| Summary of Significant Accounting Policies | 2.
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”) for interim reporting and in accordance
with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain
information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have
been 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. and its subsidiaries. Intercompany transactions and balances have been eliminated
upon consolidation. The December 31, 2020 balances reported herein are derived from the audited consolidated financial statements
of AST LLC. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to fairly state the 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 financial statements for the year ended December 31, 2020 contained in our Form 8-K dated April 12, 2021. The results of
operations for the periods presented are not indicative of the results to be expected for the year ending December 31, 2021 or for any
other interim period or other future year. Emerging
Growth Company 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 we 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 periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the prices of our securities may be more volatile. Use
of Estimates The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities as of and during
the reporting period. 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, intangible assets, and long-lived assets, and equity-based
compensation expense. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those
estimates. Cash
and Cash Equivalent s The
Company’s cash consists of cash maintained within standard bank accounts at 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 U.S.
GAAP requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized
or unrecognized in the balance sheet. 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 Inventories
are carried at the lower of cost or net realizable value. Cost is determined by the first-in first-out (FIFO) method. The cost of work-in-progress
comprises raw materials, satellite componentry, direct labor, and other direct engineering costs. No reserve for excess and/or obsolete
inventory was recognized in the periods presented. The Company’s inventory balance was $ 3.7 2.6 Property
and Equipment The
Company records property and equipment at cost. 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
Consolidated Statement 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
to 5
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
and integration equipment 5
years
Furniture
and fixtures 7
years
Vehicles 5
years 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 no
impairment charges for long-lived assets recognized
for the periods ended June 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 performs the annual goodwill impairment test during the
fourth quarter each year. There were no impairment charges for goodwill recognized for the periods
ended June 30, 2021 and 2020. Warrant
Liabilities 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”) 480 -
Distinguishing Liabilities from Equity Derivatives and Hedging 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 statement of operations. Engineering
Costs 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 BW3 satellite is currently targeted to launch during a launch window beginning in March
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. Additionally, the Company has established alternative uses (separate
economic value) for BW3 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 developments are capitalized to its construction in
progress (“CIP”) account, and presented on its condensed consolidated balance sheets. Research
and Development Costs 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 research and development. Revenue
Recognition 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 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 manufacturers, 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 June 30, 2021 and 2020. Income
Taxes The Company follows the asset and liability
method of accounting for income taxes under ASC 740 - Income Taxes 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 financial statements 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% likelihood no no Tax Receivable Agreement In conjunction with the Business
Combination, the Company also entered into a Tax Receivable Agreement (the “TRA”) with AST LLC. Pursuant to the TRA, the
Company is required to pay the sellers (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, (B)
tax basis adjustments resulting from taxable exchanges of AST LLC Common Units acquired by the Company, (C) tax deduction 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 June 30, 2021, there have been no exchanges of AST LLC units for Class A common stock of the Company and, accordingly, no TRA liabilities currently exist.
Stock-Based
Compensation The
Company estimates the grant date fair value of stock options granted to employees and to 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. 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 nonemployees in a similar fashion to the way
it accounts for stock-based compensation awards to employees. The
Company’s less than wholly owned subsidiary, AST LLC, issues stock-based compensation awards to its employees. 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. Collaboration
Agreements 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 Net
Income (Loss) per Share 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. Concentration
of Credit Risk 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, at times, may exceed federally insured
limits. The cash balances in these financial institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $ 250,000 .
The Company may deposit cash at institutions that are not insured by the FDIC, which is limited to its foreign subsidiaries. The Company
manages credit risk by reviewing the counterparties’ credit at least quarterly. The
Company’s subsidiary, Nano, which accounted for 100 61 %
of the Company’s trade receivables as of June 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 74 %
of the Company’s revenue for the six months ended June 30, 2021, and one customer accounted for approximately 20 %
of the Company’s revenue for the six months ended June 30, 2020. Credit risk on accounts receivable is minimized given the
research and development stage of the Company, and the fact that its primary business focus is to manufacture and launch its test
satellites as opposed to entering into revenue transactions with customers in the short term. Foreign
Currency Translation and Transaction Gains and Losses 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 for the Company’s foreign subsidiaries
is considered to be 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 consolidated statements of operations. Foreign currency translation gains and losses
are recorded to accumulated other comprehensive loss on the Company’s condensed consolidated balance sheets. Segments 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. Recently
Adopted Accounting Pronouncements 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 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 consolidated financial statements. Accounting
Standards Recently Issued but Not Yet Adopted 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) 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. |
