New Providence Acquisition Corp. II(NPABU) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Financial Statements This section presents unaudited condensed financial statements, detailing asset decreases from redemptions and a shift to net income driven by Trust Account interest Condensed Balance Sheets Total assets decreased to $55.85 million due to redemptions, while liabilities increased and stockholders' deficit worsened - Total Assets: | Date | Amount | | :--------------- | :------------ | | June 30, 2023 | $55,846,710 | | December 31, 2022| $258,664,674 | - Marketable Securities held in Trust Account: | Date | Amount | | :--------------- | :------------ | | June 30, 2023 | $55,508,317 | | December 31, 2022| $257,913,695 | - Total Liabilities: | Date | Amount | | :--------------- | :------------ | | June 30, 2023 | $12,033,814 | | December 31, 2022| $10,037,935 | - Excise Taxes Payable: | Date | Amount | | :--------------- | :---------- | | June 30, 2023 | $2,054,788 | | December 31, 2022| $0 | - Total Stockholders' Deficit: | Date | Amount | | :--------------- | :-------------- | | June 30, 2023 | $(11,696,091) | | December 31, 2022| $(8,950,839) | Unaudited Condensed Statements of Operations The company shifted from net loss to net income for Q2 and H1 2023, primarily due to increased Trust Account interest - Net Income (Loss): | Period Ended June 30 | 2023 (Net Income) | 2022 (Net Loss) | | :------------------- | :---------------- | :-------------- | | Three Months | $808,809 | $(136,544) | | Six Months | $2,719,695 | $(457,845) | - Interest Earned on Marketable Securities held in Trust Account: | Period Ended June 30 | 2023 | 2022 | | :------------------- | :---------------- | :-------------- | | Three Months | $1,697,318 | $248,900 | | Six Months | $4,416,657 | $313,454 | - Basic and Diluted Net Income (Loss) per share, Redeemable Class A common stock: | Period Ended June 30 | 2023 (EPS) | 2022 (EPS) | | :------------------- | :--------- | :--------- | | Three Months | $0.04 | $(0.00) | | Six Months | $0.10 | $(0.01) | Unaudited Condensed Statements of Changes in Stockholders' Deficit Stockholders' deficit increased to $(11.70) million by June 30, 2023, due to stock remeasurement and excise tax, partially offset by net income - Total Stockholders' Deficit: | Date | Amount | | :--------------- | :-------------- | | January 1, 2023 | $(8,950,839) | | June 30, 2023 | $(11,696,091) | - Key changes in Stockholders' Deficit (January 1 - June 30, 2023): - Remeasurement of Class A Common Stock to Redemption Value: $(3,410,159)[11] - Net Income: $2,719,695[13] - Excise tax payable attributable to redemption of common stock: $(2,054,788)[14] Unaudited Condensed Statements of Cash Flows H1 2023 experienced significant cash outflows from operations and financing, offset by Trust Account withdrawals for redemptions and taxes - Net Cash Used in Operating Activities (Six Months Ended June 30): | Year | Amount | | :--- | :------------ | | 2023 | $(1,489,010)$ | | 2022 | $(309,286)$ | - Cash Withdrawn from Trust Account (Investing Activities) for Six Months Ended June 30, 2023: | Purpose | Amount | | :--------------------------------------- | :------------ | | To pay franchise and income taxes | $1,343,285 | | In connection with redemption | $205,478,750 | - Redemption of common stock resulted in a cash outflow of $(205,478,750) from financing activities for the six months ended June 30, 2023[16] - Net Change in Cash (Six Months Ended June 30): | Year | Amount | | :--- | :------------ | | 2023 | $(145,725)$ | | 2022 | $(309,286)$ | Notes to Unaudited Condensed Financial Statements These notes detail organization, accounting policies, financial instruments, business combination extension, stock redemptions, and going concern assessment NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, LIQUIDITY, AND RISKS AND UNCERTAINTIES This note details the company's formation, IPO, Trust Account, business combination extension, significant stock redemptions, and going concern risks, including excise tax - New Providence Acquisition Corp. II is a blank check company incorporated in Delaware on November 16, 2020, formed for the purpose of effectuating a business combination[18] - The company consummated its Initial Public Offering (IPO) on November 9, 2021, selling 25,000,000 units at $10.00 per unit, generating gross proceeds of $250,000,000[21] - Simultaneously with the IPO, the Sponsor purchased 8,000,000 Private Placement Warrants at $1.50 per warrant, generating gross proceeds of $12,000,000[22] - An amount of $255,000,000 from the net proceeds of the IPO and private placement was placed in a Trust Account, invested in U.S. government securities[24] - The Combination Period for completing a Business Combination was extended from May 9, 2023, to May 9, 2024, following a special meeting of stockholders[34] - Public stockholders elected to redeem 19,732,125 shares of Class A common stock for approximately $205,478,750 in connection with the extension vote[35] - As of June 30, 2023, the company had $193,938 in operating bank accounts, $55,508,317 in marketable securities in the Trust Account, and a working capital deficit of $2,946,091[38] - These conditions raise substantial doubt about the Company's ability to continue as a going concern for at least one year from the financial statement issuance date, given the uncertainty of consummating a Business Combination by May 9, 2024[40] - The Inflation Reduction Act of 2022 (IR Act) introduces a new U.S. federal 1% excise tax on certain stock repurchases after January 1, 2023, which could reduce cash available