☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐No No ☒

As of ~~November 15, 2021,~~May 13, 2022 there were ~~51,729,904~~ ~~shares~~51,862,973 shares of Class A common stock, $0.0001 per value, 51,636,922shares of Class B common stock, $0.0001 par value, and 78,163,078shares of Class C common stock, $0.0001 par value, issued and outstanding.

(1) Earnings per share information has not been presented for periods prior to the Business Combination, as it resulted in values that would not be meaningful to the users of these condensed consolidated financial statements. Refer to Note 13 for further information.

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)~~

Organization and Nature of Operations

AST SpaceMobile, Inc., collectively with its subsidiaries (“SpaceMobile” or the “Company”), is an innovative satellite designer and manufacturer. ~~SpaceMobile~~The Company is currently in the process of assembling, integrating, and testing its BlueWalker 3 (“BW3”) test satellite. In addition, the Company is in the design, development, and procurement process for the ~~SpaceMobile~~ constellation of BlueBird ("BB") satellites in advance of manufacturing and launching the first ~~space-based~~space based global cellular broadband network distributed through a constellation of Low Earth Orbit ~~Satellites (the “AST Satellite Constellation”).~~satellites. Once deployed and operational, the ~~AST Satellite Constellation is~~BB satellites are designed to provide connectivity directly to standard/unmodified cellular phones or any 2G/3G/4G LTE and 5G enabled device (the “SpaceMobile Service”). At that point, ~~we intend~~the Company intends to offer the SpaceMobile Service to cellular subscribers and others through wholesale commercial roaming agreements with cellular service providers on a global basis. The Company operates from six locations that include its corporate headquarters and ~~85,000~~185,000 square foot satellite assembly, integrating and testing ~~facility~~facilities in Midland, Texas, and engineering and development ~~locations~~centers in Maryland, Spain, the United Kingdom, and Israel. In addition, its 51% owned and controlled subsidiary, NanoAvionika UAB (“Nano”), is ~~headquartered~~located in Lithuania.

On April 6, 2021 (the ~~“Closing Date”~~"Closing Date"), the Company completed a business combination ~~(“Business~~(the “Business Combination”) pursuant to that certain equity purchase agreement, dated as of December 15, 2020 (the “Equity Purchase Agreement”), by and among AST & Science, LLC (“AST LLC”), New Providence Acquisition Corp. (“NPA”), the existing ~~equityholders~~equity holders of AST LLC (“("Existing ~~Equityholders”~~Equityholders"), New Providence Acquisition Management LLC (“Sponsor”), and Mr. Abel Avellan, as representative of the Existing Equityholders. Immediately, upon the completion of the Business Combination, NPA was renamed AST SpaceMobile, Inc. and AST LLC became a subsidiary of the ~~AST SpaceMobile, Inc.~~Company. The Business Combination is documented in greater detail in Note 3.

Following the consummation of the Business Combination (the “Closing”), the combined company is organized in an “Up-C” structure in which the business of AST LLC and its subsidiaries is held by ~~AST~~ SpaceMobile ~~Inc.~~ and continues to operate through the subsidiaries of AST LLC, and in which SpaceMobile’s only direct assets consist of equity interests in AST LLC. The Company’s common stock and warrants are listed on the Nasdaq Capital Market under the symbols “ASTS” and “ASTSW”, respectively. As the managing member of AST LLC, SpaceMobile has full, exclusive and complete discretion to manage and control the business of AST LLC and to take all action it deems necessary, appropriate, advisable, incidental, or convenient to accomplish the purposes of AST LLC and, accordingly, the financial statements are being prepared on a consolidated basis with SpaceMobile.

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in ~~our~~the Company's periodic reports and proxy statements, and exemptions from the requirements of holding a ~~nonbinding~~non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

There continues to be uncertainties regarding the pandemic of the novel coronavirus (“COVID-19”), and the Company is closely monitoring the impact of COVID-19 on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, and business partners. Any estimates made herein may change as new events occur and additional information is obtained, and actual results could differ materially from any estimates made herein under different assumptions or conditions. The Company has evaluated the impact of the COVID-19 pandemic for the period ended September 30, 2021 and has not realized a material impact to the Company’s technology development efforts or operations. The Company is unable to predict the impact that COVID-19 may have on its financial position and operations moving forward due to the numerous uncertainties. The Company will continue to assess the evolving impact of COVID-19.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”) ~~for interim reporting. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been~~. The unaudited condensed ~~or omitted pursuant to such rules and regulations relating to interim financial statements. The~~ consolidated financial statements include the accounts of ~~AST SpaceMobile, Inc.~~the Company and its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation. Certain comparative amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations. The ~~December~~March 31, ~~2020~~2021 balances reported herein are derived from the ~~audited~~unaudited condensed consolidated financial statements of AST LLC. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal and recurring adjustments) necessary to fairly state the unaudited condensed consolidated financial statements.

Pursuant to the Business Combination, the transaction between the Company and AST LLC was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, NPA was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of AST LLC issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of AST LLC are stated at historical cost and net assets of NPA are stated at fair value, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Business Combination are those of AST LLC. The shares and corresponding capital amounts prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Equity Purchase Agreement.

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s ~~annual~~ audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2020 contained~~2021, included in ~~our~~its Annual Report on Form ~~8-K dated April 12, 2021.~~10-K filed with the "SEC" on March 31, 2022 (the "2021 Annual Report on Form 10-K"). The results of operations for the periods presented are not indicative of the results to be expected for the year ending December 31, ~~2021~~2022 or for any other interim period or other future year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on historical experience when available and on other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, useful lives assigned to property and equipment, the fair values of warrant liabilities, valuation and potential impairment of goodwill and long-lived assets, and equity-based compensation expense. The Company assesses estimates on an ongoing ~~basis;~~basis; however, actual results could materially differ from those ~~estimates.~~estimates due to risks and uncertainties, including the continued uncertainty surrounding rapidly changing market and economic conditions due to the COVID-19 pandemic.

~~Cash and Cash Equivalents~~

The Company’s cash consists of cash maintained within standard bank accounts at Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. The Company’s cash equivalents consist of short-term money market funds. The Company considers all highly liquid investments with a maturity date of 90 days or less at the date of purchase to be cash equivalents.

~~Fair Value of Financial Instruments~~

The Company measures certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including cash, accounts receivable, accounts payable, and accrued expenses, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

~~Inventories~~Foreign Currency Translation and Transaction Gains

~~Inventories~~The financial statements of the Company’s foreign subsidiaries are ~~carried~~translated from local currency into reporting currency, which is U.S. dollars, using the current exchange rate at the ~~lower~~balance sheet date for assets and liabilities, and the weighted average exchange rate prevailing during the period for revenues and expenses. The functional currency of ~~cost or~~the Company’s foreign subsidiaries is the local currency for each entity and, accordingly, translation adjustments for these subsidiaries are included in accumulated other comprehensive loss within stockholders’ equity. Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as other income (expense), net ~~realizable value. Cost~~in the unaudited condensed consolidated statements of operations.

BlueWalker3 Capitalization

The Company accounts for research and development costs related to the BlueWalker3 test satellite based on guidance in ASC 730 - Research and Development (“ASC 730”). The Company determined there is ~~determined by~~an alternative future use for BW3 as defined in this guidance. As such, certain costs related to the ~~first-in first-out (FIFO) method.~~construction of the BW3 test satellite are capitalized and reported as construction-in-progress (“CIP”) on the unaudited condensed consolidated balance sheets. The ~~cost of work-in-progress comprises raw materials,~~Company capitalizes only those expenditures and ancillary costs that are directly attributable to the construction phase and necessarily incurred to place BW3 into its intended location and use. To date, capitalized expenditures include the costs for satellite ~~componentry, direct labor,~~parts, paid launch cost, and other ~~direct~~non-recurring costs directly associated with BW3 developments. The other non-recurring costs primarily include third-party engineers who are hired solely for the design, assembly, and testing of BW3 and are responsible for the value and progression of the project. The costs for internal, recurrent engineers and consultants are expensed as engineering ~~costs. No reserve for excess and/or obsolete inventory was recognized in~~services and not capitalized to the ~~periods presented. The Company’s inventory~~CIP account on the unaudited condensed consolidated balance ~~was $2.7~~ sheets, as these employees are not directly associated with the development of BW3.~~million and $2.6~~ ~~million as of September 30, 2021 and December 31, 2020, respectively.~~

Property and Equipment

The Company records property and equipment at cost. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, and any other costs directly attributable to bringing the asset to a working condition for the intended use. During their construction, items of property, plant, and equipment are classified as construction in progress. When the asset is available for use, it is transferred from construction in progress to the appropriate category of property, plant, and equipment and depreciation on the item commences. Repairs and maintenance costs that do not extend the useful life or enhance the productive capacity of an asset are expensed as incurred and recorded as part of general and administrative operating expenses in the accompanying unaudited condensed consolidated statements of operations. Upon retirement or disposal of property and equipment, the Company derecognizes the cost and accumulated depreciation balance associated with the asset, with a

resulting gain or loss from disposal included in the determination of net income or loss. ~~Maintenance and repairs are charged to expense as incurred and any additions or improvements which extend the useful life of an asset or increase its productive capacity are capitalized.~~ Depreciation expense is computed using the straight-line method over the estimated useful lives which the Company has assigned to its underlying asset classes, which are as follows:

~~Schedule of Estimated Useful Lives~~


		Estimated Useful Life
Computers, software, and equipment	2	2to to 5 years~~years~~
Leasehold improvements		Shorter of estimated useful life or lease term
Satellite antenna		5 years
~~Test and lab equipment~~		5 ~~years~~
~~Phased array test facility~~		5 ~~years~~
~~Assembly~~Lab, assembly, and integration equipment		5 years
~~Furniture and fixtures~~Others (1)	5 to	7 years
~~Vehicles~~		5 ~~years~~

(1) Includes vehicles, furniture and fixtures, and a phased array test facility.

~~Long-Lived Assets~~

Long-lived assets, except for goodwill, consist of property and equipment and definite lived acquired intangible assets, such as developed technology and tradenames. Long-lived assets, except for goodwill, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of long-lived assets and definite lived intangible assets may warrant revision or if events or circumstances indicate that the carrying value of these assets may be impaired. To compute whether assets have been impaired, the estimated undiscounted future cash flows for the estimated remaining useful life of the assets are compared to the carrying value. To the extent that the future cash flows are less than the carrying value, the assets are written down to the estimated fair value of the asset. There were 0~~impairment charges for long-lived assetsrecognized for the periods ended September 30, 2021 and 2020.~~

~~Goodwill~~

The Company evaluates goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Goodwill is tested at the reporting unit level, which is considered an operating segment or one level below an operating segment. The Company has two reporting units: AST LLC and Nano. However, given no goodwill has been allocated to the AST LLC reporting unit, the Company identifies Nano as the sole reporting unit for purposes of goodwill impairment testing.

The annual goodwill impairment test is based on either a qualitative or quantitative assessment. We have the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If management determines this is the case, we are required to perform a quantitative assessment. A quantitative assessment is an analysis of the fair value of the reporting unit compared to its carrying value. A goodwill impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company perform~~s the annual goodwill impairment test during the fourth quarter each year. There were~~ 0~~impairment charges for goodwill recognized for the periods ended September 30, 2021 and 2020.~~

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ~~the Accounting Standards Codification (“ASC”)~~ASC 480 - Distinguishing Liabilities from Equity (“(“ASC 480”) and ASC 815 - Derivatives and Hedging (“ASC 815”). Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s 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 warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of operations.

Engineering costs are charged to expense as incurred. Engineering costs consist primarily of the expenses associated with our ongoing engineering efforts to establish feasibility of our satellites, as well as the cost of internal staff (such as engineers and consultants) to support these efforts. Currently, major engineering activities include the manufacturing and assembly of the satellite components required for the BW3 test satellite at the Company’s Midland, Texas facility and the development and design of the first commercial satellite launches for a first constellation phase of 20 satellites (the “BB1 Satellites”). The Company has established alternative uses (separate economic value) for BW3 test satellite and therefore, the hard costs (i.e., test equipment, antennas, sensors, cables, launch vehicles) and other nonrecurring costs solely associated with the Company’s BW3 test satellite developments are capitalized to its construction in progress (“CIP”) account, and presented on its condensed consolidated balance sheets.

Research and development costs are charged to expense as incurred. Research and development costs consist principally of non-recurring engineering development efforts in which the Company typically engages third-party vendors, including engineering, design, and development for the BB1 Satellites materials and supplies, license costs, contract services, and other outside expenses. Costs for certain research and development activities are recognized in line with the completion of specific tasks using information from the Company’s vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and reflected in the financial statements as prepaid or accrued expenses.

The Company recognizes revenue related to sales of manufactured small satellites and their components as well as launch related services. The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09 - ~~Revenue from Contracts with Customers~~ (Topic 606) and its related amendments (collectively known as “ASC 606”). In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation.

Costs to obtain the Company’s contracts are capitalized and amortized over the expected customer benefit period, and typically include commissions paid to external parties or distributors. Sales commissions are considered incremental costs in obtaining a new contract and thus are appropriately capitalized. Costs to fulfill the Company’s contracts, such as our overhead costs and third-party costs to manufacture, do not meet the specified capitalization criteria (i.e., do not generate or enhance resources of the Company) and as such are expensed as incurred. ~~Costs to obtain and fulfill the Company’s contracts were immaterial~~ ~~as of September 30, 2021 and 2020.~~

~~The Company follows the asset and liability method of accounting for income taxes under ASC 740 -~~ ~~Income Taxes~~ (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.

In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

ASC 740 prescribes a recognition threshold and a measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not (i.e., a likelihood of more than 50%) to be sustained upon examination by taxing authorities. A recognized tax position is then measured at the largest amount of benefit with ~~greater than 50% likelihoodof being realized upon ultimate settlement. The Company recognizes accrued interest and penalties related to uncertain tax positions as income tax expense. There were~~ 0~~uncertain tax positions and~~ 0amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

In conjunction with the Business Combination, the Company entered into a Tax Receivable Agreement (the “TRA”) with AST LLC. Pursuant to the TRA, the Company is required to pay the Existing Equityholders (i) 85% of the amount of savings, if any, in U.S. federal, state, local and foreign income tax that the Company actually realizes as a result of (A) existing tax basis of certain assets of AST LLC and its subsidiaries attributable to AST LLC Common Units acquired by the Company, (B) tax basis adjustments resulting from taxable exchanges of AST LLC Common Units acquired by the Company, (C) tax deductions in respect of portions of certain payments made under the TRA, and (D) certain tax attributes that are acquired directly or indirectly by the Company pursuant to a reorganization transaction. All such payments to the Existing Equityholders of AST LLC are the obligations of the Company, and not that of AST LLC. As of September 30, 2021, there have been no exchanges of AST LLC units for Class A common stock of the Company and, accordingly, no TRA liabilities have been recognized.

~~The Company accounts for equity awards, including grants of stock options and restricted stock units, in accordance with ASC 718,~~ ~~Compensation – Stock Compensation~~ (“ASC 718��). ASC 718 requires all equity-based payments to employees, which includes grants of employee equity awards, to be recognized in the condensed consolidated statements of operations and comprehensive income (loss) based on their grant date fair values. The Company estimates the grant date fair value of stock options granted to employees, non-employees, and non-employee members of the Board of Directors using the Black-Scholes option-pricing model. Use of the Black-Scholes model requires the Company to make assumptions with respect to the expected term of stock options, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. The fair value of restricted stock units granted to employees, non-employees and non-employee members of the Board of Directors is based on the fair value of the Company’s stock on the grant date. For awards that vest based solely on achievement of a service condition, the Company recognizes expense on a straight-line basis over the period during which the award holder provides such services. For awards that vest based on both service and performance conditions, the Company recognizes expense using a graded method for such awards only to the extent it believes achievement of the performance conditions are probable. The Company recognizes forfeitures as they occur and reverses any previously recognized compensation cost associated with forfeited awards. The Company accounts for stock-based compensation for awards granted to non-employees in a similar fashion to the way it accounts for stock-based compensation awards to employees.

The Company issues stock-based compensation awards to the employees, non-employees, and non-employee directors of its subsidiaries. The Company accounts for the compensation associated with these awards by offsetting expense with additional paid-in capital.

The Company’s less than wholly owned subsidiary, AST LLC, issues stock-based compensation awards to its employees, non-employees, and non-employee directors. The exercise of these awards would decrease SpaceMobile’s ownership interest in AST LLC. The Company accounts for the compensation associated with these awards similarly to the awards described above; however, the offset to the expense is recorded to noncontrolling interest rather than additional paid-in capital.

The Company considers the nature and contractual terms of an arrangement and assess whether the arrangement involves a joint operating activity pursuant to which it is an active participant and exposed to significant risks and rewards with respect to the arrangement. If the Company is an active participant and exposed to the significant risks and rewards with respect to the arrangement, it accounts for these arrangements pursuant to ASC Topic 808 - ~~Collaborative Arrangements~~, as amended by ASU 2018-18 (“ASC 808”), and applies a systematic and rational approach to recognize revenue (unless parts of the arrangement are within the scope of other authoritative accounting literature or can be appropriately analogized to other authoritative accounting literature).

The Company reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of common stock outstanding and excludes the dilutive effect of warrants, stock options, and other types of convertible securities. Diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding and the dilutive effect of stock options, warrants and other types of convertible securities are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where we report a net loss.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains its cash in accounts at financial institutions that the Company believes are of high credit quality. At times, the cash balance may exceed federally insured limits. The Company’s foreign subsidiaries may deposit cash at institutions that are not insured by the FDIC. Cash and cash equivalents at September 30, 2021 are subject to minimal credit risk.

~~The Company’s subsidiary, Nano, which accounted for~~ ~~100% of the Company’s revenue for the three and nine month periods ended September 30, 2021, derives its revenue from a small number of customers.~~ ~~Four~~ ~~customers accounted for approximately~~ 67~~% of the Company’s trade receivables as of September 30, 2021, and two customers accounted for approximately~~ 76~~% of the Company’s trade receivables as of December 31, 2020.~~ ~~Three customers accounted for approximately~~ 36~~% ofthe Company’s revenue for the nine months ended September 30, 2021, and four customers accounted for approximately~~ 74% ~~of the Company’s revenue for the nine months ended September 30, 2020. The Company manages credit risk by reviewing the counterparties’ credit at least quarterly.~~

The financial statements of the Company’s foreign subsidiaries are translated from local currency into reporting currency, which is U.S. dollars, using the current exchange rate at the balance sheet date for assets and liabilities, and the weighted average exchange rate prevailing during the period for revenues and expenses. The functional currency of the Company’s foreign subsidiaries is the local currency for each entity and, accordingly, translation adjustments for these subsidiaries are included in accumulated other comprehensive loss within stockholders’ equity.

Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as other income (expense), net in the condensed consolidated statements of operations.

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment, as the CODM reviews financial information presented on a combined basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

~~In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,~~ Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to reduce complexity in applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. The amendments in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company adopted the new standard on January 1, 2021. The new standard did not have a material effect on the condensed consolidated financial statements as of September 30, 2021.

