# AST SpaceMobile, Inc.: Form 10-Q for the period ended Jun 30, 2022

- Company: [AST SpaceMobile, Inc.](/companies/asts.md) (CIK 1780312)
- Form: 10-Q
- Filed: 2022-08-15
- Accepted by EDGAR: Aug 15, 2022, 18:26 ET
- Period: 2022-06-30
- Accession: 0000950170-22-017458
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1780312/000095017022017458/asts-20220630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1780312/000095017022017458/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $7.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-01-01 to 2022-06-30 | $9.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-04-01 to 2022-06-30 | $2.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2022-01-01 to 2022-06-30 | $4.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-04-01 to 2022-06-30 | $5.1m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2022-01-01 to 2022-06-30 | $5.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-04-01 to 2022-06-30 | $9.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2022-01-01 to 2022-06-30 | $17.4m | us-gaap:ResearchAndDevelopmentExpense |
| Income tax | 3 months, 2022-04-01 to 2022-06-30 | $96.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-01-01 to 2022-06-30 | $198.0k | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.06 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-01-01 to 2022-06-30 | −$0.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.06 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-01-01 to 2022-06-30 | −$0.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 51,868,658 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-01-01 to 2022-06-30 | 51,814,888 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-01-01 to 2022-06-30 | −$88.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-01-01 to 2022-06-30 | $12.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-06-30 | $202.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-06-30 | $232.9m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $384.9m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $22.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $74.6m | us-gaap:Liabilities |
| Long-term debt | at 2022-06-30 | $4.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-06-30 | $120.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-06-30 | $310.3m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 47,866 characters.

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. and references to our “management” or our “management team” refer to our officers and directors.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report 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 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 Quarterly Report 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 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.

### Overview

We and our global partners are building what we believe is the first space-based cellular broadband network designed to be accessible by standard 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 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 work with 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 constellation to terrestrial gateways via high throughput Q/V-band links and then directed to the in-country MNO’s core cellular network 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, BW1, which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO and the effects of doppler in a satellite to ground cellular environment using the 4G-LTE protocols.

We have completed the assembly and significant test protocols of our BW3 test satellite as of the date of this report. 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 the date of this report, the BW3 test satellite is at the launch facility undergoing integration testing with the launch vehicle and is expected to be launched during early to mid-September 2022. The actual launch date remains subject to change and is contingent on a number of factors including, but not limited to, final integration, timely readiness of the launch vehicle and other unknowns including, but not limited to, weather conditions or technical problems. As of June 30, 2022, we had incurred approximately $86.6 million of capitalized costs (including launch cost and non-recurring engineering costs) related to the assembly and testing of the BW3 test satellite. We expect to incur certain post-assembly costs related to the BW3 test satellite, including the insurance, transportation, launch vehicle integration testing, and software integration testing.

We are also currently developing and designing our constellation of BlueBird (“BB”) satellites. We plan to leverage skills, know-how and technological expertise derived from the design and assembly of our BW3 test satellite in the development of our BB satellite platform. We are currently planning the first generation of commercial BB satellites (“Block 1 BB Satellites”) utilizing the BB satellite platform. We expect the Block 1 BB Satellites will be of similar size and weight to the BW3 test satellite and have design improvements for enhanced power efficiency and throughput designed to increase capacity. We currently expect to launch five Block 1 BB Satellites in late 2023. Following the launch and deployment of five Block 1 BB Satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in certain countries and seek to generate revenue from such service. Prior to initiating such service, we will need to obtain regulatory approvals in each jurisdiction where we would provide such service and would need to enter into definitive agreements with the MNOs relating to the offering of such service in each jurisdiction.

We believe the deployment of Block 1 BB Satellites and subsequent initiation of limited service may provide numerous benefits including a first mover advantage and helping to demonstrate the advantages of a satellite to cellular service in the marketplace. This market activity can commence while we continue the development and testing of the next generation of the BB satellites. Our future generations of BB satellites are expected to derive greater throughput by taking advantage of growing improvements in the processing power of our radio frequency systems and the power output of our solar arrays as well as the capacity advantages of deploying larger size antennas. We currently plan to achieve substantial global coverage following the launch of approximately 110 BB satellites. Following the completion of substantial global coverage, we expect to introduce MIMO capabilities which would complete the constellation of 168 satellites. The timeline for the development and commercialization of our BB satellites has been, and continues to be, subject to numerous uncertainties, many of which are beyond our control, including, satisfactory and timely completion of satellite components and assembly and testing of the satellites, availability of launch windows by the launch providers, proposed orbits and resulting satellite coverage, launch costs, ability to enter into agreements with MNOs, regulatory approvals, and other factors. Accordingly, we may adopt a deployment and commercialization strategy that may differ materially from our previous and/or current plans.

