues after an
initial Business Combination are insufficient to repay our debt obligations;
? acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
? our inability to obtain necessary additional financing if the debt security
contains covenants restricting our ability to obtain such financing while the
debt security is outstanding;
? our inability to pay dividends on our common stock;
? using a substantial portion of our cash flow to pay principal and interest on
our debt, which will reduce the funds available for dividends on our common
stock if declared, our ability to pay expenses, make capital expenditures and
acquisitions, and fund other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
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? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation;
? limitations on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, and execution of our
strategy; and
? other disadvantages compared to our competitors who have less debt.
As indicated in the accompanying financial statements, at September 30, 2020, we
had $357,013 in cash and working capital of $259,351, which excludes franchise
and income taxes payable as the net amounts can be paid from the interest earned
in the Trust Account. We expect to continue to incur significant costs in the
pursuit of our acquisition plans. We cannot assure you that our plans to
complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities September 30, 2020 were organizational activities, those
necessary to prepare for the Initial Public Offering, described below, and,
after our Initial Public Offering, 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 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
expenses.
For the three months ended September 30 2020, we had a net loss of $55,049,
which consisted of operating costs of $152,823 and an unrealized loss on
marketable securities held in our Trust Account of $4,918, offset by interest
income on marketable securities held in the Trust Account of $88,058 and an
income tax benefit of $14,634.
For the nine months ended September 30 2020, we had net income of $740,226,
which consisted of interest income on marketable securities held in the Trust
Account of $1,425,833 and an unrealized gain on marketable securities held in
our Trust Account of $3,172, offset by operating costs of $492,011 and a
provision for income taxes of $196,768.
For the three months ended September 30, 2019 and for the period from May 28,
2019 (inception) through September 30, 2019, we had net income of $87,761 and
$86,668, respectively, which consists of interest income on marketable
securities held in the Trust Account of $165,606 and an unrealized gain on
marketable securities held in our Trust Account of $39,814, offset by formation
and operating costs and formation of $94,621 and $95,714, respectively, and a
provision for income taxes of $23,038.
Liquidity and Capital Resources
On September 13, 2019, we consummated the Initial Public Offering of 20,000,000
Units at a price of $10.00 per Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 5,500,000 Private Placement Warrants to the Sponsor at a price of
$1.00 per warrant, generating gross proceeds of $5,500,000.
On September 19, 2019, in connection with the underwriters' full exercise of
their over-allotment option, we consummated the sale of an additional 3,000,000
Units and the sale of an additional 600,000 Private Placement Warrants,
generating total gross proceeds of $30,600,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $230,000,000 was
placed in the Trust Account. We incurred $13,260,927 in transaction costs,
including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting
fees and $610,927 of other costs.
As of September 30, 2020, we had marketable securities held in the Trust Account
of $232,143,216 (including approximately $2,143,000 of interest income and
unrealized gains) consisting of U.S. Treasury Bills with a maturity of 180 days
or less. Interest income on the balance in the Trust Account may be used by us
to pay taxes. During the nine months ended September 30, 2020, we withdraw
$500,620 of interest earned on the Trust Account to pay our franchise and income
taxes.
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For the nine months ended September 30, 2020, cash used in operating activities
was $636,735. Net income of $740,226 was affected by interest earned on
marketable securities held in the Trust Account of $1,425,833, an unrealized
gain on marketable securities held in our Trust Account of $3,172, a deferred
tax benefit of $2,945 and changes in operating assets and liabilities, which
provided $54,989 of cash.
For the period from May 28, 2019 (inception) through September 30, 2019, cash
used in operating activities was $208,689. Net income of $86,668 was affected by
interest earned on marketable securities held in the Trust Account of $165,606,
an unrealized gain on marketable securities held in our Trust Account of
$39,814, deferred income taxes of $8,361 and changes in operating assets and
liabilities, which used $98,298 of cash.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
deferred underwriting commissions and 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 September 30, 2020, we had cash of $232,143,216 held outside the Trust
Account. We intend to use the funds held outside the Trust Account primarily to
identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the initial stockholders 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 loans may be convertible into warrants identical to the
Private Placement Warrants, at a price of $1.00 per warrant at the option of the
lender.
As of September 30, 2020, we had cash of $357,013 held outside of the Trust
Account and working capital of $259,351. Until the consummation of a Business
Combination, we will be using the funds not held in the Trust Account for
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. Our Sponsor, officers, directors or their affiliates are not under
any obligation to advance us funds, or to invest in us. Accordingly, we may not
be able to obtain additional financing. If we are unable to raise additional
capital, we 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 us on commercially acceptable terms, if at all. These conditions raise
substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2020.
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 an
affiliate of the Sponsor a monthly fee of $10,000 for office space,
administrative and support services to the Company. We began incurring these
fees on September 11, 2019 and will continue to incur these fees monthly until
the earlier of the completion of the Business Combination and the Company's
liquidation.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $8,050,000
in the aggregate. The deferred fee will become payable to the underwriters 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.
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Critical Accounting Policies
The preparation of 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:
Common Stock Subject to Possible Redemption
We account for common stock subject to possible redemption 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 is measured at fair
value. Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) is classified as temporary equity. At all other times,
common stock is classified as stockholders' equity. Our common stock features
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, common stock
subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders' equity section of our condensed balance
sheets.
Net Loss Per Share of Common Stock
We apply the two-class method in calculating earnings per share. Common stock
subject to possible redemption which is not currently redeemable and is not
redeemable at fair value, has been excluded from the calculation of basic net
loss per common share since such shares, if redeemed, only participate in their
pro rata share of the Trust Account earnings. Our net income is adjusted for the
portion of income that is attributable to common stock subject to possible
redemption, as these shares only participate in the earnings of the Trust
Account and not our income or losses.
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.
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