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes~~ (ASU 2019-12), which amended the accounting for income taxes. ASU 2019-12 eliminates certain exceptions to the guidance for income taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences as well as simplifying aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted ASU 2019-12 on January 1, 2021 and it did not have a material impact on its condensed consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The guidance clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. The Company ~~is evaluating the potential~~adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact ~~of this adoption~~ on its unaudited condensed consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an entity’s financial statements. The guidance in this update is effective for all entities for annual periods beginning after December 15, 2021. Early adoption is permitted for all entities. The amendments are to be applied prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or, retrospectively to those transactions. The Company adopted ASU 2021-10 on January 1, 2022. The adoption did not have a material impact on its disclosures.

All other new accounting pronouncements issued, but not yet effective or adopted, have been deemed to be not relevant to the Company and, accordingly, are not expected to have a material impact once adopted.

Business Combination

On April 6, 2021, the Company completed the Business Combination with AST LLC pursuant to the Equity Purchase Agreement. Pursuant to ASC 805 – Business Combinations (“ASC 805”), for financial accounting and reporting purposes, AST LLC was deemed the accounting acquirer and the Company was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Accordingly, the Business Combination was treated as the equivalent of AST LLC issuing stock (“AST LLC Common Units”) for the net assets of NPA, accompanied by a recapitalization. Under this method of accounting, the pre-Business Combination consolidated financial statements of the Company are the historical financial statements of AST LLC. The net assets of

NPA were stated at fair value, with no goodwill or other intangible assets recorded in accordance with U.S. GAAP and are consolidated with AST LLC’s financial statements on the Closing ~~date.~~Date. As a result of the Business Combination with the Company, the AST LLC Series A and Series B convertible preferred stock were converted to AST LLC Common Units. The shares and net income (loss) available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Equity Purchase Agreement.

In connection with the Business Combination, the Company entered into subscription agreements with certain investors (the Private Investment in Public Entity Investors, or ~~“PIPE~~"PIPE Investors”), whereby it issued 23,000,000Class A shares of common stock at $10.00per share (the “Private Placement Shares”) for an aggregate purchase price of $230.0million (the “Private Placement”), which closed simultaneously with the consummation of the Business Combination.

On the ~~closing date~~Closing Date of the Business Combination, the Company completed the acquisition of AST LLC and in return AST LLC and the Existing Equityholders received (i) $416.9million in cash, net of transaction expenses, (ii) 51.6million shares of Class B common stock, and (iii) 78.2million shares of Class C common stock. In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $45.7million related to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded as a reduction of additional paid-in capital in the accompanying unaudited condensed consolidated balance sheets.

The shares of non-economic Class B and Class C common stock of the Company entitle each share to one vote and ten votes per share, respectively.The non-economic Class B and Class C shares were issued to the Existing Equityholders to maintain the established voting percentage of SpaceMobile, as determined in the Equity Purchase Agreement.

As a result of the Business Combination, the Company, organized as a C corporation, owns an equity interest in AST LLC in what is commonly referred to as an “Up-C” structure. AST LLC is treated as a partnership for U.S. federal and state income tax purposes. Also, the Company has a controlling ownership interest in a Lithuanian subsidiary that is subject to foreign income taxes and is also treated as a partnership for U.S. federal and state and local taxes. Accordingly, for U.S. federal and state income tax purposes, all income, losses, and other tax attributes pass through to the members’ income tax returns, and no U.S. federal and state and local provision for income taxes has been recorded for these entities in the unaudited condensed consolidated financial statements. Certain foreign wholly-owned entities are taxed as corporations in the jurisdictions in which they operate, and accruals for such taxes are included in the unaudited condensed consolidated financial statements.

As a result of the Up-C structure, the noncontrolling interest is held by the Existing Equityholders who retained approximately 71.5% of the economic ownership percentage of AST LLC.The noncontrolling interest is classified as permanent equity within the unaudited condensed consolidated balance sheet as the Company, acting through the redemption election committee of the ~~Company’s~~Company's Board of Directors (the ~~“Redemption~~"Redemption Election Committee”), may only elect to settle a redemption request in cash if the cash delivered in the exchange is limited to the cash proceeds to be received from a new permanent equity offering through issuance of Class A common stock.

In conjunction with the Business Combination, the Company also entered into the ~~TRA~~Tax Receivable Agreement ("TRA") with AST LLC. Pursuant to the TRA, the Company is required to pay the Existing Equityholders (i) 85% of the amount of savings, if any, in U.S. federal, state, local and foreign income tax that the Company actually realizes as a result of (A) existing tax basis of certain assets of AST LLC and its subsidiaries attributable to the AST LLC Common Units, (B) tax basis adjustments resulting from taxable exchanges of AST LLC Common Units acquired by the Company, (C) tax deductions in respect of portions of certain payments made under the TRA, and (D) certain tax attributes that are acquired directly or indirectly by the Company pursuant to a reorganization transaction. All such payments to the Existing Equityholders of AST LLC are the obligations of the Company, and not that of AST LLC. As of ~~September 30, 2021,~~March 31, 2022, there have been no exchanges of AST LLC units for Class A common stock of the Company and, accordingly, no TRA liabilities have been recognized.

The Company recorded a net deferred tax asset ~~of $71.7~~ ~~million~~ for the difference between the book value and tax basis of the Company’s investment in AST LLC at the time of the Business Combination. The Company has assessed the realizability of their deferred tax assets and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As a result, the Company has recorded a full valuation allowance against its deferred tax asset resulting from the Business Combination.

Fair Value Measurement

The Company follows the guidance in ASC 820 - Fair Value Measurement (“ASC 820”), for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

•

	●	Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

	●	Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

	●	~~Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.~~

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•

Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

•

Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The ~~following table presents information about the~~ Company’s financial assets and liabilities ~~that are measured~~ at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value~~2021 were as follows (in thousands):

~~Schedule of Assets Measured at Fair Value on a Recurring Basis~~

Description	Level		September 30, 2021		December 31, 2020

							March 31, 2022
							Level 1		Level 2		Level 3
Assets:
Cash equivalents		1	$	352,011	$	-	$	247,038	$	-	$	-
Total assets measured at fair value							$	247,038	$	-	$	-

Liabilities:
Public warrant liability		1	$	45,425	$	-	$	38,291	$	-	$	-
Private placement warrant liability		2	$	30,683	$	-		-		25,253		-
Total liabilities measured at fair value							$	38,291	$	25,253	$	-


	December 31, 2021
	Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	314,747	$	-	$	-
Total assets measured at fair value	$	314,747	$	-	$	-

Liabilities:
Public warrant liability	$	34,151	$	-	$	-
Private placement warrant liability		-		23,911		-
Total liabilities measured at fair value	$	34,151	$	23,911	$	-

As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Company had $~~360.4~~ 253.7 million and $321.8million of cash and cash equivalents, respectively, of which $~~352.0~~ 247.0million and $314.7 million, respectively, is classified as cash equivalents, which consists principally of short-term money market funds with original maturities of 90 days or less. For certain instruments, including cash, accounts receivable, accounts payable, and accrued expenses, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

Warrant liabilities are comprised of both publicly issued warrants (“Public Warrants”) and private placement warrants (“Private Placement Warrants”), exercisable for shares of Class A common stock of the Company. Warrant liabilities are documented in greater detail at Note ~~10.~~11. As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Public Warrants are classified as Level 1 due to the use of an observable market quote in an active market under the ticker ~~“ASTSW”~~"ASTSW".

The Private Warrants are valued using a Black-Scholes-Merton Model. As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Private Warrants are classified as Level 2 as the transfer of Private Warrants to anyone outside of a small group of individuals who are permitted

transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants. For this reason, the Company determined that the volatility of each Private Warrant is equivalent to that of each Public Warrant.

The Company’s Black-Scholes-Merton model to value Private Warrants required the use of the following subjective assumption inputs:

•

	●	The risk-free interest rate assumption was based on a weighted average of the three and five-year U.S. Treasury rate, which was commensurate with the contractual term of the Warrants, which expire on the earlier of (i) five years after the completion of the initial business combination and (ii) upon redemption or liquidation. An increase in the risk-free interest rate, in isolation, would result in an increase in the fair value measurement of the warrant liabilities and vice versa.

	●	~~The expected volatility assumption was based on the implied volatility of the Company’s publicly-traded warrants, which as of September 30, 2021 was~~ ~~59.1~~%.

The risk-free interest rate assumption was based on a weighted average of the three and five-year U.S. Treasury rate, which was commensurate with the contractual term of the Warrants, which expire on the earlier of (i) five years after the completion of the initial Business Combination and (ii) upon redemption or liquidation. An increase in the risk-free interest rate, in isolation, would result in an increase in the fair value measurement of the warrant liabilities and vice versa.

•

The expected volatility assumption was based on the implied volatility of the Company’s publicly-traded warrants, which as of March 31, 2022 and December 31, 2021 was 56.3% and 75.6%, respectively.

Property and Equipment

Property and equipment, net consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):

~~Schedule of Property~~



	March 31, 2022			December 31, 2021
Land	$	1,350		$	1,350
Computers, software, and equipment		3,295			2,810
Leasehold improvements		7,026			6,416
Satellite antenna		3,402			2,996
Lab, assembly, and integration equipment		11,080			10,301
Others (1)		1,414			1,345
Property and equipment		27,567			25,218
Accumulated depreciation		(4,605	)		(3,592	)
Other construction in progress		9,195			6,701
Property and equipment, net		32,157			28,327

BlueWalker 3 satellite - construction in progress		82,693			67,615
Total property and equipment, net	$	114,850		$	95,942

(1) Includes vehicles, furniture and ~~Equipment, Net~~fixtures, and a phased array test facility.

September 30,
2021 December 31,
2020
Satellite testing and lab equipment $ 13,617 $ 5,324
Computers, software, and equipment 2,435 1,707
Leasehold improvements 6,101 3,537
Other 531 404
Property and equipment 22,684 10,972
Accumulated depreciation (2,775 ) (915 )
Property and equipment, net 19,909 10,057

BlueWalker 3 Satellite - construction in progress 56,677 27,013
Total property and equipment, net $ 76,586 $ 37,070

Depreciation expense for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was approximately $~~0.8~~ 1.0million and $~~0.1~~ ~~million, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was approximately~~ $~~1.9~~ 0.6~~million and~~ $~~0.3~~ million, respectively.

Texas Purchase

6. ~~Commitments~~On December 8, 2021, the Company's subsidiary, AST & Science Texas, LLC, executed an agreement to purchase real property, including offices, industrial warehouse buildings and ~~Contingencies~~equipment for a total purchase price of $8.0 million. In connection with the purchase, the Company issued a term promissory note (the "Term Loan") for $5.0 million secured by the property; refer to Note 8 for additional information. Under the terms of the Term Loan, the Company deposited $2.8 million to use exclusively for capital improvements at the property. As of March 31, 2022, the remaining deposit balance of $1.4 million is presented as restricted cash in the unaudited condensed consolidated balance sheets.

~~Leases~~SpaceX Multi-Launch Agreement

On ~~November 13, 2018,~~March 3, 2022, AST LLC entered into ~~both~~ an ~~Economic Development~~agreement (the "Multi-Launch Agreement") with Space Exploration Technologies Corp. ("SpaceX"). The Multi-Launch Agreement provides a framework for future launches of the Company’s satellites through December 31, 2024, including the launches of the BW3 test satellite and the first BB satellite. Pursuant to the Multi-Launch Agreement, the Company and SpaceX also entered into a Launch Services Agreement (the ~~“EDA”~~“BB LSA”) ~~and a sublease agreement with Midland Development Corporation. The premise~~covering the launch of the ~~EDA~~first BB satellite, and in accordance with the BB LSA, the Company paid an initial payment for the SpaceX launch services. As part of the Multi-Launch Agreement, the Company and SpaceX agreed on a framework for additional launch service agreements relating to the launch of future BB satellites. The Company paid an initial reservation fee to secure a SpaceX launch vehicle for a future BB satellite launch. With respect to the Company’s BW3 launch scheduled for Summer 2022, the Company and SpaceX agreed to changes to certain technical launch parameters, and the Company paid an additional fee to SpaceX to adjust these parameters. In connection with entry into the Multi-Launch Agreement, the Company paid an aggregate amount of $22.8 million, of which $8.0 million related to BW3 was capitalized to ~~create jobs~~BlueWalker 3 satellite - construction in progress in the ~~Midland, Texas area, as well as,~~unaudited condensed consolidated balance sheet, and $14.8 million of deposits related to ~~have AST LLC improve~~ the ~~land, office~~first BB initial payment and ~~hangar spaces at~~launch reservation fee for a future BB launch was recorded to Other non-current assets in the ~~leased facility located at~~unaudited condensed consolidated balance sheet. The exact timing of the ~~Midland International Air & Space Port in Midland, Texas.~~satellite launches is contingent on a number of factors, including satisfactory and timely completion of construction and testing. The Multi-Launch Agreement permits the Company to delay launches of its satellites upon payment of certain rebooking fees.

Commitments and Contingencies

The leased facility included office space (44,988 SF), hangar A (28,480 SF), hangar B (11,900 SF), and land (approximately 238,000 SF). The term of the lease commenced on November 21, 2018 and extends through November 20, 2033. Pursuant to the agreement, the base rental payments for the first five years will be abated, provided that the Company prepays the rent in each period and achieves an increasing level of financial commitments, measured annually on March 31st of each of the first five years of the lease. The Company can qualify for an additional five years (years six through ten of the term) of abatements which are contingent upon the Company achieving its commitments through the first five years of the lease and maintaining or exceeding those year five commitment levels in years six through year ten of the term. These commitments include 1) the total number of full-time jobs and the related annual payroll costs and 2) cumulative capital investments in personal property and improvements to the existing land/structures. ~~The Company recognizes the lease reimbursements as an offset to rent expense for the related reimbursable month when the contingency is probable of being resolved.~~Legal Proceedings

The Company’s other operating leasehold obligations include additional office space in Maryland, Spain, Israel, United Kingdom and Lithuania. The Company’s leases have established fixed payment terms which are subject to annual rent increases throughout the term of each lease agreement. The Company’s lease agreements have varying non-cancellable rental periods which include options for the Company to extend portions of its lease terms. The Company early adopted ASU 2016-02 ~~– Leases~~ (“ASC 842”) as of January 1, 2020 (“the adoption date”) using the modified retrospective method which did not require it to restate prior periods and did not have an impact on retained earnings. Management considered that it was not reasonably certain to exercise any extension options present in its lease arrangements that are outstanding as of the adoption date, with the exception of the Texas sublease. In addition, the Company’s leases have similar terms in which they may terminate the lease prior to the end date but must provide advanced notice. The Company is not reasonably certain to exercise the right to terminate their agreements.

The Company also elected to apply a practical expedient provided in ASC 842, which provides that leases with an initial term of 12 months or less and no purchase option that the Company is reasonably certain of exercising will not be included within the lease right-of-use assets and lease liabilities on its condensed consolidated balance sheets. The Company also elected to apply a practical expedient to combine the non-lease components (which include common area maintenance, taxes and insurance) with the related lease component. The Company applies these practical expedients to all asset classes.

~~Incremental Borrowing Rate~~

The Company derives its incremental borrowing rate from information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate represents a collateralized rate of interest the Company would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company’s lease agreements do not provide implicit rates. As the Company did not have any external borrowings at the adoption date with comparable terms to its lease agreements, the Company estimated its incremental borrowing rate based on the lowest grade of debt available in the marketplace for the same term as the associated lease(s). The Company elected to use an ~~11.9% discount rate for its main, shorter-term operating leases (generally two (~~2~~) to five (~~5~~) year leases), with the exception of a shorter-term lease entered into during the three months ended September 30, 2021, in which the Company elected to use an~~ 8~~% discount rate.~~ ~~For the Texas sublease, which is greater than 10 years, the Company elected to use a 15% discount rate.~~

~~Operating Leases~~

~~The components of lease expense were as follows (in thousands):~~

~~Schedule of Lease Expense~~

Three Months Ended Nine Months Ended

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Short-term operating lease expense $ 15 $ 13 $ 70 $ 24
Operating lease expense 123 79 352 180
Total lease expense $ 138 $ 92 $ 422 $ 204

~~Supplemental cash flow information related to leases for the nine months ended September 30, 2021 was as follows (in thousands):~~

~~Schedule of Supplemental Cash Flow Information Related to Leases~~

Nine Months Ended

September 30,
2021

September 30,
2020

Cash paid for amounts included in the measurement of operating lease liabilities $ 334 $ 207
Operating lease right-of-use assets obtained in exchange for lease obligations $ 269 $ 635

~~Supplemental balance sheet information related to leases as of September 30, 2021 was as follows:~~

~~Schedule of Supplemental Balance Sheet Information Related to Leases~~

~~Weighted-average remaining lease term - operating leases (years)~~			~~10.8~~
~~Weighted-average discount rate - operating leases~~			14	%

~~As of September 30, 2021, the maturities of the Company’s operating lease liabilities were as follows (in thousands):~~

~~Schedule of Maturities of Operating Lease Liabilities~~

Year ending December 31, Amount
2021 (Remaining 3 months) $ 378
2022 1,364
2023 1,370
2024 1,282
2025 1,183
Thereafter 7,886
Total lease payments 13,463
Less effects of discounting (6,535 )
Present value of lease liabilities $ 6,928

~~Legal Proceedings~~

The Company is not a party to any material litigation and does not have contingency reserves established for any litigation liabilities as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Goodwill

7. ~~Goodwill and Intangible Assets~~

~~Goodwill~~

The change in the carrying amount of goodwill for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 is summarized as follows (in thousands):

~~Summary of Changes in Carrying Amount of Goodwill~~

Nine Months Ended
September 30,
2021
Balance at beginning of the period $ 3,912
Translation adjustments (208 )
Balance at end of the period $ 3,704


	Goodwill
Balance as of December 31, 2021	$	3,641
Translation adjustments		(95	)
Balance as of March 31, 2022	$	3,546

Debt

~~Intangible Assets~~Nano Business Credit Agreement

On December 8, 2021, the Company's subsidiary, Nano, entered into an agreement with AB SEB Bank (the "Lender") pursuant to which the Lender agreed to provide up to $0.4 million (the "Business Credit") to fund certain capital expenditures. Nano may use this facility to fund up to 70% of certain capital expenditures on an as-invoiced basis through March 2022, at which time outstanding principal and interest were due and payable in monthly installments commencing on March 31, 2022 and continuing until December 6, 2025. Borrowings under the agreement bear interest at a rate per annum equal to the EURIBOR plus 3.00%. As of March 31, 2022, the outstanding balance was approximately $0.1 million which is classified within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets.

Long-term debt

~~Identified intangible assets are comprised~~Long-term debt consists of the following, ~~as of September 30, 2021 and December 31, 2020~~ (in thousands):


	March 31, 2022			December 31, 2021
Term Loan	$	5,000		$	5,000
Less: current portion		(60	)		0
Total long-term debt	$	4,940		$	5,000

~~Schedule~~On December 8, 2021, in connection with the Texas Purchase (refer to Note 5), the Company's subsidiary, AST & Science Texas, LLC entered into an agreement with Lone Star State Bank of ~~Intangible Assets~~West Texas (the "Credit Agreement") to issue a Term Loan for $5.0 million

Useful Lives September 30,
2021 December 31,
2020
Intangible assets subject to amortization:
Developed technology 5 $ 1,100 $ 1,161
Trademarks and domain name 15 23 23
Total gross intangible assets subject to amortization 1,123 1,184
Accumulated amortization (788 ) (658 )
Total net intangible assets subject to amortization $ 335 $ 526

~~The aggregate amortization expense for each~~with a maturity date of ~~the three months ended September 30, 2021 and 2020 was less than~~ $~~0.1~~ December 8, 2028~~million. The aggregate amortization expense for each~~ that is secured by the property. AST & Science Texas, LLC granted to the lenders a security interest in the assets acquired under the Texas Purchase described in Note 5.