The SpaceMobile Service has not yet generated revenue. After we begin to launch and deploy our Block 1 BB Satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in certain countries and seek to generate revenue from such service. We plan to deploy our BB satellites in a phased approach over time and expect to offer continuous coverage SpaceMobile Service in targeted geographical locations once we have deployed the necessary number of satellites for each area. We may adopt a strategy for commercial launch of the SpaceMobile Service, including the nature and type of services offered and the countries where we may launch such services, that may differ materially from our current plan.

We operate from multiple locations that include our corporate headquarters and 185,000 square foot satellite assembly, integrating and testing facilities in Texas, and engineering and development locations in the United States, Israel, Spain, and the United Kingdom. We are currently 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 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 our 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.

In March 2022, we entered into a Multi-Launch Agreement with Space Exploration Technologies Corp. (“SpaceX”) which provides a framework for future launches of our satellites through December 31, 2024, and a framework for additional launch service agreements relating to the launch of future BB satellites. The exact timing of the satellite launches is contingent on a number of factors, including satisfactory and timely completion of assembly and testing of the BB satellites. The Multi-Launch Agreement permits us to delay launches of our satellites upon payment of certain rebooking fees.

We have received an experimental license from the Federal Communications Commission (“FCC”) supporting our U.S.-based testing of the BW3 test satellite. The license covers BW3 test satellite 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, including operating licenses from the FCC and other regulators for our planned constellation of BB satellites.

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 Risk Factors contained in Part I, “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

#### Recent Developments

On July 2, 2022, AST & Science, LLC (“AST LLC”) entered into a share sale and purchase agreement (the “Share Sale and Purchase Agreement”) for the sale of all of its 51% interest in its subsidiary, NanoAvionika UAB (“Nano”) headquartered in Lithuania (the “Share Sale”). The Share Sale and Purchase Agreement provides for a purchase price of no less than €65.0 million in total enterprise value for the purchase of Nano, which is estimated to result in gross cash proceeds of approximately €27.1 million to us for the sale of our Nano shares, subject to customary working capital and net debt adjustments. The completion of the Share Sale is subject to certain customary closing conditions, including receipt of all required regulatory approvals, and is expected to close in the third quarter of 2022. Upon closing of the sale of Nano, all amounts outstanding under the Nano Financing Agreement will be repaid and the Nano Financing Agreement will be terminated. In connection with closing of the Share Sale, AST LLC is expected to enter into a cooperation agreement with Nano relating to ongoing commercial arrangements following closing of the Share Sale.

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 and Global Macroeconomic Conditions

We continue to closely monitor the impact of the COVID-19 pandemic and macroeconomic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policies, higher interest rates, volatility in the capital markets, and supply chain challenges, on all aspects of our business across geographies, including how it has and may continue to impact our operations, workforce, suppliers, and our ability to raise additional funds to fund operating and capital expenditures. Changes in the prices of satellite materials due to inflation, supply chain challenges, and other macroeconomic factors may affect our capital costs estimates to build and launch the satellite constellation and adversely affect our financial condition. The extent of impact of these factors on our business will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. To date, these factors have not had a material impact on our technology development efforts or results of our operations. However, if macroeconomic conditions deteriorate or there are unforeseen developments with respect to the current COVID-19 pandemic, our results of operations and financial condition may be adversely affected.

### 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 through June 30, 2022.

Our future results of operations will be driven by our ability to execute on our strategy and could differ materially from the historical results of operations. We intend to continue to make necessary capital investments to industrialize our AIT facilities, procure satellite materials and components, continue the research and development initiatives, and increase the headcount of our employees and consultants to support the production and launch of the BB satellites and expand our operations. All of these factors could result in materially different capital and operating expenses during the future periods. Also, we do not expect to generate revenue in future periods after the completion of the sale of Nano, which is expected to occur in the third quarter of 2022, until we launch the SpaceMobile Service.

