New Providence Acquisition Corp. II(NPABU) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements. This section presents the unaudited condensed financial statements, including balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, IPO and private placement details, related party transactions, commitments, stockholders' deficit composition, fair value measurements, and subsequent events Condensed Balance Sheets The condensed balance sheets show a significant decrease in total assets and marketable securities held in the Trust Account from December 31, 2022, to September 30, 2023, primarily due to redemptions. Total liabilities increased, and stockholders' deficit deepened Condensed Balance Sheets Key Metrics | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------------- | :----------------- | :---------------- | | Total Assets | $56,534,661 | $258,664,674 | | Marketable securities held in Trust Account | $56,230,525 | $257,913,695 | | Total Current Liabilities | $3,746,066 | $1,139,073 | | Total Liabilities | $12,496,066 | $10,037,935 | | Total Stockholders' Deficit | $(11,994,634) | $(8,950,839) | - Class A common stock subject to possible redemption decreased from 25,000,000 shares at $10.30 per share redemption value at December 31, 2022, to 5,267,875 shares at $10.64 per share redemption value at September 30, 2023, reflecting significant redemptions[4] Unaudited Condensed Statements of Operations The company reported net income for both the three and nine months ended September 30, 2023 and 2022, primarily driven by interest earned on marketable securities held in the Trust Account, offset by formation and operating costs and income taxes Unaudited Condensed Statements of Operations Key Metrics | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Formation and operating costs | $355,345 | $269,141 | $1,145,809 | $923,586 | | Interest earned on marketable securities | $722,208 | $1,093,144 | $5,138,865 | $1,406,598 | | Unrealized gain on marketable securities | $0 | $140,071 | $0 | $57,371 | | Income before provision for income taxes | $366,863 | $964,074 | $3,993,056 | $540,383 | | Provision for income taxes | $(141,164) | $(217,217) | $(1,047,662) | $(251,371) | | Net income | $225,699 | $746,857 | $2,945,394 | $289,012 | | Basic and diluted net income per share (Redeemable Class A) | $0.02 | $0.02 | $0.14 | $0.01 | - Net income for the nine months ended September 30, 2023, significantly increased to $2,945,394 from $289,012 in the prior year, primarily due to higher interest earned on marketable securities held in the Trust Account[8] Unaudited Condensed Statements of Changes in Stockholders' Deficit The statements reflect changes in stockholders' deficit, including the impact of remeasurement of Class A Common Stock to redemption value, net income, and the recording of excise tax payable attributable to common stock redemption Unaudited Condensed Statements of Changes in Stockholders' Deficit Key Metrics | Metric | January 1, 2023 Balance | September 30, 2023 Balance | | :---------------------------------------------- | :---------------------- | :------------------------- | | Total Stockholder's Deficit | $(8,950,839) | $(11,994,634) | | Remeasurement of Class A Common Stock to Redemption Value | $(3,934,401) (cumulative) | | | Net income | $2,945,394 (cumulative) | | | Excise tax payable attributable to redemption | $(2,054,788) | | - The accumulated deficit increased from $(8,951,464) at January 1, 2023, to $(11,995,259) at September 30, 2023, influenced by remeasurement of Class A Common Stock to redemption value and excise tax payable, partially offset by Net income[9] Unaudited Condensed Statements of Cash Flows Cash flows for the nine months ended September 30, 2023, show significant cash used in operating activities, offset by cash provided by investing activities (primarily from Trust Account withdrawals for redemptions and taxes), and cash used in financing activities (primarily for common stock redemption) Unaudited Condensed Statements of Cash Flows Key Metrics | Cash Flow Activity | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(1,625,474) | $(549,756) | | Net cash provided by investing activities | $206,822,035 | $0 | | Net cash used in financing activities | $(205,278,750) | $0 | | Net Change in Cash | $(82,189) | $(549,756) | | Cash – End of period | $257,474 | $531,769 | - Cash withdrawn from the Trust Account in connection with redemption amounted to $205,478,750 for the nine months ended September 30, 2023[12] Notes to Unaudited Condensed Financial Statements The notes provide critical context to the financial statements, detailing the company's nature as a blank check company, the specifics of its IPO and private placement, related party transactions, and the accounting treatment of various financial instruments and events, including the significant redemptions and the associated excise tax liability NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, LIQUIDITY, AND RISKS AND UNCERTAINTIES New Providence Acquisition Corp. II is a blank check company formed to effectuate a business combination. The company completed its IPO in November 2021, placing $255 million in a Trust Account. Significant redemptions occurred in May 2023, reducing the Trust Account balance. The company faces liquidity challenges and has until May 9, 2024, to complete a business combination, raising substantial doubt about its ability to continue as a going concern. An excise tax liability of $2,054,788 was recorded due to redemptions - The