Borrowings under the Term Loan bear interest at a fixed rate equal to 4.20% per annum until December 2026, and from December 2026 until December 2028 at a fixed rate per annum equal to 4.20% subject to adjustment if the index rate as defined in the Credit Agreement is greater than 4.20%. Interest is payable monthly in arrears commencing in January 2022. Thereafter, outstanding principal and accrued interest will be due and payable in monthly installments of $40,000, commencing in January 2023 and continuing until November 2028, with the ~~nine months ended September 30,~~final remaining balance of unpaid principal and interest due and payable in December 2028. As of March 31, 2022, and December 31, 2021, ~~and 2020~~there was ~~approximately $0.2~~ ~~millio~~0n. Based on the carrying value of identified intangible assets recorded at September 30, 2021, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be as follows (in thousands): accrued interest payable in connection with this Term Loan.

~~Schedule of Intangible Assets Future Amortization Expense~~9.

Fiscal Year Amortization Expense
2021 (remaining 3 months) $ 55
2022 221
2023 38
2024 2
2025 and Thereafter 19
Total $ 335

Revenue

Disaggregation of Revenue

The Company’s subsidiary, Nano, recognizes revenue related to sales of manufactured small satellites and their components, as well as launch related services. Currently, this is the Company’s only source of revenue. In general, the Company recognizes revenue for services provided over time as the Company’s performance does not result in an asset with an alternative use and the Company is entitled to be compensated for performance completed to date. The Company recognizes revenue for services provided over time based on an output method, under which the total value of revenue is recognized based on each contract’s deliverable(s) as they are completed and when value is transferred to a customer. Certain of the Company’s performance obligations do not meet the criteria for over time recognition such as satellite hardware and subsystems. In these scenarios, the Company recognizes revenue upon transfer of control of the performance obligation to the customer. Revenue recognized over time versus revenue recognized upon transfer ~~for~~during the ~~periods ending September 30,~~three months ended March 31, 2022 and 2021 ~~and 2020~~ was as follows (in thousands):

~~Schedule of Disaggregation of Revenue~~


	Three Months Ended September 30,				Nine Months Ended September 30,				Three months ended March 31,
	2021		2020		2021		2020		2022		2021
Revenue from performance obligations recognized over time	$	2,189	$	1,871	$	4,769	$	2,538	$	2,083	$	550
Revenue from performance obligations recognized at point-in-time transfer		261		219		1,416		727		311		401
Total	$	2,450	$	2,090	$	6,185	$	3,265	$	2,394	$	951

Contract Balances

Contract assets relate to ~~our conditional~~the Company's unconditional right to consideration for ~~our~~its completed performance under the contract. As of March 31, 2022 and December 31, 2021, the Company had no material contract assets. Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities (i.e., deferred revenue) are recognized as revenue as (or when) the Company performs under the contract. ~~During~~The following table reflects the ~~three months ended September 30, 2021,~~change in contract liabilities for the ~~Company recognized approximately $0.4million of revenue related to its deferred revenue balance at January 1, 2021. During the nine months ended September 30, 2021, the Company recognized approximately $1.5~~ period indicated (in thousands): ~~million of revenue related to its deferred revenue balance at January 1, 2021.~~


	Three months ended March 31, 2022
Beginning balance	$	6,636
Revenue recognized that was included in the contract liability at the beginning of the year		(544	)
Increase, excluding amounts recognized as revenue during the period		1,708
Ending balance	$	7,800

As of ~~September 30, 2021,~~March 31, 2022, the Company had deferred ~~reven~~uerevenue of $~~4.9~~ m7.8~~illion~~ million classified in current liabilities related to performance obligations that have not yet been satisfied. The Company expects to recognize the revenue associated with satisfying these performance obligations within the next 12 months.

10.

Stockholders’ Equity

~~Accounts Receivable~~

The ~~Company receives payments from customers based on a billing schedule~~unaudited condensed consolidated statements of stockholders' equity reflect the Business Combination as ~~established~~described in our contracts. Accounts receivable includes amounts billed and currently due from customers. Accounts receivable are recorded when the right to consideration becomes unconditional. The Company did not reserve an allowance for doubtful accounts as of September 30, 2021 or December 31, 2020 given historical experience and management’s evaluation of outstanding accounts receivable at period end.

9. ~~Stockholders’ Equity~~

Note 3. Prior to the Business Combination, NPA was a Special Purpose Acquisition Company or a “blank check company”, ~~defined~~defined as a development stage company formed for the sole purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. ~~As of the closing of the Business Combination, the Company held a~~ ~~28.5~~% ownership interest in AST LLC. The Company also became the managing member of AST LLC, allowing it to control the operating decisions of AST LLC. This resulted in the Company obtaining a controlling financial interest in AST LLC. The Company’s sole operating assets consists of the business operations, intellectual property, and other assets of AST LLC and its subsidiaries.

~~Noncontrolling Interest~~

Noncontrolling interest represents the equity interest in AST LLC held by holders other than the Company. On April 6, 2021, upon the close of the Business Combination, the Existing Equityholders’ equity ownership percentage in AST LLC was approximately ~~71.5~~%. The Company has consolidated the financial position and results of operations of AST LLC and reflected the proportionate interest held by the Existing Equityholders as noncontrolling interest in the accompanying condensed consolidated balance sheet. As of September 30, 2021, the Existing Equityholders’ equity ownership percentage in AST LLC was approximately ~~71.5~~%.

Class A Common Stock

At ~~September 30, 2021,~~March 31, 2022, there were ~~51,729,704~~ 51,782,254million shares of Class A common stock issued and outstanding. Holders of Class A common stock are entitled to one vote for each share. The Company is authorized to issue 800,000,000shares of Class A common stock with a par value of $0.0001per share.

Class B Common Stock

At ~~September 30, 2021,~~March 31, 2022, there were 51,636,922shares of Class B ~~common stock~~Common Stock issued and outstanding. Shares of Class B ~~common stock~~Common Stock were issued to the Existing Equityholders of AST LLC (other than Mr. ~~Abel~~ Avellan) in connection with the Business Combination and are ~~non-economic,~~noneconomic, but entitle the holder to one vote per share. The Company is authorized to issue 200,000,000shares of Class B ~~common stock~~Common Stock with a par value of $0.0001per share.

The Existing Equityholders (other than Mr. ~~Abel~~ Avellan) own economic interests in AST LLC which are redeemable into either shares of Class A ~~common stock~~Common Stock on a one-for-one basis or cash at the option of the Redemption Election Committee. Upon redemption of the AST LLC Common Units by the Existing Equityholders (other than Mr. ~~Abel~~ Avellan), a corresponding number of shares of Class B ~~common stock~~Common Stock held by such Existing Equityholders will be cancelled. The Class B ~~common stock~~Common Stock is subject to a lock-up, during which the shares cannot be transferred until April 6, 2022, the first anniversary of the closing of the Business Combination.

Class C Common Stock

At ~~September 30, 2021,~~March 31, 2022, there were 78,163,078million shares of Class C common stock issued and outstanding. Shares of Class C common stock were issued to Mr. ~~Abel~~ Avellan in connection with the Business Combination and are non-economic, but entitle the holder to ten votes per share (the “Super-Voting Rights”). The Company is authorized to issue 125,000,000shares of Class C common stock with a par value of $0.0001per share.

Mr. ~~Abel~~ Avellan owns economic interests in AST LLC which are redeemable into either shares of Class A common stock on a one-for-one basis or cash at the option of the Redemption Election Committee. Upon redemption of the AST LLC Common Units by Mr. ~~Avel~~ Avellan, a corresponding number of shares of Class C common stock held by Mr. ~~Abel~~ Avellan will be cancelled. Correspondingly, the Super-Voting Rights associated with the Class C common stock will be terminated. The Class C common stock is subject to a one-year lock-up, during which the shares cannot be transferred until April 6, 2022, the first anniversary of the closing of the Business Combination.

~~Preferred Stock~~

~~At September 30, 2021, there were~~ 0~~shares of preferred stock issued or outstanding. The Company is authorized to issue~~ ~~100,000,000shares of preferred stock with a par value of $0.0001~~ ~~per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.~~Noncontrolling Interest

~~10.~~ Nano Lithuania and Nano US

~~Warrant Liabilities~~AST LLC owns 51.0% of and controls Nano Lithuania and Nano US. As a result, the Company consolidates the financial results of Nano Lithuania and Nano US and reports noncontrolling interests representing the equity interests held by equity-holders other than the Company in the unaudited condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the noncontrolling interest percentage in Nano Lithuania and Nano US was approximately 49.0%. There were no changes to the noncontrolling interest percentage in Nano Lithuania or Nano US during the three months ended March 31, 2022 and 2021.

AST LLC

On April 6, 2021, upon the close of the Business Combination, the Company held a 28.5% ownership interest in AST LLC and became the sole managing member of AST LLC, allowing it to control the operating decisions of AST LLC. As a result of this control, the Company has consolidated the financial position and results of operations of AST LLC. The Company reports noncontrolling interests representing the equity interest in AST LLC held by members other than the Company in the accompanying unaudited condensed consolidated balance sheets. On the date of the Business Combination, the noncontrolling interest percentage in AST LLC was approximately 71.5%. During the three months ended March 31, 2022 there was an immaterial change in the noncontrolling interest percentage as a result of the exercise of warrants and the issuance of incentive units at AST LLC. As of March 31, 2022, the noncontrolling interest percentage in AST LLC was approximately 71.6%.

Changes in the Company’s ownership interest in AST LLC while retaining control of AST LLC are accounted for as equity transactions. Each issuance of the Company's Class A Common Stock is accompanied by a corresponding issuance of AST LLC Common Units to the Company, which results in a change in ownership and reduces the amount recorded as noncontrolling interest and increases additional paid-in capital. At ~~September 30, 2021,~~March 31, 2022, there were ~~11,500,000~~ 11,498,700Public Warrants and 6,100,000Private Placement Warrants ~~outstanding.~~outstanding (see Note 11 for further details), each of which entitles the holder to purchase one whole share of Class A Common Stock at a price of $11.50 per share. Each warrant exercise is accompanied by a corresponding issuance of AST LLC Common Units to the Company, which results in a change in ownership and reduces the amount recorded as noncontrolling interest and increases additional paid in capital.

In addition, the AST LLC Agreement permits the noncontrolling interest holders of AST LLC Common Units to exchange AST LLC Common Units, together with related shares of the Company's Class B or Class C Common Stock, for shares of the Company's Class A Common Stock on a one-for-one basis or, at the election of the Company, for cash (a "Cash Exchange.") A Cash Exchange is limited to the amount of net proceeds from the issuance of Class A Common Stock. Future redemptions or direct exchanges of AST LLC Common Units by the noncontrolling interest holders will result in a change in ownership and reduce the amount recorded as noncontrolling

interest and increase additional paid-in capital. Certain members of AST LLC also hold incentive stock options that are subject to service or performance conditions (see Note 12 for further details), that are exercisable for AST LLC Common Units. The exercise of the options results in a change in ownership and increases the amount recorded as noncontrolling interest and decreases additional paid-in capital.

11.

Warrant Liabilities

Warrant liabilities are comprised of both Public Warrants and Private Placement Warrants. Each whole Public Warrant entitles the registered holder to purchase one whole share of Class A ~~common stock~~Common Stock at a price of $11.50per share. Pursuant to the warrant agreement, a holder of Public Warrants may exercise its warrants only for a whole number of shares of Class A ~~common stock.~~ Common Stock.

This means that only a whole warrant may be exercised at any given time by a warrant holder. The Public Warrants expire on April 6, 2026, five yearsafter the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company may redeem the Public Warrants under the following conditions:

•

In whole and not in part;

•

At a price of $0.01 per warrant;

• Upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and • If, and only if, the reported last sale price of the Class A Common Stock equals or exceeds $18.00	●	~~In whole and not in part;~~
	●	~~At a price of $0.01~~ ~~per warrant;~~
	●	~~Upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and~~
	●	~~If, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00~~ ~~per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.~~

per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.

The redemption criteria discussed above prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and ~~SpaceMobile~~the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A ~~common stock~~Common Stock may fall below the $18.00redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50warrant exercise price after the redemption notice is issued.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

During the three months ended March 31, 2022, 100 Public Warrants were exercised at a price of $11.50 per share, resulting in cash proceeds of approximately $1,150 and the issuance of 100 shares of Class A Common Stock. At March 31, 2022 there were 11,498,700 Public Warrants and 6,100,000 Private Placement Warrants outstanding. At December 31, 2021, there were 11,498,800 Public Warrants and 6,100,000 Private Placement Warrants outstanding.

As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Company recorded warrant liabilities of $~~76.1~~ 63.5 million and $58.1million in the unaudited condensed consolidated balance ~~sheets.~~sheets, respectively. For the three ~~and nine month periods~~months ended ~~September 30, 2021,~~March 31, 2022, the Company recognized a gain of $~~39.4~~5.5 million ~~and a loss of $2.3~~ ~~million, respectively,~~ on the change in the fair value of the warrant liabilities in the unaudited condensed consolidated statements of operations.

~~11.~~ 12.
Stock-Based Compensation

Stock-Based Compensation Expense

Stock-based compensation, measured at the grant date based on the fair value of the award, is typically recognized ratably over the requisite services period, using the straight-line method of expense attribution. ~~The~~The Company recorded stock-based compensation expense in the following categories of its unaudited condensed consolidated statements of operations and balance sheets (in thousands):

~~Schedule of Share-Based Compensation Expense~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021 2020 2021 2020
Engineering services $ 546 $ 147 $ 1,085 $ 275
General and administrative costs 755 94 814 134
BlueWalker 3 Satellite - construction in progress 6 - 34 -
Total $ 1,307 $ 241 $ 1,933 $ 409


	Three Months Ended March 31,
	2022			2021
Engineering services	$	1,279		$	324
General and administrative costs		975			32
BlueWalker 3 Satellite - construction in progress (1)		(44	)		14
Total	$	2,210		$	370

(1)

For the three months ended March 31, 2022 stock-based compensation was reversed as a result of forfeiture of options previously provided to a supplier.

The Company estimates the fair value of the stock option awards to employees, non-employees and non-employee members of the Board of Directors using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the expected volatility of our stock, (ii) the expected term of the award, (iii) the risk-free interest rate, and (iv) any expected dividends. Due to the lack of company-specific historical and implied volatility data, the Company based the estimate of expected volatility on the estimated and expected volatilities of a representative group of publicly traded companies. For these analyses, the Company selects companies with comparable characteristics including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of the Company’s stock price becomes available. For awards that qualify as “plain-vanilla” options, the Company estimates the expected life of the employee stock options using the “simplified” method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company elects to account for forfeitures as they occur rather than apply an estimated forfeiture rate to stock-based payment expense.

The fair value of restricted stock units granted to employees, non-employees, and non-employee members of the Board of Directors is based on the fair value of the Company’s stock on the grant date. The Company elects to account for forfeitures as they occur rather than apply an estimated forfeiture rate to stock-based payment expense.

AST LLC 2019 Equity Incentive Plan

Prior to the Business Combination, under the 2019 Equity Incentive Plan (“AST LLC Incentive Plan”), AST LLC was authorized to issue ordinary shares, as well as options exercisable for ordinary shares, as incentives to its employees, non-employees, and non-employee members of its Board of Directors. The issuance of share options and ordinary shares is administered by the Board of Directors using standardized share option and share subscription agreements. Following the Business Combination, no further grants will be made under the AST LLC Incentive Plan. However, the AST LLC Incentive Plan will continue to govern the terms and conditions of the outstanding awards granted under it.

There were two types of options granted under the AST LLC Incentive Plan: (1) service-based options and (2) performance-based options. Service-based options typically vest over a five yearservice period with 20% of the award vesting on the first anniversary of the employee’s commencement date, and the balance thereafter in 48 equal monthly installments. Certain service-based options also provide for accelerated vesting if there is a change in control or other performance condition as defined by the AST LLC Incentive Plan. Performance-based options typically vest on the earliest date that any of the following occurs: (i) AST LLC effects an initial public offering and becomes a reporting company, (ii) AST LLC experiences a change of control, or (iii) other specified performance conditions. Both service-based and performance-based options typically expire no later than 10 years from the date of grant.

In connection with the Closing, AST LLC entered into the Fifth Amended and Restated Limited Liability Operating Agreement (the “A&R Operating Agreement”), which, among other things, restructured the capitalization of AST LLC to reclassify all of the existing AST LLC options into AST LLC incentive equity units (the “AST LLC Incentive Equity Units”). In connection with the reclassification

of the AST LLC options into AST LLC Incentive Equity Units, the maximum number of AST LLC Incentive Equity Units which may be issued under the AST LLC Incentive Plan were proportionately adjusted to be equal to (a) the share limit under the AST LLC Incentive Plan as of the effective date of the A&R Operating Agreement, multiplied by (b) 14.50149869 (rounded down to the nearest whole number of AST LLC Incentive Equity Units). Additionally, each unexpired and unexercised outstanding AST LLC option, whether vested or unvested, was proportionately adjusted such that (a) each AST LLC option will be exercisable for that number of AST LLC Incentive Equity Units equal to the product determined by multiplying (x) the number of AST LLC options that were issuable upon exercise immediately prior to the Closing by (y) 14.50149869 (rounded down to the nearest whole number of AST LLC Incentive Equity Units) and (b) the per unit exercise price for the AST LLC Incentive Equity Units issuable upon exercise of such AST LLC option shall be equal to the quotient of (x) the exercise price per AST LLC option immediately prior to the Closing divided by (y) 14.50149869 (rounded down to the nearest millionth). Each AST LLC option continues to be subject to the terms of the AST LLC Incentive Plan and the applicable award agreement evidencing such AST LLC option, and is further subject in all regards to the terms and conditions of the A&R Operating Agreement. Additionally, pursuant to the terms of the A&R Operating Agreement, each AST LLC Incentive Equity Unit is redeemable for one share of Class A Common Stock on the later of the (i) 24-month anniversary of the consummation of the Business Combination and (ii) six-month anniversary from the vesting date. As a result of the Business Combination, there was no incremental compensation cost and the terms of the outstanding awards, including fair value, vesting conditions and classification, were unchanged.

As of ~~September 30, 2021,~~March 31, 2022, AST LLC was authorized to issue a total of 12,812,959~~ordinary~~ ordinary shares under a reserve set aside for equity awards. As of ~~September 30, 2021,~~March 31, 2022, there were ~~12,402,116~~ 11,574,068options outstanding under the AST LLC Incentive Plan. Following the Business Combination on April 6, 2021, no further equity award grants were made under the AST LLC Incentive Plan.

