SUMMARY
OF THE PROSPECTUS
This
summary highlights selected information from this prospectus and may not contain all of the information that is important to you
in making an investment decision. Before investing in our securities, you should carefully read this entire prospectus, including
our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
See also the section entitled “Where You Can Find Additional Information.”
Unless
the context otherwise requires, all references in this prospectus to “SpaceMobile,” the “Company,” the
“Registrant,” “we,” “us” and “our” in this prospectus refer to the parent entity
formerly named New Providence Acquisition Corp., after giving effect to the Business Combination, and as renamed AST SpaceMobile,
Inc., and where appropriate, our consolidated subsidiaries, including AST & Science, LLC, and references in this prospectus
to “NPA” refer to New Providence Acquisition Corp. before giving effect to the Business Combination.
Our
Company
The
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 space-based cellular 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. Our innovative satellite designs and components are expected
to reduce the communication delay effects which existing geostationary satellite systems experience. The SpaceMobile Service is
being designed to provide global coverage for users traveling in and out of areas without terrestrial mobile services on land,
at sea or in flight.
We
are partnering with MNOs to offer the SpaceMobile Service to the MNOs’ end-user customers. We do not anticipate entering
into agreements with mobile phone or other device manufacturers, and, accordingly, users will not need to subscribe to the SpaceMobile
Service directly with us, nor will they need to purchase any new or additional equipment. We do not anticipate that mobile device
manufacturers could unilaterally prohibit the SpaceMobile Service from being offered on their devices, as the service is
designed to be complementary to the existing cellular broadband service offered by MNOs. Users will be able to access the SpaceMobile
Service when prompted on their device that they are no longer covered by the terrestrial cellular infrastructure of the MNO with
the ability to immediately connect or purchase a subscription plan directly with their existing MNO. Our agreements with MNOs
are based on a revenue sharing model. As of December 31, 2020, we have entered into agreements and understandings with MNOs which
collectively cover approximately 1.3 billion mobile subscribers of which approximately 890 million mobile subscribers are
covered by agreements that provide for revenue-sharing with us. We estimate that the global market opportunity for our services
is currently $1.1 trillion, according to GSMA market data, which represents over 5 billion mobile subscribers that are
constantly moving in and out of coverage, of which approximately 3.3 billion subscribers are unconnected to cellular broadband.
In addition to mobile subscribers, over 700 million people globally have no connectivity or mobile cellular coverage.
The
SpaceMobile Service is being designed to enable MNOs, including existing partners and others, to provide full country coverage
with no gaps and achieve their ambition to provide nationwide coverage, even in places without terrestrial infrastructure. We
believe the SpaceMobile Service will enable MNOs to augment and extend their coverage by using the MNOs’ spectrum resources
without building towers or other land-based infrastructure where it is not cost-justified or is difficult due to environmental
challenges such as mountainous or rugged terrain or maritime applications.
The
SpaceMobile Service is expected to be provided by a network of 168 high-powered, large phased-array satellites in LEO. The worldwide
mobile traffic will be directed by the SpaceMobile Service to a terrestrial gateway and then to the in-country MNO’s core
cellular network connected to the internet. We anticipate that users will connect to the SpaceMobile Service as if they were using
a local cell tower. The SpaceMobile Service has not yet generated revenues and is not expected to generate revenues until 2023,
after the first commercial satellite launch phase of the SpaceMobile Service, which is expected to provide satellite coverage
in 49 countries along the Equator, representing a total population of approximately 1.6 billion people, with 20 satellites.
On
April 1, 2019, we launched our first test satellite, the BlueWalker 1 (“BW1”), which was used to validate our satellite
to cellular architecture and was capable of managing communications delays from LEO orbit and the effects of doppler in a satellite
to ground cellular environment using the 4G-LTE protocol. We are currently manufacturing and procuring the satellite componentry
required for our BW3 test satellite. During 2021, we will be assembling and testing the BW3 satellite at our facility in Midland,
Texas. BW3 currently is targeted to launch late in the fourth quarter of 2021. 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 and the availability of
an appropriate launch window and vehicle from our launch provider. The launch of BW3 was scheduled to coincide with the launch
of a primary payload from an unrelated entity. The primary payload from such unrelated entity is delayed, which may in turn delay
the launch window for BW3. If we are required to identify another launch vehicle and/or launch provider, we may incur delays in
such launch and may incur additional costs. We are planning our first commercial satellite launches for the second half of 2022
or early 2023, which are expected to provide satellite coverage in the 49 Equatorial countries, representing a total population
of approximately 1.6 billion people, with 20 satellites. We plan to achieve full global mobile coverage with the launch of 110
satellites by the end of 2023 or early in 2024 and multiple input multiple output (“MIMO”) with the launch of a total
of 168 satellites by the end of 2024.
Summary
Risk Factors
Our
business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors”
immediately following this prospectus summary, that represent challenges that we face in connection with the successful implementation
of our strategy and the growth of our business. In particular, the following considerations, among others, may offset our competitive
strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our Class
A Common Stock or warrants and result in a loss of all or a portion of your investment:
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Our
SpaceMobile Service is in development and may not be completed on time or at all and the costs associated with it may be greater
than expected.
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We
will incur significant expenses and capital expenditures in the future to execute its business plan and develop the SpaceMobile
Service and it may by unable to adequately control its expenses.
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We
will need to raise additional funds to achieve phase II and subsequent phases of our SpaceMobile Service. These funds may
not be available when we need them on favorable terms or at all. If we cannot raise additional funds when needed, our operations
and prospects could be negatively affected.
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We
are an early stage company with a history of losses and may never become profitable.
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Rapid
and significant technological changes could render the SpaceMobile Service obsolete and impair our ability to compete.
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We
face substantial risks associated with our international operations.
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Our
products could fail to perform or could perform at reduced levels of service because of technological malfunctions or deficiencies,
regulatory compliance issues, or events outside of our control, which would harm our business and reputation.
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We
will rely on MNOs and require regulatory approvals to access the spectrum the SpaceMobile Service needs to operate.
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We
have a limited operating history and operate in a rapidly evolving industry, which makes it difficult to evaluate our business
and future prospects and increases the risk of your investment.
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We
may not be able to launch our satellites successfully or in a timely manner. Loss of a satellite during launch could delay
or impair our ability to offer services or reduce our expected potential revenues, and launch insurance, even if it is available,
will not fully cover this risk.
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Our
customized hardware and software may be difficult and expensive to service, upgrade or replace.
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We
and suppliers rely on complex systems and components, which involve a significant degree of risk and uncertainty in terms
of operational performance and costs.
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Our
management has limited experience in operating a public company.
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Our
business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third
parties.
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Our
business is subject to extensive government regulation, which mandates how we operate our business and may increase the cost
of providing services and expansion into new markets.
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We
are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and
rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders
of companies that are subject to such requirements.
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The
multi-class structure of our Common Stock has the effect of concentrating voting power with our Chief Executive Officer, which
will limit an investor’s ability to influence the outcome of important transactions, including a change of control.
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Our
only principal asset is our interest in AST, and accordingly we depend on distributions from AST to pay dividends, taxes,
other expenses, and make any payments required to be made by us under the Tax Receivable Agreement.
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Failure
to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have
a material adverse effect on our business and stock price.
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Our
outstanding warrants are accounted for as liabilities and the changes in value of our warrants could have a material
effect on our financial results.
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We
have identified a material weakness in our internal control over financial reporting as of December 31, 2020, and, as a result,
we have determined that our disclosure controls and procedures were not effective as of December 31, 2020. If we are unable
to develop and maintain an effective system of internal control over financial reporting and effective disclosure controls
and procedures, we may not be able to accurately report our financial results in a timely manner, which may adversely affect
investor confidence in us and materially and adversely affect our business and operating results.
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Corporate
Information
On
April 6, 2021, we completed the Business Combination with NPA, under which NPA was renamed “AST SpaceMobile, Inc.”
and we were organized as an umbrella partnership-C corporation (“Up-C”) structure. As a result of our Up-C structure,
we are a holding company and, accordingly, all the business of AST is held directly by AST, of which we are the managing member,
and our only direct asset consists of the AST Common Units. As the managing member of AST, we have full, exclusive and complete
discretion to manage and control the business of AST and to take all action we deem necessary, appropriate, advisable, incidental,
or convenient to accomplish the purposes of AST set forth in the A&R Operating Agreement, and, accordingly, we will present
our financial statements on a consolidated basis with AST for all periods following the Business Combination. As of the open of
trading on April 7, 2021, the Class A Common Stock and warrants of AST SpaceMobile, formerly those of NPA, began trading on Nasdaq
as “ASTS” and “ASTSW,” respectively.
Our
principal executive offices are located at Midland International Air & Space Port, 2901 Enterprise Lane, Midland, Texas 79706,
and our telephone number is (432) 276-3966. Our website address is www.ast-science.com.com. Information contained on our website
is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference
only.
Sources
of Industry and Market Data
Where
information has been sourced from a third-party, the source of such information has been identified. Unless otherwise indicated,
the information contained in this prospectus on the market environment, market developments, growth rates, market trends and competition
in the markets in which we operate is taken from publicly available sources, including third-party sources, or reflects our estimates
that are principally based on information from publicly available sources.
Emerging
Growth Company, Smaller Reporting Company and Controlled Company
We
are 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.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act of 1934, as amended (the “Exchange Act”))
are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect
to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that
when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may
make comparison of our financial statements with certain other public companies difficult or impossible because of the potential
differences in accounting standards used.
We
will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary
of the closing of NPA’s initial public offering of units, the base offering of which closed on September 13, 2019, (b) in
which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the prior June 30th;
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year
period.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may
take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial
statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of
our common stock held by non-affiliates exceeds $250 million as of the end of that fiscal year’s second fiscal quarter,
or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held
by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter. To the extent we take
advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies
difficult or impossible.
As
of the date of this prospectus, the Key Holders hold all of the Class C Common Stock, which prior to the Sunset Date will entitle
such holders to cast the lesser of 10 votes per share and the Class C Share Voting Amount, the latter of which is a number of
votes per share equal to (1) (x) an amount of votes equal to 88.31% of the total voting power of our outstanding voting stock,
minus (y) the total voting power of our outstanding capital stock owned or controlled by the Key Holders, divided by (2) the number
of shares of our Class C Common Stock then outstanding. As a result, as of the date of this prospectus, the Key Holders control
approximately 88.3% of the combined voting power of our Common Stock, and may control a majority of our voting power so long as
the Class C Common Stock represents at least 9.1% of our total Common Stock. The practical effect of the formula used to calculate
the Class C Share Voting Amount is that it will cap the aggregate voting power of the Class C Common Stock so that, in most scenarios,
the voting power of the Class C Common Stock will not increase, or will increase more slowly than it would otherwise in the event
the Class C holders acquire additional voting stock in the Company. As a result, as of the date of this prospectus, the Key Holders
control approximately 88.3% of the combined voting power of the Common Stock, and may control a majority of the voting power of
the Company so long as the Class C Common Stock represents at least 9.1% of our total Common Stock. As a result of the Key Holders’
holdings, we qualify as a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under
these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is
a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement
that (i) a majority of our Board of Directors consist of independent directors, (ii) we have a compensation committee that is
composed entirely of independent directors and (iii) director nominees be selected or recommended to the board by independent
directors.
We
rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors
and our directors will not be nominated or selected solely by independent directors. We may also rely on the other exemptions
so long as we qualify as a controlled company. To the extent we rely on any of these exemption, holders of Class A Common Stock
will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance
requirements.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making
an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks,
as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities
could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
In
the course of conducting our business operations, we are exposed to a variety of risks. These risks are generally inherent to
the alternative asset management industry or otherwise generally impact alternative asset managers like us. Any of the risk factors
we describe below have affected or could materially adversely affect our business, financial condition and results of operations.
The market price of shares of our Class A Common Stock could decline, possibly significantly or permanently, if one or more of
these risks and uncertainties occurs. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary
Note Regarding Forward-Looking Statements.”
Risks
Related to Our Business and Industry
Our
SpaceMobile Service is in development and may not be completed on time or at all and the costs associated with it may be greater
than expected.
While
we estimate the gross costs associated with designing, building and launching the SpaceMobile Service and related infrastructure
will be approximately $1.7 billion, there can be no assurance that we will complete the SpaceMobile Service and related infrastructure,
products and services on a timely basis, on budget or at all. Design, manufacture and launch of satellite systems are highly complex
and historically have been subject to delays and cost over-runs. Development of SpaceMobile Service may suffer from delays, interruptions
or increased costs due to many factors, some of which may be beyond our control, including:
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the
failure of the SpaceMobile Service to work as expected as a result of technological or manufacturing difficulties, design
issues or other unforeseen matters;
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lower
than anticipated demand and acceptance for the SpaceMobile Service and mobile satellite services in general;
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the
inability to obtain capital to finance the SpaceMobile Service and related infrastructure, products and services on acceptable
terms or at all;
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engineering
and/or manufacturing performance failing or falling below expected levels of output or efficiency;
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denial
or delays in receipt of regulatory approvals or non-compliance with conditions imposed by regulatory authorities;
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the
breakdown or failure of equipment or systems;
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non-performance
by third-party contractors or suppliers;
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the
inability to develop or license necessary technology on commercially reasonable terms or at all;
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launch
delays or failures or deployment failures or in-orbit satellite failures once launched;
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the
inability to reach commercially viable cooperative agreements to license spectrum with one or more MNOs;
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labor
disputes or disruptions in labor productivity or the unavailability of skilled labor;
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increases
in the costs of materials or services;
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changes
in project scope;
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increased
competition;
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additional
requirements imposed by changes in laws or regulations; or
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severe
weather or catastrophic events such as fires, earthquakes, storms or explosions.
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If
any of the above events occur, they could have a material adverse effect on our ability to continue to develop the SpaceMobile
Service and related infrastructure, products and services, which would materially adversely affect our business, financial condition
and results of operations.
We
will incur significant expenses and capital expenditures in the future to execute our business plan and develop the SpaceMobile
Service, and we may by unable to adequately control our expenses.
We
will incur significant expenses and capital expenditures in the future to further our business plan and develop the SpaceMobile
Service, including expenses to:
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design,
develop, assemble and launch our satellites;
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design
and develop the components of the SpaceMobile Service;
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conduct
research and development;
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purchase
raw materials and components;
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launch
and test our systems;
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expand
our design, development, maintenance and repair capabilities; and
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increase
our general and administrative functions to support our growing operations and the management of a public company.
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Because
we will incur the costs and expenses from these efforts before we receive any revenues with respect thereto, our losses in future
periods will be significant. Also, we may find that these efforts are more expensive than we currently anticipate or that these
efforts may not result in revenues, which would further increase our losses. Our ability to become profitable in the future will
not only depend on our ability to successfully launch satellites and build the SpaceMobile Service, but also to control costs.
If we are unable to efficiently design, manufacture, launch and service our satellites or experiences significant delays during
such development, our potential margins, potential profitability and prospects would be materially and adversely affected.
We
will need to raise additional funds to achieve phase II and subsequent phases of our SpaceMobile Service. These funds may not
be available to us when we need them on favorable terms or at all. If we cannot raise additional funds when needed, our operations
and prospects could be negatively affected.
The
design, development, manufacture, integration, testing, assembly and launch of satellites and related components is a capital-intensive
venture and we estimate the gross costs associated with designing, building and launching the SpaceMobile Service and related
infrastructure to be approximately $1.7 billion. We expect that we will have sufficient capital to fund planned operations and
development for the next 12 to 24 months, which includes the launch of BlueWalker 3 (“BW3”) test satellite and the
first 20 commercial satellites covering the Equatorial countries. In the event that the gross costs associated with designing,
building and launching the SpaceMobile Service are greater than expected, we may exhaust our existing capital more rapidly than
expected. We will need to raise additional capital to continue developing and launching the satellites to complete subsequent
phases of 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. We also intend to enter into equipment financing
arrangements with respect to certain equipment located at our Midland, Texas satellite assembly, integrating and testing facility.
This capital may be necessary to fund our ongoing operations, continue research, development and design efforts, improve infrastructure,
and launch satellites. We cannot be certain that additional funds will be available to us on favorable terms if required, or at
all. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could
be materially adversely affected.
We
are an early stage company with a history of losses and may never become profitable.
We
incurred a net loss of $24.4 million for the year ended December 31, 2020, and have incurred net losses of approximately $40.6
million from our inception through December 31, 2020. We will continue to incur operating and net losses each quarter until at
least the time we begin generating revenue as a result of planned launches of our commercial satellites, which is not expected
to begin until 2023, and may occur later. The likelihood of success of our business plan must be considered in light of the substantial
challenges, expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding
early-stage businesses and the competitive environment in which we operate. The development of a satellite-based global direct
wireless broadband network and related intellectual property is a speculative undertaking, involves a substantial degree of risk,
is a capital-intensive business and may ultimately fail. If we cannot successfully execute our plan to develop a global direct
wireless broadband network from LEO satellites, referred to as SpaceMobile Service, our business will not succeed.
Our
potential profitability is dependent upon the successful development and successful commercial introduction and acceptance of
SpaceMobile Service, which may not occur. Even if we are able to successfully develop our SpaceMobile Service, there can be no
assurance that it will be commercially successful and become profitable on a sustained basis, if at all. We expect to have quarter-to-quarter
fluctuations in revenues, expenses and capital expenditures, some of which could be significant, due to research, development,
manufacturing expenses and the investments required to manufacture and launch the SpaceMobile Service constellation satellites.
We
will rely on MNOs and require regulatory approvals to access the spectrum the SpaceMobile Service needs to operate.
Unlike
traditional mobile satellite services, the SpaceMobile Service does not deliver service over spectrum allocated for mobile satellite
use. Rather, the SpaceMobile Service is designed to deliver service over spectrum allocated for terrestrial mobile use. To do
so, regulators in each country where we will offer the SpaceMobile Service will need to approve the SpaceMobile Service’s
use of spectrum in this manner. We cannot be sure that these regulatory approvals will be forthcoming or, if received, that they
will be issued at a time and on terms and conditions that will allow us to meet our business plan. We will also need to reach
cooperative agreements with MNOs under which they will agree to provide us with access to their licensed spectrum on suitable
terms and conditions. We cannot be sure that such agreements can be reached or that the terms of such agreements will allow us
to provide the SpaceMobile Service for a sufficient period of time or on terms and conditions that will allow us to meet our business
plan.
We
have a limited operating history and operate in a rapidly evolving industry, which makes it difficult to evaluate our business
and future prospects and increases the risk of your investment.
Formed
in May 2017, we have a limited operating history in the satellite communications industry, which is rapidly evolving. As a result,
there is limited information on which investors can base an evaluation of our business, strategy, operating plan, results and
prospects. We intend to derive substantially all of our revenues from the SpaceMobile Service, which is still in the beginning
stages of development. There are also no assurances that we will be able to secure future business with MNOs, who are in turn
expected to market and sell the SpaceMobile Service to their existing customers as the end-user.
It
is difficult to predict future revenues and appropriately budget for expenses, and we have limited insight into trends that may
emerge and affect our business. We are a pre-revenue company facing substantial business and operational risks, including a relatively
untested market strategy, all of which makes forecasting future business results particularly difficult and results in a significant
level of execution risk.
Our
ability to successfully implement our business plan will depend on a number of factors outside of our control.
The
success of our business plan is dependent on a number of factors outside of our control, including:
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the
ability to maintain the functionality, capacity and control of the SpaceMobile Service and satellite network once launched;
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the
ability to access MNO spectrum on suitable terms to us;
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the
level of market acceptance and demand for our products and services from MNOs and their end-user customers;
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the
ability to introduce innovative new products and services that satisfy market demand;
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the
ability to comply with all applicable regulatory requirements in the countries in which we plan to operate;
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the
effectiveness of competitors in developing and offering similar services and products;
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the
ability to find third parties to successfully launch our satellites; and
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the
ability to maintain competitive prices for our products and services and to control our expenses.
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Also,
if the experience of the SpaceMobile Service’s end-users is not reasonably equivalent to the experience they have using
a terrestrial network, we may not achieve widespread customer acceptance.
We
are highly dependent on the services of Abel Avellan, our founder, Chairman and Chief Executive Officer, and if we are unable
to retain Mr. Avellan, attract and retain key employees and hire qualified management, technical and engineering personnel, our
ability to compete could be harmed.
Our
success depends, in part, on our ability to retain our key personnel. We our highly dependent on the services of Abel Avellan,
our founder, Chairman and Chief Executive Officer. Mr. Avellan is the source of many of the unique technology and development
of our business. If Mr. Avellan were to discontinue his employment with the Company due to death, disability or any other reason,
we would be significantly disadvantaged. The unexpected loss of or failure to retain one or more of our key employees could adversely
affect our business.
Our
success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified
personnel, in particular engineers. Experienced and highly skilled employees are in high demand, competition for these employees
can be intense and there may be concerns regarding new employees’ unauthorized disclosure of competitors’ trade secrets,
and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. Because our satellites
are based on a different technology platform than traditional LEO satellites, individuals with sufficient training in our technology
may not be available to hire, and as a result, we will need to expend significant time and expense training the employees it does
hire. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so
could adversely affect our business, including the execution of our global business strategy. Any failure by our management team
and our employees to perform as expected may have a material adverse effect on our business, prospects, financial condition and
operating results.
Rapid
and significant technological changes could render the SpaceMobile Service obsolete and impair our ability to compete.
The
satellite communications industry is subject to rapid advances and innovations in technology. We may face competition in the future
from companies using new technologies and new satellite systems. New technology could render the planned SpaceMobile Service obsolete
or less competitive by satisfying customer demand in more attractive ways or through the introduction of incompatible standards.
Particular technological developments that could adversely affect the business plan may include the deployment by our competitors
of new satellites with greater power, flexibility, efficiency or capabilities than ours, as well as continuing improvements in
terrestrial wireless technologies. For us to keep pace with technological changes and remain competitive, we may need to make
significant capital expenditures, including capital to design and launch new products and services. Customer acceptance of the
products and services that we offer may be affected continually by technology-based differences in product and service offerings
compared to those of competitors. New technologies may also be protected by patents or other intellectual property laws and therefore
may not be available. Any failure to implement new technology within our SpaceMobile Service may compromise our ability to compete.
If
we fail to manage our future growth effectively, our business, prospects, operating results and financial condition may be materially
adversely effected.
We
intend to expand our operations significantly as we develop the SpaceMobile Service and commence commercial operations. To properly
manage our growth, we will need to hire and retain additional personnel, upgrade our existing operational management and financial
and reporting systems, and improve our business processes and controls. our future expansion will include:
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hiring
and training new personnel;
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assembling
and servicing the satellite network;
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developing
new technologies;
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controlling
expenses and investments in anticipation of expanded operations;
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upgrading
the existing operational management and financial reporting systems and team to comply with requirements as a public company;
and
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implementing
and enhancing administrative infrastructure, systems and processes.
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Failure
to manage growth effectively could have a material adverse effect on the quality of the execution of our business plan, our ability
to attract and retain professionals, as well as our business, financial condition and results of operations.
Also,
as we introduce new services or enters into new markets, we may face new market, technological, operational, compliance and administrative
risks and challenges, including risks and challenges unfamiliar to us. We may not be able to mitigate these risks and challenges
to achieve our anticipated growth or successfully execute large and complex projects, which could materially adversely affect
our business, prospects, financial condition and results of operations.
We
could fail to achieve revenue, or experience a decline in revenue, as a result of increasing competition from companies in the
wireless communications industry, including wireless and other satellite operators, and from the extension of land-based communications
services or new technologies.
We
may face increased competition from new competitors, new technologies or new equipment, including new LEO constellations and expansion
of existing geostationary satellite systems or new technology that could eliminate the need for a satellite system. Satellite
service providers or others that rely on satellites for their business purposes and end markets, including us, face a currently
challenging industry as evidenced by the recent bankruptcies of OneWeb and Intelsat. The provision of satellite-based services
and products is subject to downward price pressure when capacity exceeds demand. In addition to satellite-based competitors, terrestrial
voice and data service providers, both wireline and wireless, could further expand into rural and remote areas and provide the
same general types of services and products that we intend to provide. Although satellite communications services and terrestrial
communications services are not perfect substitutes, the two compete in some markets and for some services and this competition
may increase if the SpaceMobile Service proves successful. Consumers generally perceive terrestrial wireless voice communication
products and services as less expensive and more convenient than those that are satellite-based. As a result of competition, we
may not be able to successfully launch our SpaceMobile Service or products, retain our customers and attract new customers.
We
face competition from existing and potential competitors in the telecommunications industry, including terrestrial and satellite-based
network systems.
The
mobile satellite services industry at-large is highly competitive, and we currently face substantial general competition from
other service providers that offer a range of mobile and fixed communications options. There are also a number of competitors
working to develop innovative solutions to compete in this industry. Also, while we view our services as largely complementary
to terrestrial wireline and wireless communications networks through our MNO partnerships, we also compete with them indirectly.
We
face competition from other service providers that offer a range of mobile and fixed communications options, such as Inmarsat,
Globalstar, ORBCOMM, Thuraya Telecommunications Co. and Iridium Communications. Also, we will face competition from companies
seeking to develop new LEO networks such as SpaceX’s Starlink, OneWeb and Amazon’s Kuiper. In addition, a continuing
trend toward consolidation and strategic alliances in the telecommunications industry, as well as the potential development of
new satellite constellations, could give rise to significant new competitors.
We
also compete with regional mobile satellite communications services in several geographic markets. In these cases, the majority
of our competitors’ customers require regional, not global, mobile voice and data services so competitors may present a
viable alternative to the SpaceMobile Service. These regional competitors operate or plan to operate geostationary satellites.
In some markets, we compete directly or indirectly with very small aperture terminal operators that offer communications services
through private networks using very small aperture terminals or hybrid systems to target business users. We also compete indirectly
with terrestrial wireline and wireless communications networks and to the extent that terrestrial communications companies invest
in underdeveloped areas, we may face increased competition in those areas. Furthermore, some foreign competitors may benefit from
government subsidies, or other protective measures, afforded by their home countries.
Some
of these competitors may provide more efficient products or services than we will be able to provide, which could reduce our market
share and adversely affect our revenues and business.
We
will be dependent on third parties to market and sell our products and services.
We
intend to partner with MNOs, and accordingly will rely on them to market and sell our products and services to end users and to
determine the prices end users pay. As a result of these arrangements, we will be dependent on the performance of our commercial
partners to generate most of our revenue. Such commercial partners will operate independently of us, and we will have limited
control over their operations, which exposes us to significant risks. Commercial partners may not commit the necessary resources
to market and sell our products and services and may also market and sell competitive products and services. Also, such commercial
partners may not comply with the laws and regulatory requirements in their local jurisdictions, which could limit their ability
to market or sell our products and services. If current or future commercial partners do not perform adequately, we may be unable
to increase our revenue in these markets or enter new markets, and we may not realize our expected growth, and our brand image
and reputation could be damaged.
We
rely on third parties for a supply of equipment, satellite components and services.
Our
business depends in large part on our ability to execute our plans to assemble, integrate and test our satellites and components
at our facility in Midland, Texas. We rely on certain key suppliers to supply and produce certain highly-technical components.
Any failure of these suppliers or others to perform could require us to seek alternative suppliers or to expand our production
capabilities, which could incur additional costs and have a negative impact on our cost or supply of components. Also, production
or logistics in supply or production areas or transit to final destinations can be disrupted for a variety of reasons including,
but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions,
economic, business, labor, environmental, public health or political issues or international trade disputes. If any of our suppliers
terminate their relationships with us, fail to provide equipment or services on a timely basis, or fail to meet performance expectations,
we may be unable to provide products or services to customers in a competitive manner, which could in turn negatively affect our
financial results and reputation.
Our
continued development of our SpaceMobile Service is and will be subject to risks, including with respect to:
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securing
necessary components on acceptable terms and in a timely manner;
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delays
in delivery of final component designs to our suppliers;
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our
ability to attract, recruit, hire and train skilled employees;
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quality
controls;
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legal
or regulatory limitations placed on our launch providers as a result of geopolitical actions or otherwise;
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satellite
launch or deployment failures;
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delays
or disruptions in supply chain;
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global chip shortages; and
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other
delays and cost overruns.
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We
do not know whether we will be able to develop efficient, automated, low-cost production capabilities and processes and reliable
sources of component supply that will enable us to successfully operate our SpaceMobile Service. Any failure to develop such production
processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects,
financial condition and operating results.