### Components of Results of Operations

#### Revenues

To date, we have not generated any revenues from our SpaceMobile Service. Our 51% owned subsidiary, Nano, generates revenue from the development and manufacture of satellite technology, and ancillary sales and services 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 for scheduled launches. Accordingly, all revenue recognition presented herein exclusively relates to Nano’s sales of goods and services. We do not expect to generate revenue in future periods after the completion of the sale of Nano, which is expected to occur in the third quarter of 2022, until we launch the SpaceMobile Service.

#### Cost of Sales

Cost of sales includes the purchase price of various products used and services performed to execute Nano’s sales contracts. Cost of sales also includes operational costs to fulfil Nano customer orders, including costs for Nano employees and overhead. We do not expect to incur cost of sales in future periods after the completion of the sale of Nano, which is expected to occur in the third quarter of 2022, until we launch the SpaceMobile Service.

#### 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 integration, testing, and development of our satellites, as well as the cost of internal staff (such as engineers and consultants) to support these efforts and general expenses related to engineering 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 professional services, including public relations, accounting and legal fees.

#### Research and Development Costs

R&D costs consist principally of non-recurring 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 mechanical deployment systems to be used in the BB satellites and in connection with the 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 placed in orbit, 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.

#### Gain (Loss ) on Remeasurement of Warrant Liabilities

Public and private warrants issued by 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.

#### Other Income (Expense), Net

Other income (expense), net consists of interest earned on cash and cash equivalents held by us in interest bearing demand deposit accounts, net of any interest expense, as well as transaction costs incurred in connection with the Purchase Agreement and other miscellaneous non-operating items, including foreign exchange gains or losses.

#### Income Tax Expense

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.

#### Noncontrolling Interest

Noncontrolling interest primarily represents the equity interest in AST LLC held by the Existing Equityholders other than us. As of June 30, 2022, the Existing Equityholders’ equity ownership percentage in AST LLC was approximately 72%. Also, noncontrolling interest includes the equity interests in our subsidiary, Nano, held by equityholders other than us. As of June 30, 2022, the noncontrolling interests in Nano were approximately 49%. We attribute a portion of net income or loss generated at AST LLC and Nano to the noncontrolling interests based on their ownership interests.

### Results of Operations

### Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table sets forth a summary of our unaudited condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021 (in thousands) and the discussion that follows compares the three months ended June 30, 2022 to the three months ended June 30, 2021.

*(unaudited)*

|  | For the Three Months Ended June 30, 2022 | 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $7,264 | $2,773 | $4,491 | 162% |
| **Cost of sales (exclusive of items shown separately below)** | 2,202 | 1,112 | 1,090 | 98 |
| **Gross profit** | 5,062 | 1,661 | 3,401 | 205 |
| **Operating expenses:** |  |  |  |  |
| Engineering services | 11,999 | 5,784 | 6,215 | 107 |
| General and administrative costs | 13,075 | 9,157 | 3,918 | 43 |
| Research and development costs | 9,145 | 9,589 | (444) | (5) |
| Depreciation and amortization | 1,185 | 567 | 618 | 109 |
| **Total operating expenses** | 35,404 | 25,097 | 10,307 | 41 |
| **Other income (expense):** |  |  |  |  |
| Gain (loss) on remeasurement of warrant liabilities | 23,049 | (41,677) | 64,726 | 155 |
| Other expense, net | (679) | - | (679) | 100 |
| **Total other income (expense), net** | 22,370 | (41,677) | 64,047 | (154) |
| **Loss before income tax expense** | (7,972) | (65,113) | 57,141 | (88) |
| Income tax expense | 96 | 56 | 40 | 71 |
| **Net loss before allocation to noncontrolling interest** | (8,068) | (65,169) | 57,101 | (88) |
| Net loss attributable to noncontrolling interest | (5,144) | (45,191) | 40,047 | (89) |
| **Net loss attributable to common stockholders** | $(2,924) | $(19,978) | $17,054 | (85)% |

#### Revenues

Total revenues increased by $4.5 million, or 162%, to $7.3 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The increase in revenue was primarily attributable to the completion of performance obligations associated with existing Nano customer contracts.

#### Cost of Sales

Total cost of sales increased by $1.1 million, or 98%, to $2.2 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The increase in cost of sales was primarily attributable to increased production and services under existing Nano customer contracts during the three months ended June 30, 2022.

#### Engineering Services

Total engineering services increased by $6.2 million, or 107%, to $12.0 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The increase was primarily attributable to a $5.6 million increase in payroll and employee related costs, including stock-based compensation expense, as a result of an increase in headcount period over period. The remaining increase relates to a $0.6 million increase in general expenses at engineering centers to support the engineering efforts related to the integration, testing, and development of our satellites.