The following table summarizes AST LLC’s option activity for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

~~Schedule of Stock Options Activities~~

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years)
Outstanding at December 31, 2020 11,822,100 $ 0.20 2.04
Granted 806,283 10.00
Exercised (15,227 ) 0.06
Cancelled or forfeited (211,040 ) 0.92
Outstanding at September 30, 2021 12,402,116 $ 0.83 1.60
Options exercisable as of September 30, 2021 7,096,395 $ 0.23 1.53
Vested and expected to vest at September 30, 2021 12,402,116 $ 0.83 1.60


	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)
Outstanding at December 31, 2021		12,359,322		$	0.83		1.39
Granted		-			-
Exercised		(558,550	)		0.06
Cancelled or forfeited		(226,704	)		0.60
Outstanding at March 31, 2022		11,574,068		$	0.87		1.21
Options exercisable as of March 31, 2022		7,068,725		$	0.45		1.09
Vested and expected to vest at March 31, 2022		11,574,068		$	0.87		1.21

The following table summarizes the Company’s unvested option activity for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

~~Schedule of Unvested Option Activity~~

	Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2020		6,526,494		$	0.16
						Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2021							5,188,990		$	0.64
Granted		806,283			4.15		0			0
Vested		(1,877,862	)		0.29		(466,125	)		0.43
Forfeited		(149,175	)		0.56		(217,522	)		0.25
Unvested at September 30, 2021		5,305,740		$	0.71
Unvested at March 31, 2022							4,505,343		$	0.68

~~The weighted-average grant-date fair value per share of~~There were 0 stock options granted during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 was $4.15~~ ~~and $0.33, respectively.~~

2021. As of ~~September 30, 2021,~~March 31, 2022, total unrecognized compensation expense related to the unvested stock options was $~~3.0~~ 2.6million, which is expected to be recognized over a weighted average period of ~~1.6~~1.2 years.

The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model, with the assumptions used for the nine months ended September 30, 2021, presented on a weighted average basis:

~~Schedule of Option Award Estimated Using a Black-scholes Option-pricing Model Assumptions~~

Nine Months Ended
September 30, 2021
Exercise price $ 10.00
Fair market value $ 4.15
Expected dividend yield 0.0 %
Expected term (in years) 6.3
Expected volatility 42.24 %
Weighted-average risk-free rate 0.55 %

SpaceMobile 2020 Incentive Award Plan

In connection with the Business Combination, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”). Awards may be made under the 2020 Plan covering an aggregate number of Class A common stock shares equal to 10,800,000. Any shares distributed pursuant to an award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market. The 2020 Plan provides for the grant of stock options, restricted stock, dividend equivalents, restricted stock units, incentive unit awards, stock appreciation rights, and other stock or cash-based awards. Each incentive unit issued pursuant to an award, if any, shall count as one share for purposes of calculating the aggregate number of shares available for issuance under the 2020 Plan.

Two types of equity awards have been granted under the 2020 Plan: (1) service-based options and (2) service-based and performance-based restricted stock units. Service-based options typically vest over a four yearservice period with 25% of the award vesting on the first anniversary of the employee’s commencement date, and the balance thereafter in 36 equal monthly installments. Service-based restricted stock units typically vest over a four year service period with 25% of the award vesting on each anniversary of the employee’s vesting commencement date. Performance-based restricted stock units typically vest on the earliest date that any of the following occurs: (i) the Company attains an incremental capital investment, or (ii) other specified performance conditions. Options typically expire no later than 10 years from the date of grant.

Stock Options

As of ~~September 30, 2021,~~March 31, 2022, there were ~~1,146,454~~ 1,833,104service-based options outstanding under the 2020 Plan.

The following table summarizes the Company’s option activity under the 2020 Plan for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

~~Schedule of Stock Options Activities~~

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years)
Outstanding at December 31, 2020 - $ - -
Granted 1,146,454 9.95
Exercised - -
Cancelled or forfeited - -
Outstanding at September 30, 2021 1,146,454 $ 9.95 3.47
Options exercisable as of September 30, 2021 27,893 $ 10.00 2.85
Vested and expected to vest at September 30, 2021 1,146,454 $ 9.95 3.47


	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)
Outstanding at December 31, 2021		1,889,115		$	10.35		3.36
Granted		-			-
Exercised		-			-
Cancelled or forfeited		(56,011	)		10.00
Outstanding at March 31, 2022		1,833,104		$	10.36		3.10
Options exercisable as of March 31, 2022		218,999		$	10.06		2.57
Vested and expected to vest at March 31, 2022		1,833,104		$	10.36		3.10

The following table summarizes the Company’s unvested option activity for the period ended ~~September 30, 2021:~~March 31, 2022:

~~Schedule of Unvested Option Activity~~

	Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2020		-		$	-
						Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2021							1,803,344		$	4.41
Granted		1,146,454			4.14		-			-
Vested		(27,893	)		4.16		(133,228	)		4.23
Forfeited		-			-		(56,011	)		4.22
Unvested at September 30, 2021		1,118,561		$	4.13
Unvested at March 31, 2022							1,614,105		$	4.43

~~The weighted-average grant-date fair value per share of~~There were 0 stock options granted ~~during the nine months ended September 30, 2021 was $4.14. There were~~ 0 ~~stock options granted in the nine months ended September 30, 2020. There were~~and no exercises during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021. A

Ass of ~~September 30, 2021,~~March 31, 2022, total unrecognized compensation expense related to the unvested stock options was $~~4.4~~ 6.3million, which is expected to be recognized over a weighted average period of ~~3.5~~ 3.1years.

~~Schedule of Option Award Estimated Using a Black-scholes Option-pricing Model Assumptions~~

Nine Months Ended
September 30, 2021
Exercise price $ 9.95
Fair market value $ 4.14
Expected dividend yield 0.0 %
Expected term (in years) 6.1
Expected volatility 42.34 %
Weighted-average risk-free rate 0.97 %

Restricted Stock Units

As of ~~September 30, 2021,~~March 31, 2022, there ~~were~~ ~~1,804,051~~ w~~restricted~~ere 1,634,781 restricted stock units outstanding under the 2020 Plan.

The following table summarizes the Company’s unvested restricted stock unit activity for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

~~Schedule of Unvested Restricted Stock Units Activity~~

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2020		-	$	-
					Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2021						1,686,031		$	10.14
Granted		1,804,051		10.11		0			0
Vested		-		-		(51,250	)		10.00
Forfeited		-		-		0			0
Unvested at September 30, 2021		1,804,051	$	10.11
Unvested at March 31, 2022						1,634,781		$	10.15

~~For the period ended September 30, 2021,~~As of March 31, 2022, total unrecognized compensation expense related to the unvested restricted stock units was $~~12.6~~ 9.6million, which is expected to be recognized over a weighted average period of ~~3.6~~ 3.1years.

SpaceMobile 2020 Employee Stock Purchase Plan

In connection with the Business Combination, the Company adopted the 2020 Employee Stock Purchase Plan (the “ESPP”). The aggregate number of common stock shares that may be issued pursuant to rights granted under the ESPP is 2,000,000shares. If any right granted under the ESPP shall for any reason terminate without having been exercised, the shares not purchased under such right shall again become available for issuance under the ESPP. As of ~~September 30, 2021,~~March 31, 2022, the Company had not issued anyawards under this plan.

~~12.~~ 13.

Net Income (Loss) per Share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to common stockholders adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements.

Prior to the Business Combination, the membership structure of AST LLC included units which shared in the profits and losses of AST LLC. The Company analyzed the calculation of earnings per unit for periods prior to the Business Combination and determined that it resulted in values that would not be meaningful to the readers of these unaudited condensed consolidated financial statements. Therefore, earnings per share information has not been presented for periods prior to the Business Combination on April 6, ~~2021. The basic and diluted earnings per share~~2021, including for the three ~~and nine~~ months ended ~~September 30, 2021 represent only the period of April 6, 2021 to September 30,~~March 31, 2021.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common ~~stock:~~stock (in thousands, except per share data):

~~Schedule of Basic and Diluted Earnings Per Share~~

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2021
(dollars in thousands except per share amounts)
Numerator
Net income (loss) before allocation to noncontrolling interest $ 16,804 $ (60,458 )
Net loss attributable to AST LLC pre Business Combination - (11,580 )
Net income (loss) attributable to the noncontrolling interest post Business Combination 12,689 (33,015 )
Net income (loss) attributable to common stockholders - basic $ 4,115 $ (15,863 )
Effect of dilutive securities:
Noncontrolling interest (278 ) -
Net income (loss) attributable to common stockholders - diluted $ 3,837 $ (15,863 )
Denominator
Weighted-average shares of Class A common stock outstanding - basic 51,729,704 51,729,704
Effect of dilutive securities:
Employee stock options 110,137 -
Weighted-average shares of Class A common stock outstanding - diluted 51,839,841 51,729,704
Earnings per share of Class A common stock - basic $ 0.08 $ (0.31 )
Earnings per share of Class A common stock - diluted $ 0.07 $ (0.31 )


	Three Months Ended March 31, 2022
Numerator
Net loss before allocation to noncontrolling interest	$	(37,903	)
Net loss attributable to noncontrolling interest		(27,182	)
Net loss attributable to common stockholders - basic and diluted	$	(10,721	)
Denominator
Weighted-average shares of Class A common stock outstanding - basic and diluted		51,760,520
Earnings per share of Class A common stock - basic and diluted	$	(0.21	)

~~Shares~~Shares of the Company’s Class B and Class C common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B and Class C common stock under the two-class method has not been presented.

At ~~September 30, 2021,~~March 31, 2022, the Company excluded from the calculation of diluted earnings per share 51,636,922shares of Class B common stock, 78,163,078shares of Class C common stock, ~~11,500,000~~ 11,498,700Public Warrants outstanding, 6,100,000Private Warrants outstanding, and 485,000unvested performance-based restricted stock units as their effect would have been anti-dilutive.

14.

Related Parties

~~13.~~ ~~Related Parties~~

~~Founder Bridge Loan~~Nano Financing Agreement

On ~~July 11, 2019, the Company~~January 12, 2022, AST LLC entered into a ~~promissory note~~financing agreement (the "Nano Financing Agreement") with ~~the founder and Chief Executive Officer of~~Nano, pursuant to which AST LLC ~~(the “Founder Note”). Under~~made available to Nano a revolving loan for up to EUR 1.5 million, whereby Nano has the ~~terms of the original and amended agreement dated September 10, 2019, the principal amount borrowed by the Company was $1.75~~ ability to draw up to EUR 0.8million ~~bearing~~at a time subject to certain conditions. The loan will bear interest at a rate of ~~2.37~~4.00% per ~~annum.~~annum payable annually on the last day of each calendar year, or 7% upon an Event of Default as defined in the loan agreement. Principal payments will be due and payable upon the issuance and/or sale of equity securities of Nano, and each calendar quarter if Nano's consolidated cash exceeds EUR 4 million, with the final remaining balance of unpaid principal and interest due on December 1, 2023. As of March 31, 2022, there are no balances outstanding under the Nano Financing Agreement. The ~~interest expense related to~~Nano Financing Agreement was be accounted for as an intercompany transaction in the ~~Founder Note was less than $0.1~~ ~~million for the year ended December 31, 2020. AST LLC repaid all amounts outstanding relating to the Founder Note on March 3, 2020.~~Company's unaudited condensed consolidated financial statements.

~~CFO Note~~19

~~On December 15, 2017, AST LLC issued~~ ~~110,000~~ ~~Existing AST LLC Common Units to its Chief Financial and Operating Officer, Thomas Severson, in exchange for a $100,000~~ ~~promissory note in favor of AST LLC (the “CFO Note”). The CFO Note accrued interest monthly at a rate of~~ ~~2.0% and was payable on the earlier of (1)~~ ~~December 15, 2027~~and (2) the occurrence of any of the following with respect to AST LLC: (i) a sale, (ii) merger, (iii) other transaction where AST LLC is not the majority, by voting power, of the surviving or resulting company, or (iv) the sale, lease, transfer, exclusive license or other disposition by AST LLC of all or substantially all of its assets. Mr. Severson repaid all principal and interest amounts under the CFO Note in December 2020.

InMotion Holdings LLC

AST owns 51% of and controls NanoAvionika UAB, a private limited liability company organized and existing under the law of the Republic of Lithuania (“Nano Lithuania”). Pursuant to that certain Investment Agreement dated November 7, 2017 (the “Investment Agreement”) by and among Nano Lithuania, InMotion Holdings, LLC, a Delaware limited liability company wholly-owned by the Company’s Chief Executive Officer and Chairman of the Board, Mr. ~~Abel~~ Avellan (“InMotion”), and the other parties to the Investment Agreement, InMotion owns one share of Nano Lithuania. Pursuant to the terms of a Service Agreement between Nano Lithuania and InMotion dated March 1, 2018 (the “Services Agreement”), InMotion is to provide consulting services including but not limited to marketing, sale support and general management support to Nano Lithuania. In connection with the Service Agreement, InMotion is entitled to receive an option to acquire 2,919newly issued shares of Nano Lithuania at EUR 305.64per share (the “Option”) and a management fee totaling $15,000per month; however, during the term of the Service Agreement, no management fees have been billed to, or collected from, Nano Lithuania, and InMotion intend to enter into an amendment to the Service Agreement to provide that its sole compensation under the Service Agreement will be the Option. In addition, AST LLC owns 51% of and controls NanoAvionics US LLC, a Delaware limited liability company (“Nano US”). Pursuant to that certain Limited Liability Company Operating Agreement dated February 21, 2020 (the “Operating Agreement”) by and among Nano US, InMotion, and the other parties to the Operating Agreement, InMotion owns one share of Nano US and an option to acquire 2,919newly issued shares of Nano US at an equivalent price per share as the option in Nano Lithuania, representing collectively with such one share, a 13% interest on a fully-diluted basis.

Support Services Agreement ~~and Production Services Agreement~~

On January 20, 2020, the Company entered into the Support Services Agreement with Finser Corporation (“Finser”), which is part of the Cisneros Group of Companies, of which Ms. Adriana Cisneros, a member of the Board of Directors is the Chief Executive Officer, whereby Finser will provide the Company consulting and administrative support services. The Company incurred less than $0.1million ~~and $0.2~~ ~~million~~ in consulting services for the three ~~and nine month periods, respectively,~~months ended ~~September 30,~~March 31, 2022 and 2021, which were included within the general and administrative expenses on the unaudited condensed consolidated statements of operations.We intend to terminate the agreement by June 30, 2022.

Vodafone

On January 28, 2021, AST LLC entered into a production services agreement (the “Production Services Agreement”) with Cisneros Media Distribution LLC (“Cisneros Media”), which is part of the Cisneros Group of Companies. Under the terms of the Production Services Agreement, Cisneros Media serves as a producer of a series of 12 videos for AST LLC. For such services, Cisernos Media is entitled to a fee of $~~180,000, comprised of $36,000, which was payable upon signing of the Production Services Agreement, and installments of $12,000~~ ~~for each video produced by Cisneros Media and accepted by AST LLC. Either party may terminate the Production Services Agreement. The Company incurred expenses of $0.1~~ million for both the three and nine month periods ended September 30, 2021, respectively, which were included within the general and administrative expenses on the condensed consolidated statements of operations.

~~Vodafone Agreement~~

~~In connection with that certain Amended and Restated Series B Preferred Shares Purchase Agreement dated as of February 4, 2020 (the “Series B Purchase Agreement”),~~ AST LLC and Vodafone have agreed to enter into one or more definitive agreements for a commercial partnership that is anticipated to use the SpaceMobile Service (the “Vodafone Commercial Agreements”). ~~Under~~In connection with the ~~Series B Purchase Agreement,~~commercial agreement, AST LLC, ~~agreed that it,~~ its subsidiaries, and affiliates ~~would~~have agreed not to enter into any agreement, term sheet, or letter of intent that grants another party the rights related to the provision of mobile services in the Vodafone markets or Vodafone partner markets prior to the execution of the Vodafone Commercial Agreements.

The Vodafone Commercial Agreements are to include mutual exclusivity, conditioned upon Vodafone making the SpaceMobile Service available to all of its customers and certain promotional efforts, within all Vodafone markets for five years commencing on the launch of a commercial service ~~based on Phase 3~~in all of the ~~SpaceMobile Service;~~Vodafone markets; preferential commercial terms in Vodafone partner markets; 50/50 revenue share for the SpaceMobile Service in Vodafone exclusivity markets; and the procurement, building and operating of mobile network ground stations at a mutually agreed cost by Vodafone. No payments have been made to date between us and Vodafone pursuant to the anticipated Vodafone Commercial Agreements. Vodafone has the right to designate one individual to the Board of Directors. Currently, Vodafone's designee is Luke Ibbetson, Head of Group Research & Development, Vodafone.

Also, AST LLC entered into a side letter with Vodafone dated December 15, 2020, under which AST LLC has agreed (i) not to enter into any material corporate strategic relationship or material commercial agreement with a party other than Vodafone and its affiliates that would be reasonably expected to materially frustrate ~~its~~AST LLC's ability to satisfy the obligations under the Vodafone Commercial Agreements with certain exceptions, (ii) to allocate sufficient funds in the capital budget to facilitate compliance with the obligations under the Vodafone Commercial Agreements; and (iii) not to alter the business plan in a manner that is materially detrimental to AST LLC’s ability to satisfy the obligations under the Vodafone Commercial Agreements.

American Tower

~~American Tower Agreement~~

~~In connection with the Series B Preferred Shares Purchase Agreement (the “Purchase Agreement”),~~ AST LLC and American Tower entered into a side letter agreement that was subsequently amended and restated on December 15, 2020 to reflect the transactions and agreements contemplated by the Equity Purchase Agreement between AST LLC and NPA (the “Amended and Restated Letter Agreement”). The Amended and Restated Letter Agreement contemplates that weAST LLC and American Tower will enter into commercial agreements to use American Tower facilities for the terrestrial gateway facilities in certain markets. The term of the operational agreement between us and American Tower is for an anticipated five years after the initial launch of commercial mobile services by AST LLC.

~~In markets in which Vodafone operates,~~On March 22, 2022, AST LLC ~~will work with Vodafone~~ and American Tower entered into a non-binding term sheet reflecting the terms and conditions for the deployment of our gateway satellite technology equipment on property owned and operated by American Tower. Under the agreement, American Tower will provide AST LLC leased space and managed services at its current and future tower sites and data centers under the global master lease agreement to ~~evaluate and plan deployments with preferred vendor status.~~ be entered into by the parties.

The usage of any American Tower services in a Vodafone market will be memorialized in a commercial agreement among all three parties. In markets where Vodafone does not operate (“Carrier Neutral Markets”), ~~AST LLC~~we and American Tower may enter into an agreement for American Tower to manage the operation of ~~the~~our deployed gateway facility in such market. In Carrier Neutral Markets where ~~AST LLC requires~~we require a third party to provide a gateway facility or services, ~~AST LLC agrees~~we agree to not accept any bid that is inferior to American Tower’s best and final proposal for such gateway facility or services. ~~AST LLC~~We also ~~agrees~~agree to use commercially reasonable efforts to utilize American Tower facilities in (i) Vodafone markets where Vodafone decides to not use its facilities, (ii) in Carrier Neutral Markets, and (iii) instances where ~~AST LLC requires~~we require a third-party vendor.