We
and our suppliers rely on complex systems and components, which involves a significant degree of risk and uncertainty in terms
of operational performance and costs.
We
and our suppliers rely on complex systems and components for the operation and assembly of our satellites, which involves a significant
degree of uncertainty and risk in terms of operational performance and costs. These components may suffer unexpected malfunctions
from time to time and may require repairs and spare parts to resume operations, which may not be readily available when needed.
Unexpected malfunctions of these components may significantly affect the intended operational efficiency. Operational performance
and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to,
scarcity of natural resources, environmental hazards and remediation, difficulty or delays in obtaining governmental permit, damages
or defects in various components, industrial accidents, fire, seismic activity and natural disasters. Should operational risks
materialize, it may result in the monetary losses, delays, unanticipated fluctuations in production, environmental damage, administrative
fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business,
prospects, financial condition or operating results.
We
face substantial risks associated with our international operations.
We
plan to offer our SpaceMobile Service globally and intend to partner with a number of foreign MNOs. Also, we have development
offices or teams in Spain, the United Kingdom and Israel and own a controlling interest in a company located in Lithuania. We
also source supplies from international suppliers. Operating in foreign countries poses substantial risks, including:
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difficulties
in developing products and services that are tailored to the needs of local customers;
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unavailability
of, or difficulties in establishing, relationships with local MNOs;
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instability
of international economies and governments;
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changes
in laws and policies affecting trade and investment in other jurisdictions, including the United Kingdom’s exit from
the European Union;
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exposure
to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions;
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difficulties
in obtaining required regulatory authorizations;
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difficulties
in enforcing legal rights in other jurisdictions;
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local
domestic ownership requirements;
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requirements
that certain operational activities be performed in-country;
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changing
and conflicting national and local regulatory requirements;
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foreign
currency exchange rates and exchange controls; and
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ongoing
compliance with the U.S. Foreign Corrupt Practices Act, U.S. export controls, anti-money laundering and trade sanction laws,
and similar anti-corruption and international trade laws in other countries.
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MNOs
will expose us to currency exchange risk, and we cannot predict the effect of future exchange rate fluctuations on our business
and operating results.
Upon
the launch of the SpaceMobile Service, we anticipate generating a significant portion of revenues from our agreements with international
MNOs. As a result, our international operations will be sensitive to currency exchange risks. We anticipate having currency exposure
arising from both sales and purchases denominated in foreign currencies, as well as intercompany transactions. Significant changes
in exchange rates between foreign currencies in which we anticipate transacting business and the U.S. dollar may adversely affect
our results of operations and financial condition.
Pursuing
strategic transactions may cause us to incur additional risks.
We
may pursue acquisitions, joint ventures or other strategic transactions from time to time. We may face costs and risks arising
from any such transactions, including integrating a new business into our business or managing a joint venture. These risks may
include adverse legal, organizational and financial consequences, loss of key customers and distributors, and diversion of management’s
time.
Also,
any major business combination or similar strategic transaction may require significant additional financing. Further, depending
on market conditions, investor perceptions of us and other factors, we might not be able to obtain financing on acceptable terms,
in acceptable amounts, or at appropriate times to implement any such transaction.
We
may be negatively affected by global economic conditions.
Our
operations and performance depend significantly on worldwide economic conditions. Uncertainty about global economic conditions
poses a risk as individual consumers, businesses and governments may postpone spending in response to tighter credit, negative
financial news, declines in income or asset values, or budgetary constraints. Reduced demand could cause a significant delay in
the launch of our satellites or the development of the SpaceMobile Service which in turn could cause a decline in our anticipated
future revenue and make it more difficult to operate profitably in the future, potentially compromising our ability to pursue
our business plan. We expect our future growth rate will be affected by the condition of the global economy, increased competition,
maturation of the satellite communications industry, and the difficulty in sustaining high growth rates as we increase in size.
The
ongoing COVID-19 pandemic may disrupt our operations and affect our ability to successfully complete the research and development
of the SpaceMobile Service on a timely basis.
The
COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility
and disruption in the financial and capital markets. We are unable to accurately predict the full impact that the ongoing COVID-19
pandemic will have on our planned development of the SpaceMobile Service, our financial condition, and operational activities
due to numerous factors that are not within our control, including the duration and severity of the outbreak, stay-at-home orders,
business closures, governmental efforts to distribute vaccines and overall vaccination rates, travel restrictions, supply chain
disruptions and employee illness or quarantines, which could result in disruptions to our operations and adversely impact our
operations and financial condition. Also, the COVID-19 pandemic has resulted in ongoing volatility in the financial and capital
markets. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial
markets relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted. Any future delays
as a result of COVID-19 would delay our phased development.
Our
management has limited experience in operating a public company.
Certain
of our executive officers have limited experience in the management of a publicly traded company. Our management team may not
successfully or effectively manage our transition to a public company that is subject to significant regulatory oversight and
reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining
to public companies could result in an increasing amount of their time that may be devoted to these activities which will result
in less time being devoted to the management and growth of our business. We may not have adequate personnel with the appropriate
level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting
required of U.S. public companies. We are in the process of upgrading our finance and accounting systems to an enterprise system
suitable for a public company, and a delay could impact our ability or prevent us from timely reporting our operating results,
timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act. The development and implementation
of the standards and controls necessary for us to achieve the level of accounting standards required of a U.S. public company
may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional
employees to support our operations as a public company, which will increase our operating costs in future periods.
Risks
Related to Our Satellites and Planned SpaceMobile Service
We
may not be able to launch our satellites successfully. Loss of a satellite during launch could delay or impair our ability to
offer our services or reduce our expected potential revenues, and launch insurance, even if it is available, will not fully cover
this risk.
We
will rely on third party parties to launch our satellites. If we fail to find third parties to launch our satellites or if the
third parties fail to perform or delay their performance, the SpaceMobile Service may not be made operational in the anticipated
timeframe or at all.
We
expect to insure the launch, over-time, of all or a portion of 168 satellites to operate the SpaceMobile Service as intended,
but do not intend to insure our satellites once they are launched for their remaining in-orbit operational lives. Launch insurance
currently costs approximately 5% to 10% of the insured value of the satellite (including launch costs), but may vary depending
on market conditions and the safety record of the launch vehicle. We may choose not to insure every launch or to only partially
insure some or all launches. Even if a lost satellite is fully insured, acquiring a replacement satellite may be difficult and
time consuming. Furthermore, the insurance does not cover lost revenue.
We
expect any launch failure insurance policies that we obtain to include specified exclusions, deductibles and material change limitations.
Typically, these insurance policies exclude coverage for damage arising from acts of war, lasers, and other similar potential
risks for which exclusions are customary in the industry at the time the policy is written.
If
launch insurance rates were to rise substantially, all of the launch costs would increase. Also, in light of increasing costs,
the scope of insurance exclusions and limitations on the nature of the losses for which we can obtain insurance, or other business
reasons, we may conclude that it does not make business sense to obtain third-party insurance and may decide to pursue other strategies
for mitigating the risk of a satellite launch failure, such as obtaining relaunch guaranties from the launch provider. It is also
possible that insurance could become unavailable, either generally or for a specific launch vehicle, or that new insurance could
be subject to broader exclusions on coverage, in which event we would bear the risk of launch failures.
Our
satellites may experience operational problems, which could affect our ability to provide an acceptable level of service to the
end-user customers.
Once
the SpaceMobile Service is developed and operational, we may experience temporary intermittent signal disruptions, dropped connections,
call initiation failures or data transmission disruptions. If the magnitude or frequency of such problems occur repeatedly, we
may no longer able to provide a commercially acceptable level of service, our business and financial results and reputation would
be harmed and our ability to pursue our business plan would be compromised. Also, failure to provide an acceptable level of service
could cause MNOs to seek other solutions for their customers.
From
time to time, we may reposition our satellites within the constellation to optimize service, which could result in degraded service
during the repositioning period. Although we will have some ability to remedy some types of problems affecting the performance
of satellites remotely from the ground, the physical repair of our satellites in space is not feasible.
Our
products could fail to perform or could perform at reduced levels of service because of technological malfunctions or deficiencies,
regulatory compliance issues, or events outside of our control, which would harm our business and reputation.
Our
products and services are subject to the risks inherent in a global, complex telecommunications system employing advanced technology
and heavily regulated by, among others, the FCC and similar authorities internationally. Any disruption to our satellites, services,
information systems or telecommunications infrastructure, or regulatory compliance issues, could result in the inability or reduced
ability of end-user customers to receive services for an indeterminate period of time. These customers may include government
agencies conducting mission-critical work throughout the world, as well as consumers and businesses located in remote areas of
the world and operating under harsh environmental conditions where traditional telecommunications services may not be readily
available. Any disruption to the SpaceMobile Service or extended periods of reduced levels of service could cause us to lose customers
or revenue, result in delays or cancellations of future implementations of our products and services, result in failure to attract
customers, or result in litigation, customer service or repair work that would involve substantial costs and distract management
from operating our business. The failure of any of the diverse elements of the planned SpaceMobile Service, including our satellites,
to function as required could render the SpaceMobile Service unable to perform at the quality and capacity levels required for
success. Any system failures, repeated product failures or shortened product life, or extended reduced levels of service could
reduce our expected sales, increase costs, or result in warranty or liability claims or litigation, and harm our business.
Our
satellites have a limited life and may fail prematurely, which would cause our network to be compromised and materially and adversely
affect our business, prospects and potential profitability.
We
may experience in-orbit malfunctions of our satellites once launched, which could adversely affect the reliability of their service
or result in total failure of the satellite. In-orbit failure of a satellite may result from various causes, including component
failure, loss of power or fuel, inability to control positioning of the satellite, solar or other astronomical events, including
solar radiation, wind and flares, and space debris. Other factors that could affect the useful lives of our satellites include
the quality of construction, gradual degradation of solar panels and the durability of components. Radiation-induced failure of
satellite components may result in damage to, or loss of, a satellite before the end of its expected life. Although we would not
incur any direct cash costs related to the failure of a satellite, if a satellite fails, we would expect to record an impairment
charge in our statement of operations to reduce the remaining net book value of that satellite to zero, and any such impairment
charges could depress our net income for the period in which the failure occurs.
Our
business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third
parties.
Failure
to adequately protect our intellectual property rights could result in our competitors offering similar services and products,
potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect
our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect
our core technology and intellectual property and to keep our use of exclusive licenses. To accomplish this, we will rely on a
combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks,
intellectual property licenses and other contractual rights to establish and protect our rights in our technology.
The
protection of our intellectual property rights will be important to our future business opportunities. However, the measures we
take to protect our intellectual property from unauthorized use by others may not be effective for various reasons, including
the following:
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any
patent applications we submit may not result in the issuance of patents;
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the
scope of our issued patents, including our patent claims, may not be broad enough to protect our proprietary rights;
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our
issued patents may be challenged or invalidated by our competitors;
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our
employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us;
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third-parties
may independently develop technologies that are the same or similar to ours;
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the
costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may
make enforcement impracticable; and
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current
and future competitors may circumvent our intellectual property.
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Patent,
trademark, copyright and trade secret laws vary throughout the world. Some foreign countries do not protect intellectual property
rights to the same extent as do the laws of the U.S. Further, policing the unauthorized use of our intellectual property in foreign
jurisdictions may be difficult. Therefore, our intellectual property rights may not be as strong or as easily enforced outside
of the U.S. Also, we may have difficulty enforcing our rights against a competitor where an infringement occurs in outer space.
Our
intellectual property applications for registration may not issue or be registered, which may have a material adverse effect on
our ability to prevent others from commercially exploiting products similar to ours.
We
cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application,
or if we are the first party to file such a patent application. If another party has filed a patent application to the same subject
matter as we have, we may not be entitled to the protection sought by the patent application. We also cannot be certain whether
the claims included in a patent application will ultimately be allowed in the applicable issued patent. Further, the scope of
protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications
that we file will issue, or that our issued patents will afford protection against competitors with similar technology. Also,
our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition
and operating results.
We
may in the future become subject to claims that our devices or services violate the patent or intellectual property rights of
others, which could be costly and disruptive to us.
We
operate in an industry that is susceptible to significant intellectual property litigation. Although we maintain insurance to
cover the cost of intellectual property litigation ($2.0 million for defending infringement claims and $10.0 million to bring
offensive infringement claims), the defense of intellectual property suit is both costly and time-consuming, even if ultimately
successful, and may divert management’s attention from other business concerns. An adverse determination in litigation to
which we may become a party could, among other things:
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subject
us to significant liabilities to third parties, including lost profit and treble damages that are not covered by insurance;
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require
disputed rights to be licensed from a third party for royalties that may be substantial;
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require
us to cease using technology that is important to our business; or
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prohibit
us from using some or all of our devices or offering some or all of our services.
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Our
customized hardware and software may be difficult and expensive to service, upgrade or replace.
Some
of the hardware and software we use in operating our SpaceMobile Service is significantly customized and tailored to meet our
requirements and specifications and could be difficult and expensive to service, upgrade or replace. Although we expect to maintain
inventories of some spare parts, it nonetheless may be difficult, expensive or impossible to obtain replacement parts for the
hardware due to a limited number of those parts being manufactured to our requirements and specifications. Also, our business
plan contemplates updating or replacing some of the hardware and software in our network as technology advances, but the complexity
of our requirements and specifications may present us with technical and operational challenges that complicate or otherwise make
it expensive or infeasible to carry out such upgrades and replacements. If we are not able to suitably service, upgrade or replace
our equipment, our ability to provide our services and therefore to generate revenue could be harmed.
Our
networks and those of our third-party service providers and MNOs may be vulnerable to security risks.
We
expect the secure transmission of confidential information over public networks to continue to be a critical element of our ability
to compete for business, manage our risks, and protect our customers and our reputation. Our network and those of our third-party
service providers, MNOs and our customers may be vulnerable to unauthorized access, computer attacks, viruses and other security
problems. Persons who circumvent security measures could wrongfully access and obtain or use information on our network or cause
service interruptions, delays or malfunctions in our devices, services or operations, any of which could harm our reputation,
cause demand for our products and services to fall, and compromise our ability to pursue our business plan. Recently, there have
been reported a number of significant, widespread security attacks and breaches that have compromised network integrity for many
companies and governmental agencies, in some cases reportedly originating from outside the United States. Also, there are reportedly
private products available in the market today which may attempt to unlawfully intercept communications made using our network.
We may be required to expend significant resources to respond to, contain, remediate, and protect against these attacks and threats,
including compliance with applicable data breach and security laws and regulations, and to alleviate problems, including reputational
harm and litigation, caused by these security incidents. In the event of such a security incident, our customer contracts may
not adequately protect us against liability to third parties with whom our customers conduct business. Although we have implemented
and intends to continue to implement security measures, these measures may prove to be inadequate. These security incidents could
have a significant effect on our systems, devices and services, including system failures and delays that could limit network
availability, which could harm our business and our reputation and result in substantial liability.
Our
satellites may collide with space debris or another spacecraft, which could adversely affect the performance of our SpaceMobile
Service.
Although
we expect to comply with best practices and international orbital debris mitigation requirements to actively maneuver our satellites
to avoid potential collisions with space debris or other spacecraft, including an onboard propulsion system and altitude and orbit
control system, these abilities are limited by, among other factors, uncertainties and inaccuracies in the projected orbit location
of, and predicted collisions with, debris objects tracked and cataloged by governments or other entities. Additionally, some space
debris is too small to be tracked and therefore its orbital location is unknown; nevertheless, this debris is still large enough
to potentially cause severe damage or a failure of our satellites should a collision occur. If our satellites collide with space
debris or other spacecraft, our SpaceMobile Service could be impaired. Also, a failure of one or more of our satellites or the
occurrence of equipment failures, collision damage, or other related problems that may result during the de-orbiting process could
constitute an uninsured loss and could materially harm our financial condition.
Risks
Related to Our Legal and Regulatory Matters
Our
business is subject to extensive government regulation, which mandates how we may operate our business and may increase the cost
of providing services and expansion into new markets.
Our
ownership and operation of a satellite communications system and the sale of services from such system are subject to significant
regulation in the United States, including by the FCC, the U.S. Department of Commerce and others, and in foreign jurisdictions
by similar local authorities. The rules and regulations of these U.S. and foreign authorities may change, and such authorities
may adopt regulations that limit or restrict our operations as presently conducted or currently contemplated. Such authorities
may also make changes in the licenses of our partners or competitors that affect their spectrum, and may significantly affect
our business. Further, because regulations in each country are different, we may not be aware if some of our partners or persons
with whom we do business do not hold the requisite licenses and approvals. Our failure to provide services in accordance with
the terms of our licenses or our failure to operate our satellites or ground stations as required by our licenses and applicable
laws and government regulations could result in the imposition of government sanctions and/or monetary fines, including the suspension
or cancellation of our licenses.
Our
ability to provide service to our customers and generate revenues could be harmed by adverse governmental regulatory actions.
Our
business is subject to extensive government regulation. Our ability to secure all requisite governmental approvals is not assured,
and the process of obtaining governmental authorizations and permit can be very time consuming, time sensitive and require compliance
with a wide array of administrative and procedural rules. Our pending application seeking FCC approval to operate feeder links
at fixed locations on V band frequencies in the U.S. has been opposed by multiple competitors in the satellite mobile and terrestrial
wireless businesses and we have no assurance if, and when, the requested authority will be forthcoming or what terms and conditions
the FCC might impose on a grant. Multiple terrestrial wireless carriers also have objected to both the process by which we propose
to request authority to use spectrum generally allocated for terrestrial broadband mobile services and to the substance of that
request. We have no assurance regarding the outcome of these objections. A failure by us to obtain required approvals could compromise
our ability to generate revenue or conduct our business in one or more countries. Our requests for regulatory approvals may be
subject to challenges by adverse parties and these challenges may delay or prevent favorable action. Furthermore, regulatory approvals
can be issued subject to conditions that have an adverse effect on our ability to implement our business plan.
The
government approvals required for us to operate the SpaceMobile Service need to be periodically renewed and renewal is not guaranteed.
The approvals also are subject to revocation, and we may be subject to fines, forfeitures, penalties or other sanctions if any
issuing authority were to find that we are not in compliance with the applicable rules, regulations or policies. The regulatory
obligations we must meet are complex, vary greatly from country to country, and are subject to interpretation. We cannot give
any assurance that the governments will agree with or accept our compliance efforts.
The
regulations we and our competitors must adhere to are subject to change by the issuing governmental authorities and there is no
guarantee that changes will not be made that are adverse to our business. Regulatory changes, such as those resulting from judicial
decisions or the adoption of treaties, legislation or regulations in countries where we operate or intends to operate may also
significantly affect our business.
Our
ability to offer one or more services in important countries or regions of the world may be limited due to regulatory requirements.
Though
anticipated to provide global service, the SpaceMobile Service may be limited in some jurisdictions by local regulations. For
example, some countries have local domestic ownership requirements, or requirements for physical facilities or gateways within
their jurisdictions, that may be difficult for us to satisfy. In some countries, we may not be able to reach a commercially viable
agreement with an MNO that will enable us to access the spectrum needed to deliver the SpaceMobile Service. The inability to offer
or provide the SpaceMobile Service in some major international markets could impair us from achieving our revenue and international
growth plans.
We
expect to provide our SpaceMobile Service in the U.S. and elsewhere on frequencies not regularly allocated for mobile-satellite
service, which requires regulatory approval, and there can be no assurance that we will receive or be able to maintain such approval.
The
SpaceMobile Service will utilize end-user frequencies that are not allocated to the satellite services. Instead, the SpaceMobile
Service will be delivered to end-user customers over frequencies generally allocated for terrestrial broadband mobile services.
The SpaceMobile Service’s use of spectrum generally allocated for terrestrial broadband mobile services, and our ability
to access the U.S. market, will need approval by the FCC. If the FCC does not provide approval, our business will be significantly,
adversely affected, and the provision of the SpaceMobile Service could be delayed or diminished, which could have a material adverse
effect on our business, financial condition and results of operations. Because terrestrial mobile frequencies are licensed to
carriers throughout the U.S., our use of such spectrum will be pursuant to a cooperative arrangement with one or more MNOs, such
as spectrum leasing agreements. our access to this spectrum will be subject to approval or notification by the regulatory licensing
authority, and any such approval or notification may be delayed or rejected, which may substantially affect our business. Under
such arrangements, we will not be the license holder for the spectrum, and our continued access to and use of the frequencies
will be subject to the ongoing consent of the MNO, and to the terms and conditions of the cooperative agreement with such MNO.
There can be no assurance that we can reach suitable cooperative agreements with MNOs or that such agreements will continue for
the life of the SpaceMobile Service.
The
shared use of the terrestrial broadband spectrum by us and the MNO will require the implementation of procedures and safeguards
to avoid co-channel interference. While we believe our SpaceMobile Service will be able to avoid such interference through our
patented technology, because the SpaceMobile Service is a new and innovative service that has not yet been implemented, the nature,
extent and effectiveness of these interference avoidance techniques, and their effect on the service we will deliver, remains
to be practically proven. If the SpaceMobile Service causes or receives harmful interference, it could have a material adverse
effect on our business, financial condition and results of operations.
The
SpaceMobile Service may qualify as a commercial mobile radio service which will subject us to a variety of ongoing regulatory
requirements.
Government
regulators have adopted a broad array of regulations governing the terms and conditions of wireless service designed to protect
consumers and the public interest. While our arrangements with the MNOs will address some of these requirements, these regulatory
obligations may prove burdensome and could have an adverse effect on our business. If we fail to comply in any material respect
with any of these regulatory requirements, we could be subject to sanctions and financial penalties, including the loss of authority
to provide service.
The
collection, storage, transmission, use and disclosure of user data and personal information by us could give rise to liabilities
or additional costs.
In
the course of providing the SpaceMobile Service, we will transmit, process, and, in some cases store in the normal course of business,
end-user data, including personal information. Many jurisdictions around the world have adopted laws and regulations regarding
the collection, storage, transmission, use and disclosure of personal information. The legal standards for processing, storing
and using this personal information are complex and continue to evolve. For example, the California Consumer Privacy Act became
effective in 2020, and other privacy related regulations are pending in several other states such as New York and Nevada. Regulatory
enforcement of the EU General Data Protection Regulation has begun resulting in significant fines for non-compliance. Other countries
have recently adopted similar laws and regulations, including Brazil, Australia, Canada, and China. As a result, they impose additional
obligations and risk on our business, and have the potential to make some of our business processes more costly or less feasible.
Also,
the interpretation of privacy and data protection laws and regulations regarding the collection, storage, transmission, use and
disclosure of such information in some jurisdictions remains unclear. These laws may be interpreted, applied and enforced in conflicting
ways from country to country and in a manner that is not consistent with our current or expected business practices. Complying
with these varying privacy and data security legal requirements could cause us to incur additional costs and change our business
practices. Because we intend for our SpaceMobile Service to be accessible in many foreign jurisdictions, some of these jurisdictions
may claim that we are required to comply with their laws, even where we have no local entity, employees or infrastructure. We
could be forced to incur significant expenses if we were required to modify the SpaceMobile Service or our security and privacy
procedures to comply with new or expanded regulations. Also, if end users allege that their personal information is not collected,
stored, transmitted, used or disclosed appropriately or in accordance with our privacy policies or applicable laws, we could have
liability to them, including claims and litigation resulting from such allegations. Any failure on our part to protect end users’
privacy and data could result in a loss of user confidence, hurt our reputation and ultimately result in the loss of users. In
the event that we suffer a loss or adverse event to our data storage or it is determined that our policies and procedures have
failed to comply with evolving laws and regulations, we may be subject to significant regulatory investigations and fines or penalties.
Radio
frequency (rf) emissions from transmitters and handsets operating on wireless mobile frequencies are the subject of regulation
and litigation concerning their safety and environmental effects, and as a result we could face litigation, liability or new regulations.
There
has been adverse publicity concerning alleged health risks associated with rf transmissions from wireless transmitters and hand-held
devices. Lawsuit have been filed against participants in the wireless industry alleging a number of adverse health consequences,
including cancer, as a result of wireless phone usage. We have not been party to any such lawsuit, but may be exposed to such
litigation in the future. We intend to comply with applicable standards for rf emissions and power and does not believe there
is valid scientific evidence that the satellite or handset transmissions associated with our SpaceMobile Service poses a health
risk. However, courts or governmental agencies could determine otherwise. Any such finding could reduce our revenue and profitability
and expose us and other communications service providers or device sellers to litigation, which, even if frivolous or unsuccessful,
could be costly to defend. Also, any actual or perceived risk from rf emissions could reduce the demand for the SpaceMobile Service.
Risks
Related to Our Organizational Structure
We
are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and rely
on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders
of companies that are subject to such requirements.
As
of the date of this prospectus, the Key Holders hold all of the Class C Common Stock, which prior to the Sunset Date will entitle
such holders to cast the lesser of 10 votes per share and the Class C Share Voting Amount, the latter of which is a number of
votes per share equal to (1) (x) an amount of votes equal to 88.31% of the total voting power of our outstanding voting stock,
minus (y) the total voting power of our outstanding capital stock owned or controlled by the Key Holders, divided by (2) the number
of shares of our Class C Common Stock then outstanding. As a result, as of the date of this prospectus, the Key Holders control
approximately 88.3% of the combined voting power of our Common Stock, and may control a majority of our voting power so long as
the Class C Common Stock represents at least 9.1% of our total Common Stock. As a result of the Key Holders’ holdings, we
qualify as a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under these rules,
a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled
company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i)
a majority of our Board of Directors consist of independent directors, (ii) we have a compensation committee that is composed
entirely of independent directors and (iii) director nominees be selected or recommended to the board by independent directors.
We
rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors
and our directors were not nominated or selected solely by independent directors. We may also rely on the other exemptions so
long as we qualify as a controlled company. To the extent we rely on any of these exemption, holders of our Class A Common Stock
will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance
requirements.
The
multi-class structure of our Common Stock has the effect of concentrating voting power with our Chief Executive Officer, which
will limit an investor’s ability to influence the outcome of important transactions, including a change of control.
Holders
of shares of our Class A Common Stock are entitled to cast one vote per share of Class A Common Stock, while holders of shares
of our Class C Common Stock are (1) prior to the Sunset Date, entitled to cast the lesser of (x) 10 votes per share and (y) the
Class C Share Voting Amount and (2) from and after the Sunset Date, entitled to cast one vote per share. As of the date of this
prospectus, the Key Holders controlled approximately 88.3% of the combined voting power of our Common Stock as a result of their
ownership of all of our Class C Common Stock. Accordingly, while we do not intend to issue additional Class C Common Stock in
the future, Mr. Avellan will be able to exercise control over all matters requiring our stockholders’ approval, including
the election of our directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially
all of our assets or other major corporate transactions. Mr. Avellan may have interests that differ from yours and may vote in
a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying,
preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium
for their capital stock as part of a sale of our company, and might ultimately affect the market price of shares of our Class
A Common Stock. For information about our multi-class class structure, see the section titled “Description of Capital Stock.”
We
cannot predict the impact our multi-class structure may have on the stock price of our Class A Common Stock.
We
cannot predict whether our multi-class structure will result in a lower or more volatile market price of Class A Common Stock
or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including
companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell and S&P Dow Jones announced
that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in
their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which
together make up the S&P Composite 1500. Beginning in 2017, MSCI, a leading stock index provider, opened public consultations
on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices;
however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures”
in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under the announced
policies, our multi-class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual
funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing
in our stock. These policies are still fairly new and it is as of yet unclear what effect, if any, they will have on the valuations
of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to
those of other similar companies that are included. Because of our multi-class structure, we will likely be excluded from certain
of these indices and we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of
investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude
investment by many of these funds and could make shares of our Class A Common Stock less attractive to other investors. As a result,
the market price of shares of our Class A Common Stock could be adversely affected.
If
we were deemed an “investment company” under the Investment Company Act of 1940, as amended (the “Investment
Company Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could
have a material adverse effect on our business.
An
issuer will generally be deemed to be an “investment company” for purposes of the Investment Company Act if:
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it
is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes
to engage primarily, in the business of investing, reinvesting or trading in securities; or
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it
is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire investment securities
having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on
an unconsolidated basis.
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We
believe that we are engaged primarily in the business of developing and providing access to a space-based cellular broadband network
to be accessible by standard smartphones and not primarily in the business of investing, reinvesting or trading in securities.