#### General and Administrative Costs

Total general and administrative costs increased by $3.9 million, or 43%, to $13.1 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This increase was primarily attributable to a $2.2 million increase in payroll and employee related costs as a result of an increase in headcount as well as an increase in stock-based compensation awards granted since the prior period. The remaining $1.7 million increase was primarily attributable to increases in office related costs at our facilities, travel expenses due to decreasing COVID-19 travel restrictions, software license costs, and insurance expenses.

#### Research and Development Costs

Total R&D costs decreased by $(0.4) million, or -5%, to $9.1 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. R&D costs are primarily attributable to third-party development efforts relating to the BB satellites to be used in the SpaceMobile constellation. Total R&D costs are expected to fluctuate quarter over quarter, as R&D costs are driven by milestones.

#### Depreciation and Amortization

Total depreciation and amortization expense increased by $0.6 million, or 109%, to $1.2 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The increase was primarily due to the purchase of additional fixed assets and leasehold improvements during the period. Depreciation expense is expected to increase significantly once the BW3 test

satellite is placed into orbit given its assigned useful life of two years.

#### Gain (Loss) on Remeasurement of Warrant Liabilities

Decrease in fair value of warrant liabilities resulted in a gain of $23.0 million for the three months ended June 30, 2022 as compared to the loss of $41.7 million for the three months ended June 30, 2021.

#### Other Income (Expense)

Increase in other expense is primarily due to transaction costs incurred in connection with the Purchase Agreement during the three months ended June 30, 2022.

#### Income Tax Expense

The provision for income taxes was $0.1 million for the three months ended June 30, 2022 and June 30, 2021. The consolidated effective tax rate for the three months ended June 30, 2022 and June 30, 2021 was (1.36)% and (0.09)%, respectively. The difference in the effective rates between periods is driven by income tax expense assessed against non-U.S earnings. For further information, see Note 16: Income Taxes to our unaudited condensed consolidated financial statements included in Item 1 of this report.

#### Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest was $(5.1) million for the three months ended June 30, 2022 as compared to $(45.2) million in the three months ended June 30, 2021. The decrease in net loss attributable to noncontrolling interest for the three months ended June 30, 2022 correlates with the decrease in net loss generated at AST LLC.

### Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

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.

*(unaudited)*

|  | For the Six Months Ended June 30, 2022 | 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $9,658 | $3,735 | $5,923 | 159% |
| **Cost of sales (exclusive of items shown separately below)** | 4,189 | 2,019 | 2,170 | 107 |
| **Gross profit** | 5,469 | 1,716 | 3,753 | 219 |
| **Operating expenses:** |  |  |  |  |
| Engineering services | 23,716 | 10,731 | 12,985 | 121 |
| General and administrative costs | 24,718 | 14,693 | 10,025 | 68 |
| Research and development costs | 17,426 | 10,603 | 6,823 | 64 |
| Depreciation and amortization | 2,285 | 1,182 | 1,103 | 93 |
| **Total operating expenses** | 68,145 | 37,209 | 30,936 | 83 |
| **Other income (expense):** |  |  |  |  |
| Gain (loss) on remeasurement of warrant liabilities | 17,567 | (41,677) | 59,244 | 142 |
| Other expense, net | (664) | (28) | (636) | (2,271) |
| **Total other income (expense), net** | 16,903 | (41,705) | 58,608 | (141) |
| **Loss before income tax expense** | (45,773) | (77,198) | 31,425 | (41) |
| Income tax expense | 198 | 57 | 141 | 247 |
| **Net loss before allocation to noncontrolling interest** | (45,971) | (77,255) | 31,284 | (40) |
| Net loss attributable to noncontrolling interest | (32,326) | (45,697) | 13,371 | (29) |
| **Net loss attributable to common stockholders** | $(13,645) | $(31,558) | $17,913 | (57)% |

#### Revenues

Total revenues increased by $5.9 million, or 159%, to $9.7 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase in revenue was primarily attributable the completion of performance obligations associated with both new and existing Nano customer contracts during the six months ended June 30, 2022.

#### Cost of Sales

Total cost of sales increased by $2.2 million, or 107%, to $4.2 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase correlates with the increase in revenue and was primarily attributable to increased production and services under new and existing Nano sales contracts during the six months ended June 30, 2022.