Additionally, AST LLC will work with American Tower to evaluate and plan gateway facility and radio access network data center deployments with preferred vendor status to offer carrier-neutral hosting facilities in certain equatorial markets. American Tower will serve as the preferred vendor for carrier neutral hosting facilities. AST LLC will pay American Tower a monthly connection fee for use of a carrier neutral hosting facility, which will be charged back to each applicable mobile network operator. If AST LLC and American Tower agree to construct a new carrier neutral hosting facility or improve an existing one and American Tower elects to fund all such capital expenditures, American Tower will provide AST LLC with a fair-market, long-term lease to such facility.No payments have been made to date between AST LLC and American Tower under the Amended and Restated Letter Agreement. American Tower has the right to designate one individual to the Board of Directors. Currently, American Tower's designee is Ed Knapp, Chief Technology Officer, American Tower.

Rakuten

~~Rakuten Commercial Agreement~~

On February 4, 2020, AST LLC entered into a commercial agreement with Rakuten, for the development of exclusive network capabilities in Japan compatible with the mobile network of Rakuten and its affiliates, which agreement was amended and restated as of December 15, 2020 (the “Rakuten Agreement”). Under the terms of the Rakuten Agreement, AST LLC agreed to make investments in building network capabilities in Japan that are compatible with the mobile network of Rakuten and its affiliates. Furthermore, AST LLC will collaborate with Rakuten to ensure network capability with Rakuten’s licensed frequencies, including full coverage in Japan with 3GPP Band 3 frequencies with multiple input multiple output (“MIMO”) capability. Upon the launch of such coverage, Rakuten will receive unlimited, exclusive rights and usage capacity in Japan in exchange for a $~~500,000~~ 0.5 million annual maintenance fee payable to AST LLC or our successors. Furthermore, AST LLC ~~agreed to~~will make $5 5.0million (or such lesser amount as mutually agreed upon the parties) in capital investments towards the design, construction, acquisition and implementation of ground communication assets. AST LLC and Rakuten will receive unlimited rights and usage of the ground assets for their respective operations, including, but not limited to, satellite and other telecommunication communications. The Rakuten Agreement includes a commercial roadmap for ~~the~~AST LLC's satellite launches with key performance indicators (“KPIs”) that AST LLC must meet. If the applicable KPIs are not met for the last two phases of the satellite launch program in accordance with such commercial roadmap or if AST LLC become subject to any bankruptcy proceeding or becomes insolvent, AST LLC shall ~~be required to~~ pay to Rakuten a penalty amount of $10 10.0million.

The term of the Rakuten Agreement shall remain in effect until AST LLC or ~~our~~its successor ~~fulfill our~~fulfills obligations under the Rakuten Agreement. No payments have been made to date between AST LLC and Rakuten under the Rakuten Agreement.Rakuten has the right to designate two individuals to our Board of Directors. Currently, Rakuten's designees are Hiroshi Mikitani, Founder, Chairman and Chief Executive Officer, Rakuten, Inc., and Tareq Amin, Chief Executive Officer, Rakuten Mobile.

~~14.~~ 15.

Income Taxes

The consolidated effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021 was ~~0.10~~(0.28)% and ~~(0.12)~~0%, ~~respectively, and the consolidated effective tax rate for the three and nine months ended September 30, 2020 was~~ 0%.respectively. The difference in the effective rates between periods is driven by income tax expense assessed against non-U.S earnings as a result of the change in structure from the Business Combination. AST LLC has elected to be treated as a partnership for U.S. federal and state income tax purposes and does not pay any U.S. federal income taxes since its income and losses are included in the returns of the members.earnings. The difference between the federal statutory tax rate of 21% and the effective tax rate is primarily driven by the Company’s Up-C organizational structure and allocation of AST LLC results to noncontrolling interest holders and the valuation allowance recorded against the Company’s net deferred tax assets.

~~The Company recorded a net deferred tax asset~~ ~~of $71.7~~ million for the difference between the book value and tax basis of the Company’s investment in AST LLC at the time of the Business Combination. The Company has assessed the realizability of their deferred tax assets and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As a result, the Company has recorded a full valuation allowance against its deferred tax asset resulting from the Business Combination.

The Company had 0uncertain tax positions as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

~~In connection with the Closing, the Company entered into the Tax Receivable Agreement. Pursuant to the~~The Tax Receivable Agreement the Company is generally required to pay the TRA Holders 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company and any applicable consolidated, unitary, or combined Subsidiaries (the “Tax Group”) realize, or are deemed to realize, as a result of certain “Tax Attributes,” which include:

	●	existing tax basis in certain assets of AST LLC and certain of its direct or indirect Subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to AST LLC Common Units acquired by the Company from a TRA Holder (including AST LLC Common Units held by a Blocker Corporation acquired by us in a Reorganization Transaction (as defined in the Tax Receivable Agreement)), each as determined at the time of the relevant acquisition;
	●	tax basis adjustments resulting from taxable exchanges of AST LLC Common Units (including any such adjustments resulting from certain payments made by us under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the terms of the A&R Operating Agreement;
	●	~~tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement; and~~
	●	~~certain tax attributes of Blocker Corporations holding AST LLC Common Units that are acquired directly or indirectly by the Company pursuant to a Reorganization Transaction.~~

Payments under the Tax Receivable Agreement generally will be based on the tax reporting positions that the Company determines (with the amount of subject payments determined in consultation with an advisory firm and subject to the TRA Holder Representative’s review and consent), and the IRS or another taxing authority may challenge all or any part of a position taken with respect to Tax Attributes or the utilization thereof, as well as other tax positions that the Company takes, and a court may sustain such a challenge. In the event that any Tax Attributes initially claimed or utilized by the Tax Group are disallowed, the TRA Holders will not be required to reimburse the Company for any excess payments that may previously have been made pursuant to the Tax Receivable Agreement, for example, due to adjustments resulting from examinations by taxing authorities. Rather, any excess payments made to such TRA Holders will be applied against and reduce any future cash payments otherwise required to be made by the Company to the applicable TRA Holders under the Tax Receivable Agreement, after the determination of such excess. However, a challenge to any Tax Attributes initially claimed or utilized by the Tax Group may not arise for a number of years following the initial time of such payment and, even if challenged earlier, such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement. As a result, there might not be future cash payments against which such excess can be applied and the Company could be required to make payments under the Tax Receivable Agreement in excess of the Tax Group’s actual savings in respect of the Tax Attributes.

Moreover, the Tax Receivable Agreement provides that, in the event (such events collectively, “Early Termination Events”) that (i) the Company exercises its early termination rights under the Tax Receivable Agreement, (ii) certain changes of control of the Company or AST LLC occur (as described in the A&R Operating Agreement), (iii) the Company, in certain circumstances, fails to make a payment required to be made pursuant to the Tax Receivable Agreement by its final payment date, which non-payment continues for 60 days following such final payment date or (iv) the Company materially breaches (or are deemed to materially breach) any of the material obligations under the Tax Receivable Agreement other than as described in the foregoing clause (iii) and, in the case of clauses (iii) and (iv), unless certain liquidity related or restrictive covenant related exceptions apply, the obligations under the Tax Receivable Agreement will accelerate (if the TRA Holder Representative so elects in the case of clauses (ii)-(iv)) and, the Company will be required to make a lump-sum cash payment to all the TRA Holders equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement, which lump-sum payment would be based on certain assumptions, including those relating to there being sufficient future taxable income of the Tax Group to fully utilize the Tax Attributes over certain specified time periods and that all AST LLC Common Units (including AST LLC Common Units held by Blocker Corporations) that had not yet been exchanged for Class A Common Stock or cash are deemed exchanged for cash. The lump-sum payment could be material and could materially exceed any actual tax benefits that the Tax Group realizes subsequent to such payment.

Payments under the Tax Receivable Agreement will be the obligations of the Company and not obligations of AST LLC. Any actual increase in the Company’s allocable share of AST LLC and its relevant subsidiaries’ tax basis in relevant assets, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A Common Stock at the time of an exchange of AST LLC Common Units by a TRA Holder pursuant to the terms of the A&R Operating Agreement and the amount and timing of the recognition of the Tax Group’s income for applicable tax purposes. While many of the factors that will determine the amount of payments that the Company will be required to make under the Tax Receivable Agreement are outside of the Company’s control, the Company expects that the aggregate payments it will be required to make under the Tax Receivable Agreement could be substantial and, if those payments substantially exceed the tax benefit we realize in a given year or in the aggregate, could have an adverse effect on the financial condition, which may be material.

Any payments made by the Company under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to the Company. To the extent that the Company is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. Furthermore, the future obligation to make payments under the Tax Receivable Agreement could make the Company a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the Tax Attributes that may be deemed realized under the Tax Receivable Agreement. Changes in income tax rates, changes in income tax laws or disagreements with tax authorities can adversely affect the Company’s, AST LLC’s or its subsidiaries’ business, financial condition or results of operations.

~~The TRA~~ holders did not acquire any Class A common stock in an Exchange or Reorganization Transaction, as defined in the Tax Receivable Agreement during the reporting period. As a result, no Tax Receivable Agreement liability has been recorded as of ~~September 30, 2021.~~March 31, 2022.

As of ~~September 30, 2021,~~March 31, 2022, there have been no exchanges of AST LLC units for Class A common stock of the Company and, accordingly, no TRA liabilities have been recognized.

16.

Subsequent Events

~~15.~~ ~~Subsequent Events~~Common Stock Purchase Agreement

On ~~October 14, 2021,~~May 6, 2022, the Company entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $75.0 million of shares of the Company’s ~~wholly owned subsidiary, AST & Science Texas LLC, entered into an agreement for purchase and sale~~Class A common stock at 97% of ~~improved real property (the “Agreement”~~the volume weighted average price ("VWAP") ~~with Black & Dillard Property Management LTD and Eagle Rig Manufacturing & Service LTD. The property includes offices, industrial warehouse buildings and paint booths consisting~~ of ~~eight single-story industrial buildings totaling~~ ~~99,372~~ ~~square feet, as well as all related intangible property, inclusive of, but not limited to, rights~~the Class A common stock calculated in ~~the architectural plans for improvements, guaranties and warranties from contractors, building permits and licenses, and advertising and promotional materials. In~~ accordance with the ~~terms~~Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales of Class A common stock are solely at the election of the ~~Agreement,~~Company, and the Company is under no obligation to sell any securities to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase ~~price to be paid by AST & Science Texas LLC for the property is $8.0~~ ~~million, of which AST & Science Texas LLC has paid an upfront deposit of $0.5~~ ~~million, which is held in an interest-bearing account. The Company~~ ~~intends to~~ ~~utilize~~ ~~the facility for the assembly and testing~~shares of the ~~SpaceMobile constellation satellites.~~Company’s Class A common stock, the Company has issued 21,969 shares of its Class A common stock as initial commitment shares and will issue an aggregate of 65,907 shares of its Class A common stock as additional commitment shares if certain conditions are met.

Agreement with former Chief Financial Officer and Director

On May 16, 2022, the Company entered into a consulting agreement by and between the Company, AST LLC, and Thomas Severson, the former Chief Financial Officer and Director of the Company (the "Consulting Agreement") to assist with the transition of his duties. Under the Consulting Agreement, Mr. Severson will provide consulting services through April 6, 2023, and the Company will reimburse any of Mr. Severson’s reasonable out-of-pocket expenses. Mr. Severson has also agreed to certain transfer restrictions relating to the Company’s securities. The foregoing summary of the Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.2 and is incorporated herein by reference.

Further, on May 16, 2022, the Company extended a non-recourse loan in the amount of $1.0 million at an interest rate of 8.00% per annum to Mr. Severson. Both the loan and interest on loan are due for repayment on the second anniversary of its effective date. The loan may be prepaid at any time and is subject to certain mandatory prepayment conditions. The loan is secured by a pledge of $2.0 million of Mr. Severson’s equity securities in AST LLC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~References~~Except as otherwise noted or where the context requires otherwise, references in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to AST SpaceMobile, Inc. ~~(formerly known as New Providence Acquisition Corp.). References~~and references to our “management” or our “management team” refer to our officers and ~~directors, and references to the “Sponsor” refer to New Providence Acquisition Management LLC.~~ directors.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with ~~the~~our unaudited condensed consolidated financial statements and ~~the~~related notes ~~thereto contained elsewhere~~included in Item 1 of this Quarterly ~~Report. Certain information~~Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2021, including our audited consolidated financial statements and related notes contained ~~in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.~~therein.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” for the purposes of federal securities laws 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 Part I, “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the Risk Factors section of our Form S-1 Registration Statement filed with the SEC on June 25, 2021 (File No. 333-257425) as well as the Risk Factors contained in Part II, Item 1A of our Form 10-Q filed with the SEC on August 16,year ended December 31, 2021. 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.

On April 6, 2021 (the “Closing Date”), the Company completed a business combination (“Business Combination”) pursuant to that certain Equity Purchase Agreement, by and among AST & Science LLC (“AST LLC”), New Providence Acquisition Corp. (“NPA”), the existing equityholders of AST LLC (“Existing Equityholders”), Sponsor, and Mr. Abel Avellan. As contemplated by the Equity Purchase Agreement:

	~~(a)~~	~~NPA was appointed as the managing member of AST LLC and AST LLC became a subsidiary of NPA;~~

	~~(b)~~	~~NPA changed its name to “AST SpaceMobile, Inc.”;~~

	~~(c)~~	immediately prior to the closing of the Business Combination, all then-outstanding shares of Class B common stock, par value $0.0001 per share, of NPA (“NPA Class B Common Stock”) held by Sponsor (the “Sponsor Stock”) converted into shares of Class A common stock, par value $0.0001 per share, of NPA (“NPA Class A Common Stock”) immediately prior to the Business Combination;

	~~(d)~~	each share of NPA Class A Common Stock, including those converted as described in (c) above, was converted into one share of Class A common stock, par value $0.0001 per share, of the Company (“Class A Common Stock”), and each warrant of NPA (an “NPA Warrant”) was converted into one warrant of the Company (a “Warrant��);

	~~(e)~~	AST LLC restructured its capitalization, appointed the Company as its managing member and issued to the Company 51,729,704 units of ownership interest in AST LLC (the “AST LLC Common Units”), which entitle the holder to the distributions, allocations, and other rights under the Fifth Amended and Restated Limited Liability Company Operating Agreement of AST LLC (the “A&R Operating Agreement”), in exchange for which AST LLC received approximately $226.4 million remaining in NPA’s trust account following (i) the $4.8 million payment of deferred underwriting commissions (ii) $0.2 million of redemptions made in connection with NPA’s special meeting of stockholders relating to the transactions contemplated by the Equity Purchase Agreement (the “Special Meeting”) and NPA’s annual meeting of stockholders to approve, among other things, a charter amendment to extend the date by which it had to complete an initial business combination and (iii) the repayment of a $0.6 million related party loan between the Sponsor and NPA;

	~~(f)~~	~~AST LLC issued to the Company warrants to purchase up to 17,600,000 AST LLC Common Units;~~

	~~(g)~~	~~certain PIPE Investors purchased 23,000,000 shares of Class A Common Stock at a purchase price of $10 per share;~~

	~~(h)~~	the Company issued 51,636,922 shares of Class B common stock, par value $0.0001 per share, of the Company, which carries one vote per share but no economic rights (“Class B Common Stock”) to the AST LLC Existing Equityholders (other than Mr. Abel Avellan); and

	~~(i)~~	the Company issued 78,163,078 shares of Class C common stock, par value $0.0001 per share, of the Company, which carries ten votes per share but no economic rights (“Class C Common Stock”) to Mr. Abel Avellan (the transactions referred to in clauses (a) through (i), collectively, the “Business Combination”).

The Company received net proceeds of $416.9 million. In connection with the closing of the Business Combination, the Company incurred an additional $30.3 million of contingent transaction costs, which were paid at closing.

Overview

We are an innovative satellite designer and manufacturer. We operate from six locations that include our corporate headquarters and ~~85,000~~185,000 square foot satellite assembly, integrating and testing ~~facility~~facilities in ~~Midland,~~ Texas, and engineering and development locations in Maryland, Spain, the United Kingdom, and Israel. ~~In addition,~~Also, our 51% owned and controlled subsidiary, NanoAvionika UAB (“Nano”), is headquartered in Lithuania.

We and our global partners are building what we believe is the first ~~and only~~ space-based cellular broadband network designed to be accessible by standard ~~smartphones.~~mobile phones. Our SpaceMobile Service is expected to provide cost-effective, high-speed mobile broadband services with global coverage to all end-users, regardless of where they live or work, without the need to purchase special equipment. We believe the SpaceMobile Service would be the first global direct mobile broadband network using ~~low Earth orbit (“LEO”)~~LEO satellites to provide connectivity to any standard, unmodified, off-the-shelf mobile phone or 2G/3G/4G LTE/5G and IoT-enabled device. We intend to partner with ~~mobile network operators (“MNOs”~~Mobile Network Operators ("MNOs") to offer the SpaceMobile Service to the MNOs’ end-user customers. Our vision is that users will not need to subscribe to the SpaceMobile Service directly with us, nor will they need to purchase any new or additional equipment. Instead, users will be able to access the SpaceMobile Service when prompted on their mobile device that they are no longer within range of the land-based facilities of the MNO operator or will be able to purchase a plan directly with their existing mobile provider.

The SpaceMobile Service currently is planned to be provided through a network of 168 high-powered, large phased-array satellites in LEO. The worldwide mobile traffic will be directed by the SpaceMobile ~~Service~~constellation to a terrestrial ~~gateway~~gateways via high throughput Q/V-band links and then directed to the in-country MNO’s core cellular network ~~connected to the internet.~~infrastructure, located at our dedicated gateways. Our intent is that users will be able to connect to the SpaceMobile Service as if they were using a local cell tower, with less communication delay effects than existing geostationary satellite communication systems experience.

On April 1, 2019, we launched our first test satellite, ~~BlueWalker 1 (“BW1”),~~BW1, which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO orbit and the effects of doppler in a satellite to ground cellular environment using the 4G-LTE protocol. We are currently ~~assembling, integrating,~~completing the assembly and testing ~~the satellite componentry required for~~of our ~~BlueWalker 3 (“BW3”)~~BW3 test satellite. The BW3 test satellite has an aperture of 693 square feet and is designed to communicate directly with mobile phones via 3GPP standard frequencies. As of ~~September 30, 2021,~~March 31, 2022, we have incurred approximately ~~$56.7~~$82.7 million of capitalized costs (including launch cost and non-recurring ~~engineering) relating~~engineering costs) related to the construction and testing of the BW3 test ~~satellite and expect to incur an additional $10.0 to $12.0 million (including non-recurring engineering) to bring this project to completion.~~satellite. The BW3 test satellite ~~will be using SpaceX as a~~is substantially complete having undergone over 700 tests of its capabilities and systems and is targeted to launch ~~services provider. The current available launch window with SpaceX runs from March 2022 through April~~in the Summer of 2022. However, the exact timing of such launch is contingent on a number of factors, including satisfactory and timely completion of ~~construction and~~ testing of BW3 test satellite. We have the option to select an alternate launch window if we deliver a rebooking notice to SpaceX by December 1, 2021 and pay a rebooking fee. While we have not yet determined if we will provide such rebooking notice and select an alternate mission and launch window, at this time we believe it is likely that we may elect to do so to provide additional time for BW3 testing and final launch preparation. If we exercise the option to rebook, we plan to target a BW3 launch within months of the original launch window; however, any alternate launch window would be subject to mutual agreement and coordination with SpaceX.BW3.