We hold ourselves out as communications company and do not propose to engage primarily in the business of investing, reinvesting
or trading in securities. Accordingly, we do not believe that we are an “orthodox” investment company as described
in the first bullet point above. Furthermore, we treat AST as a majority-owned subsidiary for purposes of the Investment Company
Act. Therefore, we believe that less than 40% of our total assets (exclusive of U.S. government securities and cash items) on
an unconsolidated basis comprise assets that could be considered investment securities. Accordingly, we do not believe that we
or AST will be an inadvertent investment company by virtue of the 40% inadvertent investment company test as described in the
second bullet point above. Also, we believe we will not be an investment company under section 3(b)(1) of the Investment Company
Act because we will be primarily engaged in a non-investment company business.
The
Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment
companies. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates,
impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance
requirements. We intend to continue to conduct our operations so that we will not be deemed to be an investment company under
the Investment Company Act. However, if anything were to happen that would cause us to be deemed to be an investment company under
the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on our capital structure,
ability to transact business with affiliates (including AST) and ability to compensate key employees, could make it impractical
for us to continue our business as currently conducted, impair the agreements and arrangements between and among AST, us or our
senior management team, or any combination thereof and materially and adversely affect our business, financial condition and results
of operations.
Because
members of our senior management team hold most or all of their economic interest in AST through other entities, conflicts of
interest may arise between them and holders of shares of Class A Common Stock or us.
Because
members of our senior management team hold most or all of their economic interest in AST directly through holding companies rather
than through ownership of shares of Class A Common Stock, they may have interests that do not align with, or conflict with, those
of the holders of Class A Common Stock or with us. For example, members of our senior management team may have different tax positions
from those of the Company and/or holders of Class A Common Stock, which could influence their decisions regarding whether and
when to enter into certain transactions or dispose of assets, whether and when to incur new or refinance existing indebtedness,
and whether and when we should terminate the Tax Receivable Agreement and accelerate the obligations thereunder. Also, the structuring
of future transactions and investments may take into consideration the members’ tax considerations even where no similar
benefit would accrue to us.
Risks
Related to Tax
Our
only principal asset is our interest in AST, and accordingly we depend on distributions from AST to pay dividends, taxes, other
expenses, and make any payments required to be made by us under the Tax Receivable Agreement.
We
are a holding company and have no material assets other than our ownership of AST Common Units. We do not have independent means
of generating revenue or cash flow, and our ability to pay our taxes, operating expenses, and pay any dividends in the future
is dependent upon the financial results and cash flows of AST. There can be no assurance that AST will generate sufficient cash
flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants under debt
instruments will permit such distributions. If AST does not distribute sufficient funds to us to pay our taxes or other liabilities,
we may default on contractual obligations or have to borrow additional funds. In the event that we are required to borrow additional
funds it could adversely affect our liquidity and subject us to additional restrictions imposed by lenders.
AST
is treated as partnership for U.S. federal income tax purposes and, as such, generally is not subject to any entity-level U.S.
federal income tax. Instead, taxable income is allocated, for U.S. federal income tax purposes, to the holders AST Common Units.
Under the terms of the A&R Operating Agreement, AST is obligated to make pro rata tax distributions to holders of AST Common
Units calculated at certain assumed rates. In addition to tax expenses, we will also incur expenses related to our operations,
including payment obligations under the Tax Receivable Agreement, which could be significant and some of which will be reimbursed
by AST (excluding payment obligations under the Tax Receivable Agreement). For so long as we are Managing Member (as defined in
the A&R Operating Agreement) of AST, we intend to cause AST to make ordinary distributions and tax distributions to the holders
of AST Common Units on a pro rata basis in amounts sufficient to enable us to cover all applicable taxes, relevant operating expenses,
payments under the Tax Receivable Agreement and dividends, if any, declared by us. However, AST’s ability to make such distributions
may be subject to various limitations and restrictions, including, but not limited to, retention of amounts necessary to satisfy
the obligations of AST and its subsidiaries and restrictions on distributions that would violate any applicable restrictions contained
in AST’s debt agreements, or any applicable law, or that would have the effect of rendering AST insolvent. To the extent
we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue
interest until paid. Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material
breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable
Agreement, which could be substantial.
We
anticipate that the distributions received from AST may, in certain periods, exceed our actual tax liabilities and obligations
to make payments under the Tax Receivable Agreement. Our Board of Directors, in its sole discretion, will make any determination
from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, to pay
dividends on our Class A Common Stock. We will have no obligation to distribute such cash (or other available cash other than
any declared dividend) to our stockholders.
The
Tax Receivable Agreement requires us to make cash payments to the TRA Holders in respect of certain tax benefits and such payments
may be substantial. In certain cases, payments under the Tax Receivable Agreement may (i) exceed any actual tax benefits the Tax
Group realizes or (ii) be accelerated.
In
connection with the Closing, we entered into the Tax Receivable Agreement. Pursuant to the Tax Receivable Agreement, we are generally
required to pay the TRA Holders 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are
based on, or measured with respect to, net income or profits, and any interest related thereto that we and any applicable consolidated,
unitary, or combined Subsidiaries (the “Tax Group”) realize, or are deemed to realize, as a result of certain “Tax
Attributes,” which include:
● existing
tax basis in certain assets of AST and certain of its direct or indirect Subsidiaries, including assets that will eventually be
subject to depreciation or amortization, once placed in service, attributable to AST Common Units acquired by us from a TRA Holder
(including AST Common Units held by a Blocker Corporation acquired by us in a Reorganization Transaction (as defined in the Tax
Receivable Agreement)), each as determined at the time of the relevant acquisition;
● tax basis adjustments
resulting from taxable exchanges of AST Common Units (including any such adjustments resulting from certain payments made by us
under the Tax Receivable Agreement) acquired by us from a TRA Holder pursuant to the terms of the A&R Operating Agreement;
● tax deductions in
respect of portions of certain payments made under the Tax Receivable Agreement; and
● certain tax
attributes of Blocker Corporations holding AST Common Units that are acquired directly or indirectly by us pursuant to a
Reorganization Transaction.
Payments
under the Tax Receivable Agreement generally will be based on the tax reporting positions that we determine (with the amount of
subject payments determined in consultation with an advisory firm and subject to the TRA Holder Representative’s review
and consent), and the IRS or another taxing authority may challenge all or any part of a position taken with respect to Tax Attributes
or the utilization thereof, as well as other tax positions that we take, and a court may sustain such a challenge. In the event
that any Tax Attributes initially claimed or utilized by the Tax Group are disallowed, the TRA Holders will not be required to
reimburse us for any excess payments that may previously have been made pursuant to the Tax Receivable Agreement, for example,
due to adjustments resulting from examinations by taxing authorities. Rather, any excess payments made to such TRA Holders will
be applied against and reduce any future cash payments otherwise required to be made by us to the applicable TRA Holders under
the Tax Receivable Agreement, after the determination of such excess. However, a challenge to any Tax Attributes initially claimed
or utilized by the Tax Group may not arise for a number of years following the initial time of such payment and, even if challenged
earlier, such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to
make under the terms of the Tax Receivable Agreement. As a result, there might not be future cash payments against which such
excess can be applied and we could be required to make payments under the Tax Receivable Agreement in excess of the Tax Group’s
actual savings in respect of the Tax Attributes.
Moreover,
the Tax Receivable Agreement provides that, in the event (such events collectively, “Early Termination Events”) that
(i) we exercise our early termination rights under the Tax Receivable Agreement, (ii) certain changes of control of the Company
or AST occur (as described in the A&R Operating Agreement), (iii) we, in certain circumstances, fail to make a payment required
to be made pursuant to the Tax Receivable Agreement by its final payment date, which non-payment continues for 60 days following
such final payment date or (iv) we materially breach (or are deemed to materially breach) any of our material obligations under
the Tax Receivable Agreement other than as described in the foregoing clause (iii) and, in the case of clauses (iii) and (iv),
unless certain liquidity related or restrictive covenant related exceptions apply, our obligations under the Tax Receivable Agreement
will accelerate (if the TRA Holder Representative so elects in the case of clauses (ii)-(iv)) and, we will be required to make
a lump-sum cash payment to all the TRA Holders equal to the present value of all forecasted future payments that would have otherwise
been made under the Tax Receivable Agreement, which lump-sum payment would be based on certain assumptions, including those relating
to there being sufficient future taxable income of the Tax Group to fully utilize the Tax Attributes over certain specified time
periods and that all AST Common Units (including AST Common Units held by Blocker Corporations) that had not yet been exchanged
for Class A Common Stock or cash are deemed exchanged for cash. The lump-sum payment could be material and could materially exceed
any actual tax benefits that the Tax Group realizes subsequent to such payment.
Payments
under the Tax Receivable Agreement will be our obligations and not obligations of AST. Any actual increase in our allocable share
of AST and its relevant subsidiaries’ tax basis in relevant assets, as well as the amount and timing of any payments under
the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price
of the Class A Common Stock at the time of an exchange of AST Common Units by a TRA Holder pursuant to the terms of the A&R
Operating Agreement and the amount and timing of the recognition of the Tax Group’s income for applicable tax purposes.
While many of the factors that will determine the amount of payments that we will be required to make under the Tax Receivable
Agreement are outside of our control, we expect that the aggregate payments we will be required to make under the Tax Receivable
Agreement could be substantial and, if those payments substantially exceed the tax benefit we realize in a given year or in the
aggregate, could have an adverse effect on our financial condition, which may be material.
Any
payments made by us under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise
been available to us. To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason,
the unpaid amounts will be deferred and will accrue interest until paid. Additionally, nonpayment for a specified period and/or
under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore
accelerate payments due under the Tax Receivable Agreement. Furthermore, our future obligation to make payments under the Tax
Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot
use some or all of the Tax Attributes that may be deemed realized under the Tax Receivable Agreement. Increases in income tax
rates, changes in income tax laws or disagreements with tax authorities can adversely affect our, AST’s or its subsidiaries’
business, financial condition or results of operations.
We
could be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in the United
States or other jurisdictions.
We
could also be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in
the United States or other jurisdictions and changes in tax law, including increases in applicable tax rates and limitations on
deductions and credits, could reduce our after-tax income and adversely affect our business and financial condition.
Our
effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties. These
laws, regulations and treaties are complex and often open to interpretation. In the future, the tax authorities could challenge
our interpretation of laws, regulations and treaties, resulting in additional tax liability or adjustment to our income tax provision
that could increase our effective tax rate. Changes to tax laws may also adversely affect our ability to attract and retain key
personnel.
Risks
Related to Being a Public Company
The
requirements of being a public company may strain our resources and divert management’s attention.
As
a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall
Street Reform and Consumer Protection Act, the Nasdaq listing requirements and other applicable securities rules and regulations.
Compliance with these rules and regulations increase our legal and financial compliance costs, make some activities more difficult,
time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging
growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and
procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures
and internal control over financial reporting to meet this standard, significant resources and management oversight may be required.
As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business
and operating results. We may need to hire more employees in the future or engage outside consultants to comply with these requirements,
which will increase our costs and expenses.
Failure
to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our business and stock price.
We
are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management
to certify financial and other information in our quarterly and annual reports and provide an annual management report on the
effectiveness of controls over financial reporting. Additionally, once we no longer qualify as an “emerging growth company,”
we will be required to have our independent registered public accounting firm provide an attestation report on the effectiveness
of our internal control over financial reporting. An adverse report may be issued in the event our independent registered public
accounting firm is not satisfied with the level at which our controls are documented, designed or operating.
A
material weakness is a deficiency, or combination of deficiencies, in internal controls, such that there is a reasonable possibility
that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal controls that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance. When evaluating our internal
control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the
applicable deadline imposed upon us for compliance with the requirements of Section 404. On April 12, 2021, the Acting Chief Accountant
and Acting Director of the Division of Corporation Finance of the SEC issued a Staff Statement on Accounting and Reporting Considerations
for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Staff Statement”). Following
this issuance of the SEC Staff Statement, after consultation with our independent registered public accounting firm, our management
and our audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate our previously issued
audited financial statements as of and for the years ended December 31, 2020 and 2019 (the “Restatement”). See “—Our
outstanding warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect
on our financial results.” As part of such process, we identified a material weakness in our internal controls over financial
reporting. Also, management, along with our principal executive and financial officers, have concluded that our disclosure controls
and procedures were not effective as of December 31, 2020, in light of the material weakness identified in our internal control
over financial reporting.
If
we fail to remediate existing material weaknesses, fail to identify any additional material weaknesses in our internal control
over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal
control over financial reporting is ineffective, or if our independent registered public accounting firm is unable to express
an opinion as to the effectiveness of our internal control over financial reporting, we could fail to meet our reporting obligations
or be required to restate our financial statements for prior periods. Investors may also lose confidence in the accuracy and completeness
of our financial reports, the market price of our Class A Common Stock and warrants could be negatively affected, and we could
become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial
and management resources.
We
are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements
applicable to emerging growth companies could make our Class A Common Stock less attractive to investors.
We
are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage
of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,”
including:
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not
being required to have our independent registered public accounting firm audit our internal control over financial reporting
under Section 404 of the Sarbanes-Oxley Act;
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reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation or golden parachute payments not previously
approved.
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Our
status as an emerging growth company will end as soon as any of the following takes place:
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the
last day of the fiscal year in which we have more than $1.07 billion in annual revenue;
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the
date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;
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the
date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or
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the
last day of the fiscal year ending after the fifth anniversary of NPA’s initial public offering.
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We
cannot predict if investors will find our securities less attractive if we choose to rely on any of the exemptions afforded emerging
growth companies. If some investors find our securities stock less attractive because we rely on any of these exemptions, there
may be a less active trading market for our securities and the market price of those securities may be more volatile.
Further,
the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a registration statement under the Securities Act declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at
the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another
public company, which is neither an emerging growth company nor a company that has opted out of using the extended transition
period difficult because of the potential differences in accounting standards used.
A
significant portion of our total outstanding shares of our Class A Common Stock (or shares of our Class A Common Stock that may
be issued in the future pursuant to the exchange or redemption of AST Common Units) are restricted from immediate resale but may
be sold into the market in the near future. This could cause the market price of our Class A Common Stock to drop significantly,
even if our business is doing well.
Subject
to certain exceptions, pursuant to the Stockholders’ Agreement, the Stockholder Parties are contractually restricted from
transferring any SpaceMobile common stock held by such party (other than approximately 2,500,000 shares of Class A Common Stock
purchased by certain Existing Equityholders in the PIPE Investment) for a period of one year following the Closing (the “Lock-Up
Period”); provided that the Sponsor may transfer one-third of its shares of Class A Common Stock if the stock price equals
or exceeds $12.00 for any 20 trading days within any 30 trading-day period commencing at least 150 days after the Closing.
Following
the expiration of the Lock-up Period, no Stockholder Party will be restricted from selling shares of our Class A Common Stock
held by them or that may be received by them in exchange for AST Common Units or warrants, as the case may be, other than by applicable
securities laws. As such, sales of a substantial number of shares of our Class A Common Stock in the public market could occur
at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares,
could reduce the market price of our Class A Common Stock. As of the date of this prospectus, the Stockholder Parties collectively
owned approximately 81.2% of our outstanding common stock, representing approximately 96.1% of the voting power of our common
stock, and the AST Equityholders, in turn, owned approximately 71.5% of the AST Common Units. As restrictions on resale end and
registration statements for the sale of shares of our Class A Common Stock and warrants by the parties to the Registration Rights
Agreements are available for use, the sale or possibility of sale of these shares of Class A Common Stock and warrants could have
the effect of increasing the volatility in the market price of our Class A Common Stock or warrants, or decreasing the market
price itself.
Warrants
will become exercisable for our Class A Common Stock, which will increase the number of shares eligible for future resale in the
public market and result in dilution to our stockholders.
As
of May 5, 2021, there are 17,600,000 outstanding warrants to purchase 17,600,000 shares of our Class A Common Stock at an exercise
price of $11.50 per share, which warrants will become exercisable 30 days following the Closing. To the extent such warrants are
exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to the holders of our Class
A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such
shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class
A Common Stock.
We
may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders
of at least 65% of the then outstanding public warrants. As a result, the exercise price of the warrants could be increased, the
exercise period could be shortened and the number of shares of Class A common stock purchasable upon exercise of a warrant could
be decreased, all without a warrant holder’s approval.
Our
warrants are issued in registered form under the Warrant Agreement with Continental Stock Transfer & Trust Company, as warrant
agent. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure
any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding
public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly,
we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding
public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of
at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other
things, increase the exercise price of the warrants, convert the warrants into cash or Class A common stock, shorten the exercise
period or decrease the number of shares of Class A common stock purchasable upon exercise of a warrant.
Registration
of the shares of our Class A Common Stock issuable upon exercise of the warrants under the Securities Act may not be in place
when an investor desires to exercise warrants.
Under
the terms of the Warrant Agreement, we are obligated to file and maintain an effective registration statement under the Securities
Act, covering the issuance of shares of our Class A Common Stock issuable upon exercise of the warrants. We cannot assure you
that we will be able to do so if, for example, any facts or events arise that represent a fundamental change in the information
set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein
are not current or correct or we are required to address any comments the SEC may issue in connection with such registration statement.
If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we are required to permit holders
to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we
will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon
such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from
registration is available. If, and when, the warrants become redeemable by us, we may exercise our redemption right even if we
are unable to register or qualify the underlying shares of Common Stock for sale under all applicable state securities laws.
We
may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making
their warrants worthless.
We
have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration,
at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption
and provided certain other conditions are met. If and when the public warrants become redeemable by us, we may not exercise our
redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification
under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts
to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which
the warrants were offered by us in our initial public offering. Redemption of the outstanding public warrants could force you
(i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii)
to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept
the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially
less than the market value of your warrants.
None
of the warrants issued to the Sponsor in a private placement that occurred concurrently with our initial public offering will
be redeemable by us so long as they are held by the Sponsor or its permitted transferees.
Provisions
in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a
third-party.
Our
Bylaws require, unless we consent in writing to the selection of an alternative forum, that (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other
employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising
pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action asserting a claim against us, our directors,
officers or employees governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware,
except any claim (a) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party
not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction
of the Court of Chancery within 10 days following such determination), (b) which is vested in the exclusive jurisdiction of a
court or forum other than the Court of Chancery, (c) for which the Court of Chancery does not have subject matter jurisdiction,
or (d) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District
of Delaware shall have concurrent jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit
will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision
benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies,
a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect
of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance
with federal securities laws and the rules and regulations thereunder.
Notwithstanding
the foregoing, our Bylaws provide that the exclusive forum provision will not apply to suits brought to enforce a duty or liability
created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange
Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act
or the rules and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in
the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging
lawsuits against our directors and officers. For more information, see “Description of Capital Stock.”
General
Risk Factors
The
market price and trading volume of our securities may be volatile.
Securities
markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market
or political conditions, could reduce the market price of our Class A Common Stock and warrants in spite of our operating performance.
We cannot assure you that the market price of our Class A Common Stock and warrants will not fluctuate widely or decline significantly
in the future in response to a number of factors, including, among others, the following:
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the
realization of any of the risk factors presented in this prospectus;
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developments
involving our competitors;
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variations
in our operating performance and the performance of our competitors in general;
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difficult
global market and economic conditions;
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loss
of investor confidence in the global financial markets and investing in general;
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inability
to attract, retain or motivate our directors, officers or other key personnel;
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adverse
market reaction to indebtedness we may incur, securities we may grant under our 2020 Plan or otherwise, or any other securities
we may issue in the future, including shares of Class A Common Stock;
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failure
to meet securities analysts’ earnings estimates;
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publication
of negative or inaccurate research reports about us or our industry or the failure of securities analysts to provide adequate
coverage of the Class A Common Stock in the future;
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speculation
in the press or investment community about our business;
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additions
and departures of key employees and personnel;
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competition
for talent and skill-sets required;
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commencement
of, or involvement in, litigation involving us;
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the
volume of shares of our Class A Common Stock available for public sale;
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additional
or unexpected changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business
or enforcement of these laws and regulations, or announcements relating to these matters;
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increases
in compliance or enforcement inquiries and investigations by regulatory authorities, including as a result of regulations
mandated by the Dodd-Frank Act and other initiatives of various regulators that have jurisdiction over us; and
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adverse
publicity about our industry.
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The
obligations associated with being a public company involve significant expenses and require significant resources and management
attention, which may divert from our business operations.
As
a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act
requires the filing of annual, quarterly and current reports with respect to a public company’s business and financial condition.
The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over
financial reporting. As a result, we are incurring, and will continue to incur, significant legal, accounting and other expenses
that we did not incur prior to the business combination. Our management team and many of our other employees devote substantial
time to compliance, and may not effectively or efficiently manage our transition into a public company.
These
rules and regulations have resulted, and will continue to result, in us incurring substantial legal and financial compliance costs
and make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain coverage. As a result, it may be difficult for us to attract and retain
qualified people to serve on our Board of Directors, our board committees or as executive officers.
We
may be subject to securities class action litigation, which may harm our business, financial condition and results of operations.
Companies
that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We
may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs
and damages, and divert management’s attention from other business concerns, which could seriously harm our business, financial
condition and results of operations.
We
may also be called on to defend ourselves against lawsuits relating to our business operations. Some of these claims may seek
significant damage amounts due to the nature of our business. Due to the inherent uncertainties of litigation, we cannot accurately
predict the ultimate outcome of any such proceedings. A future on-payment outcome in a legal proceeding could have an adverse
impact on our business, financial condition and results of operations. Also, current and future litigation, regardless of its
merits, could result in substantial legal fees, settlement or judgment costs and a diversion of management’s attention and
resources that are needed to successfully run our business.
Our
outstanding warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect
on our financial results.
On
April 12, 2021, the Acting Chief Accountant and Acting Director of the Division of Corporation Finance of the SEC issued a Staff
Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)
(the “SEC Staff Statement”). The SEC Staff Statement sets forth the conclusion of the SEC’s Office of the Chief
Accountant that certain provisions included in the warrant agreements entered into by many special purpose acquisition companies
require such warrants to be accounted for as liabilities measured at fair value, rather than as equity securities, with changes
in fair value during each financial reporting period reported in earnings. As a result of the SEC Staff Statement, we reevaluated
the accounting treatment of our warrants, and determined to classify the warrants as derivative liabilities measured at fair value,
with changes in fair value each period reported in earnings.
As
a result, included on our consolidated balance sheets as of December 31, 2020 and 2019 contained elsewhere in this prospectus
are derivative liabilities related to embedded features contained within our warrants. Accounting Standards Codification 815,
Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each
balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings
in the statement of operations. As a result of the recurring fair value measurement, our consolidated financial statements and
results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value
measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount
of such gains or losses could be material.
We
have identified a material weakness in our internal control over financial reporting as of December 31, 2020, and, as a result,
we have determined that our disclosure controls and procedures were not effective as of December 31, 2020. If we are unable to
develop and maintain an effective system of internal control over financial reporting and effective disclosure controls and procedures,
we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence
in us and materially and adversely affect our business and operating results.
Following
this issuance of the SEC Staff Statement, after consultation with our independent registered public accounting firm, our management
and our audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate our previously issued
audited financial statements as of and for the years ended December 31, 2020 and 2019. See “—Our outstanding
warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial
results.” As part of such process, we identified a material weakness in our internal controls over financial reporting.
In addition, management, along with our principal executive and financial officers, have concluded that our disclosure controls
and procedures were not effective as of December 31, 2020, in light of the material weakness identified in our internal control
over financial reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented,
or detected and corrected on a timely basis.
Effective
internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps
to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that
these initiatives will ultimately have the intended effects.
If
we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to
prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or
interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding
timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence
in our financial reporting and the prices of our securities may decline as a result. We cannot assure you that the measures we
have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We
may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following
the issuance of the SEC Staff Statement, after consultation with our independent registered public accounting firm, our management
and our audit committee concluded that it was appropriate to restate our previously issued audited financial statements as of
and for the years ended December 31, 2020 and 2019. See “—Our outstanding warrants are accounted for as liabilities
and the changes in value of our Warrants could have a material effect on our financial results.” As part of the Restatement,
we identified a material weakness in our internal controls over financial reporting.
As
a result of such material weakness, the Restatement, the change in accounting for the warrants, and other matters raised or that
may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims
invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and material weaknesses
in our internal control over financial reporting and the preparation of our financial statements or related public filings. As
of the date of this prospectus, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that
such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have
a material adverse effect on our business, results of operations and financial condition.
An
active trading market for our securities may not be maintained.
We
can provide no assurance that we will be able to maintain an active trading market for our Class A Common Stock and warrants on
Nasdaq or any other exchange in the future. If an active market for our securities is not maintained, or if we fail to satisfy
the Nasdaq continued listing standards for any reason and our securities are delisted, it may be difficult for our security holders
to sell their securities without depressing the market price for the securities or at all. An inactive trading market may also
impair our ability to both raise capital by selling shares of capital stock and acquire other complementary products, services,
technologies or businesses by using our shares of capital stock as consideration.
Securities
analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause
our stock price or trading volume to decline.
The
trading market for our securities is influenced to some extent by the research and reports that industry or financial analysts
publish about us and our business. We do not control these analysts, and the analysts who publish information about our company
may have relatively little experience with us or our industry, which could affect their ability to accurately forecast our results
and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage,
if any of the analysts who cover us provide inaccurate or on-payment research or issue an adverse opinion regarding our stock
price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering
us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
USE
OF PROCEEDS
All
of the shares of Class A Common Stock and warrants offered by the selling stockholders named herein (the “Selling Stockholders”)
under this prospectus will be sold by the Selling Stockholders for their respective accounts. We will not receive any of the proceeds
from these sales.
The
Selling Stockholders will pay any underwriting fees, discounts, selling commissions, stock transfer taxes and certain legal expenses
incurred by such Selling Stockholders in disposing of their shares of Class A Common Stock and warrants, and we will bear all
other costs, fees and expenses incurred in effecting the registration of such securities covered by this prospectus, including,
without limitation, all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent
registered public accountants.
We
will receive any proceeds from the exercise of our warrants for cash, but not from the sale of the shares of Class A Common Stock
issuable upon such exercise.
MARKET
PRICE OF OUR CLASS A COMMON STOCK AND DIVIDENDS
Market
Price of our Class A Common Stock
Our
Class A Common Stock is listed on Nasdaq under the symbols “ASTS.”
On
May 5, 2021, the closing price of our Class A Common Stock was $7.68. As of May 5, 2021, there were 51,729,704 shares of
our Class A Common Stock outstanding, held of record by 28 holders. The number of record holders of our Class A Common Stock
does not include The Depository Trust Company participants or beneficial owners holding shares through nominee names.
Dividend
Policy
We
have never paid any cash dividends on the Company’s Common Stock. The payment of cash dividends in the future will be dependent
upon revenues and earnings, if any, capital requirements and general financial condition from time to time. The payment of any
cash dividends will be within the discretion of our Board of Directors, and our Board of Directors will consider whether or not
to institute a dividend policy. It is presently expected that we will retain all earnings for use in our business operations and,
accordingly, it is not expected that our Board of Directors will declare any dividends in the foreseeable future.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
Under
the Equity Purchase Agreement, a series of transactions occurred, including the following: NPA (i) entered into the A&R Certificate
of Incorporation to, among other things, (a) change the name of NPA to AST SpaceMobile, Inc., (b) convert all then-outstanding
Sponsor Stock into Class A Common Stock and (c) authorize the issuance of Class B Common Stock and Class C Common Stock, (ii)
replaced the Existing Bylaws with the SpaceMobile Bylaws, and (iii) entered into the Tax Receivable Agreement with AST and the
Existing Equityholders as part of the transaction. Following the Closing Date, NPA is organized in an “Up-C” structure
in which substantially all of the operating assets of AST’s business are held by AST, and NPA’s only assets are its
equity interests in AST.
The
following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation
S-X. The following unaudited pro forma condensed combined financial statements of the Company presents the combination of the
financial information of NPA and AST, adjusted to give effect to the Business Combination including:
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reverse recapitalization between AST and NPA, whereby no goodwill or other intangible assets are recorded;
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the
completion of the PIPE Investment pursuant to the PIPE Subscription Agreements; and
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the
effectiveness of the Tax Receivable Agreement.