for a Business Combination[42][43] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines accounting policies, including GAAP, emerging growth company status, fair value for marketable securities, temporary equity for Class A stock, income tax, EPS, warrant treatment, and ASU 2016-13 adoption - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC rules for Form 10-Q[44] - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[46][47] - Marketable securities held in the Trust Account are classified as trading securities and presented at fair value, with gains and losses included in interest earned[52] - Class A common stock subject to possible redemption is classified as temporary equity and presented at redemption value, with changes recognized immediately[53][54] - The company accounts for income taxes under ASC 740, recognizing deferred tax assets and liabilities; the effective tax rate for Q2 2023 was 28.68% (vs. -33.36% in 2022) and 25.00% for H1 2023 (vs. -8.06% in 2022)[58] - Net income (loss) per common stock is computed using the two-class method, with warrants not considered dilutive as their exercise is contingent upon future events[63][64] - Management concluded that Public Warrants and Private Placement Warrants qualify for equity accounting treatment based on specific terms and applicable guidance[68] - The company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, with no material impact on its financial statements[70] NOTE 3. INITIAL PUBLIC OFFERING This note details the IPO, including the sale of 25,000,000 Units at $10.00 each, generating $250,000,000 gross proceeds, with each unit comprising Class A common stock and a warrant - The company sold 25,000,000 Units in its Initial Public Offering, including a partial exercise of the over-allotment option[72] - The purchase price per Unit was $10.00, generating gross proceeds of $250,000,000[72] - Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (Public Warrant)[72] NOTE 4. PRIVATE PLACEMENT This note describes the Sponsor's purchase of 8,000,000 Private Placement Warrants for $12,000,000, with proceeds added to the Trust Account, and their potential expiration if no business combination occurs - The Sponsor purchased 8,000,000 Private Placement Warrants at $1.50 per warrant, for an aggregate purchase price of $12,000,000[73] - A portion of the proceeds from the Private Placement Warrants was added to the Trust Account[73] - If a Business Combination is not completed within the Combination Period, the Private Placement Warrants will expire worthless[73] NOTE 5. RELATED PARTY TRANSACTIONS This note details related party transactions, including the Sponsor's Founder Shares purchase, Class B to Class A stock conversion, monthly administrative fees, and the absence of Working Capital Loans - The Sponsor paid $25,000 for 5,750,000 shares of Class B common stock (Founder Shares)[75] - Stock-based compensation expense related to Founder Shares is not recognized as of June 30, 2023, because the performance condition (consummation of a Business Combination) is not considered probable[76] - On May 5, 2023, the Sponsor converted 3,000,000 shares of Class B common stock into shares of Class A common stock[78] - The company pays the Sponsor up to $20,000 per month for administrative support, incurring $60,000 for Q2 and $120,000 for H1 2023[79] - No Working Capital Loans were outstanding from related parties at June 30, 2023, or December 31, 2022[81] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines commitments and contingencies, including registration rights for certain security holders, a deferred underwriting fee, and ongoing consulting service arrangements - Holders of Founder Shares, Private Placement Warrants, and potential Working Capital Loan warrants are entitled to registration rights[82] - A deferred underwriting fee of $8,750,000 is payable to the underwriter solely upon the completion of a Business Combination[83] - The company has consulting service arrangements with aggregate monthly fees of approximately $10,000, incurring $27,700 for Q2 2023 and $57,700 for H1 2023[84] NOTE 7. STOCKHOLDERS' DEFICIT This note details stockholders' deficit components, including authorized preferred stock, Class A and B common stock, outstanding Public and Private Placement Warrants, and their exercisability and redemption terms - The company is authorized to issue up to 1,000,000 shares of preferred stock, with none issued or outstanding as of June 30, 2023, and December 31, 2022[85] - Class A Common Stock Subject to Possible Redemption: | Date | Shares Outstanding | | :--------------- | :----------------- | | June 30, 2023 | 5,267,875 | | December 31, 2022| 25,000,000 | - Class B Common Stock Issued and Outstanding: | Date | Shares Outstanding | | :--------------- | :----------------- | | June 30, 2023 | 3,250,000 | | December 31, 2022| 6,250,000 | - Class B common stock automatically converts into Class A common stock upon the closing of a Business Combination or at the holder's option, on a one-for-one basis (subject to adjustment)[89] - As of June 30, 2023, there were 8,333,333 Public Warrants and 8,000,000 Private Placement Warrants issued and outstanding[91][100] - Public Warrants become exercisable on the later of 30 days after a Business Combination or 12 months from the IPO closing, expiring five years from the Business Combination or earlier upon redemption/liquidation[91] - The company may redeem outstanding Public Warrants at $0.01 per warrant if the Class A common stock price equals or exceeds $18.00 per share for 20 trading days within a 30-day period[97] NOTE 