Company consummated its Initial Public Offering of 25,000,000 units at $10.00 per unit, generating gross proceeds of $250,000,000, with $255,000,000 placed in a Trust Account[17][20] - Public stockholders elected to redeem 19,732,125 shares of Class A common stock for approximately $205,478,750 in May 2023, reducing the Trust Account balance[31] - An excise tax liability of $2,054,788 was recorded as of September 30, 2023, due to the redemptions, which can be offset by future share issuances[40] - The company has a working capital deficit of $3,441,930 as of September 30, 2023, and faces substantial doubt about its ability to continue as a going concern if it cannot complete a business combination by May 9, 2024[34][36] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the basis of presentation for the unaudited condensed financial statements, the company's status as an emerging growth company, its use of estimates, and specific accounting treatments for cash, marketable securities in the Trust Account, Class A common stock subject to redemption, offering costs, income taxes, net income per common stock, fair value measurements, and warrant liabilities. It also mentions the adoption of ASU 2016-13 with no material impact - The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[43][44] - Class A common stock subject to possible redemption is classified as temporary equity and presented at redemption value, with changes recognized immediately[50][51] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Key Metrics | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Effective Tax Rate | 38.5% | 22.5% | 26.2% | 46.5% | - The Company adopted ASU 2016-13 on January 1, 2023, which did not have a material impact on its financial statements[68] NOTE 3. INITIAL PUBLIC OFFERING The Company completed its Initial Public Offering on November 9, 2021, selling 25,000,000 units at $10.00 per unit, each consisting of one Class A common stock and one-third of one redeemable Public Warrant - 25,000,000 Units were sold in the IPO at $10.00 per Unit, generating $250,000,000 in gross proceeds[70] - Each Unit included one share of Class A common stock and one-third of one redeemable Public Warrant, with each whole warrant exercisable at $11.50 per share[70] NOTE 4. PRIVATE PLACEMENT Concurrently with the IPO, the Sponsor purchased 8,000,000 Private Placement Warrants at $1.50 each, generating $12,000,000 in gross proceeds, a portion of which was added to the Trust Account - The Sponsor purchased 8,000,000 Private Placement Warrants at $1.50 per warrant, totaling $12,000,000[71] - Proceeds from the Private Placement Warrants were added to the Trust Account and will be used to fund public share redemptions if a business combination is not completed[71] NOTE 5. RELATED PARTY TRANSACTIONS This note details transactions with related parties, including the issuance of Founder Shares to the Sponsor and director nominees, an administrative support agreement with the Sponsor, and a promissory note issued to the Sponsor for working capital - The Sponsor initially received 5,750,000 Founder Shares for $25,000, with 50,000 shares transferred to director nominees at a fair value of $9.74 per share[73][74] - The Company pays the Sponsor up to $20,000 per month for administrative support services, incurring $60,000 and $180,000 for the three and nine months ended September 30, 2023, respectively[77] - On September 15, 2023, the Company issued an unsecured promissory note of $300,000 to the Sponsor, with $200,000 outstanding as of September 30, 2023[80] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines the Company's commitments, including registration rights for certain securities, a deferred underwriting fee payable upon business combination completion, and consulting service arrangements - The underwriter is entitled to a deferred fee of $8,750,000, payable from the Trust Account upon completion of a Business Combination[82] - The Company has consulting service arrangements with aggregate monthly fees of approximately $10,000, incurring $0 and $57,700 for the three and nine months ended September 30, 2023, respectively[83] NOTE 7. STOCKHOLDERS' DEFICIT This note details the authorized and outstanding shares of preferred stock, Class A common stock, and Class B common stock, including their voting rights and conversion features. It also describes the terms and conditions of the Public and Private Placement Warrants, including exercise and redemption provisions NOTE 7. STOCKHOLDERS' DEFICIT Key Metrics | Stock Class | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :---------------- | | Class A Common Stock (subject to redemption) | 5,267,875 shares | 25,000,000 shares | | Class B Common Stock | 3,250,000 shares | 6,250,000 shares | - On May 5, 2023, the Sponsor converted 3,000,000 shares of Class B common stock into Class A common stock[90] - 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 Business Combination completion[91][95] - The Company may redeem outstanding Public Warrants at $0.01 per warrant if the Class A common stock price equals or exceeds $18.00 for 20 trading days within a 30-day period[97] NOTE 8. FAIR VALUE MEASUREMENTS This note describes the fair value hierarchy used for financial assets and liabilities and presents the fair value of marketable securities held in the Trust Account, which are classified as Level 1 assets NOTE 8. FAIR VALUE MEASUREMENTS Key Metrics | Description | Level | September 30, 2023 | December 31, 2022 | | :-------------------------------------- | :---- | :----------------- | :---------------- | | Marketable securities held in Trust Account | 1 | $56,230,525 | $257,913,695 | - Marketable securities held in the Trust Account are classified as Level 1 assets, reflecting quoted prices in active markets for identical assets[102][104] NOTE 9. SUBSEQUENT EVENTS The Company evaluated subsequent events up to the financial statement issuance date and identified no events requiring adjustment or disclosure - No subsequent events requiring adjustment or disclosure were identified after the balance sheet date up to the date the unaudited condensed financial statements were issued[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial condition and results of operations, highlighting its status as a blank check company, the impact of IPO and private placement proceeds, and the ongoing search for a business combination. It details the net income drivers, liquidity challenges, and critical accounting policies, emphasizing the substantial doubt about the company's ability to continue as a going concern - The Company is a blank check company focused on identifying a target for a business combination, generating non-operating income from interest on Trust Account securities[109][112] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Key Metrics | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $225,699 | $746,857 | $2,945,394 | $289,012 | | Interest earned on marketable securities | $722,208 | $1,093,144 | $5,138,865 | $1,406,598 | | Operating and formation costs | $355,345 | $269,141 | $1,145,809 | $923,586 | - Cash used in operating activities was $1,625,474 for the nine months ended September 30, 2023, compared to $549,756 for the same period in 2022[117][118] - As of September 30, 2023, the Trust Account held $56,230,525, and the company had $257,474 in operating bank accounts, with a working capital deficit of $3,441,930[34][119][121] - The company has until May 9, 2024, to consummate a business combination, and the uncertainty raises substantial doubt about its ability to continue as a going concern[125] Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, New Providence Acquisition Corp. II is exempt from providing 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[135] Item 4. Controls and Procedures. The company's Certifying Officers concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to an un-remediated material weakness in internal controls over financial reporting related to properly recording and accruing expenses. No changes in internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect internal control over financial reporting - Disclosure controls and procedures were not effective as of September 30, 2023[136] - A previously identified material weakness in internal controls over financial reporting, related to properly recording and accruing expenses, has not yet been remediated[136] - No changes in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2023, that materially affected or are reasonably likely to materially affect internal control over financial reporting[138] PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company reported no legal proceedings - There are no legal proceedings to report[140] Item 1A. Risk Factors. The Company refers to the risk factors disclosed in its Annual Report on Form 10-K for the period ended December 31, 2022, and states that no other material changes to these factors have occurred as of the date of this Quarterly Report - Risk factors are described in the Annual Report on Form 10-K for the period ended December 31, 2022[141] - No other material changes to the risk factors have been disclosed as of the date of this Quarterly Report[141] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section details the Initial Public Offering of 25,000,000 units and the concurrent private placement of 8,000,000 warrants to the Sponsor, outlining the gross proceeds, offering costs, and the allocation of net proceeds to the trust account - The Initial Public Offering involved the sale of 25,000,000 Units at $10.00 per Unit, generating $250,000,000 in gross proceeds[142] - The Sponsor purchased 8,000,000 private placement warrants at $1.50 per warrant, generating $12,000,000 in gross proceeds[143] - Total IPO-related costs were $14,566,172, including $5,000,000 in underwriting fees and $8,750,000 in deferred underwriting fees[144] - After deducting fees and expenses, $255,000,000 of the total net proceeds of $256,183,828 was placed in the trust account[145] Item 3. Defaults Upon Senior Securities. The Company reported no defaults upon senior securities - There are no defaults upon senior securities[146] Item 4. Mine Safety Disclosures. This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[146] Item 5. Other Information. The Company reported no other information - There is no other information to report[146] Item 6. Exhibits. This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report, including organizational documents, certifications, and XBRL data files - The exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, certifications of principal executive and financial officers, and Inline XBRL documents[148] SIGNATURES The report is duly signed on behalf of New Providence Acquisition Corp. II by its Chief Executive Officer, Gary Smith, and Chief Financial Officer, James Bradley, as of November 13, 2023 - The report is signed by Gary Smith, Chief Executive Officer, and James Bradley, Chief Financial Officer, on November 13, 2023[149]