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NPA
was a blank check company incorporated on May 28, 2019 as a Delaware corporation and formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On September 13, 2019, the closing date of the IPO, NPA completed its IPO of 20,000,000 units at $10.00 per unit, generating gross
proceeds of $200,000,000. Simultaneously with the closing of the IPO, NPA completed the sale of 5,500,000 private placement warrants
to the Sponsor at a price of $1.00 per warrant, generating gross proceeds of $5,500,000. The 20,000,000 public warrants issued
in the IPO units and the 5,500,000 private placement warrants are each exercisable for one share of Class A Common Stock at an
exercise price of $11.50. On September 19, 2019, in connection with the underwriters’ full exercise of their over-allotment
option, NPA completed the sale of an additional 3,000,000 units and the sale of an additional 600,000 private placement warrants,
generating total gross proceeds of $30,600,000. Following the IPO, the exercise of the over-allotment option and the sale of the
private placement warrants, a total of $230,000,000 was placed in the Trust Account. At the close of the transaction, immediately
prior to the effect of redemptions, there was approximately $232 million held in the Trust Account.
AST
was organized as a limited liability company under the laws of the State of Delaware on May 31, 2017. AST’s 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. The SpaceMobile Service would be the first global
space-based cellular 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 believe AST’s innovative satellite designs and components will
reduce the communication delay effects which existing geostationary satellite systems experience. The SpaceMobile Service is intended
to provide global coverage for users traveling in and out of areas without terrestrial mobile services on land, at sea or in flight.
The
following unaudited pro forma condensed combined balance sheet as of December 31, 2020 assumes that the Business Combination occurred
on December 31, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020
present the pro forma effect to the Business Combination as if they had been completed on January 1, 2020.
The
unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily
reflect what the Company’s financial condition or results of operations would have been had the Business Combination occurred
on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting the
future financial condition and results of operations of the Company. The actual financial position and results of operations may
differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The
historical financial information of NPA was derived from the audited financial statements of NPA as of and for the year ended
December 31, 2020, incorporated by reference into this prospectus. The historical financial information of AST was derived from
the audited consolidated financial statements of AST as of and for the year ended December 31, 2020, incorporated by reference
into this prospectus. This information should be read together with NPA’s and AST’s audited financial statements and
related notes, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations
of AST” and other financial information incorporated by reference into this prospectus.
The
Business Combination has been accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded,
in accordance with United States generally accepted accounting principles (“GAAP”). The AST members continue to control
AST before and after the Business Combination. As there is no change in control, AST was determined to be the accounting acquirer
based on evaluation of the following facts and circumstances:
|
|
●
|
AST
members have a majority of the voting power of the Company;
|
|
|
|
|
|
|
●
|
AST
has the ability to nominate and represent a majority of the Company’s Board; and
|
|
|
|
|
|
|
●
|
AST’s
former management comprises the vast majority of the management and executive positions of the Company.
|
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 issuing stock for the net assets of NPA,
accompanied by a recapitalization. The net assets of NPA were stated at historical cost, with no goodwill or other intangible
assets recorded. Operations prior to the Business Combination are those of AST.
Description
of the Business Combination
On
December 15, 2020, NPA entered into the Equity Purchase Agreement. The consideration paid in connection with the Business Combination
consisted of the Contribution Amount. Following the completion of the Equity Purchase Agreement, a series of transactions occurred
including the following: NPA (i) entered into the A&R Certificate of Incorporation to, among other things, (a) changed the
name of NPA to AST SpaceMobile, Inc., (b) converted all then-outstanding Sponsor Stock into Class A Common Stock and (c) authorized
the issuance of Class B Common Stock and Class C Common Stock, (ii) replaced the Existing Bylaws with the SpaceMobile Bylaws,
and (iii) entered into the TRA with AST and the Existing Equityholders as part of the transaction.
Additionally,
the Existing Equity holders, the Company and AST entered into the A&R Operating Agreement of AST, which, among other things,
(i) restructured the capitalization of AST to (a) authorize the issuance of AST Common Units to NPA, (b) reclassified the Existing
AST Units, other than any Existing AST Prior Incentive Equity Units, held by the Existing Equityholders into AST Common Units
and (c) reclassified all of the Existing AST Prior Incentive Equity Units into AST Incentive Equity Units, concurrently with and
subject to adjustments to the AST Options affecting the number of units and exercise price (as applicable) thereof, (ii) appointed
NPA as the managing member of AST. Pursuant to the completion of the Equity Purchase Agreement, each Existing AST Unit held by
each Existing Equityholder was automatically reclassified into the number of AST Common Units set forth in Schedule I of the Equity
Purchase Agreement. Following this reclassification, any certificates outstanding evidencing ownership of Existing AST Units were
of no further force or effect.
Following
the completion of the Equity Purchase Agreement, the Company is organized in an “Up-C” structure whereby the existing
members of AST received a class of noneconomic common shares (Class B Common Stock) and Abel Avellan, the prior controlling party
of AST, received a class of super-voting, noneconomic common shares (Class C Common Stock) in the Company while retaining economic
interests in AST that are exchangeable to Class A Common Stock or redeemable for cash. When a holder of Class B Common Stock exchanges
AST Common Units for shares of Class A Common Stock, a number of shares of Class B Common Stock equal to the number of such AST
Common Units will be immediately retired and will no longer be outstanding. However, when a holder of Class C Common Stock exchanges
AST Common Units for Class A Common Stock, no shares of Class C Common Stock are retired until the shares of Class A Common Stock
received in exchange are transferred to a person who is not a Key Holder. By contrast, if AST Common Units are redeemed for cash,
whether by holders of Class B Common Stock or Class C Common Stock, a corresponding number of shares of Class B Common Stock or
Class C Common Stock will be retired and will no longer be outstanding.
The
following table shows the effect on the voting rights and economic interests on each class of stockholders based on the economic
interest and voting rights at Closing Date if all of the holders of Class B Common Stock exchanged their AST Common Units for
Class A Common Stock following the closing of the Business Combination.
|
|
|
Economic
and Voting Rights at Closing
|
|
|
Class
B Holders Exchange All Common Units
for
Class A Common Stock Post-Closing
|
|
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class
A Holders
|
|
|
51,729,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
%
|
|
|
51,729,704
|
|
|
|
6
|
%
|
|
|
51,729,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
%
|
|
|
51,729,704
|
|
|
|
6
|
%
|
|
Class
B Holders
|
|
|
—
|
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
28
|
%
|
|
|
51,636,922
|
|
|
|
6
|
%
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
28
|
%
|
|
|
51,636,922
|
|
|
|
6
|
%
|
|
Class
C Holders
|
|
|
—
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
43
|
%
|
|
|
781,630,780
|
|
|
|
88
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
43
|
%
|
|
|
781,630,780
|
|
|
|
88
|
%
|
|
Totals
|
|
|
51,729,704
|
|
|
|
51,636,922
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
884,997,406
|
|
|
|
100
|
%
|
|
|
103,366,626
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
884,997,406
|
|
|
|
100
|
%
|
Because
all of the shares of Class B Common Stock are retired immediately upon exchange, and effectively replaced with Class A Common
Stock, the economic interest and voting rights of the various classes of stockholders do not change following such exchange.
The
effect of the holders of Class C Common Stock collectively exchanging all of their AST Common Units for shares of Class A Common
Stock, is reflected in the table below.
|
|
|
Economic
Interests and Voting Rights at Closing
|
|
|
Class
C Holders Exchange All Common Units
for
Class A Common Stock Post-Closing
|
|
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class
A Holders
|
|
|
51,729,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
%
|
|
|
51,729,704
|
|
|
|
6
|
%
|
|
|
51,729,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
%
|
|
|
51,729,704
|
|
|
|
6
|
%
|
|
Class
B Holders
|
|
|
—
|
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
28
|
%
|
|
|
51,636,922
|
|
|
|
6
|
%
|
|
|
—
|
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
20
|
%
|
|
|
51,636,922
|
|
|
|
6
|
%
|
|
Class
C Holders
|
|
|
—
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
43
|
%
|
|
|
781,630,780
|
|
|
|
88
|
%
|
|
|
78,163,078
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
60
|
%
|
|
|
781,630,780
|
|
|
|
88
|
%
|
|
Totals
|
|
|
51,729,704
|
|
|
|
51,636,922
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
884,997,406
|
|
|
|
100
|
%
|
|
|
129,892,782
|
|
|
|
51,636,922
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
884,997,406
|
|
|
|
100
|
%
|
Although
the shares of Class C Common Stock remain outstanding, they are non-economic, and so the economic percentages for each class of
stockholder do not change by virtue of the exchange. Furthermore, the voting percentages do not change either, because the calculation
of the Class C Share Voting Amount, reduces the number of shares that each share of Class C Common Stock bears by an amount proportional
to the number of shares of other voting stock (other than Class C Common Stock) held by the Class C Common Stockholder. The practical
effect of the formula used to calculate the Class C Share Voting Amount is that it will cap the aggregate voting power of the
Class C Common Stock so that, in most scenarios, the voting power of the Class C Common Stock will not increase, or will increase
more slowly than it would otherwise in the event the Class C holders acquire additional voting stock in the Company. In this example,
because the Class C Stockholders received additional voting stock in the form of Class A Common Stock, the Class C Share Voting
Amount is reduced from 10 votes per share (at Closing) to approximately 9 votes per share, so the overall voting power of the
Class C shares remains constant.
As
such, in these examples, a holder of Class B Common Stock exchanging AST Common Units for Class A Common Stock and forfeiting
its voting shares of Class B Common Stock, such holder has the same voting and economic rights in the Company before and after
such transaction. Upon a holder of Class C Common Stock exchanging AST Common Units for Class A Common Stock but not also forfeiting
its voting shares of Class C Common Stock, such holder retains their same ownership rights in the Company before and after such
exchange; however, because the holder retains shares of Class C Common Stock until the corresponding shares of Class A Common
Stock are transferred to non-Key Holders, the holder’s voting rights remain the same as before the exchange. Although the
holder of Class C Common Stock now has additional voting stock in the Company—the Class A Common Stock received in exchange
of AST Common Units—the number of votes each share of Class C Common Stock bears is reduced (through the calculation of
the Class C Share Voting Amount) so that the holder’s overall voting power does not increase.
However,
there can be situations in the future where, unlike the above example, a holder of Class C Common Stock could exchange AST Common
Units for shares of Class A Common Stock and increase their voting power, because the cap in the calculation of “Class C
Share Voting Amount” does not come into play. Holders of Class C Common Stock could, in certain situations, increase their
voting power by conducting an exchange of AST Common Units, even when their economic position does not change. The following table
shows the effect an exchange of AST Common Units by holders of Class C Common Stock could have if undertaken at a time when the
total share base of the Company is significantly expanded. The columns on the right reflect that, as the result of subsequent
issuances, the number of Class A shares outstanding has increased four-fold, to 207,000,000 shares, with no changes in the holdings
of the other classes of stockholder. The columns on the right show the effect on voting and economic interests caused by a Class
C Holder exchanging 20% of their total AST Common Units when the Class A share base is so expanded.
|
|
|
Economic
Interests and Voting Rights with
Four-Fold
Increase in Public Float
|
|
|
Class
C Holders Exchange 20% of Aggregate
Common
Units for Class A Common Stock
|
|
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class
A
Shares
|
|
|
Class
B
Shares
|
|
|
Class
C
Shares
|
|
|
Economic
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class A Holders
|
|
|
206,918,816
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
%
|
|
|
206,918,816
|
|
|
|
19.9
|
%
|
|
|
206,918,816
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58
|
%
|
|
|
206,918,816
|
|
|
|
19.6
|
%
|
|
Class B Holders
|
|
|
—
|
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
15
|
%
|
|
|
51,636,922
|
|
|
|
5.0
|
%
|
|
|
—
|
|
|
|
51,636,922
|
|
|
|
—
|
|
|
|
15
|
%
|
|
|
51,636,922
|
|
|
|
4.9
|
%
|
|
Class
C Holders
|
|
|
—
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
23
|
%
|
|
|
781,630,780
|
|
|
|
75.1
|
%
|
|
|
15,632,616
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
27
|
%
|
|
|
797,263,396
|
|
|
|
75.5
|
%
|
|
Totals
|
|
|
206,918,816
|
|
|
|
51,636,922
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
1,040,186,518
|
|
|
|
100
|
%
|
|
|
222,551,432
|
|
|
|
51,636,922
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
1,055,819,134
|
|
|
|
100
|
%
|
In
this case, although the Class C Holders have not increased their economic stake in the Company — only exchanged their AST
Common Units for Class A Common Stock — because they can now vote that Class A Common Stock in addition to the Class C Common
Stock that has not been retired, they have increased their number of total votes by approximately 15.6 million and their percentage
of voting power by 0.4% relative to the holders of Class A and Class B Common Stock.
Following
the completion of the transactions contemplated by the Equity Purchase Agreement, Avellan holds all the outstanding shares of
Class C Common Stock and as a percentage of the sum of Class A Common Stock, Class B Common Stock and Class C Common Stock outstanding
that is approximately 43% of the total. In addition to voting together with Class A Common Stock and Class B Common Stock (with
one vote per share) on all matters, as a holder of Class C Common Stock, Avellan is, prior to the Sunset Date, entitled to a number
of votes on all matters on which stockholders are entitled to vote equal to the lesser of 10 votes per share and the Class C Share
Voting Amount, the latter of which is a number of votes per share equal to (i) the Closing Class C Percentage (which is approximately
88%) of the total voting power of the outstanding voting stock of the Company, minus (ii) the total voting power of the
outstanding stock of the Company owned or controlled by the Key Holders (other than of Class C Common Stock), divided by
(iii) the number of shares of Class C Common Stock outstanding.
All
the Company’s assets are held directly by, and all of the Company’s operations are conducted through, AST, and the
Company’s only direct asset consists of the AST Common Units. The existing AST equity holders control own approximately
71% of AST Common Units, respectively; the Company is the sole manager of AST in accordance with the terms of the A&R Operating
Agreement entered into in connection with the closing of the Business Combination. After the Closing Date, current NPA stockholders,
together with the PIPE Investors, own approximately 29% of the combined Class A Common Stock. The public and private placement
warrants remained outstanding following the Business Combination.
In
connection with the Business Combination, NPA entered into the Subscription Agreements with the PIPE Investors, under which NPA
issued 23 million shares of NPA Class A Common Stock at $10.00 per share, for gross proceeds to NPA of approximately $230 million.
Also,
at the closing of the Business Combination, the Company, AST, the Existing Equity holders and the TRA Holder Representative entered
into the Tax Receivable Agreement. Under the Tax Receivable Agreement, the Company is generally required to pay the TRA Holders
85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect
to, net income or profits, and any interest related thereto that the Tax Group realizes, or is deemed to realize, as a result
of certain Tax Attributes, which include:
|
|
●
|
existing
tax basis in certain assets of AST and certain of its direct or indirect Subsidiaries, including assets that will eventually
be subject to depreciation or amortization, once placed in service, attributable to AST Common Units acquired by the Company
from a TRA Holder (including AST Common Units held by a Blocker Corporation acquired by the Company in a Reorganization Transaction
(as defined in the Tax Receivable Agreement)), each as determined at the time of the relevant acquisition;
|
|
|
|
|
|
|
●
|
tax
basis adjustments resulting from taxable exchanges of AST Common Units (including any such adjustments resulting from certain
payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the
terms of the A&R Operating Agreement;
|
|
|
|
|
|
|
●
|
tax
deductions in respect of portions of certain payments made under the Tax Receivable Agreement; and
|
|
|
|
|
|
|
●
|
certain
tax attributes of Blocker Corporations holding AST Common Units that are acquired directly or indirectly by the Company pursuant
to a Reorganization Transaction.
|
The
following summarizes the consideration for the Business Combination:
|
in thousands(a)
|
|
|
|
|
Cash held in the Trust Account prior to redemptions
|
|
$
|
232,033
|
|
|
Less: Redemptions
|
|
|
(205
|
)
|
|
Proceeds of PIPE Investment
|
|
|
230,000
|
|
|
Less: Deferred underwriting commissions
|
|
|
(4,830
|
)
|
|
Contribution Amount
|
|
$
|
456,998
|
|
|
|
(a)
|
The
Contribution Amount that was contributed to AST is calculated based on the $232.0 million of NPA cash and $230.0 million raised
from the PIPE Investment less $4.8 million for deferred underwriting commissions payable to BTIG and $0.2 million in
redemptions. The Contribution Amount does not reflect a reduction of $0.6 million related to the repayment of a 2021 loan
between the Sponsor and NPA upon closing of the Business Combination.
|
The
following summarizes the pro forma shares of Common Stock economic ownership and voting rights associated with such shares:
Ownership
and Voting
|
in actuals
|
|
Shares
|
|
|
Ownership
%
|
|
|
Voting
Rights
|
|
|
Voting
%
|
|
|
Class A Common Stock(a)
|
|
|
51,729,704
|
|
|
|
29
|
%
|
|
|
51,729,704
|
|
|
|
6
|
%
|
|
Class B Common Stock(b)
|
|
|
51,636,922
|
|
|
|
28
|
%
|
|
|
51,636,922
|
|
|
|
6
|
%
|
|
Class C Common Stock(c)
|
|
|
78,163,078
|
|
|
|
43
|
%
|
|
|
781,630,780
|
|
|
|
88
|
%
|
|
Total Shares at Closing
|
|
|
181,529,704
|
|
|
|
100
|
%
|
|
|
884,997,406
|
|
|
|
100
|
%
|
|
(a)
|
Excludes
(i) 129,800,000 AST Common Units held by parties other than the Company outstanding immediately following the completion of
the Business Combination, (ii) 6,100,000 private placement warrants outstanding and (iii) 11,500,000 public warrants outstanding.
AST Common Units are redeemable for, at the Company’s election (subject to certain exceptions), either cash (based on
the market price for a share of Class A Common Stock at the time of the redemption) or an equal number of shares of Class
A Common Stock.
|
|
(b)
|
Class
B Common Stock are non-economic and carry one vote per share whereas Class A Common Stock are economic shares and will have
one vote per share.
|
|
(c)
|
Class
C Common Stock are non-economic and, until the Sunset Date, will entitle the holder thereof to cast a number of votes on all
matters on which stockholders are entitled to vote equal to the lesser of (x) 10 votes and (y) the Class C Share Voting Amount,
whereas Class A Common Stock are economic shares and will have one vote per share. From and after the Sunset Date, Class C
Common Stock will entitle the holder thereof to case one vote per share.
|
The
following unaudited pro forma condensed combined balance sheet as of December 31, 2020, the unaudited pro forma condensed combined
statement of operations for the year ended December 31, 2020 are based on the historical financial statements of NPA and AST.
The unaudited pro forma adjustments are based on information currently available, assumptions and estimates underlying the unaudited
pro forma adjustments and are described in the accompanying notes. Actual results may differ materially from the assumptions used
to present the accompanying unaudited pro forma condensed combined financial information.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS
OF DECEMBER 31, 2020
(in
thousands)
|
|
|
NPA
(Historical)
(US GAAP)
|
|
|
AST
(Historical)
(US GAAP)
|
|
|
Combined
|
|
|
Pro Forma Adjustments
|
|
|
|
|
Pro Forma Combined
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
131
|
|
|
$
|
42,777
|
|
|
$
|
42,908
|
|
|
|
(110
|
)
|
|
(A)
|
|
$
|
461,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,033
|
|
|
(B)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,000
|
|
|
(C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,295
|
)
|
|
(C) (E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,050
|
)
|
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,482
|
)
|
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
|
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(312
|
)
|
|
(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205
|
)
|
|
(N)
|
|
|
|
|
|
Accounts receivable, net
|
|
|
-
|
|
|
|
2,081
|
|
|
|
2,081
|
|
|
|
-
|
|
|
|
|
|
2,081
|
|
|
Inventory
|
|
|
-
|
|
|
|
2,591
|
|
|
|
2,591
|
|
|
|
-
|
|
|
|
|
|
2,591
|
|
|
Prepaid expenses
|
|
|
23
|
|
|
|
1,249
|
|
|
|
1,272
|
|
|
|
-
|
|
|
|
|
|
1,272
|
|
|
Other current assets
|
|
|
55
|
|
|
|
2,234
|
|
|
|
2,289
|
|
|
|
(1,107
|
)
|
|
(E)
|
|
|
1,182
|
|
|
Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueWalker 3 satellite - construction in progress
|
|
|
-
|
|
|
|
27,013
|
|
|
|
27,013
|
|
|
|
-
|
|
|
|
|
|
27,013
|
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
10,057
|
|
|
|
10,057
|
|
|
|
-
|
|
|
|
|
|
10,057
|
|
|
Other Long-Term Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
|
-
|
|
|
$
|
7,045
|
|
|
|
7,045
|
|
|
|
-
|
|
|
|
|
|
7,045
|
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
526
|
|
|
|
526
|
|
|
|
-
|
|
|
|
|
|
526
|
|
|
Goodwill, net
|
|
|
-
|
|
|
|
3,912
|
|
|
|
3,912
|
|
|
|
-
|
|
|
|
|
|
3,912
|
|
|
Investment and cash held in trust account
|
|
|
232,196
|
|
|
|
-
|
|
|
|
232,196
|
|
|
|
(163
|
)
|
|
(A)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232,033
|
)
|
|
(B)
|
|
|
|
|
|
Other assets and deposits
|
|
|
-
|
|
|
|
160
|
|
|
|
160
|
|
|
|
-
|
|
|
|
|
|
160
|
|
|
Total Assets
|
|
$
|
232,405
|
|
|
$
|
99,645
|
|
|
$
|
332,050
|
|
|
|
184,926
|
|
|
|
|
$
|
516,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
634
|
|
|
$
|
4,990
|
|
|
$
|
5,624
|
|
|
$
|
(559
|
)
|
|
(D)
|
|
$
|
4,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(359
|
)
|
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
|
(F)
|
|
|
|
|
|
Accrued expenses
|
|
|
-
|
|
|
|
4,222
|
|
|
|
4,222
|
|
|
|
559
|
|
|
(D)
|
|
|
4,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(450
|
)
|
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227
|
)
|
|
(F)
|
|
|
|
|
|
Deferred revenue
|
|
|
-
|
|
|
|
3,401
|
|
|
|
3,401
|
|
|
|
-
|
|
|
|
|
|
3,401
|
|
|
Current operating lease liability
|
|
|
-
|
|
|
|
504
|
|
|
|
504
|
|
|
|
-
|
|
|
|
|
|
504
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
|
|
(10
|
)
|
|
(F)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(H)
|
|
|
|
|
|
Deferred underwriting fees payable
|
|
|
8,050
|
|
|
|
-
|
|
|
|
8,050
|
|
|
|
(8,050
|
)
|
|
(E)
|
|
|
-
|
|
|
Warrants liability
|
|
|
68,114
|
|
|
|
-
|
|
|
|
68,114
|
|
|
|
-
|
|
|
|
|
|
68,114
|
|
|
Non-current operating lease liability
|
|
|
-
|
|
|
|
6,541
|
|
|
|
6,541
|
|
|
|
-
|
|
|
|
|
|
6,541
|
|
|
Total Liabilities
|
|
|
76,808
|
|
|
|
19,658
|
|
|
|
96,466
|
|
|
|
(9,171
|
)
|
|
|
|
|
87,295
|
|
|
Redeemable Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Common stock subject to possible redemption
|
|
|
150,597
|
|
|
|
-
|
|
|
|
150,597
|
|
|
|
(150,597
|
)
|
|
(I)
|
|
|
-
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
2
|
|
|
(C)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
(K)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
(N)
|
|
|
|
|
|
Class B Common Stock
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
(K)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
(L)
|
|
|
|
|
|
Class C Common Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
(L)
|
|
|
8
|
|
|
Series A convertible preferred units, net
|
|
|
|
|
|
|
9,394
|
|
|
|
9,394
|
|
|
|
(9,394
|
)
|
|
(L)
|
|
|
-
|
|
|
Series B convertible preferred units, net
|
|
|
|
|
|
|
102,717
|
|
|
|
102,717
|
|
|
|
(102,717
|
)
|
|
(L)
|
|
|
-
|
|
|
Founder’s common equity
|
|
|
-
|
|
|
|
5,462
|
|
|
|
5,462
|
|
|
|
(5,462
|
)
|
|
(L)
|
|
|
-
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
-
|
|
|
|
(168
|
)
|
|
|
(168
|
)
|
|
|
168
|
|
|
(J)
|
|
|
-
|
|
|
Additional paid in capital
|
|
|
59,840
|
|
|
|
-
|
|
|
|
59,840
|
|
|
|
229,998
|
|
|
(C)
|
|
|
162,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,295
|
)
|
|
(C) (E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,780
|
)
|
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,595
|
|
|
(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(305,512
|
)
|
|
(M)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(168
|
)
|
|
(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,842
|
)
|
|
(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,560
|
|
|
(L)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205
|
)
|
|
(N)
|
|
|
|
|
|
Accumulated deficit
|
|
|
(54,842
|
)
|
|
|
(39,908
|
)
|
|
|
(94,750
|
)
|
|
|
(273
|
)
|
|
(A)
|
|
|
(40,531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
|
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,842
|
|
|
(J)
|
|
|
|
|
|
Total equity attributable to stockholders
|
|
|
5,000
|
|
|
|
77,497
|
|
|
|
82,497
|
|
|
|
39,182
|
|
|
|
|
|
121,679
|
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
2,490
|
|
|
|
2,490
|
|
|
|
305,512
|
|
|
(M)
|
|
|
308,002
|
|
|
Total equity
|
|
|
5,000
|
|
|
|
79,987
|
|
|
|
84,987
|
|
|
|
344,694
|
|
|
|
|
|
429,681
|
|
|
Total liabilities and equity
|
|
$
|
232,405
|
|
|
$
|
99,645
|
|
|
$
|
332,050
|
|
|
$
|
184,926
|
|
|
|
|
$
|
516,976
|
|
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2020
(in
thousands, except share and per share data)
|
|
|
NPA
(Historical)
(US GAAP)
|
|
|
AST
(Historical)
(US GAAP)
|
|
|
Combined
|
|
|
Pro Forma Adjustments
(1)
|
|
|
|
|
Pro Forma Combined
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
5,967
|
|
|
$
|
5,967
|
|
|
$
|
-
|
|
|
|
|
$
|
5,967
|
|
|
Cost of Sales
|
|
|
-
|
|
|
|
(3,025
|
)
|
|
|
(3,025
|
)
|
|
|
-
|
|
|
|
|
|
(3,025
|
)
|
|
Gross Profit
|
|
|
-
|
|
|
|
2,942
|
|
|
|
2,942
|
|
|
|
-
|
|
|
|
|
|
2,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering services
|
|
|
-
|
|
|
|
(13,081
|
)
|
|
|
(13,081
|
)
|
|
|
-
|
|
|
|
|
|
(13,081
|
)
|
|
General and administrative cost
|
|
|
-
|
|
|
|
(12,320
|
)
|
|
|
(12,320
|
)
|
|
|
(350
|
)
|
|
AA
|
|
|
(12,670
|
)
|
|
Research and development cost
|
|
|
-
|
|
|
|
(1,011
|
)
|
|
|
(1,011
|
)
|
|
|
-
|
|
|
|
|
|
(1,011
|
)
|
|
Formation and operating cost
|
|
|
(1,125
|
)
|
|
|
-
|
|
|
|
(1,125
|
)
|
|
|
120
|
|
|
BB
|
|
|
(1,005
|
)
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
(887
|
)
|
|
|
(887
|
)
|
|
|
-
|
|
|
|
|
|
(887
|
)
|
|
Total Operating Expense
|
|
|
(1,125
|
)
|
|
|
(27,299
|
)
|
|
|
(28,424
|
)
|
|
|
(230
|
)
|
|
|
|
|
(28,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend Income
|
|
|
1,480
|
|
|
|
71
|
|
|
|
1,551
|
|
|
|
(1,480
|
)
|
|
CC
|
|
|
71
|
|
|
Changes in fair value of warrant liabilities
|
|
|
(52,152
|
)
|
|
|
|
|
|
|
(52,152
|
)
|
|
|
-
|
|
|
|
|
|
(52,152
|
)
|
|
Interest expense
|
|
|
-
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
|
|
(10
|
)
|
|
Other income and (expense), net
|
|
|
2
|
|
|
|
22
|
|
|
|
24
|
|
|
|
-
|
|
|
|
|
|
24
|
|
|
Total other income /(expense)
|
|
|
(50,670
|
)
|
|
|
83
|
|
|
|
(50,587
|
)
|
|
|
(1,480
|
)
|
|
|
|
|
(52,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(51,795
|
)
|
|
|
(24,274
|
)
|
|
|
(76,069
|
)
|
|
|
(1,710
|
)
|
|
|
|
|
(77,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
(166
|
)
|
|
|
(131
|
)
|
|
|
(297
|
)
|
|
|
-
|
|
|
|
|
|
(297
|
)
|
|
Net Loss
|
|
|
(51,961
|
)
|
|
|
(24,405
|
)
|
|
|
(76,366
|
)
|
|
|
(1,710
|
)
|
|
|
|
|
(78,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net loss attribute to non-controlling interest
|
|
|
-
|
|
|
|
344
|
|
|
|
344
|
|
|
|
54,812
|
|
|
DD
|
|
|
55,156
|
|
|
Loss attributable to stockholders
|
|
|
(51,961
|
)
|
|
|
(24,061
|
)
|
|
|
(76,022
|
)
|
|
|
53,102
|
|
|
|
|
|
(22,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share
|
|
$
|
(6.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.44
|
)
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
8,598,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,729,704
|
|
|
(1)
|
Net
loss per common share is based on the weighted average shares of Class A Common Stock and does not include Class B Common
Stock and Class C Common Stock as these shares are non-economic.
|
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1.
