| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis
of Presentation and Principles of Consolidation The
accompanying 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”).
The consolidated financial statements include the accounts of 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 31, 2020 balances reported herein are derived
from the audited consolidated financial statements of AST LLC. 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. 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 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; however, actual results
could materially differ from those estimates due to risks and uncertainties, including the continued uncertainty surrounding rapidly
changing market and economic conditions due to the COVID-19 pandemic. 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 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 Consolidated Statements of Operations. 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. 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. Restricted
Cash Restricted
cash consists of bank deposits held for the purposes of funding any capital improvements at the Company’s new assembly, integration,
and testing facility in Midland, Texas. Refer to Note 5. Accounts
Receivable 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 December 31, 2021 or December 31, 2020 based
on management’s evaluation of expected credit losses for outstanding accounts receivable at period end. Concentration
of Credit Risk Assets
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 as of December 31, 2021 are subject to minimal credit risk. The
Company’s subsidiary, Nano, which accounted for 100 53 76 42 50 Inventories Inventories
are stated 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 and finished goods comprises raw materials and satellite components, direct labor, and other direct engineering
costs. The
Company’s policy is to write-down inventory when conditions exist that suggest inventory may be in excess of anticipated demand
or is obsolete based upon assumptions about future demand for the Company’s products and market conditions. The Company regularly
evaluates the ability to realize the value of inventory based on a combination of factors including, but not limited to, historical usage
rates, forecasted sales or usage, and estimated current or future market values. When recorded, inventory write-downs are intended to
reduce the carrying value of inventory to its net realizable value. No reserve for excess and/or obsolete inventory was recognized during
the years ended December 31, 2021 and 2020. As of December 31, 2021, inventories consisted primarily of finished goods. BlueWalker3
Capitalization The
Company accounts for research and development costs related to the BW3 test satellite based on guidance in ASC 730 - Research and Development
(“ASC 730”). The Company determined there is an alternative future use for BW3 as defined in this guidance. As such, certain
costs related to the construction of the BW3 test satellite are capitalized and reported as construction-in-progress (“CIP”)
on the Consolidated Balance Sheets. The 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 parts, paid launch cost, and other 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 services and not capitalized to the CIP account on the Consolidated Balance Sheets, as these employees are not directly
associated with the development of BW3. 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 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. 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 5
Leasehold
improvements Shorter
of estimated useful life or lease term
Satellite
antenna 5
Test
and lab equipment 5
Phased
array test facility 5
Assembly
and integration equipment 5
Furniture
and fixtures 7
Vehicles 5 Leases The
Company early adopted ASC 842, Leases (“ASC 842”) effective January 1, 2020 using the modified retrospective method which
did not require the Company restate prior periods and did not have an impact on retained earnings. The Company elected the “package
of 3” practical expedients permitted under ASC 842 which eliminated the requirements to reassess prior conclusions about lease
identification, lease classification, and initial direct costs. At
the inception or modification of an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances
present. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in
exchange for consideration. Control over the use of the identified asset means the Company has both (a) the right to obtain substantially
all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Leases with a term greater than
one year are recognized on the Consolidated Balance Sheets as right-of-use assets, lease liabilities, and, if applicable, long-term lease
liabilities. Lease liabilities and the corresponding right-of-use assets are recorded based on the present values of future minimum lease
payments over the expected lease terms. The Company includes options to extend or terminate the lease in the lease term where it is reasonably
certain that it will exercise these options. The interest rate implicit in lease contracts is typically not readily determinable. As
such, the Company utilizes the appropriate incremental borrowing rates, which are the rates that would be incurred to borrow on a collateralized
basis, over similar terms, amounts equal to the lease payments in a similar economic environment. Right-of-use
assets include unpaid lease payments and exclude lease incentives and initial direct costs incurred. For the Company’s operating
leases, the Company recognizes lease expense for minimum lease payments on a straight-line basis over the lease term. Variable payments
that do not depend on a rate or index are not included in the lease liability and are recognized as incurred. The Company’s lease
contracts do not include residual value guarantees nor do they include restrictions or other covenants. If significant events, changes
in circumstances, or other events indicate that the lease term or other inputs have changed, the Company would reassess lease classification,
remeasure the lease liability by using revised inputs as of the reassessment date, and adjust the right-of-use asset. The
Company elected to apply a practical expedient 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 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. See Note 6 for further details. 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. The Company amortizes long-lived assets using the straight-line method over their estimated useful lives. 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 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 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. The Company has 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, the Company is 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 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 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 an unrealized gain or loss in the Consolidated Statements of Operations. 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.
For the Company’s outstanding debt, it was estimated that the carrying amount approximates fair value as the interest rate on the
long-term debt approximates a market interest rate. 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 ASC 606 - Revenue from Contracts with Customers Costs
to obtain the Company’s contracts are capitalized and amortized in accordance with the pattern of transfer of the underlying goods
or services, 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 the
Company’s 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 December 31, 2021 and 2020. Cost
of Sales Cost
of sales includes the operational costs incurred to fulfil customer orders at the Company’s subsidiary, Nano, including product
costs, labor and related overhead. Engineering
Costs Engineering
costs are charged to expense as incurred. Engineering costs consist primarily of the costs of internal staff (such as engineers and consultants)
associated with the Company’s ongoing engineering efforts related to the integration, testing, and development of the Company’s
satellites, and general expenses related to engineering centers. Research
and Development Costs Research
and development costs are charged to expense as incurred. Research and development costs consist principally of non-recurring development
efforts in which the Company typically engages third-party vendors, including design and development of the electronic componentry, software,
and mechanical deployment systems to be used in the BB 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. Stock-Based
Compensation The
Company accounts for equity awards, including grants of stock options and restricted stock units, in accordance with ASC 718, Compensation
– Stock Compensation 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 the compensation associated with equity 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 the Company’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. 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 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 entered into a Tax Receivable Agreement (the “TRA”) with AST LLC.
Pursuant to the TRA, the Company is required to pay the Existing Equityholders 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 December
31, 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. Noncontrolling
Interests The
noncontrolling interests primarily represent the equity interest in AST LLC held by holders other than the Company. In addition, AST
owns 51 Net
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 the Company reports
a net loss. 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, 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 consolidated financial statements as of December 31, 2021. In
December 2019, the FASB issued ASU 2019-12, Income Taxes 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). 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 impact of this adoption on its 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 will be 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 does not expect the adoption of ASU 2021-10 to have a significant 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. |