We are also ~~in the development~~currently developing and ~~design process~~designing our constellation of ~~our first constellation phase of 20 satellites (the “BB1 Satellites”~~BlueBird ("BB")~~. We~~ are currently planning our first commercial satellite launches for the BB1 Satellites to begin during the last quarter of 2022 and continue during the first two or potentially three quarters of 2023. This first phase of satellites is expected to provide satellite coverage in the 49 Equatorial countries, representing a total population of approximately 1.6 billion people, with 20 satellites. We currently plan to begin launching the first commercial BB satellites in the second quarter of 2023 and expect this to continue through 2025. We currently plan to achieve ~~full~~substantial global mobile coverage after the ~~completion~~launch of a total of 110 satellites by the launches required to deploy an additional 90 satellites which we are targeting to begin launching during the last quarter of 2023 and continue during 2024, assuming the first phase is successfully completed in the anticipated time frame. Assuming we are able to substantially achieve full global mobile coverage, we currently are planning to begin the launches required to deploy an additional 58 satellites with multiple input multiple output (“MIMO”) capabilities beginning in the fourth quarterend of 2024 ~~through~~and MIMO capabilities during 2025 after the ~~third quarter~~launch of ~~2025. While this represents our~~a total of 168 satellites. Our current ~~planning, our launch plans and timelines are~~plan is subject to numerous ~~factors,~~uncertainties, many of which are beyond our control, including, ~~manufacturing timelines~~satisfactory and ~~our ability to successfully contract with~~timely completion of assembly and testing of the satellites, availability of launch ~~providers that can accommodate~~windows by the ~~technical specifications of our BB1 Satellites,~~launch providers, proposed orbits and resulting satellite coverage, ~~and proposed~~ launch ~~timing and~~ costs, ability to enter into agreements with MNOs, regulatory approvals, and other ~~factors which could impact the determination of launch providers.~~factors. Accordingly, we may adopt a deployment strategy that may differ materially from our current plan.

The SpaceMobile Service has not yet generated revenue and is not expected to generate revenue until after the commercial launch of the SpaceMobile Service. After we begin to launch and deploy our BB satellites during 2023, we may seek to generate revenue during 2023 by providing a limited SpaceMobile Service in certain countries. The limited SpaceMobile Service would not be available on a continuous basis and our ability to offer such limited services is dependent upon numerous factors, including execution of definitive commercial agreements with MNOs, agreement by MNOs to provide limited services to their end-user customers, end-user customer acceptance, pricing, availability of active satellites over the applicable countries, regulatory approvals, and other factors. As we continue to launch and deploy additional BB satellites during 2024 and 2025, we expect to generate revenue after the commercial launch of the SpaceMobile Service in certain geographical locations beginning in 2024.

~~Revenue is currently generated from Nano,~~On March 3, 2022, AST LLC entered into a Multi-Launch Agreement with SpaceX which ~~consists~~provides a framework for future launches of the Company’s satellites through December 31, 2024, including the launches of the BW3 test satellite ~~development~~ and ~~manufacturing, procuring~~the first BB satellite. As part of the Multi-Launch Agreement, the Company and ~~arranging launch services, as well as in-orbit operations. Additionally,~~SpaceX agreed on a ~~smaller scale, Nano offers hosted payload services, sale~~framework for additional launch service agreements relating to the launch of ~~individual~~future BB satellites. In connection with entry into the Multi-Launch Agreement, the Company paid an aggregate amount of $22.8 million for BW3 launch cost, first BB initial payment and launch reservation fee for a future BB launch. The exact timing of the satellite ~~parts~~launches is contingent on a number of factors, including satisfactory and ~~subsystems,~~timely completion of construction and ~~software licenses.~~ testing. The Multi-Launch Agreement permits the Company to delay launches of its satellites upon payment of certain rebooking fees.

We ~~do not~~are currently ~~generate any revenue~~industrializing the assembly, integration, and testing processes for the future production of the BB satellites. We are making the necessary capital investments in the assembly, integration and testing ("AIT") facility in Texas. We are hiring, and expect to continue hiring, assembly, integration, and testing employees necessary for the production of the BB satellites and engineers that will be required to test and integrate the BB satellites. Also, we are continuing to implement and integrate various systems, such as product lifecycle management, manufacturing execution system, enterprise resource planning system, and other ~~than through Nano.~~systems required to industrialize the manufacturing processes of the BB satellites. We are also actively engaged with the third-party vendors to secure supply of components and materials for production of the BB satellites. Furthermore, we are continuing to expand our research and development ("R&D") efforts for the development of electronics required for BB satellites and cellular and ground infrastructure and gateways.

We are an early stage and emerging growth company and, as such, we are subject to all of the risks associated with early stage and emerging growth companies. Please refer to ~~the Risk Factors section of our Form S-1 Registration Statement filed with the SEC on June 25, 2021 (File No. 333-257425) as well as the~~ Risk Factors contained in Part ~~II, Item 1A of~~I, “Item 1A. Risk Factors” included in our Annual Report on Form ~~10-Q filed with~~10-K for the ~~SEC on August 16, 2021 for a description of such risks.~~year ended December 31, 2021.

~~Impact of COVID-19 Pandemic~~Recent Developments

~~With~~On May 2, 2022, we received an experimental license from the ~~on-going global spread~~Federal Communications Commission ("FCC") supporting our U.S.-based testing of the BW3 satellite. The license covers BW3 space-to-ground testing in the United States using 3GPP low-band cellular frequencies and Q/V-band frequencies, subject to certain restrictions. We require additional authorizations from the FCC for our planned constellation of BB satellites.

On May 6, 2022, we entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”) to sell to B. Riley up to $75.0 million of shares of the Company’s Class A common stock over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Refer to Liquidity and Capital Resources below for further information.

Impact of COVID-19 Pandemic

We continue to closely monitor the impact of the COVID-19 pandemic weand the resulting impact on all aspects of our business across geographies, including how it has and may continue to impact our workforce, suppliers and vendors. We have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on ~~its~~our business. The extent to which the COVID-19 pandemic impacts our business, research and development efforts and the value of our equity, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease. The global economic disruptions and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties specific to the industry.time. To date, the pandemic has not had a material impact to our technology development efforts or results of our operations. However, given the ~~daily~~ evolution of the COVID-19 outbreak and

the global responses to curb its spread, we are not able to estimate the future effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity.

Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations

The consolidated assets, liabilities and results of operations for the period from January 1, 2021 up to April 6, 2021, the date the Company completed a business combination (the "Business Combination"), are those of our accounting predecessor, AST LLC. After the Business Combination, upon obtaining additional funding of $416.9 million, we significantly expanded research and development initiatives, made significant progress on the BW3 test satellite and design of the BB satellites, increased the headcount of employees and consultants, and expanded our operations. All of these factors contributed to a significant increase in related operating and capital expenditures during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Also, in connection with the Business Combination, we issued warrants which are recorded at fair value in our unaudited condensed consolidated balance sheet. The change in fair value of warrants was recognized as a gain or loss in the unaudited condensed consolidated statement of operations.

Components of Results of Operations

Revenues

To date, we have not generated ~~significant revenues and do not expect to begin generating~~any revenues from our SpaceMobile ~~Service until 2023.~~Service. Our 51% owned subsidiary, Nano, generates revenue from the development and manufacture of satellite technology, and ancillary sales and services ~~in Europe and the United States.~~globally. Nano also sells individual satellite parts, subsystems, and software to be configured to customers’ satellites, and enters into “rideshare” type agreements whereby Nano provides hosted payload services using customers’ payloads integrated with Nano-owned ~~Satellite Buses~~satellite buses for scheduled launches. ~~Given the above information, any~~Accordingly, all revenue recognition presented herein exclusively relates to Nano’s ~~commercially available~~sales of goods and services.

Cost of Sales

Cost of sales includes the purchase price of various products used and services performed to execute Nano’s ~~revenue~~sales contracts. Cost of sales also includes operational costs to fulfil Nano customer orders, including costs for Nano employees and ~~overhead.~~

overheads.

Engineering Services

Engineering costs are charged to expense as incurred. Engineering costs consist primarily of the expenses associated with our ongoing engineering efforts related to ~~establish feasibility~~integration, testing, and development of our satellites, as well as the cost of internal staff (such as engineers and consultants) to support these ~~efforts. Currently, major~~efforts and general expenses related to engineering activities include the manufacturing and assembly of the satellite components required for the BW3 test satellite at the Company’s Midland, Texas facility and the development and design of the first commercial satellite launches for a first constellation phase of 20 satellites (the “BB1 Satellites”).centers.

General and Administrative Costs

General and administrative costs include the costs of insurance, cost of non-engineering personnel and personnel related expenses such as recruiting and travel and lodging expenses, software licensing and subscriptions, office and facilities expenses, investor relations, and ~~outside~~ professional services, including public relations, accounting and legal ~~fees necessary to comply with the rules of the SEC and regulations applicable to a public company.~~

~~Research and Development Costs~~fees.

Research and ~~development (“~~Development Costs

R~~&D”)~~&D costs consist principally of non-recurring ~~engineering developments~~development activities in which we typically engage third-party vendors. Currently, major R&D activities include engaging with vendors to help design and develop the electronic componentry, software, and ~~software~~mechanical deployment systems to be used in the ~~first commercial satellite launch phase of~~BB satellites and in connection with the ~~BB1 Satellites.~~planned SpaceMobile service.

Depreciation and Amortization

Depreciation and amortization expense includes amounts related to property and equipment as well as definite lived intangible assets. Once the BW3 test satellite is completed and successfully launched, we expect a significant portion of our depreciation expense to relate to the depreciation of this asset, given its assigned useful life is two years.

~~Changes in Fair Value~~Gain (Loss ) on Remeasurement of Warrant Liabilities

Public and private warrants issued by ~~the Company~~us are accounted for as liability-classified instruments at their initial fair value on the date of issuance. They are remeasured on each balance sheet date and changes in the estimated fair value are recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of operations.

~~Interest Income, Net~~25

~~Interest~~Other Income (Expense), Net

Other income (expense), net consists ~~primarily~~ of interest earned on cash and cash equivalents held by us in interest bearing demand deposit accounts, net of any interest ~~expense.~~

~~Other Income (Expense), Net~~

~~Other income or~~ expense, ~~consists of~~as well as miscellaneous non-operating items, including foreign exchange gains or losses.

Income Tax Expense

~~As a result of the Business Combination, the Company, organized as a C corporation, owns an equity interest in AST LLC in what is commonly referred to as an “Up-C” structure.~~ AST LLC is treated as a partnership for U.S. federal and state income tax purposes. Also, we have a controlling ownership interest in Nano, a Lithuanian subsidiary, that is subject to foreign income taxes and is also treated as a partnership for U.S. federal and state and local taxes. Accordingly, for U.S. federal and state income tax purposes, all income, losses, and other tax attributes pass through to the members’ income tax returns, and no U.S. federal and state and local provision for income taxes has been recorded for these entities in the unaudited condensed consolidated financial statements. Certain foreign wholly-owned entities are taxed as corporations in the jurisdictions in which they operate, and accruals for such taxes are included in the unaudited condensed consolidated financial statements.

~~We recorded a net deferred tax asset of~~ ~~$71.7 m~~illion for the difference between the book value and tax basis of our investment in AST LLC at the time of the Business Combination. We have assessed the realizability of our deferred tax assets and in that analysis have considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As a result, we have recorded a full valuation allowance against our deferred tax asset resulting from the Business Combination.

Noncontrolling Interest

Noncontrolling interest primarily represents the equity interest in AST LLC held by the Existing Equityholders other than ~~the Company.~~us. As of ~~September 30, 2021,~~March 31, 2022, the Existing Equityholders’ equity ownership percentage in AST LLC was approximately ~~71.5%~~72%. Also, noncontrolling interest includes the equity interests in our subsidiaries, Nano Lithuania and Nano US, held by equityholders other than us. As of March 31, 2022, the noncontrolling interests in Nano Lithuania and Nano US was approximately 49%. We attribute a portion of net income or loss generated at AST LLC, Nano Lithuania, and Nano US to the noncontrolling ~~interest.~~

interests based on their ownership interests.

Results of Operations

~~Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020~~

The following table sets forth a summary of our unaudited condensed consolidated ~~results~~statements of operations for the ~~periods indicated below~~three months ended March 31, 2022 and 2021 (in thousands) and the ~~changes between~~discussion that follows compares the ~~periods.~~three months ended March 31, 2022 to the three months ended March 31, 2021.


	Three Months Ended September 30, (unaudited)								Three months ended March 31,
	2021		2020			$ Change			(unaudited)
	(dollars in thousands)								2022			2021			$ Change			% Change
Revenues	$	2,450	$	2,090		$	360		$	2,394		$	951		$	1,443			152		%

Cost of sales (exclusive of items shown separately below)		2,103		833			1,270			1,986			896			1,090			122

Gross profit		347		1,257			(910	)		408			55			353			642

Operating expenses:
Engineering services		8,026		3,502			4,524			11,740			5,659			6,081			107
General and administrative costs		9,331		2,825			6,506			11,619			5,537			6,082			110
Research and development costs		4,888		17			4,871			8,281			304			7,977			2,624
Depreciation and amortization		867		112			755			1,100			614			486			79
Total operating expenses		23,112		6,456			16,656			32,740			12,114			20,626			170

Other income (expense):
Changes in fair value of warrant liabilities		39,401		-			39,401
Interest income, net		4		14			(10	)
Loss on remeasurement of warrant liabilities										(5,482	)		-			(5,482	)		100
Other income (expense), net		180		4			176			15			(28	)		43			(154	)
Total other income (expense), net		39,585		18			39,567
Total other expense, net										(5,467	)		(28	)		(5,439	)		19,425

Income (loss) before income tax expense		16,820		(5,181	)		22,001
Loss before income tax expense										(37,799	)		(12,087	)		(25,712	)		213
Income tax expense		16		-			16			104			1			103			10,300
Net income (loss) before allocation to noncontrolling interest		16,804		(5,181	)		21,985
Net loss before allocation to noncontrolling interest										(37,903	)		(12,088	)		(25,815	)		214

Net income (loss) attributable to noncontrolling interest		12,689		350			12,339
Net income (loss) attributable to common stockholders	$	4,115	$	(5,531	)	$	9,646
Net loss attributable to noncontrolling interest										(27,182	)		(508	)		(26,674	)		5,251
Net loss attributable to common stockholders									$	(10,721	)	$	(11,580	)	$	859			(7	)	%

Revenues

Total revenues increased by ~~$0.4~~ $1.4 million, or 152%, to ~~$2.5~~$2.4 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The increase in revenue was primarily ~~due~~attributable to ~~an increase in sales to new third-party customers, as well as~~ the ~~achievement~~completion of ~~milestones on contracts~~performance obligations associated with existing ~~third-party customers of Nano.~~Nano customer contracts.

Cost of Sales

Total cost of sales increased by ~~$1.3~~$1.1 million, or 122%, to ~~$2.1~~$2.0 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~significant~~ increase in cost of sales ~~as compared to the increase in revenue for the comparable period as described above,~~ was primarily ~~due~~attributable to ~~work being performed on new~~increased production and services under
existing ~~revenue~~Nano sales contracts ~~with third-party customers of Nano in which milestones have not yet been reached~~ during the three months ended ~~September 30, 2021.~~March 31, 2022.

Engineering Services

Total engineering services increased by ~~$4.5~~$6.1 million, or 107%, to ~~$8.0 million~~$11.7 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was ~~primarily due~~primarily attributable to a ~~$3.9~~$5.3 million increase in ~~headcount~~payroll and employee related costs as a result of ~~engineers and~~an increase in headcount period over period. The remaining change relates to a ~~$0.2~~$0.8 million increase in ~~consultant costs. The costs~~general expenses at engineering centers to support the engineering efforts related to ~~recurrent engineers~~the integration, testing, and ~~consultants that are not solely associated with the~~ development of ~~BW3 and BB1 Satellites~~our satellites. Engineering expenses are ~~expensed as engineering services. The remaining $0.4 million increase relates to other operating expenses, such as $0.3 million in facility expenses. We expect engineering expenses~~expected to continue to increase ~~over~~in the ~~upcoming years~~near term as we hire additional engineers and third parties in our development of the SpaceMobile ~~Service is developed.~~Service.

General and Administrative Costs

Total general and administrative costs increased by ~~$6.5~~$6.1 million, or 110%, to ~~$9.3~~ $11.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was primarily due to a ~~$2.8 million increase in~~increased insurance costs, employee and ~~consultant-related~~consultant related expenses, ~~such as salaries~~ and ~~recruiting fees due to the increase in headcount compared to the prior period, a $1.3~~office related costs. The $1.4 million increase in insurance costs ~~a $1.1~~was attributable to increased insurance needs, including related to D&O insurance, intellectual property insurance and insurance coverage for our expanded facilities. The $1.2 million increase in ~~office-related~~consultant and employee related expenses ~~including software licenses and computer maintenance, a $0.9~~ was attributable to an increase in headcount period over period. The $1.3 million increase in professional service fees ~~due~~was attributable to the increase in legal, tax, and accounting services ~~compared to the prior period, and~~provided since becoming a ~~$0.4~~ public company. The $1.0 million increase in ~~other~~office-related costs was primarily attributable to increased costs for repairs and maintenance at our existing facility in Texas, headcount-driven increases in office supplies, software costs, and increased rent. The remaining $1.2 million increase in general and administrative costs was attributable to miscellaneous expenses, ~~such as~~including licensing costs and travel ~~expenses and other~~ costs.

Research and Development Costs

Total ~~research and development~~R&D costs ~~were~~ ~~$4.9~~increased by $8.0 million to $8.3 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~near zero in~~ the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was primarily due to ~~the~~third-party development efforts relating to the ~~BB1 Satellites~~BB satellites to be used in the SpaceMobile constellation, which began to increase substantially during the second quarter of 2021. Prior to the second quarter of 2021, our operations primarily related to constructing the BW3 test satellite, and istherefore R&D efforts were limited during the three months ended March 31, 2021. Total R&D costs are expected to continue to increase in future ~~periods.~~periods until the BB satellite design and development is completed, however, they may fluctuate quarter over quarter as R&D costs are driven by milestones.

Depreciation and Amortization

Total depreciation and ~~amortizatio~~namortization expense increased by ~~$0.8~~$0.5 million, or 79%, to ~~$0.9~~$1.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was primarily due to the purchase of additional fixed assets
and leasehold improvements ~~between periods.~~during the period. Depreciation expense is expected to increase significantly once the BW3 test
satellite is completed and successfully launched given its assigned useful life of two years.

Changes in Fair Value of Warrant Liabilities

~~Total changes~~Increase in fair value of warrant liabilities ~~was $39.4~~resulted in a loss of $5.5 million for the three months ended September 30, 2021 as compared to zero in the three months ended September 30, 2020. The increase was due to the unrealized gain on the change in the fair value of the warrant liabilities of $39.4 million during the three months ended September 30, 2021.March 31, 2022. We did not have a similar change in the fair value of the warrant liabilities induring the ~~comparative period~~three months ended March 31, 2021 as the warrant liabilities were not recorded ~~as a result of~~until the Business Combination was completed in the second quarter of 2021.