Basis of Presentation
The
Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP as AST has been determined to
be the accounting acquirer, primarily due to the fact that AST shareholders continue to control the Company. Under this method
of accounting, while NPA is the legal acquirer, it is treated as the “acquired” company for financial reporting purposes.
Accordingly, the Business Combination was treated as the equivalent of AST issuing stock for the net assets of NPA, accompanied
by a recapitalization. The net assets of NPA are stated at historical cost, with no goodwill or other intangible assets recorded.
Operations prior to the Business Combination are those of AST.
The
unaudited pro forma condensed combined balance sheet as of December 31, 2020 assumes that the Business Combination occurred on
December 31, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 present
pro forma effect to the Business Combination as if they have been completed on January 1, 2020.
The
unaudited pro forma condensed combined balance sheet as of December 31, 2020 has been prepared using, and should be read in conjunction
with, the following:
|
|
●
|
NPA’s
audited balance sheet as of December 31, 2020 and the related notes, included elsewhere in this prospectus; and
|
|
|
|
|
|
|
●
|
AST’s
audited consolidated balance sheet as of December 31, 2020 and the related notes, included elsewhere in this prospectus.
|
The
unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 has been prepared using, and
should be read in conjunction with, the following:
|
|
●
|
NPA’s
audited statement of operations for the year ended December 31, 2020 and the related notes, included elsewhere in this prospectus
and
|
|
|
|
|
|
|
●
|
AST’s
audited consolidated statement of operation for the year ended December 31, 2020 and the related notes, included elsewhere
in this prospectus.
|
Management
has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed
combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially
from the information presented.
The
unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies,
tax savings, cost savings or anticipated costs of operating a public company that may be associated with the Business Combination.
The
pro forma adjustments reflecting the completion of the Business Combination are based on certain currently available information
and certain assumptions and methodologies that we believe are reasonable under the circumstances. The unaudited condensed pro
forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and
is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible
the difference may be material. We believe that these assumptions and methodologies provide a reasonable basis for presenting
all of the significant effects of the Business Combination based on information available to management at the time and that the
pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed
combined financial information.
The
unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations
and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative
of the future consolidated results of operations or financial position of the Company. They should be read in conjunction with
the historical financial statements and notes thereto of the Company and AST.
2.
Accounting Policies
Upon
completion of the Business Combination, the Company’s management performed a comprehensive review of the two entities’
accounting policies. As a result of the review, management may identify differences between the accounting policies of the two
entities which, when conformed, could have a material impact on the financial statements of the Company. Based on initial analysis,
management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial
information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in
accounting policies.
3.
Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The
unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination
and has been prepared for informational purposes only.
The
following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation
S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed
Businesses”. Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict
the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies
and other transaction effects that have occurred or reasonably expected to occur (“Management’s Adjustments”).
We have elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in
the following unaudited pro forma condensed combined financial information.
The
unaudited pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted
had the Company filed consolidated income tax returns during the periods presented.
The
unaudited pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements
of operations are based upon the amount of Class A Common Stock outstanding, assuming the Business Combination occurred on January
1, 2020.
Adjustments
to Unaudited Pro Forma Condensed Combined Balance Sheet
The
adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2020 are as follows:
|
|
(A)
|
Reflects
the change in the cash and cash equivalents, and cash held in Trust balances held by NPA, prior to redemption payments, at
the close of the Business Combination.
|
|
|
|
|
|
|
(B)
|
Reflects
the reclassification of $232.0 million of investments and cash held in the Trust Account, prior to redemptions, that became
available to fund the Business Combination.
|
|
|
|
|
|
|
(C)
|
Represents
the gross proceeds of $230.0 million from the issuance of 23 million shares of Class A Common Stock at $0.0001 par value,
in the PIPE Investment offset by the PIPE Investment fee of $5.3 million.
|
|
|
|
|
|
|
(D)
|
Reflects
the reclassification of NPA’s historical accrued expenses to align with the balance sheet presentation of AST.
|
|
|
(E)
|
Reflects
the settlement of $43.7 million of transaction costs in connection with the Business Combination, of which $0.8 million has
been paid as of December 31, 2020. $5.3 million relates to the PIPE Investment fee as noted above and is reflected as a reduction
of additional paid-in capital as those are directly related to the equity raise. $8.1 million is the settlement of NPA’s
deferred underwriting compensation fees incurred during the IPO due upon completion of the Business Combination of which $4.8
million is payable to BTIG. $0.8 million relates to the settlement of the accrued transaction expenses within accrued expenses
and accounts payable. $1.1 million of deferred transaction costs which is directly related to the equity raise is reflected
within additional paid in capital. The remaining settlement amount of $29.5 million relates to advisory, legal, and other
fees incurred and is reflected within additional paid-in capital.
|
|
|
|
|
|
|
(F)
|
Reflects
the settlement of NPA’s historical liabilities after payment of liabilities related to transaction costs in connection
with the Business Combination that was settled upon the close of the Business Combination.
|
|
|
|
|
|
|
(G)
|
Reflects
the reduction in cash for the one-time discretionary transaction bonus approved by the AST board of directors to Mr. Severson
for efforts towards the completion of the Business Combination.
|
|
|
|
|
|
|
(H)
|
Pursuant
to the Tax Receivable Agreement, the Company is generally required to pay the TRA Holders 85% of the amount of savings, if
any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits,
and any interest related thereto that the Tax Group realizes, or is deemed to realize, as a result of certain Tax Attributes,
which include existing tax basis in certain assets of AST and certain of its direct or indirect Subsidiaries, including assets
that will eventually be subject to depreciation or amortization, once placed in service, attributable to AST Common Units
acquired by the Company from a TRA Holder (including AST Common Units held by a Blocker Corporation acquired in a Reorganization
Transaction (as defined in the Tax Receivable Agreement)), each as determined at the time of the relevant acquisitions; tax
basis adjustments resulting from taxable exchanges of AST Common Units (including any such adjustments resulting from certain
payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the
terms of the A&R Operating Agreement; tax deductions in respect of portions of certain payments made under the Tax Receivable
Agreement; and certain tax attributes of Blocker Corporations holding AST Common Units that are acquired directly or indirectly
by the Company pursuant to a Reorganization Transaction.
|
Upon
the completion of the Business Combination, the Tax Group did not acquire any AST Common Units in an Exchange or Reorganization
Transaction, as defined in the Tax Receivable Agreement. As a result, no Tax Receivable Agreement liability has been recorded.
As part of the Business Combination, the Company obtains an increased tax basis in its AST Common Units. The gross (pre-tax) deferred
tax asset relating to SpaceMobile’s investment in AST is approximately $299 million. The Company has assessed the realizability
of their deferred tax assets and in that analysis has considered the relevant positive and negative evidence available to determine
whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As a result, the Company
has recorded a full valuation allowance against its deferred tax assets. A full valuation allowance on deferred tax assets will
be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.
|
|
(I)
|
Reflects
the reclassification of the NPA Class A Common Stock subject to possible redemption to permanent equity at $0.0001 par value.
|
|
|
|
|
|
|
(J)
|
Reflects
the reclassification of NPA’s historical accumulated deficit and AST’s accumulated other comprehensive loss to
additional paid in capital as part of the recapitalization.
|
|
|
|
|
|
|
(K)
|
Reflects
the conversion of Founder Shares to Class A Common Stock at the closing of the Business Combination. In connection with the
closing of the Business Combination, all Founder Shares converted into shares of Class A Common Stock.
|
|
|
(L)
|
Reflects
conversion of redeemable preferred units and AST Series A Preferred Units and AST Series B Preferred Units into AST Common
Units, and the recapitalization of AST as the issuance of Class B Common Stock and Class C Common Stock as consideration for
the reverse recapitalization.
|
|
|
|
|
|
|
(M)
|
Reflects
the recognition of 71% noncontrolling interests as a result of the Up-C structure. The noncontrolling interest is determined
based on the noncontrolling interest percentage of NPA’s pro forma equity less certain adjustments.
|
Our
A&R Operating Agreement provides that the AST Common Units not held by us provide each member with the right to cause us to
redeem its AST Common Units in whole or in part at any time and from time to time following the waiver or expiration of the lock-up
period pursuant to the Stockholders’ Agreement. NPA, as the Managing Member of AST, shall have the option to elect to have
the AST Common Units redeemed for either shares of Class A Common Stock or cash as set forth in the A&R Operating Agreement
(the “Cash Settlement”). We established a committee to exercise full control over all decisions on settlement for
noncontrolling interest redemptions. The committee, named the Redemption Election Committee, has the fiduciary duties to act in
the best interests of all of our stockholders, was delegated the full power of our board in respect of redemption settlement decisions,
and consists solely of directors that are neither nominated by, or affiliated with, any noncontrolling interest holders.
Further,
the settlement decisions made by the Redemption Election Committee will be solely in the Company’s control and cannot be
overridden or vetoed by other board members, including Mr. Avellan. Under the Stockholders’ Agreement, the Stockholder Parties
agreed that, until such date as the Stockholder Parties collectively control less than 50% of the total voting power of the Company,
(i) the Stockholder Parties will take all necessary action to cause the Company and the Company’s Board to maintain the
Redemption Election Committee of the Company’s Board and its delegated powers and (ii) the provisions of the Stockholders’
Agreement relating to the Redemption Election Committee cannot be amended without the express approval of the Redemption Election
Committee.
The
noncontrolling interest was classified as permanent equity within the pro forma balance sheet as the Company, acting through the
Special Redemption Committee, may only elect to settle a redemption request in cash if the cash delivered in the exchange is limited
to the cash proceeds to be received from a new permanent equity offering through issuance of Class A Common Stock in accordance
with Section 11.1.2 of the Operating Agreement.
|
|
(N)
|
Reflects
the actual redemption of 20,296 shares of NPA Common Stock for aggregate redemption payments of $0.2 million at a redemption
price of approximately $10.09 per share and allocated to Class A Common Stock and additional paid-in capital using par value
$0.0001 per share as of the close of the transaction.
|
Adjustments
to Unaudited Pro Forma Condensed Combined Statements of Operations
The
pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the year ended December
31, 2020 are as follows:
|
|
(AA)
|
Reflects
the one-time payment of a discretionary transaction bonus approved by the AST board of directors to Mr. Severson for efforts
towards the completion of the Business Combination.
|
|
|
|
|
|
|
(BB)
|
Reflects
the elimination of NPA’s administrative service fee paid to the Sponsor that ceased upon the close of the Business Combination.
|
|
|
|
|
|
|
(CC)
|
Reflects
elimination of interest income and dividends earned on the Trust Account.
|
|
|
|
|
|
|
(DD)
|
Reflects
the recognition of net income attributable to the 71% noncontrolling interests as a result of the Up-C structure.
|
4.
Earnings per Share
Represents
net earnings per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares
in connection with the Business Combination, assuming the shares were outstanding since January 1, 2020. As the Business Combination
are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares
outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have
been outstanding for the entire periods presented.
|
(in
thousands, except share and per share data)
|
|
|
|
|
Pro forma net loss attributable
to stockholders
|
|
$
|
(22,920
|
)
|
|
Pro forma weighted average Class A Common
Stock – basic and diluted
|
|
|
51,729,704
|
|
|
Pro forma Class A net loss per ordinary
share
|
|
$
|
(0.44
|
)
|
|
Pro forma weighted average Class A shares
outstanding – basic and diluted
|
|
|
|
|
|
Class A – Public Stockholders
|
|
|
22,979,704
|
|
|
Class A –
Sponsors
|
|
|
5,750,000
|
|
|
Total New Providence Acquisition
Corp.
|
|
|
28,729,704
|
|
|
Class A –
Private Placement Investors (PIPE)
|
|
|
23,000,000
|
|
|
Pro
forma weighted average Class A shares outstanding – basic and diluted(1)
|
|
|
51,729,704
|
|
|
|
(1)
|
The
Class B Common Stock and Class C Common Stock issued for consideration are non-economic and as such are excluded from the
earnings per share calculation. For the purposes of applying the treasury stock method for calculating diluted earnings per
share, it was assumed that all outstanding warrants sold in the IPO and warrants sold in the private placement are exchanged
for 17.6 million underlying Class A Common Stock. However, this results in anti-dilution, and the effect of such exchange
was not included in calculation of diluted earnings per share.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes. This discussion
contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a
result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements” sections and elsewhere in this prospectus, our actual results may differ materially from those anticipated in
these forward-looking statements.
Overview
We
are an innovative satellite designer and manufacturer. We operate from six locations that include our corporate headquarters and
85,000 square foot satellite assembly, integrating and testing facility in Midland, Texas, as well as operations in Maryland,
Spain, the United Kingdom, and Israel. Also, our 51% owned and controlled subsidiary, Nano, is located in Lithuania.
We,
with our global partners, are building the first and only space-based cellular broadband network to be accessible by standard
smartphones. Our SpaceMobile Service is expected to provide cost-effective, high-speed mobile broadband services with global coverage
to all end-users, regardless of where they live or work, without the need to purchase special equipment. We believe the SpaceMobile
Service would be the first global direct mobile broadband network using low Earth orbit (“LEO”) satellites to provide
connectivity to any standard, unmodified, off-the-shelf mobile phone or 2G/3G/4G LTE/5G and IoT-enabled device. We intend to partner
with mobile network operators (“MNOs”) to offer the SpaceMobile Service to the MNOs’ end-user customers. Users
will not need to subscribe to the SpaceMobile Service directly with us, nor will they need to purchase any new or additional equipment.
Users will be able to access the SpaceMobile Service when prompted on their 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 is planned to be provided through a network of 168 high-powered, large phased-array satellites in LEO. The
worldwide mobile traffic will be directed by the SpaceMobile Service to a terrestrial gateway and then to the in-country MNO’s
core cellular network connected to the internet. Users will 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, the BlueWalker 1 (“BW1”), which was used to validate our satellite
to cellular architecture and was capable of managing communications delays from LEO orbit and the effects of doppler in a satellite
to ground cellular environment using the 4G-LTE protocol. We are currently manufacturing and procuring the satellite componentry
required for our BlueWalker 3 (“BW3”) test satellite. As of December 31, 2020, we have incurred approximately $27.0
million on our BW3 efforts, and we intend to incur an additional $27 to $30 million to bring this project to completion.
We are currently manufacturing, assembling and procuring the satellite componentry required for our BW3 test satellite. During
2021, we will be assembling and testing the BW3 satellite at our facility in Midland, Texas. BW3 currently is targeted to launch
late in the fourth quarter of 2021. We are planning our first commercial satellite launches for the second half of 2022 or early
2023, which are expected to provide satellite coverage in certain Equatorial countries with 20 satellites. We plan to achieve
full global mobile coverage with the launch of 110 satellites by the end of 2023 or early in 2024 and MIMO with the launch of
a total of 168 satellites by the end of 2024.
Revenue
is currently generated from Nano, which consists of satellite development and manufacturing, procuring and arranging launch services,
as well as in-orbit operations. Additionally, on a smaller scale, Nano offers hosted payload services, sale of individual satellite
parts and subsystems, and software licenses. We are exploring the possibility of reducing our ownership interest in Nano, such
that we would no longer own a majority of the share capital of Nano.
For
additional information regarding our relationships with industrial and wireless infrastructure providers, see the section entitled
“Business — Key Industrial and Wireless Infrastructure Provider Relationships.”
Impact
of COVID-19 Pandemic
With
the on-going global spread of the COVID-19 pandemic, we have implemented business continuity plans designed to address and mitigate
the impact of the COVID-19 pandemic on our business. The extent to which the COVID-19 pandemic impacts our business, research
and development efforts and the value of our equity, will depend on future developments that are highly uncertain and cannot be
predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social
distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease.
The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated
with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth
prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations,
it may also have the effect of heightening many of the other risks and uncertainties specific to the industry. To date, the pandemic
has not had a material impact to our technology development efforts or results of our operations. However, given the daily evolution
of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the future effects of the COVID-19
outbreak on our results of operations, financial condition, or liquidity.
Components
of Results of Operations
Revenues
To
date, we have not generated significant revenues and do not expect to begin generating revenues from the SpaceMobile Service until
2023. Our 51% owned subsidiary, Nano, generates revenue from ancillary sales and services in Europe and the United States, but
is primarily engaged in the development and manufacture of satellite technology. 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. Given the above information, any revenue recognition presented herein is limited to Nano’s commercially available
goods and services.
Cost
of Sales
Cost
of sales includes the purchase price of various products and services that are used in performing under Nano’s revenue arrangements.
Cost of sales also includes operational costs to fulfill Nano customer orders, including costs for Nano employees and overhead.
Engineering
Services
Engineering
costs are charged to expense as incurred. Engineering costs consist primarily of the expenses associated with our ongoing engineering
efforts to establish technical feasibility of our products, as well as the cost of internal staff (such as engineers and consultants)
to support these efforts. Currently, major engineering activities include procuring and manufacturing the satellite components
required for the BW3 satellite. We are currently manufacturing and procuring the satellite componentry required for our BW3 test
satellite. During 2021, we will be assembling and testing the BW3 satellite at our facility in Midland, Texas. BW3 currently is
targeted to launch late in the fourth quarter of 2021. 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 and the availability of an appropriate launch
window and vehicle from our launch provider. The launch of BW3 was scheduled to coincide with the launch of a primary payload
from an unrelated entity. The primary payload from such unrelated entity is delayed, which may in turn delay the launch window
for BW3. If we are required to identify another launch vehicle and/or launch provider, we may incur delays in such launch and
may incur additional costs. Additionally, we have 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 our BW3 developments are capitalized to its construction in progress (“CIP”) account, and presented on our Consolidated
Balance Sheets.
Research
and Development Costs
Our
research and development (“R&D”) costs consist principally of non-recurring engineering developments in which
we typically engage third party vendors. Currently, major R&D activities include engaging with vendors to help develop the
electronic componentry and software to be used in the first commercial satellite launch phase of the SpaceMobile Service, which
is expected to provide satellite coverage in certain countries along the Equator with 20 satellites.
General
and Administrative Costs
Our
general and administrative expenses include the costs of insurance, personnel, and outside professional services, including accounting
and legal fees. We expect to incur additional expenses as a result of becoming a public company, including expenses necessary
to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance
and reporting obligations under SEC rules and regulations, as well as higher expenses for general and director and officer insurance,
investor relations, and professional services.
Depreciation
and Amortization
Depreciation
and amortization expense includes amounts related to property and equipment as well as finite-lived intangible assets. Once BW3
is completed and successfully launched, we expect a significant portion of our depreciation expense to relate to the depreciation
of this asset, given its assigned useful life is two years.
Interest
Income
Our
interest income consists primarily of interest earned on cash and cash equivalents held by us in interest bearing demand deposit
accounts.
Interest
Expense
Our
interest expense consisted of interest on the borrowings from our Chief Executive Officer, Abel Avellan. We repaid all amounts
due under this borrowing as of March 3, 2020.
Other
Income and (Expense), Net
Our
other income or expense consists of miscellaneous non-operating items, such as foreign exchange gains or losses.
Income
Taxes
Our
income tax expense is driven by our foreign subsidiaries, primarily Israel and Nano.
Results
of Operations
Year
Ended December 31, 2020 Compared to the Year Ended December 31, 2019
The
following table sets forth a summary of our consolidated results of operations for the year-end periods indicated below and the
changes between the periods.
|
|
|
Year
Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
$
Change
|
|
|
|
|
(dollars
in thousands)
|
|
|
Revenues
|
|
$
|
5,967
|
|
|
$
|
1,414
|
|
|
$
|
4,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
(3,025
|
)
|
|
|
(954
|
)
|
|
|
(2,071
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
2,942
|
|
|
|
460
|
|
|
|
2,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering services
|
|
|
13,081
|
|
|
|
4,668
|
|
|
|
8,413
|
|
|
General and administrative
costs
|
|
|
12,320
|
|
|
|
5,404
|
|
|
|
6,916
|
|
|
Research and development
costs
|
|
|
1,011
|
|
|
|
1,062
|
|
|
|
(51
|
)
|
|
Depreciation
and amortization
|
|
|
887
|
|
|
|
388
|
|
|
|
499
|
|
|
Total
operating expenses
|
|
|
27,299
|
|
|
|
11,522
|
|
|
|
15,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
71
|
|
|
|
2
|
|
|
|
69
|
|
|
Interest expense
|
|
|
(10
|
)
|
|
|
(22
|
)
|
|
|
12
|
|
|
Other
income and (expense), net
|
|
|
22
|
|
|
|
(15
|
)
|
|
|
37
|
|
|
Total
other income (expense)
|
|
|
83
|
|
|
|
(35
|
)
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income
taxes
|
|
|
(24,274
|
)
|
|
|
(11,097
|
)
|
|
|
(13,177
|
)
|
|
Income
taxes
|
|
|
(131
|
)
|
|
|
(44
|
)
|
|
|
(87
|
)
|
|
Net
loss
|
|
$
|
(24,405
|
)
|
|
$
|
(11,141
|
)
|
|
$
|
(13,264
|
)
|
Revenues
Total
revenues increased by $4.6 million to $6.0 million for the year ended December 31, 2020 as compared to the year ended December
31, 2019. The increase was primarily due to a $3.9 million increase in sales to new third-party customers, and a $0.7 million
increase in revenue recognized on existing Nano customers.
Cost
of Sales
Total
cost of sales increased by $2.1 million to $3.0 million for the year ended December 31, 2020 as compared to the year ended December
31, 2019. The increase was primarily due to increased costs to deliver new and existing revenue contracts to Nano customers, specifically
at the newly established Nano US entity during the fiscal year.
Engineering
Services
Total
engineering services increased by $8.4 million to $13.1 million for the year ended December 31, 2020 as compared to the year ended
December 31, 2019. The increase was primarily due to a $5.2 million increase in internal engineer headcount and a $1.8 million
increase in internal consultant headcount. The costs related to recurrent engineers and consultants that are not solely associated
with the development of BW3 are expensed as engineering services. The remaining $1.4 million increase relates to other operating
expenses, such as consumables, components and facility expenses, specifically relating to new operations in United Kingdom during
the current fiscal year. We expect engineering expenses to continue to increase over the upcoming years as the SpaceMobile Service
is developed.
General
and Administrative Costs
Total
general and administrative costs increased by $6.9 million to $12.3 million for the year ended December 31, 2020 as compared to
the year ended December 31, 2019. The increase was primarily due to a $4.0 million increase in employee and consultant-related
expenses such as salaries and recruiting fees due to the increase in headcount compared to the prior year period, a $1.8 million
increase in professional costs due to the increase in legal and accounting services compared to the prior year period, and a $1.5
million increase in other miscellaneous expenses such as corporate office supplies, licenses, and insurance costs, offset by a
$0.4 million decrease in travel expenses due to reduced travel as a result of the COVID-19 pandemic.
Research
and Development Costs
Total
research and development costs decreased by $0.1 million to $1.0 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. The decrease was primarily due a $1.1 million decrease in costs relating to the development of BW1
given this project was completed in 2019, offset by a $1.0 million increase in 2020 development efforts relating to the SpaceMobile
constellation.
Depreciation
and Amortization
Total
depreciation and amortization increased by $0.5 million to $0.9 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. The increase was primarily due to the purchase of additional fixed assets and leasehold improvements
during the fiscal year.
Total
Other Income (Expense)
Total
other income increased by $0.1 million to $0.1 million for the year ended December 31, 2020 as compared to the year ended December
31, 2019. The increase was primarily driven by a $0.1 million increase in interest earned during the current fiscal year.
Liquidity
and Capital Resources
We
require capital to fund our operating expenses and to make capital expenditures. We expect our capital requirements to increase
as our operations expand. Historically, we have funded operations primarily from the proceeds from issuances of AST Series A Preferred
Units and AST Series B Preferred Units (“AST Preferred Stock”). Through December 31, 2020, we had raised an aggregate
of $120.8 million in gross proceeds from the issuance of AST Preferred Stock. As of December 31, 2020, cash and cash equivalents
totaled $42.8 million and working capital totaled $37.8 million. In connection with the closing of the Business Combination, we
received $418 million in net proceeds. We also intend to enter into equipment financing arrangements with respect to certain equipment
located at our Midland, Texas satellite assembly, integrating and testing facility. We closely monitor our liquidity and capital
resources for any potential impact that the COVID-19 pandemic may have on operations. Also, we are exploring various sources of
funding aimed at further supporting our liquidity profile, as well as maintaining business and organizational continuity through
the pandemic.
The
design, development, manufacture, integration, testing, assembly and launch of satellites and related components is a capital-intensive
venture. We estimate the gross costs associated with designing, building and launching the 20 Equatorial SpaceMobile satellites
to be approximately $510 million, which includes $128 million of capital raised to date by us from preferred stock, common stock,
and founder loan proceeds. To raise the necessary capital to fund this expenditure in the short term, we entered into an Equity
Purchase Agreement with NPA on December 15, 2020 with respect to the Business Combination, which closed on April 6, 2021. As part
of the Business Combination, NPA contributed approximately $457 million in gross proceeds to us in exchange for 28.5% of the outstanding
AST Common Units and became the managing member of AST. We estimate the gross costs associated with designing, building and launching
all global and MIMO SpaceMobile satellites and related infrastructure to be approximately $1.7 billion. We believe that, following
the Closing, we have sufficient capital to fund planned operations and development for the next 12 to 24 months, which includes
the manufacturing, assembly and launch of our first 20 Equatorial satellites. We will need to raise additional capital to continue
developing and launching satellites to complete subsequent phases of 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.
This capital may be necessary to fund our ongoing operations, continue research, development and design efforts, improve infrastructure,
and launch satellites. We cannot be certain that additional funds will be available to us on favorable terms if required, or at
all. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could
be materially adversely affected.
Cash
Flows
Historical
Cash Flows
The
following table summarizes our sources and uses of cash for the years ended December 31, 2020 and 2019:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(dollars
in thousands)
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
42,777
|
|
|
$
|
26,498
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in operating
activities
|
|
$
|
(22,800
|
)
|
|
$
|
(9,300
|
)
|
|
Cash used in investing
activities
|
|
|
(30,411
|
)
|
|
|
(3,654
|
)
|
|
Cash provided by
financing activities
|
|
|
69,663
|
|
|
|
32,379
|
|
Operating
activities
Cash
used in operating activities was $22.8 million for the year ended December 31, 2020, as compared to cash used in operating activities
of $9.3 million for the same period in 2019. The $13.5 million increase in cash used in operating activities for the year ended
December 31, 2020 was primarily attributable to the $24.4 million net loss as a result of the expansion of our operations and
satellite technology development efforts, an increase in net loss of $13.3 million, as well as a $0.2 million increase driven
by a $1.1 million change in operating assets and liabilities, offset by a $0.9 million change in adjustments to reconcile net
loss to cash used in operating activities.
Investing
activities
Cash
used in investing activities was $30.4 million for the year ended December 31, 2020, as compared to cash used in investing activities
of $3.7 million for the same period in 2019. The $26.8 million increase in cash used in investing activities for the year ended
December 31, 2020 was primarily attributable to a $20.2 million increase in BW3 satellite construction costs that started at the
end of year 2019 and are still in progress, as well as a $6.6 million increase in purchases of property and equipment including
satellite antennas, test equipment, and leasehold improvements.