8. FAIR VALUE MEASUREMENTS This note describes the company's fair value measurements, classifying financial assets and liabilities into a three-level hierarchy, with marketable securities in the Trust Account categorized as Level 1 - The company classifies financial assets and liabilities into a three-level fair value hierarchy based on the observability of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[102][103] - Marketable Securities held in Trust Account (Level 1 Fair Value): | Date | Amount | | :--------------- | :------------ | | June 30, 2023 | $55,508,317 | | December 31, 2022| $257,913,695 | NOTE 9. SUBSEQUENT EVENTS The company evaluated subsequent events up to the financial statement issuance date and identified no events requiring adjustment or additional disclosure - The company evaluated subsequent events up to the date of financial statement issuance and did not identify any events requiring adjustment or disclosure beyond what is already noted[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The blank check company, lacking operating revenue, reported net income for Q2 and H1 2023 due to Trust Account interest, but faces liquidity and going concern challenges - The company is a blank check company formed to effectuate a business combination and has not generated any operating revenues to date, relying on interest income from its Trust Account[109][112] - Net Income (Loss) for the Periods Ended June 30: | Period | 2023 (Net Income) | 2022 (Net Loss) | | :----------- | :---------------- | :-------------- | | Three Months | $808,809 | $(136,544) | | Six Months | $2,719,695 | $(457,845) | - Cash used in operating activities was $(1,489,010) for the six months ended June 30, 2023[117] - As of June 30, 2023, the company had $55,508,317 in marketable securities in the Trust Account and $193,938 in cash held outside the Trust Account[119][121] - The company faces substantial doubt about its ability to continue as a going concern due to the uncertainty of completing a Business Combination by May 9, 2024, and potential need for additional capital[123] - The company has no off-balance sheet financing arrangements as of June 30, 2023[124] - Contractual obligations include a monthly administrative fee of up to $20,000 per month to the Sponsor and a deferred underwriting fee of $8,750,000 payable upon completion of a Business Combination[125][126] - Critical accounting policies include the classification of warrant liabilities as equity, Class A common stock subject to redemption as temporary equity, and the calculation of net income (loss) per common stock using the two-class method[128][129][130] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[131] Item 4. Controls and Procedures Disclosure controls were ineffective as of June 30, 2023, due to an un-remediated material weakness in expense accrual, but financial statements are fairly presented with no material control changes - The company's disclosure controls and procedures were not effective as of June 30, 2023[132] - A previously identified material weakness in internal controls over financial reporting, related to properly recording and accruing expenses, has not yet been remediated[132] - Management believes that the financial statements included in this report present fairly in all material respects, despite the material weakness, due to additional analysis performed[132] - There were no changes to internal control over financial reporting during the fiscal quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect it[134] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - The company is not involved in any legal proceedings[136] Item 1A. Risk Factors No material changes to risk factors were reported from the Annual Report on Form 10-K for the period ended December 31, 2022 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the period ended December 31, 2022, as of the date of this Quarterly Report[137] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the IPO of 25,000,000 units for $250,000,000, the Sponsor's $12,000,000 private placement, and the $255,000,000 placed in the trust account after costs - The Initial Public Offering involved the sale of 25,000,000 Units at $10.00 per Unit, generating gross proceeds of $250,000,000[138] - The Sponsor purchased 8,000,000 private placement warrants at $1.50 per warrant, generating gross proceeds of $12,000,000, pursuant to an exemption from registration[139] - Total Initial Public Offering related costs amounted to $14,566,172, including $8,750,000 of deferred underwriting fees[140] - After deducting fees and expenses, $255,000,000 of the total net proceeds from the IPO and private placement was placed in the trust account[141] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company has no defaults upon senior securities[142] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[142] Item 5. Other Information The company reported no other information - No other information to report[142] Item 6. Exhibits This section lists exhibits filed or incorporated by reference, including the Amended and Restated Certificate of Incorporation, Bylaws, and various certifications - The exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and various certifications (e.g., 31.1, 31.2, 32.1, 32.2) filed or incorporated by reference[144] PART III. SIGNATURES Signatures The report was signed by Gary Smith, CEO, and James Bradley, CFO, on behalf of New Providence Acquisition Corp. II on August 21, 2023 - The report was signed by Gary Smith, Chief Executive Officer, and James Bradley, Chief Financial Officer, on August 21, 2023[147]