#### Engineering Services

Total engineering services increased by $13.0 million, or 121%, to $23.7 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase was primarily attributable to a $11.6 million increase in payroll and employee related costs, including stock-based compensation expense, as a result of an increase in headcount period over period. The remaining $1.4 million increase relates to general expenses at engineering centers to support engineering efforts related to the integration, testing, and development of our satellites.

#### General and Administrative Costs

Total general and administrative costs increased by $10.0 million, or 68%, to $24.7 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase was primarily attributable to a $3.7 million increase in payroll and employee related costs as a result of an increase in headcount period over period, as well as an increase in stock-based compensation awards granted since the prior period. The $2.5 million increase in 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 licensing costs, and increased rent. The $1.5 million increase in insurance costs was attributable to increased insurance needs, including related to D&O insurance, intellectual property insurance and insurance coverage for our expanded facilities. The $1.4 million increase in travel expenses was related to decreasing COVID-19 travel restrictions. The remaining $0.9 million increase was attributable to increase in professional services fees, software licensing costs, and other miscellaneous expenses.

#### Research and Development Costs

Total research and development costs increased by $6.8 million, or 64%, to $17.4 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. R&D costs are primarily attributable to third-party development efforts relating to the BB satellites to be used in the SpaceMobile constellation. Prior to the second quarter of 2021, our operations primarily related to constructing the BW3 test satellite, and therefore R&D efforts were limited. The increase in R&D costs was primarily due to completion of milestones on ongoing and new R&D programs. Total R&D costs are expected to fluctuate quarter over quarter, as R&D costs are driven by milestones.

#### Depreciation and Amortization

Total depreciation and amortization expense increased by $1.1 million, or 93%, to $2.3 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase was primarily due to the purchase of additional fixed assets and leasehold improvements during the six months ended June 30, 2022.

#### Gain (Loss) on Remeasurement of Warrant Liabilities

Decrease in fair value of warrant liabilities resulted in a gain of $17.6 million for the six months ended June 30, 2022 as compared to the loss of $41.7 million during the six months ended June 30, 2021.

#### Other Income (Expense)

Increase in other expense is primarily due to transaction costs incurred in connection with the Purchase Agreement during the second quarter ended June 30, 2022.

#### Income Tax Expense

The provision for income taxes was $0.2 million for the six months ended June 30, 2022 and $0.1 million for the six months ended June 30, 2021. The consolidated effective tax rate for the six months ended June 30, 2022 and June 30, 2021 was (0.44%) and (0.07)%, respectively. The difference in the effective rates between periods is driven by income tax expense assessed against non-U.S earnings. For further information, see Note 16: Income Taxes to our unaudited condensed consolidated financial statements included in Item 1 of this report.

#### Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest was $(32.3) million for the six months ended June 30, 2022 as compared to $(45.7) million in the six months ended June 30, 2021. The decrease in net loss attributable to noncontrolling interest for the six months ended June 30, 2022 correlates with the decrease in net loss generated at AST LLC.

### Liquidity and Capital Resources

We require capital to fund our operating expenses and to make capital expenditures. As of June 30, 2022, we had $202.4 million of cash and cash equivalents on hand. We believe our cash on hand is sufficient to meet our current working capital needs, planned operating expenses and capital expenditure for a period of at least 12 months from the date of this Quarterly Report.

The design, assembly, integration, testing and launch of satellites and related ground infrastructure is capital-intensive. We currently estimate the capital expenditures required for the design, assembly and launch of our first 20 commercial satellites to be between approximately $300.0 million and $340.0 million. The estimated capital costs to complete the satellite configurations have increased from our prior estimates due to a number of factors. We expect that the initial five satellites will use existing components from our BlueWalker 3 test satellite design including FPGA (Field Programmable Gate Array), reaction wheels and antennas. We believe that utilizing these existing components and technology will enable us to launch these satellites sooner but will also result in an increase in cost per satellite due to the current higher costs of these first generation components. The cost of the satellite configuration has also increased due to the impacts of inflation, supply chain disruptions, design changes, and increases in the cost of electronic components, assembly equipment, launch costs, salaries and other aspects of our satellite design and assembly activities. These estimated costs are preliminary estimates and based on certain assumptions and information currently available to us and are subject to changes based on numerous factors, including potential price changes due to inflation, supply chain disruptions and volume discounts, design changes, delays in development of components and materials, launch costs, launch insurance, and other factors. Accordingly, actual costs may materially differ from our current estimates.