Financing
activities
Cash
provided by financing activities was $69.7 million for the year ended December 31, 2020, as compared to cash provided by financing
activities of $32.4 million for the same period in 2019. The $37.3 million increase in cash provided by financing activities for
the year ended December 31, 2020 was primarily attributable to $72.9 million of net proceeds from the issuance of AST Series B
Preferred Units during the fiscal year, offset by a $31.5 million decrease in net proceeds from AST Series B Preferred Units issued
in the prior period.
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:
|
|
●
|
Seeking
and obtaining market access approvals;
|
|
|
|
|
|
|
●
|
Establishing
and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality,
products and services to support our satellite development;
|
|
|
|
|
|
|
●
|
Addressing
any competing technological and market developments; and
|
|
|
|
|
|
|
●
|
Attracting,
hiring, and retaining qualified personnel.
|
Further
details on the various risks to our operations are provided and discussed in the “Risk Factors” section of this document.
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. In addition, our ability to raise necessary financing could be impacted by the COVID-19
pandemic and its 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 ourself or potentially discontinue
operations. See the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements” included herein for additional information.
Contractual
Obligations
The
following table reflects our contractual obligations as of December 31, 2020:
|
|
|
Payments
Due by Period
|
|
|
|
|
Total
|
|
|
Less
than 1 year
|
|
|
More
than
1 year and less than 3
|
|
|
More
than
3 years and less than 5
|
|
|
More
than 5 years
|
|
|
|
|
(dollars
in thousands)
|
|
|
Operating
lease obligations(1)
|
|
$
|
14,151
|
|
|
$
|
1,432
|
|
|
$
|
2,604
|
|
|
$
|
2,413
|
|
|
$
|
7,701
|
|
|
Purchase
obligations(2)
|
|
|
8,337
|
|
|
|
8,337
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
22,488
|
|
|
$
|
9,769
|
|
|
$
|
2,604
|
|
|
$
|
2,413
|
|
|
$
|
7,701
|
|
|
(1)
|
We
primarily lease office space under operating lease agreements, with the most material lease relating to our International
Air & Space Port in Midland, Texas. Refer to Note 6 — Commitments and Contingencies in the
Notes to Consolidated Financial Statements for additional information on our leases.
|
|
(2)
|
The
purchase obligations are associated with contracts with GK Launch Services and Dialog that are enforceable and legally
binding, and specify all significant terms, including quantities to be purchased, price provisions, and the approximate
timing of the transactions. Refer to Note 13 — Significant Agreements in the Notes to Consolidated
Financial Statements for additional information.
|
Off-Balance
Sheet Arrangements
We
do not maintain any off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
Our
management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an ongoing basis, we evaluate our policies and estimates, including but not limited to,
those related to our revenue from contracts with customers, goodwill, intangibles and long-lived assets. Our management bases
our estimates on historical experience, data available at the time the estimates are made and various assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
We
consider the following accounting policies to be those that require the most subjective judgment or that involve uncertainty that
could have a material impact on our financial statements. If actual results differ significantly from management’s estimates
and projections, there could be a material effect on the financial statements. This is not a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with
no need for management’s judgment in its application. For a discussion of our other accounting policies, see Note 2 —
Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements.
Revenue
from Contracts with Customers
We
recognize revenue when or as control is transferred to a customer, which is in accordance with ASC 606, “Revenue from Contracts
with Customers” (“ASC 606”). The determination of revenue is dependent upon the following five step process:
1) we account for a contract with a customer when there is written approval, the contract is committed, the rights of the parties
are identified, the contract has commercial substance and consideration is probable of collection; 2) we determine performance
obligations by assessing whether the products or services are distinct from the other elements of the contract. In order to be
distinct, the product or service must perform either on its own or with readily available resources and must be separate within
the context of the contract; 3) we consider the amount stated on the face of the purchase order to be the transaction price and
does not have variable consideration which could impact the stated purchase price agreed to; 4) transaction price is allocated
to each individual performance obligation based on the standalone selling price of that performance obligation and if standalone
market transactions are not available, we will estimate the standalone selling price through market assessments; and 5) if the
transaction meets the criteria for over time recognition, we recognize revenue as the good or service is delivered. For transactions
that do not meet the criteria for over time recognition, we will recognize revenue at a point in time based on an assessment of
the five criteria for transfer of control. We have concluded that revenue should be recognized when shipped or delivered based
on contractual terms.
As
it relates to government and space agency grants, Nano receives grant funding in exchange for satellite technology development
efforts made by Nano to the European Space Agency and other governmental bodies. If Nano fails to maintain required commitments,
the funds received may have to be repaid or other adverse consequences may arise, which could affect cash flows and profitability.
When Nano has been awarded grant funding, cost reimbursements are recognized when it is probable that Nano will comply with the
conditions attached to the grant arrangement and the grant proceeds will be received. Grants are recognized in Nano’s results
of operations on a systematic basis over the periods in which it recognizes the related costs for which the grant is intended
to compensate. Specifically, when grants are related to reimbursements, the grants are recognized as a reduction of the related
expense in our results of operations. For grants related to reimbursements of capital expenditures, the grants are recognized
as a reduction of the basis of the asset and recognized in Nano’s results of operations over the estimated useful life of
the depreciable asset as reduced depreciation expense.
As
it relates to collaborative arrangements, we consider the nature and contractual terms of an arrangement and assess whether the
arrangement involves a joint operating activity pursuant to which we are an active participant and exposed to significant risks
and rewards with respect to the arrangement. If we are an active participant and exposed to the significant risks and rewards
with respect to the arrangement, we account for these arrangement pursuant to ASC Topic 808, Collaborative Arrangements, as amended
by ASU 2018-18 (“ASC 808”), and applies a systematic and rational approach to recognize revenue (unless parts of the
arrangement are within the scope of other authoritative accounting literature or can be appropriately analogized to other authoritative
accounting literature). In connection with the Initial Series B Preferred Stock Issuance, we entered into a commercial agreement
on October 26, 2019 with Vodafone, whereby Vodafone is provided exclusivity to operate the SpaceMobile Service in agreed upon
markets as defined in the agreement. As part of this agreement, Vodafone will promote the service as an element of its normal
business, and we are provided a 50/50 revenue share for all services enabled by our SpaceMobile satellite segment. The term of
the agreement is five years starting with the initial launch of commercial service based on the Phase 3 constellation anticipated
in 2023. The Vodafone commercial agreement is considered a collaborative arrangement under ASC 808 as both parties are active
participants and share in the significant risks and rewards of the activities. We will not assign any value to the Vodafone commercial
agreement at inception and will recognize their share of expenses as they are performed up to the time the activities are revenue
generating.
Goodwill,
Intangibles and Long-Lived Assets
We
assess goodwill for impairment at least annually in the fourth quarter, on a reporting unit basis, or more frequently, when events
and circumstances occur indicating that the recorded goodwill may be impaired. For the year ended December 31, 2020, our goodwill
impairment process included applying a quantitative impairment analysis where the fair value of the reporting unit was compared
to its carrying value (including goodwill). We engaged an independent third-party valuation specialist to assist in the determination
of the fair value of the reporting unit based upon inputs and assumptions provided by management. The fair value of the reporting
unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value,
discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from
comparable publicly traded companies that are applied to operating performance of the reporting unit. Significant judgments inherent
in these analyses include estimating the amount and timing of future cash flows and the selection of appropriate discount rates
and long-term growth rate assumptions. Changes in these estimates and assumptions could materially affect the determination of
fair value for the reporting unit and could result in an impairment charge, which could be material to our financial position
and results of operations. Based on the results of the quantitative impairment analysis, it was determined that there has been
no impairment of goodwill related to the reporting unit as of December 31, 2020.
We
assesses the impairment of intangible and long-lived assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors we consider important in the determination of an impairment include significant underperformance
relative to historical or projected future operating results, significant changes in the manner that we use the acquired asset
and significant negative industry or economic trends.
Recent
Accounting Pronouncements
See
Note 2 — Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for a full
description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations
and financial condition.
BUSINESS
Our
Company
We
are an innovative satellite designer and manufacturer. We operate from six locations that include our corporate headquarters and
85,000 square foot satellite assembly, integrating and testing facility in Midland, Texas, as well as operations in Maryland,
Spain, the United Kingdom, and Israel. Also, our 51% owned and controlled subsidiary, Nano, is located in Lithuania.
The
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 space-based cellular 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. Our innovative satellite designs and components are expected
to reduce the communication delay effects which existing geostationary satellite systems experience. The SpaceMobile Service is
being designed to provide global coverage for users traveling in and out of areas without terrestrial mobile services on land,
at sea or in flight.
We
are partnering with MNOs to offer the SpaceMobile Service to the MNOs’ end-user customers. We do not anticipate entering
into agreements with mobile phone or other device manufacturers, and, accordingly, users will not need to subscribe to the SpaceMobile
Service directly with us, nor will they need to purchase any new or additional equipment. We do not anticipate that mobile device
manufacturers could unilaterally prohibit the SpaceMobile Service from being offered on their devices, as the service is
designed to be complementary to the existing cellular broadband service offered by MNOs. Users will be able to access the SpaceMobile
Service when prompted on their device that they are no longer covered by the terrestrial cellular infrastructure of the MNO with
the ability to immediately connect or purchase a subscription plan directly with their existing MNO. Our agreements with MNOs
are based on a revenue sharing model. As of December 31, 2020, we have entered into agreements and understandings with MNOs which
collectively cover approximately 1.3 billion mobile subscribers of which approximately 890 million mobile subscribers are
covered by agreements that provide for revenue-sharing with us. We estimate that the global market opportunity for our services
is currently $1.1 trillion, according to GSMA market data, which represents over 5 billion mobile subscribers that are
constantly moving in and out of coverage, of which approximately 3.3 billion subscribers are unconnected to cellular broadband.
In addition to mobile subscribers, over 700 million people globally have no connectivity or mobile cellular coverage.
The
SpaceMobile Service is being designed to enable MNOs, including existing partners and others, to provide full country coverage
with no gaps and achieve their ambition to provide nationwide coverage, even in places without terrestrial infrastructure. The
SpaceMobile Service will enable MNOs to augment and extend their coverage by using the MNOs’ spectrum resources without
building towers or other land-based infrastructure where it is not cost-justified or is difficult due to environmental challenges
such as mountainous or rugged terrain or maritime applications.
The
SpaceMobile Service is expected to be provided by a network of 168 high-powered, large phased-array satellites in LEO. The worldwide
mobile traffic will be directed by the SpaceMobile Service to a terrestrial gateway and then to the in-country MNO’s core
cellular network connected to the internet. We anticipate that users will connect to the SpaceMobile Service as if they were using
a local cell tower. The SpaceMobile Service has not yet generated revenues and is not expected to generate revenues until 2023,
after the first commercial satellite launch phase of the SpaceMobile Service, which is expected to provide satellite coverage
in 49 countries along the Equator, representing a total population of approximately 1.6 billion people, with 20 satellites.
On
April 1, 2019, we launched our first test satellite, the BlueWalker 1 (“BW1”), which was used to validate our satellite to
cellular architecture and was capable of managing communications delays from LEO orbit and the effects of doppler in a satellite to ground
cellular environment using the 4G-LTE protocol. We are currently manufacturing and procuring the satellite componentry required for our
BlueWalker 3 (“BW3”) test satellite. As of December 31, 2020, we have incurred approximately $27.0 million on our BW3 efforts,
and we intend to incur an additional $27 to $30 million to bring this project to completion. We are currently manufacturing, assembling
and procuring the satellite componentry required for our BW3 test satellite. During 2021, we will be assembling and testing the BW3 satellite
at our facility in Midland, Texas. BW3 currently is targeted to launch late in the fourth quarter of 2021. We are planning our first
commercial satellite launches for the second half of 2022 or early 2023, which are expected to provide satellite coverage in certain
Equatorial countries with 20 satellites. We plan to achieve full global mobile coverage with the launch of 110 satellites by the end
of 2023 or early in 2024 and MIMO with the launch of a total of 168 satellites by the end of 2024.
Strategy
Key
elements of our strategy include:
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Maintaining
our Focus on Technology and Innovations. We continue to focus on research and development to bring our SpaceMobile Service
to the global market. Our continued innovation in the development of our satellite system, components and related technologies
and services are supported by a global engineering team of space scientists and consultants, which includes approximately
220 space scientists and engineers (of which 22 have PhDs), and a culture that deeply values and supports innovation.
We protect our focus on development and innovations by owning the majority of the intellectual property we use and protects
such intellectual property with U.S. and worldwide registrations and applications.
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Continue
to Partner with MNOs to Sell the SpaceMobile Service to their End-User Customers. We continue to partner with MNOs to
use the SpaceMobile Service to supplement and augment their terrestrial networks. As of December 31, 2020, we have entered
into agreements and understandings with MNOs which collectively cover approximately 1.3 billion mobile subscribers
and of which approximately 890 million mobile subscribers are covered by agreements with MNOs that provide for revenue-sharing
with us. We continue to work with existing partners as well as continues to expand with new partners to increase market access
in the markets in which we operate.
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Continuing
to Build and Leverage Relationships with Industrial and Wireless Infrastructure Providers. We intend to continue developing
our industrial partnerships that produce products used in our satellites and that we source electronic components from to
accelerate the development of our SpaceMobile Service as well as to continue developing commercial partnerships that allow
us to gain access to mobile subscribers across the globe. Our engineering, production and technology relationships augment
our internal resources, which include the ability to integrate and test satellites at our Midland, Texas facility, and we
intend to leverage their capabilities and infrastructure.
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Competitive
Advantages of the SpaceMobile Service
We
believe that our SpaceMobile Service will provide us with meaningful competitive advantages over current and developing solutions,
including the following:
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The
SpaceMobile Service is expected to have the first-mover advantage and provide a first of its kind service to fill cellular
coverage gaps;
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The
SpaceMobile Service will be operating in an industry with high barriers to entry, and we believe these barriers, including
our proprietary and innovative satellite technologies and robust patent portfolio, which includes more than 1,200 patent and
patent pending claims as of May 4, 2021, and our agreements and relationships with telecommunications companies, including
some which are mutually exclusive, may provide insulation against direct competition;
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The
SpaceMobile Service is being designed to work with any standard cellphone and does not require any dedicated or proprietary
terminal or special purpose satellite phones to access the network;
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The
SpaceMobile Service is not expected to experience the noticeable delay which existing geostationary satellite systems experience;
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The
SpaceMobile Service is being designed to be able to adapt our satellite network to terrestrial infrastructure changes and
disruptions;
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The
SpaceMobile Service is expected to offer global support of broadband internet connectivity under our wholesale business model
of revenue sharing agreements with MNOs;
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The
SpaceMobile Service is being designed to provide continuous coverage across multiple geographic areas;
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The
SpaceMobile Service will not rely on direct sales to end-users and will utilize the existing customer bases of our partnership
MNOs; and
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The
SpaceMobile Service will not require us to enter into agreements with mobile phone or other device manufacturers, and there
is little risk that such manufacturers could unilaterally prohibit the SpaceMobile Service from being offered on their devices.
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The
SpaceMobile Service
The
SpaceMobile Service is expected to be provided by a high-powered, large phased-array 168 satellite system in LEO. The worldwide
mobile traffic will be directed by the SpaceMobile Service to the gateway 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 technology will not
require any grants of new mobile spectrum or any involuntary spectrum sharing. Instead, with the consent of the participating
MNO and the national regulator, our technology will expand the utility of already-licensed mobile terrestrial spectrum to the
MNOs, without causing harm to other users, in large part because the same licensee engages in satellite-terrestrial coordination.
The SpaceMobile Service anticipated architecture is pictured below:
BlueBird
1 Satellites
The
first commercial satellite launch phase of the SpaceMobile Service is expected to be comprised of 20 BlueBird 1 (“BB1”)
satellites that will provide coverage to 49 Equatorial countries. The development of the BB1 is ongoing and the manufacturing,
testing and validation plans for the BB1 satellites have not commenced and will commence following the development and subsequent
testing of the BW3 test satellite in development.
The
BB1 satellites are being designed to use patented high-throughput modular satellite technology to distribute the functional capabilities
of conventional satellites (power, thermal, navigation, communications) across many small, functionally independent and patented
modules called Microns. The distribution of functionality across a large area, low volume and in-space structure maximizes the
surface area while minimizing the total system mass. Because of the distributed nature of functionality, even if some Microns
fail in space, the SpaceMobile Service is still expected to be able to continue operations, though at a slightly degraded capacity
compared to the total loss of a conventional satellite. These Micron modules use a unique modular design and mechanically deploy
in space to create the solar panel on one side and the beamforming antenna on the other side.
Development
and Commercial Launch Timeline
Development
and Testing
On
April 1, 2019, we successfully launched BW1, which connected directly to an antenna (“BW2”) at our facility in Midland,
Texas, to test its satellite to ground communications technology. During such testing, we were able to validate its cellular architecture
and was capable of managing communications delays from LEO orbit and the effects of doppler in a satellite to ground cellular
environment using the 4G-LTE protocol. We are currently manufacturing and procuring the satellite componentry required for our
BW3 test satellite. During 2021, we will be assembling and testing the BW3 satellite at our facility in Midland, Texas. BW3 currently
is targeted to launch late in the fourth quarter of 2021. 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 and the availability of an appropriate
launch window and vehicle from our launch provider. The launch of BW3 was scheduled to coincide with the launch of a primary payload
from an unrelated entity. The primary payload from such unrelated entity is delayed, which may in turn delay the launch window
for BW3. If we are required to identify another launch vehicle and/or launch provider, we may incur delays in such launch and
may incur additional costs. We are planning our first commercial satellite launches for the second half of 2022 or early 2023,
which are expected to provide satellite coverage in the 49 Equatorial countries along the Equator, representing a total population
of approximately 1.6 billion people, with 20 satellites. We plan to achieve full global mobile coverage with the launch of 110
satellites by the end of 2023 or early in 2024 and MIMO with the launch of a total of 168 satellites by the end of 2024.
The
BW3 test satellite is expected to enable live ground, sea, and airborne testing with unmodified LTE and 5G devices such as smartphones,
tablets and internet of things (“IoT”) equipment. The satellite is also expected to enable live testing for voice,
video and data. Testing will be available for approximately six minutes per satellite pass approximately two times per day in
certain areas. For U.S. based testing, we will utilize a gateway installed in Midland, Texas and in Hawaii. We will install at
least two additional gateways for the full constellation, one on the East Coast and a second on the West Coast.
With the BW3 test satellite, our main objective is to demonstrate the entire technology stack of our constellation satellite
design by providing direct broadband communications between one of our patented LEO satellites and standard compliant LTE and
5G devices without any modification using UE standard in select bands in the 698 MHz to 960 MHz range and using gateways located
in a number of selected countries, including the U.S. The BW3 test satellite will provide the testing and validation plans for
the BB1 satellite design, expected to be used for the first phase of commercial satellites comprising the SpaceMobile Service.
Phased
Commercial Launch Timeline
We
have developed a phased approach to the commercialization and launch of the SpaceMobile Service. We are currently manufacturing
and procuring the satellite componentry required for our BW3 test satellite. During 2021, we will be assembling and testing the
BW3 satellite at our facility in Midland, Texas. BW3 currently is targeted to launch late in the fourth quarter of 2021. We are
planning our first commercial satellite launches for the second half of 2022 or early 2023, which are expected to provide satellite
coverage in the 49 Equatorial countries along the Equator, representing a total population of approximately 1.6 billion people,
with 20 satellites. We plan to achieve full global mobile coverage with the launch of 110 satellites by the end of 2023 or early
in 2024 and MIMO with the launch of a total of 168 satellites by the end of 2024.
Competitive
Strengths
We
believe the following strengths position us to develop the SpaceMobile Service and capitalize on the presented opportunity:
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Experienced
Management Team. Our management team has significant experience in designing, developing, building, launching, and operating
satellites in both geostationary and LEO. We were founded by Abel Avellan, our founder, Chairman and Chief Executive Officer,
who has over 25 years of success in the space industry and is a co-inventor of 24 U.S. patents. Most recently, he was the
founder and CEO of Emerging Markets Communications. Mr. Avellan was also named Satellite Teleport Executive of the Year in
2017 and was the recipient of the Satellite Transaction of the Year award by Euroconsult in 2015.
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Innovative
Patented Satellite Technologies. The SpaceMobile Service is positioned to be the first and only global space-based mobile
broadband network to be accessible to any standard, unmodified, off-the-shelf mobile phone or 2G/3G/4G LTE/5G and IoT-enabled
device without communications delay encumbering other solutions. We believe our management’s history of developing
proprietary and innovative satellite technologies, including having more than 1,200 patent and patent pending claims as of
May 4, 2021, demonstrates that we possess the expertise and credibility required to develop such innovative satellite technologies.
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Attractive
and Growing Global Market. We believe that the mobile satellite services industry will continue to experience growth driven
by the increasing awareness of the need for reliable mobile voice and data communications services, the lack of coverage of
most of the Earth’s surface by terrestrial wireless systems, the continued development of innovative, lower cost technology,
applications integrating mobile satellite products and services, and the continued development of the IoT. Only satellite
providers can offer global coverage, and the satellite industry is characterized by significant financial, technological and
regulatory barriers to entry.
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Existing
Relationships with Wireless Infrastructure Providers. We have developed relationships with companies, such as Vodafone,
Rakuten, American Tower, Samsung NEXT and others that have innovative technologies and products, highly skilled personnel
or potential end-user customers that complement our strategy. In addition, our partnership model with MNOs allows them to
augment and extend their coverage by using their own spectrum resources without having to build towers or other infrastructure
where it is not cost-justified or is difficult, which, in turn, provides us with the ability to sell our SpaceMobile Service
to the end-user customers of MNOs without any direct contract with us. As of December 31, 2020, we have entered into agreements
and understandings with MNOs which collectively cover approximately 1.3 billion mobile subscribers and of which approximately
890 million mobile subscribers are covered by agreements with MNOs that provide for revenue-sharing with us.
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Customers,
Sales and Marketing
The
SpaceMobile Service will offer global broadband internet connectivity under our wholesale business model of revenue sharing agreements
with MNOs. Our target commercial customers/partners for our services are the MNOs through commercial agreements and gaining access
to their existing customers as the ultimate end-users. The agreements between us and each MNO partner is based on a revenue sharing
model. As of December 31, 2020, we have entered into agreements and understandings with MNOs which collectively cover approximately
1.3 billion mobile subscribers and of which approximately 890 million mobile subscribers are covered by agreements with MNOs
that provide for revenue-sharing with us. We expect that the MNOs will market and sell the SpaceMobile Service directly to their
existing customers.
It
is anticipated that the MNOs will market the enhanced coverage of the SpaceMobile Service to their customers and offer the service
as a differentiated price to the current terrestrial coverage using the following service offerings through automatic prompts
that are made via text message directly to the end-user customer’s mobile phone when they leave the terrestrial coverage
area and at the point in time when they likely want to access the SpaceMobile Service or are subscribed for as part of a monthly
add-on to the end-user customer’s existing wireless plan:
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Service
Offering
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Service
Offering Details
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Pass (Ad-Hoc)
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Upon
leaving the terrestrial cellular coverage area, mobile subscribers will receive a text
on their phone asking if they would like to turn on the SpaceMobile Service.
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Monthly
Add-on Subscription (Consumer)
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Subscribers
can pay a fixed monthly fee to add the SpaceMobile Service as a supplemental service to their current wireless plan.
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Seamless
roaming onto the SpaceMobile Service’s network upon entering an area without cell tower coverage.
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Monthly
Add-on Subscription (Enterprise)
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Same
as monthly ad-on for consumers, but with more data targeting commercial enterprises and governments.
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Standalone
Get Connected Plan
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In
areas without cellular coverage today, subscribers will use and pay for the SpaceMobile Service as their primary network.
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Incumbent
wireless companies and other promotional partners are expected to sell and/or subsidize low-cost phones and market the SpaceMobile
Service.
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expect that the majority of our revenue will be generated from the SpaceMobile Service offerings described above through revenue
sharing arrangements with MNOs.
Manufacturing,
Assembly and Launch
We
utilize a range of contract manufacturers to manufacture our satellites hardware and software components included therein, including
the arrangements described below in “—Relationships with Industrial Partners”. We will conduct extensive testing
and quality control procedures for all products in our assembly, integrating and testing facility in Midland, Texas. Contract
manufacturers produce products for many different customers and are able to pass on the benefits of large-scale manufacturing
to their customers. These manufacturers are able to produce high quality products at lower costs by: (1) exercising their high-volume
purchasing power, (2) employing advanced and efficient production equipment and capital intensive systems whose costs are leveraged
across their broad customer base, and (3) using a cost-effective skilled workforce.
Our
management team facilitates an efficient contract manufacturing process through the development of strong relationships with a
number of different domestic and off-shore contract manufacturers. Our internal manufacturing capability is expected to continue
to be very limited and we intend to continue to rely on contract manufacturers for manufacturing. We also rely on outside vendors
to manufacture specific components and subassemblies used in the production of a portion of our systems. Some components, subassemblies
and services necessary for the manufacture of our products are obtained from a sole source supplier or a limited group of suppliers.
Our
satellite systems will be assembled, integrated and tested in our facility in Midland, Texas. We have entered into a satellite
launch agreement with a third party to launch our BW3 satellite into orbit and believe multiple sources of satellite launch providers
are available to compete for subsequent phased launches. During 2021, we will be assembling and testing the BW3 satellite at our
facility in Midland, Texas. BW3 currently is targeted to launch late in the fourth quarter of 2021. 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 and the availability of an appropriate launch window and vehicle from our launch provider. The launch of BW3 was scheduled
to coincide with the launch of a primary payload from an unrelated entity. The primary payload from such unrelated entity is delayed,
which may in turn delay the launch window for BW3. If we are required to identify another launch vehicle and/or launch provider,
we may incur delays in such launch and may incur additional costs.
Satellite
Technology Development
The
industry in which we compete is subject to rapid technological developments, evolving standards, changes in customer requirements
and continuing developments in the communications and networking environment. Our ability to adapt to these changes, and to develop
the SpaceMobile Service and the related components, is a significant factor in our ability to execute our business plan.
We
conduct a majority of our engineering development activities by utilizing our in-house engineering team of space scientists and
consultants, which includes approximately 220 space scientists and engineers (of which 22 have PhDs) worldwide.
Our engineering development activities primarily take place at development offices or teams located in Maryland, Spain, the United
Kingdom and Israel as well as at our assembly and testing facility in Midland, Texas.
Government
Regulation
We
are required to comply with the laws and regulations of, and often obtain approvals from, national and local authorities in connection
with our services. As we expand service to additional countries and regions, we will become subject to additional governmental
approvals and regulations. We will provide a number of services that rely on the use of radio-frequency spectrum, and the provision
of such services is highly regulated. Satellites are to be operated in a manner consistent with the regulations and procedures
of the International Telecommunication Union (“ITU”), a specialized agency of the United Nations, which require the
coordination of the operation of satellite systems in certain circumstances, and more generally are intended to avoid the occurrence
of harmful interference among different users of the radio spectrum.
Our
business is subject to extensive rules, regulations, statutes, orders and policies imposed by the government in the United States
and in foreign jurisdictions. For example, in the U.S. commercial use of radio-frequency spectrum is subject to the jurisdiction
of the FCC under the Communications Act of 1934, as amended (Communications Act). The FCC is responsible for authorizing the operation
of commercial spacecraft, and also authorizes non-U.S. licensed spacecraft to be used to serve the United States. The FCC also
licenses the operation of satellite earth stations and regulates the technical and other aspects of the operation of these facilities.
The
SpaceMobile Service in the United States is subject to a pending application before the FCC. The application seeks authority to
utilize 243 satellites operating in 16 orbital planes in an approximate altitude of 700 kilometers. If we do not operate all 243
satellites as requested, we would need to modify our license with the FCC or risk losing a portion of our surety bond for failure
to meet all milestones. The FCC application, and an accompanying Request for Declaratory Ruling, have been accepted for filing
and is under consideration by the FCC.
Because
the SpaceMobile Service will be using satellites transmitting on spectrum traditionally licensed to MNOs, we also will need the
approval of the Wireless Telecommunications Bureau, which handles terrestrial wireless licensing. We intend to seek this approval
in connection with a spectrum lease agreement with a terrestrial wireless carrier which we have a cooperative arrangement. Certain
wireless carriers have indicated that they intend to oppose this approval on procedural and substantive grounds.
