01—Abstract
Summary
Summary of the 10-K filed March 1, 2021. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K, filed by New Providence Acquisition Corp. (NPA) for fiscal 2020, is the annual report of a blank check company (SPAC), not of AST SpaceMobile's operating business.
NPA is the public shell that agreed on December 15, 2020 to merge with AST & Science LLC, which would be renamed AST SpaceMobile, Inc. and list under ASTS. The filing describes AST's satellite cellular broadband plans only as background for the pending transaction. NPA has no revenue, no operations, and no employees, so the 10-K itself says little about AST's technology, customers, or financial performance.
Investors evaluating the eventual combined company should rely on the proxy statement/prospectus filed February 16, 2021 for that information. NPA's financial position is simple. At December 31, 2020 it held $232.2 milliona in its trust account, roughly $10.10 per public share, including about $2.2 million of accumulated interest.
Net income for 2020 was $191,177,b driven by $1.48 million of trust interest income that was largely offset by $1.12 million of operating costs and $166K of taxes. Cash outside the trust was only $131,151, against a working capital deficit of $337,484. Auditor Marcum LLP included a going-concern paragraph, and the company's only near-term funding is non-interest-bearing loans from its sponsor, with $300K drawn as of February 26, 2021.
The key near-term risks are the deadline and the litigation. NPA must complete a business combination by March 15, 2021, and a stockholder vote on March 12, 2021 would extend that to June 15, 2021. If the deadline is missed, public shares would be redeemed at roughly $10.00c each and the warrants would expire worthless.
Three stockholder lawsuits challenging the adequacy of the proxy disclosures are pending, which management considers without merit. The proposed deal also includes a $230 milliond PIPE for 23 million Class A shares, which would dilute existing holders.
02—Key points
Key Highlights
- NPA is a blank check SPAC with no revenue or operations; the 10-K covers the shell, not AST SpaceMobile's business.
- The trust account held $232.2M at December 31, 2020 (about $10.10 per public share, including interest), against $8.05M of deferred underwriting fees payable on a completed deal.
- 2020 net income was $191,177: $1.48M trust interest income, less $1.12M operating costs and $166K income taxes.
- Cash outside the trust was $131,151 with a $337,484 working capital deficit; Marcum LLP issued a going-concern paragraph.
- The Equity Purchase Agreement with AST & Science LLC (signed December 15, 2020) would make NPA the public parent (renamed AST SpaceMobile, Inc.) under an Up-C structure, with a $230M PIPE for 23 million Class A shares.
- The business combination deadline is March 15, 2021; a March 12 vote would extend it to June 15, 2021, and failure to close triggers redemption at about $10.00 per share with warrants expiring worthless.
- Three stockholder lawsuits (January 25, February 5, and February 8, 2021) challenge the proxy disclosures and seek to enjoin the deal; management says they lack merit.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 1, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.97M— | — |
| Cost of Revenue | $3.02M— | — |
| Gross Profit | $2.94M— | — |
| R&D Expenses | $1.01M— | — |
| Operating Expenses | $27.30M$385K | +6993.3% |
| Operating Income | -$1.12M-$385K | −192.2% |
| Net Income | -$24.41M-$2.88M | −747.0% |
| EPS (Basic) | $-6.13$-0.61 | −904.9% |
| Shares Outstanding (Basic) | 8.60M6.11M | +40.7% |
05—Questions
Frequently Asked Questions
Does this 10-K show AST SpaceMobile's revenues, customers, or satellite financials?
No. The filing is for New Providence Acquisition Corp., a shell with no revenue or operations. AST's business is described only as background for the pending merger. Detailed AST financial and operational information is in the February 16, 2021 proxy statement/prospectus.
What happens to my shares if the merger is not completed?
If no business combination closes by the deadline (March 15, 2021, or June 15, 2021 if extended), NPA will redeem all public shares for cash equal to the trust balance per share, about $10.00, less up to $100,000 of dissolution costs. Warrants receive nothing and expire worthless. Public holders can also redeem for cash when a deal is put to a vote, and that redemption is independent of how they vote.
Why does the auditor raise going-concern doubt if the trust holds $232 million?
The trust funds are restricted to paying redeeming stockholders or completing a deal, so they are not available for operating costs. Cash outside the trust was only $131,151 against a $337,484 working capital deficit, and the company depends on sponsor loans with no obligation to fund it. The auditor concluded the company may not be able to meet its obligations without a completed combination.
How does the sponsor and insider ownership affect public investors?
The sponsor, New Providence Management LLC, holds 5,750,000 Class B founder shares and 6,100,000 private placement warrants, and it has agreed to vote its shares for the merger. Sponsor-affiliated insiders control about 19.9% of voting power, so the public vote needs only about 37.5% of public shares to approve a deal. Insider shares would be worthless if no deal closes, which creates an incentive to complete a transaction.
What dilution could public shareholders face from the AST transaction?
The transaction contemplates issuing 23 million Class A shares to PIPE investors for $230 million, plus the conversion of founder shares and issuances to AST equityholders. Redemptions would reduce cash in the trust, and the anti-dilution provisions in the Class B shares could increase conversion shares if equity is issued below $9.20 per share. Warrants exercisable at $11.50 would also add potential dilution.
06—Continue