~~Other~~ 27

Income ~~(Expense), net~~Tax Expense

~~Total other~~The provision for income ~~net~~taxes was ~~$0.2~~$0.1 million for the three months ended ~~September 30, 2021 as compared to~~March 31, 2022 and near zero in the three months ended September 30, 2020. The increase was primarily due to non-recurring income from a third-party contract executed during the three months ended September 30, 2021. We did not have similar income in the comparative period.

~~Noncontrolling Interest~~

~~Net income attributable to noncontrolling interest was $12.7 million~~ for the three months ended ~~September 30, 2021 as compared to $0.4 million in~~March 31, 2021. The consolidated effective tax rate for the three months ended ~~September 30, 2020. This increase~~March 31, 2022 and March 31, 2021 was (0.28)% and 0%, respectively. The difference in ~~net~~the effective rates between periods is driven by income ~~correlates with the increase~~tax expense assessed against non-U.S earnings. For further information, see Note 15: Income Taxes to our unaudited condensed consolidated financial statements included in ~~net income generated at AST LLC given the noncontrolling interest represents a portion~~Item 1 of ~~such net income.~~

this report.

~~Nine Months Ended September 30, 2021 Compared~~

Net Loss attributable to ~~the Nine Months Ended September 30, 2020~~

~~The following table sets forth a summary of our consolidated results of operations for the interim periods indicated below and the changes between the periods.~~

Nine Months Ended September 30,
(unaudited)
2021 2020 $ Change
(dollars in thousands)
Revenues $ 6,185 $ 3,265 $ 2,920

Cost of sales (exclusive of items shown separately below) 4,122 2,634 1,488

Gross profit 2,063 631 1,432

Operating expenses:
Engineering services 18,757 8,426 10,331
General and administrative costs 24,031 7,638 16,393
Research and development costs 15,491 60 15,431
Depreciation and amortization 2,049 417 1,632
Total operating expenses 60,328 16,541 43,787

Other income (expense):
Changes in fair value of warrant liabilities (2,276 ) - (2,276 )
Interest income, net 12 58 (46 )
Other income (expense), net 144 (2 ) 146
Total other income (expense), net (2,120 ) 56 (2,176 )

Income (loss) before income tax expense (60,385 ) (15,854 ) (44,531 )
Income tax expense 73 - 73
Net income (loss) before allocation to noncontrolling interest
(60,458 ) (15,854 ) (44,604 )

Net income (loss) attributable to noncontrolling interest (33,015 ) (327 ) (32,688 )
Net income (loss) attributable to common stockholders $ (27,443 ) $ (15,527 ) $ (11,916 )

~~Revenues~~

~~Total revenues increased~~ ~~by $2.9~~ ~~million to~~ ~~$6.2~~ million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase in revenue was primarily due to an increase in sales to new third-party customers, as well as the achievement of milestones on contracts with existing third-party customers of Nano.

~~Cost of Sales~~

~~Total cost of sales increased by~~ ~~$1.5~~ ~~million to~~ ~~$4.1~~ million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase in cost of sales was primarily due to increased costs recognized under new and existing revenue contracts to third-party customers of Nano during the nine months ended September 30, 2021.

~~Engineering Services~~

~~Total engineering services increased by $10.3 million to $18.8 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase was primarily due to~~ a $8.1 million increase in headcount of engineers and a $1.4 million increase in consultant costs. The costs related to recurrent engineers and consultants that are not solely associated with the development of BW3 and BB1 Satellites are expensed as engineering services. The remaining $0.8 million increase relates to other operating expenses, such as consumables and components and facility expenses. We expect engineering expenses to continue to increase over the upcoming years as the SpaceMobile Service is developed.

~~General and Administrative Costs~~

Total general and administrative costs increased by $16.4 million to $24.0 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase was primarily due to a $6.9 million increase in employee and consultant-related expenses, such as salaries and recruiting fees due to the increase in headcount compared to the prior period, a $2.9 million increase in professional service fees due to the increase in legal and accounting services compared to the prior period, a $2.8 million increase in office-related expenses ~~including software licenses and computer maintenance, a $2.7 million increase in insurance costs, and a $1.1 million increase in other miscellaneous expenses.~~

~~Research and Development Costs~~

~~Total research and development costs increased by $15.4 million~~ ~~to $15.5~~ million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase was primarily due to third-party development efforts relating to the BB1 Satellites to be used in the SpaceMobile constellation.

~~Depreciation and Amortization~~

~~Total depreciation and amortization expense increased by $1.6~~ ~~million to~~ ~~$2.0~~ million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase was primarily due to the purchase of additional fixed assets and leasehold improvements during the period.

~~Changes in Fair Value of Warrant Liabilities~~

Total changes in fair value of warrant liabilities was $2.3 million for the nine months ended September 30, 2021 as compared to zero in the nine months ended September 30, 2020. The decrease was due to the unrealized loss on the change in the fair value of the warrant liabilities of $2.3 million during the nine months ended September 30, 2021. We did not have a similar change in the fair value of the warrant liabilities in the comparative period as the warrant liabilities were recorded as a result of the Business Combination in the second quarter of 2021.

~~Other Income (Expense), net~~

Total other income, net was $0.1 million for the nine months ended September 30, 2021 as compared to near zero in the nine months ended September 30, 2020. The increase was primarily due to non-recurring income from a third-party contract executed during the nine months ended September 30, 2021. We did not have similar income in the comparative period.

Noncontrolling Interest

Net loss attributable to noncontrolling interest was ~~$33.0~~$27.2 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~$0.3~~$0.5 million in the ~~nine~~three months ended ~~September 30, 2020. This increase in net~~March 31, 2021. Net loss ~~correlates with~~attributable to noncontrolling interest for the ~~increase in net loss generated at AST LLC given~~three months ended March 31, 2022 mainly related to the noncontrolling interest ~~represents a portion of such~~in AST LLC. There was no noncontrolling interest in AST LLC during the three months ended March 31, 2021 and the net ~~loss.~~loss attributable to noncontrolling interest during this period related to the noncontrolling interest in Nano only.

Liquidity and Capital Resources

We require capital to fund our operating expenses and to make capital ~~expenditures.~~expenditures. We expect our capital requirements to increase as we execute our ~~operations expand. As a result of~~plan to develop the ~~Business Combination, which occurred on April 6, 2021, NPA contributed net proceeds of approximately $416.9 million.~~SpaceMobile Service with global coverage. As of ~~September 30, 2021~~March 31, 2022, we ha~~d $360.4~~ had $255.1 million of ~~cash and~~cash, cash equivalents, and restricted cash on hand. We believe our cash on hand ~~inclusive of the cash obtained from the Business Combination,~~ is sufficient to meet our current working capital needs, planned operating expenses and capital expenditure ~~requirements~~ for a period of at least ~~eighteen~~12 months from the date of this Quarterly Report on Form 10-Q.

The design, manufacture, integration, testing, assembly and launch of satellites and related components and related ground infrastructure is a capital-intensive venture. We currently estimate the capital ~~asset investments~~expenditures required for the manufacture and launch of the first ~~phase of the BB1 Satellites~~20 BB satellites to be between approximately ~~$260.0~~$260.0 million and $300.0 million, which is expected to be incurred ~~through~~during the remainder of ~~2021, during~~ 2022 and ~~during~~ 2023. Assuming we are able to execute on our current planned timeframe, we estimate ~~the~~our capital ~~asset investments~~expenditures required for the manufacture and launch ~~of all phases~~ of the planned constellation, including the 168 satellites we currently anticipate are required to reach substantial global mobile coverage with MIMO capabilities, to be ~~between~~ approximately~~$1.7 billion and~~ $1.9 billion which is expected to be incurred through 2025.

We will continue to seek to raise additional capital prior to the remainder of 2021 and through the third quarter of 2025. Through at least the end of 2023, and potentially into 2024 our operating expenses (excluding depreciation and amortization) are expected to increase quarterly resulting from increases in expenses relating to 1) hiring the required employees to complete the manufacture, assembly, integration and testingcommercial launch of the BW3 Satellite during 2021 and BB1 Satellites during 2022 and 2023, 2) additional general and administrative costs relating to the operation of a growing public company (legal and accounting fees, D&O and other insurance, etc.) and the related increase in the number of corporate employees, 3) expenses relating to the negotiation and procurement activities relating to the design and procurement required for the BB1 Satellites and efforts related to the required regulatory approvals, and 4) third-party research and development efforts relating to the development and design elements of the BB1 Satellites. We believeSpaceMobile Service. Also, we have sufficient capital to fund planned operations and capital investments for at least eighteen months from the date hereof. The capital asset investments required to complete the SpaceMobile constellation and related operating costs are preliminary estimates. As we complete the design, development, componentry and launch procurement, assembly, integration and testing of the BB1 Satellites, our estimates may be subject to change and actual costs may be materially greater than our current estimates. We will need to raise significant additional capital to ~~continue developing and launching satellites required to complete~~build out the SpaceMobile ~~Service.~~Service to provide global coverage. We expect to raise additional funds through the issuance of equity, equity related or debt securities, or through obtaining credit from government or financial institutions or commercial partners. This capital ~~may~~will be necessary to fund ongoing operations, continue research, development and design efforts, improve infrastructure, and launch satellites. The capital asset investments required to complete the SpaceMobile constellation and related operating costs are preliminary estimates. As we complete the design, development, componentry and progress with procurement, assembly, integration and testing of the BB satellites, our estimates may be subject to change and actual costs may be materially greater than our current estimates. We may also face delays and other challenges which will have the impact of increasing the cost of the SpaceMobile constellation. We cannot be certain that additional funds will be available to us on favorable terms if required, or at all. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects ~~could~~will be materially adversely affected.

We have contractual obligations, including non-cancellable operating leases for office space, with terms expiring through February

~~Cash Flows~~2028. During the three months ended March 31, 2022, there were no material changes from the future minimum annual rental payments required under the operating lease agreements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. As of March 31, 2022, we had contractual commitments with third parties in the aggregate amount of $35.2 million related to R&D programs, capital improvements, and procurement of BB satellite components. We expect these commitments will continue to increase as we complete the supply chain and electronics development in preparation for the production and launch of the BB satellites.

~~Historical Cash Flows~~Common Stock Purchase Agreement

On May 6, 2022, the Company entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $75.0 million of shares of the Company’s Class A common stock at 97% of the volume weighted average price ("VWAP") of the Class A common stock calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales of Class A common stock are solely at the election of the Company, and the Company is under no obligation to sell

any securities to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s Class A common stock, the Company has issued 21,969 shares of its Class A common stock as initial commitment shares and will issue an aggregate of 65,907 shares of its Class A common stock as additional commitment shares if certain conditions are met.

Texas Financing Agreement

In December 2021, concurrent with the purchase of real property and equipment in Midland, Texas, our wholly owned subsidiary, AST & Science Texas, LLC (the "Subsidiary"), entered into a new Credit Agreement providing for a $5.0 million term loan secured by the property. Borrowings under the term loan bear interest at a fixed rate equal to 4.20% per annum until December 7, 2026, and from December 8, 2026 until December 8, 2028 at a fixed rate per annum equal to 4.20% subject to adjustment if the index rate as defined in the Credit Agreement is greater than 4.20%. See the notes to the unaudited condensed consolidated financial statements (Note 8) contained elsewhere in this Quarterly Report on Form 10-Q for more information.

In connection with the term loan, we have deposited into a reserve account $2.8 million of restricted cash that may be used only for the purposes of funding capital improvements related to the AIT facility located in Midland, Texas. Under any event of default, the lender will have the right to offset against this account any past due payments, indebtedness or charges owed by us. As of March 31, 2022 and December 31, 2021, $1.4 million and $2.8 million, respectively, was included within restricted cash in our unaudited condensed consolidated balance sheets, for the remaining expected capital improvement costs related to the AIT facility located in Midland, Texas.

The Credit Agreement contains certain customary events of default, and certain covenants that limit our Subsidiary's ability to, among other things, create liens on collateral, consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates. If our Subsidiary fails to perform its obligations under these and other covenants, or should any event of default occur, the term loan may be terminated and any outstanding borrowings, together with unpaid accrued interest, could be declared immediately due and payable, and the lender will be authorized to take possession of the collateral.

Cash Flows

Historical Cash Flows

The following table summarizes our sources and uses of cash for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020:~~(in thousands) (unaudited):

	Nine Months Ended September 30, (unaudited)
	2021			2020			Three months ended March 31,
	(dollars in thousands)						(unaudited)
Cash and cash equivalents	$	360,390		$	63,074
							2022			2021
Cash, cash equivalents and restricted cash							$	255,110		$	22,213
Cash used in operating activities	$	(58,612	)	$	(13,061	)	$	(47,508	)	$	(8,527	)
Cash used in investing activities		(40,494	)		(20,717	)		(21,567	)		(11,423	)
Cash provided by financing activities		416,878			70,338
Cash provided by (used in) financing activities								130			(595	)

Operating activities

Cash used in operating activities wa~~s $58.6~~was $47.5 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, including $14.8 million of deposits paid to SpaceX related to the first BB initial payment and a launch reservation fee for a future BB launch, as compared to cash used in operating activities of ~~$13.1 million~~$8.5 million for the ~~same period in 2020.~~ three months ended March 31, 2021. The ~~$45.5~~$24.2 million increase in cash used in operating activities, ~~for~~excluding the ~~nine months ended September 30, 2021~~above mentioned deposits paid to SpaceX, was ~~primarily~~ attributable to ~~the $44.6~~ ~~million higher net loss~~increased operating expenditures related to increased headcount as ~~a result of our Business Combination and related expansion of~~ our operations expanded, increased research and ~~satellite~~ ~~technology~~ development efforts, ~~net of non-cash cost items~~ and ~~changes in operating working capital. Non-cash cost items increased $5.7 million period-over-period, primarily driven by a $2.3 million~~an increase in ~~fair value of the warrant liability and~~professional fees related to being a ~~$1.5 million increase in stock-based compensation, and a decrease in operating working capital of $6.6 m~~public company.~~illion period-over-period.~~

Investing activities

Cash used in investing activities was ~~$40.5~~$21.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to cash used in investing activities of ~~$20.7~~$11.4 million for the ~~same period in 2020. The $19.8~~ three months ended March 31, 2021. The $10.2 million increase in cash used in investing activities ~~for the nine months September 30, 2021~~ was primarily attributable to a ~~$12.2~~$8.0 million related to BW3 launch cost, $0.2 million increase in BW3 satellite construction costs ~~as well as~~and a ~~$7.6 million~~$2.0 million increase in purchases of property and equipment including satellite antennas, test equipment, and leasehold improvements.

Financing activities

Cash provided by financing activities was ~~$416.9~~$0.1 million ~~for~~during the ~~nine~~three months ~~September 30, 2021,~~ended March 31, 2022, as compared to cash ~~provided by~~used for financing activities of ~~$70.3~~$0.6 million ~~for~~during the ~~same period in 2020. The $346.6 million increase in cash provided by~~three months ended March 31, 2021. Cash used for financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 was ~~primarily attributable~~ related to direct costs incurred related to the ~~$416.9 million of net proceeds from the~~ Business ~~Combination in the second quarter of 2021, offset~~ ~~by the $72.1 million of net proceeds received from the issuance of AST LLC Series B Preferred Units in the 2020 period.~~Combination.

Impact of inflation

While inflation may impact our capital and operating expenditures, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future, including by heightened levels of inflation experienced globally as a consequence of the COVID-19 pandemic and recent geopolitical conflict.

Funding Requirements

We believe our existing cash and cash equivalents ~~along with the net proceeds received from the Business Combination with NPA~~ will be sufficient to meet anticipated cash requirements for at least 1812 months from the date hereof. However, our forecast of the period of time through which our financial resources will be adequate to support operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could expend capital resources sooner than we expect.

Future capital requirements will depend on many factors, including:

•

	●	~~Seeking and obtaining market access approvals;~~
	●	Establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support our satellite development;
	●	~~Addressing any competing technological and market developments;~~
	●	~~Technological or manufacturing difficulties, design issues or other unforeseen matters;~~
	●	~~Negotiation of launch agreements, launch delays or failures or deployment failures or in-orbit satellite failures; and~~
	●	~~Attracting, hiring, and retaining qualified personnel.~~

Establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support our satellite development;

•

Technological or manufacturing difficulties, design issues or other unforeseen matters;

•

Negotiation of launch agreements (including launch costs), launch delays or failures or deployment failures or in-orbit satellite failures;

•

Addressing any competing technological and market developments;

•

Seeking and obtaining market access approvals; and

•

Attracting, hiring, and retaining qualified personnel.

Until such time, if ever, as we can generate substantial revenues to support our cost structure, we expect to finance cash needs through a combination of equity offerings, debt financings, commercial and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of stockholders will be, or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through commercial agreements, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies and/or future revenue streams, or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Also, our ability to raise necessary financing could be impacted by the COVID-19 pandemic, recent geopolitical events, and ~~its~~inflationary economic conditions and their effects on the market conditions. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our commercialization efforts or grant rights to develop and market other services even if we would otherwise prefer to develop and market these services ourselves or potentially discontinue operations.

~~Off-Balance Sheet Arrangements~~

~~We did not have any off-balance sheet arrangements as of September 30, 2021.~~

~~Contractual Obligations~~

~~Refer to Note 6 of our unaudited condensed consolidated financial statements included elsewhere in this Report for a summary of our commitments as of September 30, 2021.~~

Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Preparation of the financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our unaudited condensed consolidated financial ~~statements.~~statements. Our significant accounting policies are described in Note 2 of the Company’s unaudited condensed consolidated financial statements included elsewhere in this ~~Report. Our~~Report as well as in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. Our critical accounting policies are described below.

BlueWalker3 Capitalization

We account for research and development costs related to the BW3 test satellite ~~based on guidance~~ in accordance with ASC 730 – Research and Development(“ (“ASC 730”). ~~In reaching this conclusion, we~~We have determined there is an alternative future use for BW3 as defined in this guidance. ~~Under ASC 730,~~As such, certain costs related to the construction of the BW3 test satellite are capitalized and reported as construction-in-progress (“CIP”) on our unaudited condensed consolidated balance sheets. We capitalize only those expenditures and ancillary costs that are directly attributable to the construction phase and necessarily incurred to place BW3 into its intended location and use. To date, capitalized expenditures include the costs for satellite parts, paid launch costs, and other non-recurring costs directly associated with BW3 developments. The other non-recurring costs primarily include third-party engineers ~~and consultants~~ who are hired solely for the design and assembly of BW3 and are responsible for the value and progression of the project. The costs for internal, recurrent engineers and consultants are expensed as engineering services and not capitalized to the CIP account on our unaudited condensed consolidated balance sheets, as these employees are not directly associated with the development of BW3. Costs incurred that are not directly attributable to the construction phase or necessarily incurred to place BW3 into its intended location and use are recognized as an expense as incurred.

Warrant Liabilities

~~Warrant Liabilities~~

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ~~the Accounting Standards Codification (“ASC”)~~ASC 480 - Distinguishing Liabilities from Equity (“(“ASC 480”) and ASC 815 - Derivatives and Hedging (“ASC 815”). Our assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock and whether the warrant 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 warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as a non-cash gain or loss in the unaudited condensed consolidated statements of operations.