We
also will need to secure FCC authority in the future for the ground segment of the SpaceMobile Service namely two or three fixed
earth stations located in the United States. Earth station licenses generally are granted for 15 year terms, and typically are
renewed in the ordinary course. Material changes in earth station operations would require prior approval by the FCC. The operation
of our earth stations is subject to various license conditions, as well as the technical and operational requirements of the FCC’s
rules and regulations.
The
SpaceMobile Service will also operate under filings made by Papua New Guinea with the ITU and Papua New Guinea has issued a Radiocommunications
Apparatus License to us to operate our satellite system. The orbital location and frequencies for our satellites are subject to
the ITU’s regulations, including its frequency registration and coordination procedures, and its various provisions on spectrum
usage. Those procedures are specified in the ITU Radio Regulations and seek to facilitate shared international use of limited
spectrum and orbital resources in a manner that avoids harmful interference. Among other things, the ITU regulations set forth
procedures for establishing international priority with respect to the use of such resources, deadlines for bringing satellite
networks into use in order to maintain such priority, and coordination rights and obligations with respect to other networks,
which vary depending on whether such networks have higher or lower ITU priority. Further licensing by Papua New Guinea may be
required if material changes to the SpaceMobile Service are made.
Government
regulators, including the FCC, have adopted expansive views of the scope of their regulatory authority over carriers providing
broadband mobile service and are increasingly focused on the quality of service, customer disclosures, customer privacy, and the
customer support that wireless carriers provide. These include, but are not limited to, common carrier obligations; universal
service obligations; rules governing billing and the pass through of third party charges, regulations governing subscriber privacy
and customer proprietary network information; access to E911 and location accuracy requirements; roaming obligations; rules that
require wireless service providers to configure their networks to facilitate electronic surveillance by law enforcement officials;
emergency warning requirements; rules governing spam, telemarketing and truth-in-billing; outage reporting; open Internet and
Net neutrality requirements; cybersecurity and rules requiring the offering of equipment and services that are accessible to and
usable by persons with disabilities, among others.
Intellectual
Property
Our
intellectual property portfolio consists of over 18 patent families, one United States patent (and the exclusive license to use
one United States patent) and 16 United States patent applications. We also have patents in 12 countries in Europe and Japan with
7 international patent applications in the following six non-United States countries: Japan, Australia, Korea, Canada, Europe
and India. We have more than 1,200 patent and patent pending claims as of May 4, 2021.
We
seek to establish and maintain our proprietary rights in our technology and products through a combination of patents, copyrights,
trademarks, trade secrets and contractual rights. We also seek to maintain our trade secrets and confidential information through
nondisclosure policies, the use of appropriate confidentiality agreements and other security measures. We have registered a number
of patents and trademarks in the United States and in other countries and have a number of patent filings pending determination.
There can be no assurance, however, that these rights can be successfully enforced against competitive products in any particular
jurisdiction. Although we believe the protection afforded by our patents, copyrights, trademarks, trade secrets and contracts
has value, the rapidly changing technology in the satellite and wireless communications industries and uncertainties in the legal
process make our future success dependent primarily on the innovative skills, technological expertise and management abilities
of our employees rather than on the protections afforded by patent, copyright, trademark and trade secret laws and contractual
rights.
Certain
of our products include software or other intellectual property licensed from third parties. While it may be necessary in the
future to seek or renew licenses relating to various aspects of our products, we believe, based upon past experience and standard
industry practice, that such licenses generally could be obtained on commercially reasonable terms. Nonetheless, there can be
no assurance that the necessary licenses would be available on acceptable terms, if at all.
The
industry in which we compete is characterized by rapidly changing technology, a large number of patents, and frequent claims and
related litigation regarding patent and other intellectual property rights. We cannot assure you that our patents and other proprietary
rights will not be challenged, invalidated or circumvented, that others will not assert intellectual property rights to technologies
that are relevant, or that our rights will give us a competitive advantage. In addition, the laws of some foreign countries may
not protect our proprietary rights to the same extent as the laws of the United States.
Competition
The
mobile satellite services industry at-large is highly competitive but has significant barriers to entry, including the cost and
difficulty associated with successfully developing, building and launching a satellite network and obtaining various governmental
and regulatory approvals. In addition to cost, there is a significant amount of lead time associated with obtaining the required
licenses, building and launching the satellite constellation, and developing and deploying the ground network technology. We currently
face substantial general competition from other service providers that offer a range of mobile and fixed communications options.
There are also a number of competitors working to develop innovative solutions to compete in this industry. In addition, while
we view our services as largely complementary to terrestrial wireline and wireless communications networks through our MNO partnerships,
we also compete with them indirectly.
We
face competition from other service providers that offer a range of mobile and fixed communications options, such as Inmarsat,
Globalstar, ORBCOMM, Thuraya Telecommunications Co. and Iridium Communications. In addition, we will face competition from companies
seeking to develop new LEO networks such as SpaceX’s Starlink, OneWeb and Amazon’s Kuiper. The key differentiator
between the SpaceMobile Service and all other LEO constellations and mobile satellite service providers is that we intend to connect
our SpaceMobile Service to standard, unmodified cellular phones without the requirement of special software ground terminals or
hardware all while utilizing the spectrum owned and licensed by the MNOs where as other LEO constellations and mobile satellite
service providers require a specific dedicated/proprietary terminal to access each network. In the case of the LEO operators,
a VSAT end-user terminal is used and with the mobile satellite service providers, a special purpose satellite phone is required.
We
also compete with regional mobile satellite communications services in several geographic markets. In these cases, the majority
of our competitors’ customers require regional, not global, mobile voice and data services, so competitors may present a
viable alternative to the SpaceMobile Service. These regional competitors operate or plan to operate geostationary satellites.
In some markets, we compete directly or indirectly with very small aperture terminal operators that offer communications services
through private networks using very small aperture terminals or hybrid systems to target business users. We also compete indirectly
with terrestrial wireline and wireless communications networks and to the extent that terrestrial communications companies invest
in underdeveloped areas, we may face increased competition in those areas.
Environmental
Matters
We
are subject to various laws and regulations relating to the protection of the environment and human health and safety, including
those governing the management, storage and disposal of hazardous materials, such as fuels and batteries, which may contain hazardous
materials. We could incur significant costs, including cleanup costs, fines, sanctions and third-party claims, as a result of
violations of or in connection with liabilities under environmental laws and regulations.
Facilities
We
currently operate from five leased locations that includes our corporate headquarters and 85,000 square foot satellite assembly,
integrating and testing facility in Midland, Texas and development offices or teams located in Maryland, Spain, the United Kingdom
and Israel. Also, our majority-controlled subsidiary, Nano, is located in Lithuania.
Employees
As
of April 30, 2021, we had 204 full-time employees and 11 part-time employees, none of whom are subject to any collective
bargaining agreement. We consider our employee relations to be good. Our success also depends, in part, on our continuing ability
to identify, hire, attract, train and develop other highly qualified personnel, in particular engineers. Experienced and highly
skilled employees are in high demand. Competition for these employees can be intense, and there may be concerns regarding new
employees’ unauthorized disclosure of competitors’ trade secrets. Our ability to hire, attract and retain employees
depends on our ability to provide competitive compensation. Because our satellites are based on a different technology platform
than traditional LEO satellites, individuals with sufficient training in our technology may not be available to hire. As a result,
we will need to expend significant time and expense training the employees we do hire. Generally, each employee is required to
sign a confidentiality, non-disclosure and non-use agreement with us.
Legal
Proceedings
From
time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
We are not currently party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse
impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances
that favorable outcomes will be obtained.
Key
Industrial and Wireless Infrastructure Provider Relationships
We
have relationships with both industrial partners and wireless infrastructure provider. A summary of our industrial and commercial
material relationships is below.
Relationships
with Industrial Partners
Inomize
Ltd. (“Inomize”)
In
June 2020, we entered into a design and manufacturing agreement with Inomize (the “Inomize DMA”) under which Inomize
will manufacture application-specific integrated circuit chips in accordance with our specifications for use in our satellite
program. The Inomize DMA amends and restates a previous agreement executed by the parties in November 2019. The manufacturing
will be conducted in stages, commencing with production readiness review and concluding with mass production; however, we have
the sole option to proceed or not proceed with the next stage. Furthermore, each stage has two sets of pricing based on design
architecture, which we will select in our sole discretion. We own all intellectual property rights in developed materials created
by Inomize under the Inomize DMA, excluding any Inomize background intellectual property and third party materials embedded in
such developed materials. However, we receive a perpetual, non-exclusive, irrevocable, royalty-free license to Inomize background
intellectual property. Furthermore, Inomize represents, warrants, and covenants to not enter into any new agreements with third
parties to provide services related to the “Field of Use” for 12 years from the earlier of the expiration of the Inomize
DMA or delivery of each stage. The “Field of Use” is defined as the provision of connectivity to devices for non-terrestrial,
high-altitude platform, space-based systems and satellites. Under the Inomize DMA, we provided Inomize with equity compensation
in the form of 15,000 AST Options to purchase Existing AST Common Units at an exercise price of $8.71, which AST Options converted
into AST Incentive Equity Unit to purchase 217,522 AST Common Units at a price of $0.6007 per unit at Closing. The vesting of
such options will occur on the date of the launch of our BW3 test satellite and subject to the delivery and acceptance of the
deliverables under the Inomize DMA. The term of the DMA ends when we have accepted all the deliverables under the last stage that
we elect to complete with Inomize.
Dialog
Semiconductor Operations Services Limited (“Dialog”)
In
September 2020, we entered into a design and manufacturing agreement with Dialog covering the first 20 BB1 satellites (the “Dialog
DMA”) under which Dialog will provide design and supply chain services for four radio frequency integrated chips (“RFIC’s”).
The services include the specification, design, fabrication, packaging, lab validation, qualification, production test development,
and mass production of the RFIC’s. These chips will be used in the front end modules for our equatorial and inclined orbit
constellations. The first two stages in the process consist of design non-recurring engineering activities and qualification/testing
and the third stage relates to production. Dialog has provided not-to-exceed pricing for the RFIC’s to be manufactured under
the Dialog DMA. Dialog owns all intellectual property rights in any circuity design components and process technology furnished
or developed by Dialog under the Dialog DMA; however, we receive a perpetual, non-exclusive, royalty-free, irrevocable license
to Dialog background intellectual property incorporated into any units produced for us by Dialog. Dialog will not enter into any
new agreements with third parties to provide services which Dialog knows are for the Field of Use. “Field of Use”
means radio frequency front end semiconductor devices specifically and solely for use in LEO satellite payloads which provide
direct radio connectivity using 2G/3G/4G LTE/5G mobile frequencies and standards between the satellites and standard, unmodified,
off-the-shelf mobile user equipment (i.e., mobile phone and mobile IoT equipment which is not modified in any way specific to
such satellite connectivity). Furthermore, Dialog is restricted from licensing in the Field of Use any Dialog background intellectual
property. These Field of Use restrictions can last as long as seven years from the day we accept delivery of the last increment
of Midband FEM integrated circuits, but may be shorter. The term of the Dialog DMA is five years.
SAFRAN
Electrical & Power USA LLC (“SAFRAN”) Purchase Orders
During
2019 and 2020, we entered into a number of purchase order agreements with SAFRAN (the “SAFRAN Agreements”). The SAFRAN
Agreements provide for SAFRAN to provide engineering, design and development services relating to the design, testing and assembly
of satellite componentry and other components of the SpaceMobile Service. We retain all rights in all intellectual property developed
under the SAFRAN Agreements.
Relationships
with Wireless Infrastructure Providers
Vodafone
Agreement
In
connection with that certain Amended and Restated Series B Preferred Shares Purchase Agreement dated as of February 4, 2020 (the
“Series B Purchase Agreement”), we and Vodafone agreed to enter into one or more definitive agreements for a commercial
partnership that is anticipated to use the SpaceMobile Service (the “Vodafone Commercial Agreements”). Under the Series
B Purchase Agreement, we agreed that we, our subsidiaries, and affiliates would not enter into any agreement, term sheet, or letter
of intent that grants another party the rights related to the provision of mobile services in the Vodafone markets or Vodafone
partner markets prior to the execution of the Vodafone Commercial Agreements.
The
Vodafone Commercial Agreements are to include mutual exclusivity, conditioned upon Vodafone making the SpaceMobile Service available
to all of its customers and certain promotional efforts, within all Vodafone markets for five years commencing on the launch of
a commercial service based on Phase 3 of the SpaceMobile Service; preferential commercial terms in Vodafone partner markets; 50/50
revenue share for the SpaceMobile Service in Vodafone exclusivity markets; and the procurement, building and operating of mobile
network ground stations at a mutually agreed cost by Vodafone. No payments have been made to date between us and Vodafone pursuant
to the anticipated Vodafone Commercial Agreements. Vodafone has the right to designate one individual to our Board of Directors.
Currently, Vodafone’s designee is Luke Ibbetson.
Also,
we entered into a side letter with Vodafone dated December 15, 2020, under which we have agreed (i) not to enter into any material
corporate strategic relationship or material commercial agreement with a party other than Vodafone and its affiliates that would
be reasonably expected to materially frustrate our ability to satisfy our obligations under the Vodafone Commercial Agreements
with certain exceptions, (ii) to allocate sufficient funds in the capital budget to facilitate compliance with our obligations
under the Vodafone Commercial Agreements; and (iii) not to alter our business plan in a manner that is materially detrimental
to our ability to satisfy our obligations under the Vodafone Commercial Agreements.
American
Tower Agreement
In
connection with the Series B Preferred Shares Purchase Agreement (the “Purchase Agreement”), we and American Tower
entered into a side letter agreement that was subsequently amended and restated on December 15, 2020 to reflect the transactions
and agreements contemplated by the Equity Purchase Agreement between us and NPA (the “Amended and Restated Letter Agreement”).
The Amended and Restated Letter Agreement contemplates that we and American Tower will enter into commercial agreements to use
American Tower facilities for our terrestrial gateway facilities in certain markets. Our space platform and gateway facilities
will provide MNOs with mobile service infrastructure in areas not well served by terrestrial networks. The term of the operational
agreement between us and American Tower is five years after the initial launch of commercial mobile services by us.
In
markets in which Vodafone operates, we will work with Vodafone and American Tower to evaluate and plan deployments with preferred
vendor status. The usage of any American Tower services in a Vodafone market will be memorialized in a commercial agreement among
all three parties. In markets where Vodafone does not operate (“Carrier Neutral Markets”), we and American Tower may
enter into an agreement for American Tower to manage the operation of our deployed gateway facility in such market. In Carrier
Neutral Markets where we require a third party to provide a gateway facility or services, we agree to not accept any bid that
is inferior to American Tower’s best and final proposal for such gateway facility or services. We also agree to use commercially
reasonable efforts to utilize American Tower facilities in (i) Vodafone markets where Vodafone decides to not use its facilities,
(ii) in Carrier Neutral Markets, and (iii) instances where we require a third-party vendor.
Additionally,
we will work with American Tower to evaluate and plan gateway facility and radio access network data center deployments with preferred
vendor status to offer carrier-neutral hosting facilities in certain equatorial markets. American Tower will serve as the preferred
vendor for carrier neutral hosting facilities. We will pay American Tower a monthly connection fee for use of a carrier neutral
hosting facility, which will be charged back to each applicable MNO. If we and American Tower agree to construct a new carrier
neutral hosting facility or improve an existing one and American Tower elects to fund all such capital expenditures, American
Tower will provide ATS with a fair-market, long-term lease to such facility.
Rakuten
Agreement
On
February 4, 2020, we entered into a commercial agreement with Rakuten, for our development of exclusive network capabilities in
Japan compatible with the mobile network of Rakuten and its affiliates, which agreement was amended and restated as of December
15, 2020 (the “Rakuten Agreement”). Under the terms of the Rakuten Agreement, we agreed to make investments in building
network capabilities in Japan that are compatible with the mobile network of Rakuten and its affiliates. Furthermore, we will
collaborate with Rakuten to ensure network capability with Rakuten’s licensed frequencies, including full coverage in Japan
with 3GPP Band 3 frequencies with MIMO capability. Upon the launch of such coverage, Rakuten will receive unlimited, exclusive
rights and usage capacity in Japan in exchange for a $500,000 annual maintenance fee payable to us or our successors. We will
make $5 million (or such lesser amount as mutually agreed upon the parties) in capital investments towards the design, construction,
acquisition and implementation of ground communication assets. We and Rakuten will receive unlimited rights and usage of the ground
assets for their respective operations, including, but not limited to, satellite and other telecommunication communications. The
Rakuten Agreement includes a commercial roadmap for our satellite launches with key performance indicators (“KPIs”)
that we must meet. If we do not meet the applicable KPIs for the last two phases of our satellite launch program in accordance
with such commercial roadmap or if we become subject to any bankruptcy proceeding or becomes insolvent, we shall pay to Rakuten
a penalty amount of $10 million.
The
term of the Rakuten Agreement shall remain in effect until we or our successor fulfill our obligations under the Rakuten Agreement.
No payments have been made to date between us and Rakuten under the Rakuten Agreement.
AT&T
Services, Inc. Memorandum of Understanding
In
August 2020, we and AT&T Services, Inc. (“AT&T”) entered into a binding memorandum of understanding (the “AT&T
Agreement”) to collaborate on the design, implementation, and launch of a space-mobile communications ecosystem (the “Satellite
System”). The AT&T Agreement sets forth certain key terms of a prospective subsequent commercial agreement (the “AT&T
Commercial Agreement”), including the roles and responsibilities of each party, although any AT&T Commercial Agreement
will be contingent upon further agreement between us and AT&T. Under the AT&T Agreement, we will design, develop, manufacture,
launch, manage, and maintain a constellation of 168 satellite to enable continuous satellite-based mobile wireless service across
the AT&T coverage area comprised of the continental United States, Hawaii, Puerto Rico, Mexico, and adjacent international
waters (the “Coverage Area”). AT&T will provide technical and commercial resources to work with us to develop
service and commercial offerings for the Coverage Area. AT&T will also give permission to the FCC to authorize us to test
the BW3 satellite under an experimental license on certain mobile bands.
Other
Memorandum of Understanding
We
have also entered into a memorandum of understanding with other MNOs, including Telefonica, S.A., Indosat Ooredoo, Millicom International
Cellular, Telecom Argentina, S.A., Telstra, Liberty Latin America Ltd. and others. These memorandums of understanding each generally
provide for a non-exclusive arrangement whereby we and the MNO collaborate on technology development and/or implementation with
respect to the SpaceMobile Service.
MANAGEMENT
Executive
Officers and Directors
Set
forth below are the names, ages and positions of each of the individuals who serve as our directors and executive officers as
of April 30, 2021:
|
Name
|
|
Age
|
|
Position
|
|
Executive
Officers
|
|
|
|
|
|
Abel
Avellan
|
|
50
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
Thomas
Severson
|
|
57
|
|
Chief
Financial Officer, Chief Operating Officer and Director
|
|
Brian
Heller
|
|
53
|
|
Executive
Vice President, General Counsel and Secretary
|
|
Rulfo
Hernandez
|
|
42
|
|
Chief
Accounting Officer
|
|
|
|
|
|
|
|
Non-Employee
Directors
|
|
|
|
|
|
Tareq
Amin
|
|
48
|
|
Director
|
|
Adriana
Cisneros(2)(3)
|
|
41
|
|
Director
|
|
Alexander
Coleman(1)(2)(4)
|
|
54
|
|
Director
|
|
Luke
Ibbetson
|
|
52
|
|
Director
|
|
Edward
Knapp
|
|
60
|
|
Director
|
|
Hiroshi
Mikitani
|
|
56
|
|
Director
|
|
Ronald
Rubin(1)
|
|
55
|
|
Director
|
|
Richard
Sarnoff(3)
|
|
62
|
|
Director
|
|
Julio
A. Torres(1)(2)(3)
|
|
55
|
|
Director
|
|
(1)
|
Member
of the audit committee, effective upon the completion of the Business Combination.
|
|
(2)
|
Member of the compensation
committee, effective upon the completion of the Business Combination.
|
|
(3)
|
Member of the nominating
and corporate governance committee, effective upon the completion of the Business Combination.
|
|
(4)
|
Member of the redemption
election committee, effective upon the completion of the Business Combination.
|
Executive
Officers
Abel
Avellan. Abel Avellan serves as our Chief Executive Officer and Chairman of our Board of Directors. Mr. Avellan is AST’s
Chairman, founder and Chief Executive Officer since its inception in 2017. Prior to founding AST, Mr. Avellan served as the founder
and Chief Executive Officer of Emerging Markets Communications (EMC), a satellite-based communications services provider to maritime
and other mobility markets, from 2000 until its sale to Global Eagle Entertainment Inc. in July 2016. Following the acquisition
of EMC, Mr. Avellan worked as the President and Chief Strategy Officer for Global Eagle Entertainment Inc. until April 2017. Mr.
Avellan has over 25 years of success in the space industry and is the co-inventor of 24 U.S. patents. He was the recipient of
the Satellite Transaction of the Year award by Euroconsult in 2015 and was named Satellite Teleport Executive of the Year in 2017.
Mr. Avellan has a BS in Electrical Engineering from Simón Bolivar University. We believe Mr. Avellan is qualified to serve
on our Board of Directors due to his expertise and years of success developing innovative space-based technologies and continually
proven engineering and management acumen.
Thomas
Severson. Thomas Severson serves as our Chief Financial and Operating Officer and a member of our Board of Directors.
Mr. Severson has served as AST’s Chief Financial Officer and Chief Operating Officer since October 2017. Prior to such time,
Mr. Severson served as the Executive Vice President and Chief Financial Officer of Emerging Markets Communications (EMC) from
2015 until its sale to Global Eagle Entertainment Inc. in July 2016. Mr. Severson continued in the same position for Global Eagle
Entertainment Inc. following the acquisition of EMC until February 2017. Prior to that, Mr. Severson worked as Chief Financial
Officer for a number of private and public companies, including Myxer Inc., The Nicklaus Companies, American Media, Inc., Paxson
Communications, Inc. and earlier in his career, was Chief Accounting Officer for Sinclair Broadcast Group Inc. and was a certified
public accountant in the audit assurance practice of KPMG. Mr. Severson graduated magna cum laude and has a Bachelor of Science
Degree in Accounting from the University of Baltimore. We believe Mr. Severson is qualified to serve on our Board of Directors
due to 20 years of diverse financial management in expertise in technology, media and telecommunications and years of success
involved in the operation of AST and previous companies.
Brian
Heller. Brian Heller serves as our Executive Vice President, General Counsel and Secretary. Mr. Heller has over twenty
years of public company experience. Mr. Heller joined AST as its Executive Vice President, General Counsel and Secretary in February
2021. Prior to joining AST, he served as General Counsel of Castle Brands Inc., a publicly-traded spirits company, from October
2008 until its sale to Pernod Ricard in October 2019, and as Senior Vice President - Business and Legal Affairs of Ladenburg Thalmann
Financial Services, a publicly-traded financial services company, from April 2007 until its sale to a portfolio company of Reverence
Capital Partners in May 2020. He joined Ladenburg from AOL Latin America, where he served as Associate General Counsel. Previously,
Mr. Heller was a Partner in the Corporate and Intellectual Property Departments at the Steel Hector & Davis law firm (now
Squire Patton Boggs) in Miami, Florida. Earlier in his career, he served as a law clerk to the Honorable James Lawrence King of
the United States District Court for the Southern District of Florida. Mr. Heller received his J.D., cum laude, from Georgetown
University Law Center, where he was Articles Editor of the Georgetown Law Journal, and his bachelor of science degree from Northwestern
University.
Rulfo
Hernandez. Rulfo Hernandez serves as our Chief Accounting Officer. Mr. Hernandez joined AST in February 2021 serving as
Chief Accounting Officer. Prior to joining AST, Mr. Hernandez worked at Opko Health Inc., serving as its Chief Accounting Officer
and Treasurer from July 2020 to February 2021 and as Controller from May 2014 to July 2020. Prior to joining Opko Health Inc.
Mr. Hernandez served in various roles at Pricewaterhousecoopers LLP from January 2002 to May 2014. Mr. Hernandez received a Master’s
degree from H. Wayne Huizenenga School of Business and Entrepreneurship and his bachelor’s degree from Andrés Bello
Catholic University.
Non-Employee
Directors
Tareq
Amin. Tareq Amin serves as a member of our Board of Directors. Since April 2019, Mr. Amin has served as Group Executive
Vice President and Chief Technology Officer of Rakuten, Inc., one of the world’s leading Internet service companies, and
has served as Chief Technology Officer of Rakuten Mobile, Inc., a subsidiary or Rakuten, Inc., since June 2018. Prior to joining
Rakuten Mobile, Inc., Mr. Amin served as Senior Vice President of Technology Development and Automation for Reliance Jio from
April 2013 to June 2018. Prior to that, he served as Vice President of Carrier Solutions for Huawei and as Senior Director of
National Planning & Performance at T-Mobile. Mr. Amin currently serves on the board of several private companies. Mr. Amin
holds a bachelor’s degree in electrical engineering and physics from Portland State University. We believe Mr. Amin is qualified
to serve on our Board of Directors based on his years of experience in the telecommunications industry.
Adriana
Cisneros. Adriana Cisneros serves as a member of our Board of Directors. Since September 2013, Ms. Cisneros has served
as the Chief Executive Officer of Cisneros, a global enterprise focused on media & entertainment, digital advertising solutions,
real estate, and social leadership, and she served as its Vice Chairman and Director of Strategy from September 2005 to August
2013. Since 2018, she has served on the board of directors of Mattel Inc. and also serves on numerous non-profit boards. Ms. Cisneros
holds a B.A. in journalism from Columbia University, a M.A. in Journalism from New York University and a degree in leadership
development from Harvard University Business School. We believe Ms. Cisneros is qualified to serve on our Board of Directors based
on her significant leadership experience in media, real estate, entertainment and digital and consumer products.
Alexander
Coleman. Alexander Coleman serves as a member of our Board of Directors. Alexander Coleman has 20 years of institutional
private equity experience, focused predominantly on U.S. based middle market companies. Most recently, Mr. Coleman has served
as the Chairman of New Providence Acquisition Corp. II since November 2020 and the Chairman of New Providence Acquisition Corp.
III since January 2021. He previously served as Chairman of NPA’s board from September 2019 until the closing of the Business
Combination in April 2021. Mr. Coleman is the founder and Managing Partner of Annex Capital Management LLC, a U.S. based private
equity group founded in 2004. Annex Capital focuses on making control investments in middle market companies in a broad array
of industries, and also acquires distressed debt and direct equity in the secondary market. Concurrently with Annex, Mr. Coleman
was a co-Head and Managing Partner of Citicorp Venture Capital, Citi’s New York based leveraged buyout fund. Mr. Coleman
was also a Managing Partner of Sea Hunter, a specialized fund focused on the evolving global cannabis market and a predecessor
to Tilt Holdings. Prior to these positions, from 1996 through to 2004, Mr. Coleman was a Managing Investment Partner and co-Head
of Dresdner Kleinwort Capital LLC, Dresdner Bank’s North American merchant banking group. While at Dresdner, Mr. Coleman
oversaw the bank’s U.S. based private equity businesses, which included control and minority equity investing, mezzanine,
distressed senior debt and, for a period of time, a fund-of-funds program. From 1989 to 1995, Mr. Coleman worked with several
groups while at Citi, including the Media Group, the Restructuring Group and Citicorp Venture Capital. Mr. Coleman has served
as a director and chairman of the board for numerous private and public companies, including Remy Inc., StackTeck Systems Ltd.,
Maxcess International, TeleCorp PCS, Hypercube (f/k/a KMC Telecom), Mrs. Field’s Famous Brands Inc., Gardenburger Inc.,
NurseFinders Inc., Waddington International, Inc. and JAC Products, Inc. Mr. Coleman received an MBA from the University of Cambridge
and a BA in Economics from the University of Vermont. We believe Mr. Coleman is qualified to serve on our Board of Directors based
on his experience leading companies across many industries.
Luke
Ibbetson. Luke Ibbetson serves as a member of our Board of Directors. Mr. Ibbetson has worked with Vodafone since 1996
and has lead the Vodafone Group Research and Development Organisation since 2013, which is responsible for all aspects of future
research, including trials of emerging technologies. Mr. Ibbetson serves on the board of several industry groups and initiatives,
including the 5G Automotive Alliance, and serves as Chairman of the Next Generation Mobile Networks Alliance Board Strategy committee,
Mr. Ibbetson holds a B.Sc. in electronic engineering and a M.Sc. in telecommunications from the University of Leeds. We believe
Mr. Ibbetson is qualified to serve on our Board of Directors based on his years of experience and commitment to innovative thinking
in the telecommunications industry.