We will require additional capital to assemble and launch the BB satellites and provide the SpaceMobile Service. 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, although our ability to access the capital markets during this period of volatility may require us to modify our current expectations. We are in discussions with financial institutions regarding equipment financing to enhance liquidity. The additional capital will be necessary to fund ongoing operations, continue research, development and design efforts, improve infrastructure, and launch satellites. There can be no assurance that additional funds will be available to us on favorable terms or at all. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects may be materially and adversely affected.

We have contractual obligations, including non-cancellable operating leases for office space, with terms expiring through February 2028. During the six months ended June 30, 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 June 30, 2022, we had contractual commitments with third parties in the aggregate amount of $45.3 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.

#### Common Stock Purchase Agreement

On May 6, 2022, we entered into a Purchase Agreement with B. Riley. Pursuant to the Purchase Agreement, we have the right, in our sole discretion, to sell to B. Riley up to $75.0 million of shares of our 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 our election, and we are 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 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 if certain conditions are met. On July 5, 2022, the Company issued additional 21,969 shares of its Class A common stock when the first VWAP purchase occurred. Other than the issuance of the initial commitment shares of the Company’s Class A common stock to B. Riley, the Company had not issued any shares of its Class A common stock to raise capital under the Purchase Agreement as of June 30, 2022. Subsequent to June 30, 2022 and through August 5, 2022 the Company issued 1,166,993 shares of its Class A common stock, which does not include the 43,938 shares of Class A common stock issued as commitment shares, aggregating to net proceeds of $7.6 million under the Purchase Agreement.

#### 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 (“AST Texas”), 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 (Refer to Note 9) contained elsewhere in this Quarterly Report for more information.

The Credit Agreement contains certain customary events of default, and certain covenants that limit AST Texas’ ability to, among other things, create liens on collateral, consolidate, merge, sell, or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with its affiliates. If AST Texas 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 six months ended June 30, 2022 and 2021 (in thousands) (unaudited):

*(unaudited)*

|  | For the Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: |
| Cash and cash equivalents | $202,371 | $402,612 |
| Cash used in operating activities | $(88,505) | $(38,372) |
| Cash used in investing activities | (33,600) | (18,598) |
| Cash provided by financing activities | 263 | 416,878 |

#### Operating activities

Cash used in operating activities was $(88.5) million for the six months ended June 30, 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 $(38.4) million for the six months ended June 30, 2021. The $35.3 million increase in cash used in operating activities, excluding the above mentioned deposits paid to SpaceX, was attributable to higher operating expenses as a result of an increase in headcount, research and development efforts, software license costs, professional services fees and other office related expenses, and an increase in advances paid to vendors for development and procurement of long-lead components for our BB satellites.

#### Investing activities

Cash used in investing activities was $(33.6) million for the six months ended June 30, 2022, as compared to cash used in investing activities of $(18.6) million for the six months ended June 30, 2021. The $15.0 million increase in cash used in investing activities was primarily attributable to a $9.8 million increase in BW3 test satellite assembly costs and a $5.2 million increase in purchases of property and equipment including construction costs incurred at the Company’s new facility in Midland, Texas, satellite antennas, and test equipment.

#### Financing activities

Cash provided by financing activities was $0.3 million during the six months ended June 30, 2022, as compared to cash provided by financing activities of $416.9 million during the six months ended June 30, 2021. Cash provided by financing activities for the six months ended June 30, 2021 was attributable to the proceeds from the Business Combination.

### Impact of Inflation

While inflation may impact our capital and operating expenditures, we believe the effects of inflation, if any, on our historical results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations, capital cost estimates, and financial condition will not be materially impacted by the current heightened levels of inflation.

### Funding Requirements

We believe our existing cash and cash equivalents will be sufficient to meet anticipated cash requirements for at least 12 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:

- 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, 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 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.

### 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. For a discussion of our critical accounting policies, see “Critical Accounting Policies” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

### Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2022.

## Market risk

As filed, 163 characters.

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.

## Controls and procedures

As filed, 1,462 characters.

### 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 June 30, 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 June 30, 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.

## Risk factors

As filed, 247 characters.

As of June 30, 2022, there have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022.

Filed Aug 15, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-017458. Last ingested by Listed: Oct 30, 2026, 11:10 ET. No prices; not investment advice.