Goodwill and Long-Lived Assets

We assess goodwill for impairment at least annually in the fourth quarter, on a reporting unit basis, or more frequently, when events and circumstances occur indicating that the recorded goodwill may be impaired. ~~For~~We first perform a qualitative assessment of goodwill, a Step 0 analysis, to determine whether it is more likely than not that the ~~year ended December 31, 2020, our goodwill~~fair value of a reporting unit is less than its carrying amount. The qualitative impairment ~~process included applying~~analysis consists of evaluating macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, relevant entity-specific events, events affecting a specific reporting unit, and sustained decrease in the share price. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value we perform a quantitative impairment ~~analysis where~~test. This test identifies both the existence of and the amount of goodwill impairment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount goodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value an impairment loss is recognized in amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit. When performing a quantitative impairment test we make various estimates and assumptions in determining the estimated fair value of the reporting unit, was compared to its carrying value (including goodwill). We engaged an independent third-party valuation specialist to assist in the determination of the fair value of the reporting unit based upon inputs and assumptions provided by management. The fair value of the reporting unit was based upon an equal weighting of the income and market approaches, utilizingincluding estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. ~~Significant~~It is possible that changes in circumstances or changes in management’s judgments, ~~inherent in these analyses include estimating the amount~~assumptions and ~~timing of future cash flows and the selection of appropriate discount rates and long-term growth rate assumptions. Changes in these~~ estimates ~~and assumptions could materially affect the determination of fair value for the reporting unit and~~ could result in an impairment charge ~~which could be material to our financial position and results~~ of ~~operations. Based on the results~~a portion or all of ~~the quantitative impairment analysis, it was determined that there has been no impairment of goodwill related to the reporting unit as of December 31, 2020.~~its goodwill.

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important in the determination of an impairment include significant underperformance relative to historical or projected future operating results, significant changes in the manner that we use the acquired asset and significant negative industry or economic trends.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) as of ~~September 30, 2021.~~March 31, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2021.~~March 31, 2022.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors.

As of ~~September 30, 2021,~~March 31, 2022, there have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our ~~Registration Statement~~Annual Report on Form ~~S-1~~10-K for the year ended December 31, 2021 filed with the SEC on ~~June 25, 2021 (File No. 333-257425) as well as the Risk Factors contained in Part II, Item 1A of our Form 10-Q filed with the SEC on August 16, 2021.~~March 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not Applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item ~~3. Defaults Upon Senior Securities.~~5. Other Information.

~~None.~~On May 16, 2022, the Company entered into a consulting agreement by and between the Company, AST LLC, and Thomas Severson, the former Chief Financial Officer and Director of the Company (the "Consulting Agreement") to assist with the transition of his duties. Under the Consulting Agreement, Mr. Severson will provide consulting services through April 6, 2023, and the Company will reimburse any of Mr. Severson’s reasonable out-of-pocket expenses. Mr. Severson has also agreed to certain transfer restrictions relating to the Company’s securities. The foregoing summary of the Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.2 and is incorporated herein by reference.

~~Item 4. Mine Safety Disclosures.~~Further, on May 16, 2022, the Company extended a non-recourse loan in the amount of $1.0 million at an interest rate of 8.00% per annum to Mr. Severson. Both the loan and interest on loan are due for repayment on the second anniversary of its effective date. The loan may be prepaid at any time and is subject to certain mandatory prepayment conditions. The loan is secured by a pledge of $2.0 million of Mr. Severson’s equity securities in AST LLC.

~~Not Applicable.~~

~~Item 5. Other Information.~~

~~None.~~

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

~~No.~~		~~Description of Exhibit~~
~~3.1~~10.1		~~Second Amended and Restated Certificate~~Multi-Launch Services Agreement, dated as of ~~Incorporation~~March 3, 2022 (including Launch Services Agreement, dated March 3, 2022, relating to the launch of ~~AST SpaceMobile, Inc.~~the BlueBird satellite) (incorporated by reference to Exhibit ~~3.1~~10.1 to the ~~registrant’s~~Company’s Current Report on Form 8-K filed with the SEC on ~~April 12, 2021).~~March 9, 2022)
~~3.2~~10.2*†		~~Amended and Restated Bylaws of AST SpaceMobile, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).~~
10.1†*		~~Offer Letter, dated as of September 14, 2021, between AST & Science LLC and Shanti Gupta.~~
~~10.2~~		~~Launch Services~~Consulting Agreement, dated as of September 20, 2021, between AST & Science LLC and Joint Stock Company GK Launch Services (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 24, 2021).May 16, 2022
~~10.3~~		Launch Agreement, dated as of July 23, 2021, between AST & Science LLC and Space Exploration Technologies Corp. (“SpaceX”) (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2021).
31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		~~Inline~~ XBRL Instance Document
101.CAL		~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH		~~Inline~~ XBRL Taxonomy Extension Schema Document
101.DEF		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		~~Inline~~ XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~		~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

* Filed herewith

†Management contract or compensatory plan or arrangement

* Filed herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	AST SPACEMOBILE, INC. ~~(formerly known as New Providence Acquisition Corp.)~~

Date: ~~November 15, 2021~~May 16, 2022	By:	/s/ Abel Avellan
	Name:	Abel Avellan
	Title:	Chairman and Chief Executive Officer
		Principal Executive Officer

Date: ~~November 15, 2021~~May 16, 2022	By:	/s/ ~~Tom Severson~~Sean R. Wallace
	Name:	~~Tom Severson~~Sean R. Wallace
	Title:	~~Chief Operating Officer and~~ Chief Financial Officer
		Principal Financial Officer


Midland Intl. Air & Space Port
2901 Enterprise Lane Midland, Texas		79706
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	ASTS	The Nasdaq Stock Market LLC
Warrants exercisable for one share of Class A common stock at an exercise price of $11.50	ASTSW	The Nasdaq Stock Market LLC


☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated filer	☒Smaller reporting company
	☒	☒ Emerging growth company

		~~Page~~
		Page
Part I. Financial Information		1
Item 1. Interim Financial Statements		1
Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (Unaudited)		1
Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)		2
Condensed Consolidated Statements of Comprehensive Income (Loss) for ~~the~~ three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)		3
Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)		65
Notes to Condensed Consolidated Financial Statements (Unaudited)		76
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3023
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk		4132
Item 4. Controls and Procedures		4132
Part II. Other Information		4233
Item 1. Legal Proceedings		4233
Item 1A. Risk Factors		4233
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4233
Item 3. Defaults Upon Senior Securities		4233
Item 4. Mine Safety Disclosures		4233
Item 5. Other Information		4233
Item 6. Exhibits		4334
Part III. Signatures		4435


AST SPACEMOBILE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except share data)


	March 31, 2022			December 31, 2021

ASSETS
Current assets:
Cash and cash equivalents	$	253,731		$	321,787
Restricted cash		1,379			2,750
Accounts receivable		2,593			2,173
Inventories		1,827			1,412
Prepaid expenses		3,537			3,214
Other current assets		9,862			4,467
Total current assets		272,929			335,803

Property and equipment:
BlueWalker 3 satellite - construction in progress		82,693			67,615
Property and equipment, net		32,157			28,327
Total property and equipment, net		114,850			95,942

Other non-current assets:
Operating lease right-of-use assets, net		7,990			7,991
Intangible assets, net		205			242
Goodwill		3,546			3,641
Other non-current assets		15,066			317
Total other non-current assets		26,807			12,191

TOTAL ASSETS	$	414,586		$	443,936

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,917		$	6,638
Accrued expenses and other current liabilities		7,295			7,469
Deferred revenue		7,800			6,636
Current operating lease liabilities		900			634
Total current liabilities		22,912			21,377

Warrant liabilities		63,544			58,062
Non-current operating lease liabilities		7,312			7,525
Long-term debt		4,940			5,000
Total liabilities		98,708			91,964

Commitments and contingencies (Note 6)

Stockholders' Equity:
Class A Common Stock, $.0001 par value; 800,000,000 shares authorized; 51,782,254 and 51,730,904 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.		5			5
Class B Common Stock, $.0001 par value; 200,000,000 shares authorized; 51,636,922 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.		5			5
Class C Common Stock, $.0001 par value; 125,000,000 shares authorized; 78,163,078 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.		8			8
Additional paid-in capital		172,708			171,155
Accumulated other comprehensive loss		(505	)		(433	)
Accumulated deficit		(81,182	)		(70,461	)
Noncontrolling interest		224,839			251,693
Total stockholders' equity		315,878			351,972

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	414,586		$	443,936

See accompanying notes to the condensed consolidated financial statements


AST SPACEMOBILE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except share and per share data)

	Three Months Ended March 31,
	2022			2021

Revenues	$	2,394		$	951

Cost of sales (exclusive of items shown separately below)		1,986			896

Gross profit		408			55

Operating expenses:
Engineering services		11,740			5,659
General and administrative costs		11,619			5,537
Research and development costs		8,281			304
Depreciation and amortization		1,100			614
Total operating expenses		32,740			12,114

Other income (expense):
Loss on remeasurement of warrant liabilities		(5,482	)		-
Other income (expense), net		15			(28	)
Total other expense, net		(5,467	)		(28	)

Loss before income tax expense		(37,799	)		(12,087	)
Income tax expense		104			1
Net loss before allocation to noncontrolling interest		(37,903	)		(12,088	)

Net loss attributable to noncontrolling interest		(27,182	)		(508	)
Net loss attributable to common stockholders	$	(10,721	)	$	(11,580	)
Net loss per share of common stock attributable to common stockholders (1)
Basic and diluted	$	(0.21	)	N/A
Weighted average shares used in computing net loss per share of common stock (1)
Basic and diluted		51,760,520		N/A

	September 30, 2021			December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents	$	360,390		$	42,777
Accounts receivable		1,282			2,081
Inventory		2,726			2,591
Prepaid expenses		4,119			1,249
Other current assets		2,072			2,234
Total current assets		370,589			50,932

Property and equipment:
BlueWalker 3 Satellite - construction in progress		56,677			27,013
Property and equipment, net		19,909			10,057
Total property and equipment, net		76,586			37,070

Other non-current assets:
Operating lease right-of-use assets		6,783			7,045
Intangible assets, net		335			526
Goodwill		3,704			3,912
Other assets and deposits		3,010			160
Total other non-current assets		13,832			11,643

TOTAL ASSETS	$	461,007		$	99,645

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,656		$	4,990
Accrued expenses and other current liabilities		3,377			4,222
Deferred revenue		4,850			3,401
Current operating lease liabilities		495			504
Total current liabilities		15,378			13,117

Warrant liabilities		76,108			-
Non-current operating lease liabilities		6,433			6,541
Total liabilities		97,919			19,658

Commitments and contingencies (Note 6)		-

Stockholders’ Equity
Class A common stock, $.0001 par value, 800,000,000 shares authorized, 51,729,704 shares issued and outstanding as of September 30, 2021		5			-
Class B common stock, $.0001 par value, 200,000,000 shares authorized, 51,636,922 shares issued and outstanding as of September 30, 2021		5			-
Class C common stock, $.0001 par value, 125,000,000 shares authorized, 78,163,078 shares issued and outstanding as of September 30, 2021		8			-
Common stock
Additional paid-in capital		169,385			-
Common equity (pre-combination)		-			117,573
Accumulated other comprehensive loss		(394	)		(168	)
Accumulated deficit		(67,351	)		(39,908	)
Noncontrolling interest		261,430			2,490
Total stockholders’ equity		363,088			79,987

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	461,007		$	99,645


	Class A Common Stock				Class B Common Stock				Class C Common Stock				Additional Paid-in		Common Equity (Pre-Combination)				Accumulated Other Comprehensive			Accumulated			Noncontrolling			Total
	Shares		Values		Shares		Values		Shares		Values		Capital		Shares		Values		Loss			Deficit			Interest			Equity

Balance, June 30, 2021		51,729,704	$	5		51,636,922	$	5		78,163,078	$	8	$	168,297		-	$	-	$	(373	)	$	(71,466	)	$	248,721		$	345,197
Stock options exercised
Stock options exercised, shares
Stock-based compensation pre-Business Combination
Recapitalization transaction, net of transaction costs of $45.7 million
Recapitalization transaction, net of transaction costs of $45.7 million, shares
Adjustment to noncontrolling interest upon issuance of incentive units at AST LLC
Issuance of Series B Convertible Preferred Stock, net of issuance costs of $5,958
Issuance of Series B Convertible Preferred Stock, net of issuance costs of $5,958, shares
Stock-based compensation		-		-		-		-		-		-		1,088		-		-		-			-			219			1,307
Stock-based compensation post-Business Combination
Foreign currency translation adjustments		-		-		-		-		-		-		-		-		-		(21	)		-			(199	)		(220	)
Net income																-		-		-			4,115			12,689			16,804
Balance, September 30, 2021		51,729,704	$	5		51,636,922	$	5		78,163,078	$	8	$	169,385		-	$	-	$	(394	)	$	(67,351	)	$	261,430		$	363,088


Three Months Ended March 31, 2021
	Class A Common Stock				Class B Common Stock				Class C Common Stock				Additional		Common Equity (Pre-Combination)				Accumulated Other
	Shares		Values		Shares		Values		Shares		Values		Paid-in Capital		Shares		Values		Comprehensive Loss			Accumulated Deficit			Noncontrolling Interest			Total Equity

Balance, December 31, 2020 (1)		-	$	-		-	$	-		-	$	-	$	-		129,800,000	$	117,573	$	(168	)	$	(39,908	)	$	2,490		$	79,987
Stock-based compensation pre Business Combination		-		-		-		-		-		-		-		-		370		-			-			-			370
Foreign currency translation adjustments		-		-		-		-		-		-		-		-		-		(197	)		-			(66	)		(263	)
Net loss		-		-		-		-		-		-		-		-		-		-			(11,580	)		(508	)		(12,088	)
Balance, March 31, 2021		-	$	-		-	$	-		-	$	-	$	-		129,800,000	$	117,943	$	(365	)	$	(51,488	)	$	1,916		$	68,006


(1) Previously reported amounts have been adjusted for the retroactive application of the recapitalization related to the Business Combination. Refer to Note 3 for further information.

See accompanying notes to the condensed consolidated financial statements


	Nine Months Ended September 30,							Three months ended March 31,
	2021			2020				2022			2021

Cash flows from operating activities:
Net loss before allocation to noncontrolling interest	$	(60,458	)	$	(15,854	)		$	(37,903	)	$	(12,088	)
Adjustments to reconcile net loss before noncontrolling interest to cash used in operating activities:
Depreciation		1,878			251				1,046			557
Amortization of intangible assets		171			166				54			57
Change in fair value of warrant liabilities		2,276			-
Loss on remeasurement of warrant liabilities									5,482			0
Non-cash lease expense		505			221				170			100
Stock-based compensation		1,899			409				2,254			356
Changes in operating assets and liabilities:
Accounts receivable		710			(406	)			(470	)		942
Prepaid expenses and other current assets		(2,700	)		(1,183	)			(6,838	)		100
Inventory		(282	)		(1,613	)			(457	)		(443	)
Accounts payable and accrued expenses		(1,069	)		3,310				2,684			1,273
Operating lease liabilities		(354	)		(221	)			(112	)		(94	)
Deferred revenue		1,662			1,981				1,333			725
Other assets and liabilities		(2,850	)		(122	)			(14,751	)		(12	)
Net cash used in operating activities		(58,612	)		(13,061	)			(47,508	)		(8,527	)

Cash flows from investing activities:				��
Purchase of property and equipment		(11,293	)		(3,710	)			(4,660	)		(2,728	)
BlueWalker 3 Satellite - construction in process		(29,201	)		(17,007	)
BlueWalker 3 satellite - construction in process									(16,907	)		(8,695	)
Net cash used in investing activities		(40,494	)		(20,717	)			(21,567	)		(11,423	)

Cash flows from financing activities:
Proceeds from Business Combination		456,420			-
Direct and incremental costs incurred for the Business Combination		(39,542	)		-
Repayment for founder bridge loan		-			(1,750	)
Proceeds from issuance of Series B Preferred Stock		-			79,833
Issuance costs from issuance of Series B Preferred Stock		-			(7,745	)
Net cash provided by financing activities		416,878			70,338
Direct costs incurred for the Business Combination									0			(595	)
Proceeds from warrant exercises									33			0
Proceeds from debt									97			0
Net cash provided by (used in) financing activities									130			(595	)

Effect of exchange rate changes on cash		(159	)		16
Effect of exchange rate changes on cash, cash equivalents and restricted cash									(482	)		(19	)

Net increase in cash and cash equivalents		317,613			36,576
Cash and cash equivalents, beginning of period		42,777			26,498
Cash and cash equivalents, end of period	$	360,390		$	63,074
Net decrease in cash, cash equivalents and restricted cash									(69,427	)		(20,564	)
Cash, cash equivalents and restricted cash, beginning of period									324,537			42,777
Cash, cash equivalents and restricted cash, end of period								$	255,110		$	22,213

Supplemental disclosure of cash flow information:
Non-cash transactions:
Purchases of construction in process in accounts payable	$	2,266		$	1,163			$	1,483		$	3,263
Purchases of property and equipment in accounts payable		1,306			-				1,661			362
Right-of-use assets obtained in exchange for operating lease liabilities as of January 1, 2020 upon adoption of ASC 842		-			6,472
Right-of-use assets obtained in exchange for operating lease liabilities									191			0

See accompanying notes to the condensed consolidated financial statements							See accompanying notes to the condensed consolidated financial statements

	September 30, 2021			December 31, 2020
Satellite testing and lab equipment	$	13,617		$	5,324
Computers, software, and equipment		2,435			1,707
Leasehold improvements		6,101			3,537
Other		531			404
Property and equipment		22,684			10,972
Accumulated depreciation		(2,775	)		(915	)
Property and equipment, net		19,909			10,057

BlueWalker 3 Satellite - construction in progress		56,677			27,013
Total property and equipment, net	$	76,586		$	37,070


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Short-term operating lease expense	$	15	$	13	$	70	$	24
Operating lease expense		123		79		352		180
Total lease expense	$	138	$	92	$	422	$	204

Year ending December 31,	Amount
2021 (Remaining 3 months)	$	378
2022		1,364
2023		1,370
2024		1,282
2025		1,183
Thereafter		7,886
Total lease payments		13,463
Less effects of discounting		(6,535	)
Present value of lease liabilities	$	6,928

	Nine Months Ended September 30, 2021
Balance at beginning of the period	$	3,912
Translation adjustments		(208	)
Balance at end of the period	$	3,704

	Useful Lives		September 30, 2021			December 31, 2020
Intangible assets subject to amortization:
Developed technology		5	$	1,100		$	1,161
Trademarks and domain name		15		23			23
Total gross intangible assets subject to amortization				1,123			1,184
Accumulated amortization				(788	)		(658	)
Total net intangible assets subject to amortization			$	335		$	526

Fiscal Year	Amortization Expense
2021 (remaining 3 months)	$	55
2022		221
2023		38
2024		2
2025 and Thereafter		19
Total	$	335

	Nine Months Ended September 30, 2021
Exercise price	$	10.00
Fair market value	$	4.15
Expected dividend yield		0.0	%
Expected term (in years)		6.3
Expected volatility		42.24	%
Weighted-average risk-free rate		0.55	%

	Nine Months Ended September 30, 2021
Exercise price	$	9.95
Fair market value	$	4.14
Expected dividend yield		0.0	%
Expected term (in years)		6.1
Expected volatility		42.34	%
Weighted-average risk-free rate		0.97	%