Edward
Knapp. Edward Knapp serves as a member of our Board of Directors. Mr. Knapp currently serves as the corporate Chief Technology
Officer for American Tower Corporation. Prior to joining American Tower in 2017, Mr. Knapp served as Senior Vice President of
Engineering at Qualcomm, where he was responsible for Qualcomm’s New Jersey Corporate Research Center, from which he managed
a global engineering team of researchers and product engineering staff. He currently serves on the board of directors of the Center
for Automotive Research. Mr. Knapp holds a B.E. in electrical engineering from Stony Brook University, an M.S. in electrical engineering
from Polytechnic University (NYU) in New York, and an M.B.A. from Columbia University. We believe Mr. Knapp is qualified to serve
on our Board of Directors based on based on his more than thirty-eight years of communications technology experience and thirty
years of experience in the development of the global wireless industry.
Hiroshi
Mikitani. Hiroshi Mikitani serves as a member of our Board of Directors. Mr. Mikitani is the founder, Chairman and Chief
Executive Officer of Rakuten, Inc. Founded in 1997, Rakuten Inc. is one of the world’s leading Internet service companies.
In 2018, Mr. Mikitani was appointed Chief Executive Officer of Rakuten Medical, Inc., a biotechnology company developing the proprietary
Illuminox™ platform as a new standard in precision-targeted anti-cancer treatment technology, and he has also served as
Chairman and a director of the company since 2016. Mr. Mikitani has served as a member of the Lyft, Inc. board of directors since
March 2015 and currently serves on the boards of directors of a number of privately held companies. In 2011, he was appointed
Chairman of the Tokyo Philharmonic Orchestra. He also serves as Representative Director of the Japan Association of New Economy
(JANE). Mr. Mikitani holds a commerce degree from Hitotsubashi University and an M.B.A. from Harvard Business School. We believe
Mr. Mikitani is qualified to serve on our Board of Directors based on his extensive operating and management experience with major
technology companies.
Ronald
Rubin. Ronald Rubin serves as a member of our Board of Directors. Mr. Rubin is the Co-Founder and Managing Director Tower
Alliance, LLC, a leading provider of outsourced services to wireless infrastructure owners. Mr. Rubin is also the Co-Founder and
Managing Director of Southcom Holdings I, LLC, which oversees and implements wireless infrastructure investment and management
strategies in Latin America. Mr. Rubin served as Chief Financial Officer of Global Tower Partners from 2010 to 2013. Mr. Rubin
holds a B.S. in Accounting from American University and a M.S. in Taxation from Florida International University and is a Certified
Public Accountant. We believe Mr. Rubin is qualified to serve on our Board of Directors based on his years of experience in the
telecommunications industry.
Richard
Sarnoff. Richard Sarnoff serves as a member of our Board of Directors. Mr. Sarnoff is Partner at Kohlberg Kravis Roberts
& Company and leads its media, entertainment and education investing activities for US private equity. From 2014 through 2017,
Mr. Sarnoff served as Managing Director and Head of the Media and Communications industry group of Kohlberg Kravis Roberts &
Company, leading investments in the Media, Telecom, Digital Media and Education sectors in the US. Mr. Sarnoff currently serves
on the board of directors of Chegg, Inc. and of several private companies, as well as several not-for-profit organizations. Mr.
Sarnoff holds a B.A. in Art and Archeology from Princeton University and an M.B.A. from Harvard Business School. We believe Mr.
Sarnoff is qualified to serve on our Board of Directors based on his extensive experience serving in senior leadership roles,
and on the boards of directors of media and digital technology companies.
Julio
A. Torres. Julio A. Torres serves as a member of our Board of Directors. Mr. Torres has served as the managing partner
at Multiple Equilibria Capital, a financial advisory firm since March 2013. Mr. Torres has served as the Chief Executive Officer
and member of the board of directors of Andina Acquisition Corp. III since January 2019. From August 2015 to March 2018, Mr. Torres
served as Chief Executive Officer and a member of the board of directors of Andina Acquisition Corp. II, a blank check company
that consummated an initial business combination with Lazy Days’ R.V. Center, Inc. From October 2011 through January 2013,
Mr. Torres served as Co-Chief Executive Officer of Andina Acquisition Corp. He also served as a member of the board of Andina
1 from October 2011 until its merger in December 2013 with Tecnoglass Inc. and has continued to serve on the board of Tecnoglass
Inc. since such time. Mr. Torres also serves on the board of several international public companies. Mr. Torres graduated from
the Universidad de los Andes and received an M.B.A. from the Kellogg Graduate School of Management at Northwestern University
and a master in public administration from the J.F. Kennedy School of Government at Harvard University. We believe Mr. Torres
is qualified to serve on our Board of Directors based on his extensive operational and company governance experience.
Corporate
Governance
Composition
of the Board of Directors
The
business and affairs of our Company are managed under the direction of our Board of Directors. Our Board of Directors is chaired
by Mr. Avellan, and includes Thomas Severson, Adriana Cisneros, Hiroshi Mikitani, Luke Ibbetson, Tareq Amin, Edward Knapp, Richard
Sarnoff, Julio A. Torres, Alexander Coleman and Ronald Rubin, four of whom qualify as independent. Subject to the terms of the
Stockholders’ Agreement and our Charter and Bylaws, the number of directors will be fixed by the Board of Directors.
When
considering whether directors and director nominees have the experience, qualifications, attributes and skills, taken as a whole,
to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of its business and structure,
the Board of Directors expects to focus primarily on each person’s background and experience as reflected in the information
discussed in each of the directors’ individual biographies set forth above in order to provide an appropriate mix of experience
and skills relevant to the size and nature of its business.
In
connection with the Business Combination, we and the Stockholder Parties entered into the Stockholders’ Agreement. Pursuant
to the Stockholders’ Agreement, among other things, the AST Equityholders agreed to vote all securities of the Company that
may be voted in the election of our directors held by such AST Equityholders in accordance with the provisions of the Stockholders’
Agreement, and the Stockholder Parties agree to take all necessary action to cause Avellan to be the chairperson of our Board
of Directors until the Sunset Date.
Our
Board of Directors currently consists of 13 directors, with two director seats currently being vacant. Our equityholders may nominate
directors as follows: (a) Avellan may nominate seven members of our Board of Directors, which amount includes the two initial
vacancies for which Avellan will have the right, pursuant to the Stockholders’ Agreement, to designate directors for appointment
to such vacancies at any time, (b) Invesat, Vodafone Sponsor and American Tower each may nominate one member of our Board of Directors,
and (c) Rakuten USA may nominate two members of our Board of Directors. The AST Equityholders will agree to vote for each of the
foregoing nominees.
Avellan’s
right to nominate directors will decrease in proportion to the Key Holders’ ownership interests in the Company’s aggregate
outstanding voting power, such that if the Key Holders, at any point after the Closing Date: (i) own less than 50% of the Company’s
aggregate outstanding voting power of the Company, the Key Holders may only nominate five members of our Board of Directors, (ii)
own less than 40% of the aggregate outstanding voting power of the Company, the Key Holders may only nominate three members of
our Board of Directors, (iii) own less than 30% of the aggregate outstanding voting power of the Company, the Key Holders may
only nominate two members of our Board of Directors, (iv) own less than 20% of the aggregate outstanding voting power of the Company,
the Key Holders may only nominate one member of our Board of Directors, and (v) own less than 5% of the aggregate outstanding
voting power of the Company, the Key Holders will no longer be entitled to nominate any members of our Board of Directors. If
the size of our Board of Directors is increased or decreased, the number of members that Avellan may designate will increase or
decrease proportionately to the size of our Board of Directors.
Invesat’s
nomination right will terminate if it (together with its permitted transferees) ceases to hold at least 5% of the outstanding
Class A Common Stock of the Company (assuming exchange of all AST Common Units for shares of Class A Common Stock). Vodafone’s
nomination right will terminate if it (together with its permitted transferees) ceases to beneficially own either (a) at least
5% of the outstanding Class A Common Stock of the Company or (b) at least 50% of the Class A Common Stock held by it immediately
after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock). Sponsor’s nomination right
will terminate at the second annual meeting of the stockholders of the Company following the Closing. American Tower’s nomination
right will terminate if it (together with its permitted transferees) ceases to hold at least 50% of the Class A Common Stock held
by it immediately after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock). Rakuten USA’s
nomination right with respect to its first designee will terminate if it (together with its permitted transferees) ceases to hold
either (i) at least 5% of the outstanding Class A Common Stock of the Company or (ii) at least 50% of the Class A Common Stock
held by it immediately after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock), and Rakuten
USA’s nomination right with respect to its second designee will terminate if it (together with its permitted transferees)
ceases to hold at least 10% of the outstanding Class A Common Stock of the Company (assuming exchange of all AST Common Units
for shares Class A Common Stock).
Director
Independence
We
are required to comply with the applicable rules of Nasdaq in determining whether a director is independent. Prior to the completion
of the Business Combination, the parties undertook a review of the independence of the individuals named above and have determined
that each of Adriana Cisneros, Alexander Coleman, Ronald Rubin and Julio A. Torres qualifies as “independent” as defined
under the applicable Nasdaq rules.
Controlled
Company Exception
As
of the date of this prospectus, the Key Holders hold all of the Class C Common Stock, which prior to the Sunset Date will entitle
such holders to cast the lesser of 10 votes per share and the Class C Share Voting Amount, the latter of which is a number of
votes per share equal to (1) (x) an amount of votes equal to 88.31% of the total voting power of our outstanding voting stock,
minus (y) the total voting power of our outstanding capital stock owned or controlled by the Key Holders, divided by (2) the number
of shares of our Class C Common Stock then outstanding. As a result, as of the date of this prospectus, the Key Holders control
approximately 88.3% of the combined voting power of our Common Stock, and may control a majority of our voting power so long as
the Class C Common Stock represents at least 9.1% of our total Common Stock. The practical effect of the formula used to calculate
the Class C Share Voting Amount is that it will cap the aggregate voting power of the Class C Common Stock so that, in most scenarios,
the voting power of the Class C Common Stock will not increase, or will increase more slowly than it would otherwise in the event
the Class C holders acquire additional voting stock in the Company. As a result, the Key Holders control approximately 88.3% of
the combined voting power of the Common Stock, and may control a majority of the voting power of the Company so long as the Class
C Common Stock represents at least 9.1% of our total Common Stock. As a result of the Key Holders’ holdings, we qualify
as a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a
listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled
company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i)
a majority of our Board of Directors consist of independent directors, (ii) we have a compensation committee that is composed
entirely of independent directors and (iii) director nominees be selected or recommended to our Board of Directors by independent
directors.
We
rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors
and our directors will not be nominated or selected solely by independent directors. We may also rely on the other exemptions
so long as we qualify as a controlled company. To the extent we rely on any of these exemption, holders of Class A Common Stock
will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements
of Nasdaq.
Audit
Committee
Our
audit committee is responsible for, among other things:
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appointing,
compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
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discussing
with our independent registered public accounting firm their independence from management;
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reviewing,
with our independent registered public accounting firm, the scope and results of their audit;
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approving
all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
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overseeing
the financial reporting process and discussing with management and our independent registered public accounting firm the quarterly
and annual financial statements that we file with the SEC;
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overseeing
our financial and accounting controls and compliance with legal and regulatory requirements;
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reviewing
our policies on risk assessment and risk management;
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reviewing
related person transactions; and
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establishing
procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing
matters.
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Our
audit committee consists of Messrs. Torres, Coleman and Rubin, with Mr. Torres serving as chair. The parties have affirmatively
determined that each member of the audit committee qualifies as independent under Nasdaq rules applicable to board members generally
and under Nasdaq rules and Exchange Act Rule 10A-3 specific to audit committee members. All members of our audit committee meet
the requirements for financial literacy under the applicable Nasdaq rules. In addition, each of Messrs. Rubin and Torres qualifies
as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. Our Board of
Directors has adopted a written charter for the audit committee, which is available on our corporate website at https://investors.ast-science.com.
The information on any of our websites is deemed not to be incorporated in this prospectus or to be part of prospectus.
Compensation
Committee
Our
compensation committee will be responsible for, among other things:
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reviewing
and approving the corporate goals and objectives, evaluating the performance of and reviewing and approving, (either alone
or, if directed by our Board of Directors, in conjunction with a majority of the independent members of our Board of Directors)
the compensation of our Chief Executive Officer, and the Chief Executive Officer may not be present during voting or deliberations
on his compensation;
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overseeing
an evaluation of the performance of and reviewing and setting or making recommendations to our Board of Directors regarding
the compensation of our other executive officers;
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reviewing
and approving or making recommendations to our Board of Directors regarding our incentive compensation and equity-based plans,
policies and programs;
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reviewing
and approving all employment agreement and severance arrangements for our executive officers;
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making
recommendations to our Board of Directors regarding the compensation of our directors; and
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retaining
and overseeing any compensation consultants.
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Our
compensation committee consists of Ms. Cisneros and Messrs. Coleman and Torres, with Mr. Coleman serving as chair. Our Board of
Directors has affirmatively determined that each of Ms. Cisneros and Messrs. Coleman and Torres qualifies as independent under
Nasdaq rules and is a “non-employee director” as defined in Rule 16b-3 of the Exchange Act. Our Board of Directors
has adopted a written charter for the compensation committee, which is available on our corporate website at https://investors.ast-science.com.
The information on any of our websites is deemed not to be incorporated in this prospectus or to be part of this prospectus.
Nominating
and Corporate Governance Committee
Our
nominating and corporate governance committee will be responsible for, among other things:
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identifying
individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors;
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overseeing
succession planning for our Chief Executive Officer and other executive officers;
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periodically
reviewing our Board of Directors’ leadership structure and recommending any proposed changes to our Board of Directors;
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overseeing
an annual evaluation of the effectiveness of our Board of Directors and its committees; and
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developing
and recommending to our Board of Directors a set of corporate governance guidelines.
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Our
nominating and corporate governance committee consists of Ms. Cisneros and Messrs. Sarnoff and Torres, with Mr. Sarnoff serving
as chair. The parties have affirmatively determined that each of Ms. Cisneros and Mr. Torres qualifies as independent under Nasdaq
rules. Our Board of Directors has adopted a written charter for the nominating and corporate governance committee, which is available
on our corporate website at https://investors.ast-science.com. The information on any of our websites is deemed not to
be incorporated in this prospectus or to be part of this prospectus.
Redemption
Election Committee
Our
redemption election committee will be responsible for determining whether, in connection with the redemption of AST Common Units
by a holder thereof, we, in our capacity as managing member of AST, should elect to redeem such AST Common Units for cash or shares
of Class A Common Stock. Our redemption election committee must be comprised solely of directors who were not nominated under
the Stockholders’ Agreement or other contractual right by, and are not otherwise affiliated with, any holder of Class B
Common Stock or Class C Common Stock, and currently consists of Mr. Coleman. Under the Stockholders’ Agreement, the Stockholder
Parties have agreed that, until such date as the Stockholder Parties collectively control less than 50% of the total voting power
of the Company, (i) the Stockholder Parties will take all necessary action to cause the Company and our Board of Directors to
maintain the Redemption Election Committee of our Board of Directors and its delegated powers and (ii) the provisions of the Stockholders’
Agreement relating to the Redemption Election Committee cannot be amended without the express approval of the Redemption Election
Committee. Our Board of Directors has adopted a written charter for the redemption election committee, which is available on our
corporate website at https://investors.ast-science.com. The information on any of our websites is deemed not to be incorporated
in this prospectus or to be part of this prospectus.
Code
of Ethics
We
have a code of ethics that applies to all of our executive officers, directors and employees, including our principal executive
officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The
code of ethics is available on our corporate website at https://investors.ast-science.com. We intend to make any legally
required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on its website rather than by filing
a Current Report on Form 8-K.
Risk
Oversight
Our
Board of Directors is responsible for overseeing our risk management process. Our Board of Directors focuses on our general risk
management strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management.
Our audit committee is also responsible for discussing our policies with respect to risk assessment and risk management. Our Board
of Directors believes its administration of its risk oversight function has not negatively affected our Board of Directors’
leadership structure.
Compensation
Committee Interlocks and Insider Participation
None
of our executive officers has, during the last year, participated in deliberations of our Board of Directors concerning executive
officer compensation. None of our executive officers currently serves, or has served during the last year, as a member of the
board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our
Board of Directors.
EXECUTIVE
AND DIRECTOR COMPENSATION
AST
Officer Compensation
This
section discusses the material components of the executive compensation program for AST’s executive officers who are named
in the “2020 Summary Compensation Table” below. In fiscal year 2020, AST’s “named executive officers”
and their positions were as follows:
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Abel
Avellan, Chairman of the Board and Chief Executive Officer; and
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Thomas
Severson, Chief Financial Officer and Chief Operating Officer.
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2020
Summary Compensation Table
The
following table sets forth information concerning the compensation of the named executive officers for the year ended December
31, 2020.
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Name and Principal Position
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Year
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Salary
($)
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Bonus
($)
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Option
Awards
($)(1)
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All Other
Compensation
($)
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Total
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Abel Avellan
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2020
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35,838
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—
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—
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—
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35,838
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Chairman of the Board and Chief Executive Officer
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2019
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23,770
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—
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—
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—
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23,770
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Thomas Severson
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2020
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220,313
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(2)
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—
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—
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—
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220,313
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Chief Financial Officer and Chief Operating Officer
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2019
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114,869
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—
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63,732
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—
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178,601
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(1)
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Amounts
reflect the full grant-date fair value of options covering Existing AST Common Units granted in the applicable year computed
in accordance with the FASB’s ASC Topic 718, rather than the amounts paid to or realized by the named individual. We
provide information regarding the assumptions used to calculate the value of all option awards made to executive officers
in Note 10 to the Consolidated Financial Statements of AST included herein.
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(2)
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Effective
as of January 7, 2020, Mr. Severson’s annual base salary increased from $120,000 to $225,000.
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Narrative
Disclosure to Summary Compensation Table
2020
Salaries
The
AST named executive officers receive their respective base salaries to compensate them for services rendered to AST. The base
salary payable to each named executive officer is intended to provide a fixed component of compensation, and for Mr. Severson,
reflects the executive’s skill set, experience, role and responsibilities. Mr. Avellan, AST’s Chief Executive Officer,
has historically asked not to be paid any base salary in excess of applicable minimum wage requirements under federal law and,
as such, has received substantially below-market base salary.
The
2020 annualized base salaries for Messrs. Avellan and Severson were $35,568 and $225,000, respectively. In January 2020, the AST
board of directors approved an increase to Mr. Severson’s annual base salary from $120,000 to $225,000, effective as of
January 7, 2020, based on Mr. Severson’s increased responsibilities and individual performance. Additionally, the AST board
of directors approved an increase to Mr. Severson’s annual base salary from $225,000 to $250,000, effective upon the completion
of the Business Combination, to better align Mr. Severson’s base salary to that of other similarly-situated executives in
AST’s market. Mr. Avellan has agreed that following the Business Combination, he will not initially draw a salary from SpaceMobile.
Equity
Compensation
The
goals of AST’s long-term, equity-based incentive awards are to align the interests of AST’s executive’s with
the interests of stockholders. Because vesting is based on continued service, equity-based incentives also foster the retention
of AST executives during the award vesting period. To reward and retain AST executives in a manner that aligns their interests
with stockholders’ interests, AST has historically used stock options as the primary incentive vehicle for long-term compensation.
Because employees realize value from stock options only if AST’s stock price increases relative to the stock option’s
exercise price, AST believes stock options provide meaningful incentives to achieve increases in the value of AST stock over time,
thus further aligning the interests of our executives and other option recipients with the interests of our shareholders.
Mr.
Severson, one of AST’s two named executive officers, currently holds AST Options. AST Options generally vest over five years,
with 1/5th of the total number of Existing AST Common Units subject to the AST Option vesting on the one-year anniversary
of the employee’s start date or grant date, as applicable, and the remaining Existing AST Common Units subject to the AST
Option vesting in equal monthly installments over the ensuing 48 months, subject to the employee’s continued service with
AST on the vesting date. AST Options generally expire 10 years from the date of grant.
None
of AST’s named executive officers received any stock options or other incentive equity awards during fiscal year 2020.
In
April 2019, the AST board of directors approved an option grant to Mr. Severson covering 108,000 Existing AST Common Units at
an exercise price of $0.93 per unit which was determined at that time to equal the fair market value of an Existing AST Common
Unit on the grant date, and subject to AST’s standard five-year vesting schedule as noted above. Mr. Severson’s AST
Option will vest in full immediately prior to the completion of a change in control (as defined in the award agreement), subject
to Mr. Severson’s continued service until such event.
In
connection with the Business Combination, the Existing AST Common Units subject to the award granted to Mr. Severson were converted
into 1,566,161 AST Incentive Equity Units at an exercise price of approximately $0.06 per unit. Each AST Incentive Equity Unit
received by Mr. Severson will be redeemable for one share of Class A Common Stock on the later of the (i) 24-month anniversary
of the completion of the Business Combination and (ii) six-month anniversary of the vesting date.
Equity
Compensation Plans
AST
Incentive Plan
AST
currently maintains the AST Incentive Plan to provide additional incentives for employees, directors and consultants of AST, and
to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important
to AST’s success. Prior to the completion of the Business Combination, AST offered options covering Existing AST Common
Units to AST’s employees, including one of its named executive officers, as the long-term incentive component of the compensation
program. In connection with the completion of the Business Combination, no further awards will be granted under the AST Incentive
Plan. However, the AST Incentive Plan will continue to govern the terms and conditions of the outstanding awards granted under
it.
SpaceMobile
2020 Incentive Award Plan
In
connection with the Business Combination, our Board of Directors adopted, and our stockholders approved, the AST SpaceMobile,
Inc. 2020 Incentive Award Plan, or the 2020 Plan, to facilitate the grant of cash and equity incentives to qualified directors,
employees (including named executive officers) and consultants of ours and certain affiliates, and to enable us and certain affiliates
to obtain and retain services of these individuals, which is essential to our long-term success. For additional information about
the 2020 Plan, please see the section titled “— SpaceMobile 2020 Incentive Award Plan” below.
Other
Elements of Compensation
401(k)
Plan
AST
currently maintains a 401(k) retirement savings plan for its employees, including named executive officers, who satisfy certain
eligibility requirements. Named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time
employees. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax
basis through contributions to the 401(k) plan. Currently, AST does not match contributions made by participants in the 401(k)
plan. AST believes that providing a vehicle for tax-deferred retirement savings through AST’s 401(k) plan adds to the overall
desirability of its executive compensation package and further incentivizes AST’s employees, including named executive officers,
in accordance with its compensation policies.
Employee
Benefits and Perquisites
Health/Welfare
Plans. All of AST’s full-time employees, including named executive officers, are eligible to participate in AST’s
health and welfare plans, including:
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medical,
dental and vision benefits;
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medical
and dependent care flexible spending accounts;
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●
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short-term
and long-term disability insurance; and
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life
insurance.
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AST
also maintains a key man life insurance policy for Mr. Avellan, which provides for $5 million payable to AST. AST believes the
perquisites described above are necessary and appropriate to provide a competitive compensation package to its named executive
officers.
No
Tax Gross-Ups
AST
has no obligations to make gross-up payments to cover named executive officers’ personal income taxes that may pertain to
any of the compensation or perquisites paid or provided by AST.
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the number of Existing AST Common Units underlying outstanding equity incentive plan awards for each
named executive officer as of December 31, 2020.
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Option
Awards(1)
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Name
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Grant
Date
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Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
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Option
Exercise Price
($)
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Option
Expiration
Date
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|
Abel Avellan
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—
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—
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—
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—
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—
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Thomas Severson
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04/17/2019
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68,400
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39,600
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(2)
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0.93
|
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04/17/2029
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(1)
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In
connection with the Business Combination, and assuming an exchange ratio of one Existing AST Common Unit for 14.50149869 shares
of Class A Common Stock, the Existing AST Common Units subject to the award granted to Mr. Severson were converted into
1,566,161 AST Incentive Equity Units at an exercise price of approximately $0.06 per unit.
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(2)
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The
option vests over five years, with 1/5th of the total number of Existing AST Common Units subject to the option
vesting on the one-year anniversary of Mr. Severson’s start date of October 1, 2017 and the remaining Existing AST Common
Units subject to the option vesting in equal monthly installments over the ensuing 48 months, subject to Mr. Severson’s
continued service on the applicable vesting date. The option will vest in full immediately prior to the completion of a change
in control (as defined in the award agreement), subject to Mr. Severson’s continued service until such event.
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Executive
Compensation Arrangements
Offer
Letter with Abel Avellan
On
July 18, 2018, AST entered into an offer letter with Mr. Avellan, AST’s Chairman and Chief Executive Officer. Pursuant to
the offer letter, Mr. Avellan receives an annual base salary of $23,770 and is eligible to participate in AST’s customary
health, welfare and fringe benefit plans. In addition, on December 15, 2017, Mr. Avellan entered into AST’s form Nondisclosure,
Confidentiality, Assignment and Noncompetition Agreement containing certain restrictive covenants, including non-compete and non-solicitation
restrictions for a period of one year following a termination or cessation of employment for any reason. Mr. Avellan has agreed
that following the Business Combination, he will not initially draw a salary from SpaceMobile.
Offer
Letter with Thomas Severson
On
March 30, 2018, AST entered into an offer letter with Mr. Severson, AST’s Chief Financial Officer and Chief Operating Officer.
Under the offer letter, Mr. Severson receives an annual base salary of $120,000, which was increased to $225,000, effective as
of January 7, 2020, based on Mr. Severson’s increased responsibilities and his overall performance and which was further
increased to $250,000, effective upon the completion of the Business Combination, to better align Mr. Severson’s base salary
to that of other similarly-situated executives in AST’s market. Mr. Severson is also eligible to participate in AST’s
customary health, welfare and fringe benefit plans. Also, on December 15, 2017, Mr. Severson entered into AST’s form Nondisclosure,
Confidentiality, Assignment and Noncompetition Agreement containing certain restrictive covenants, including non-compete and non-solicitation
restrictions for a period of one year following a termination or cessation of employment for any reason.
Director
Compensation
Historically,
AST has not paid cash or stock-based compensation to directors for their service on the board of directors of AST. However, in
April 2019, the AST board of directors did approve an option grant to Ms. Cisneros covering 50,000 Existing AST Common Units,
as further detailed below.
The
following table sets forth information for the fiscal year ended December 31, 2020 regarding the compensation awarded to, earned
by or paid to the non-employee directors of AST who served on the AST board of directors during fiscal year 2020.
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Name(1)
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Fees
Earned or
Paid in Cash
($)
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Option
Awards
($)
|
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Total
($)
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Adriana Cisneros
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—
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—
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—
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Luke Ibbetson
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—
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—
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—
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Hiroshi Mikitani(2)
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—
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|
—
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|
|
—
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|
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Tareq Amin(2)
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—
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|
|
—
|
|
|
|
—
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|
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(1)
|
Mr.
Avellan, Chairman of the AST board of directors and Chief Executive Officer and Mr. Severson, AST’s Chief Financial Officer
and Chief Operating Officer, are not included in this table, as each was an employee of AST in 2020 and did not receive compensation
for services as a director. All compensation paid to Messrs. Avellan and Severson for their services provided to AST in 2020 is reflected
in the Summary Compensation Table.
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|
(2)
|
Messrs.
Mikitani and Amin were appointed to the AST board on February 4, 2020.
|
As
of December 31, 2020, Ms. Cisneros held a stock option covering 50,000 Existing AST Common Units. None of the other non-employee
members of the AST board held outstanding equity awards as of December 31, 2020.
In
April 2019, the AST board of directors approved an option grant to Ms. Cisneros covering 50,000 Existing AST Common Units at an
exercise price of $0.93 per unit which was determined at that time to equal the fair market value of an Existing AST Common Unit
on the grant date. The option vests over five years, with 1/5th of the total number of AST Common Units subject to
the option vesting on November 5, 2019 and the remaining Existing AST Common Units subject to the option vesting in equal monthly
installments over the ensuing 48 months, subject to Ms. Cisneros’ continued service on the applicable vesting date. In addition,
the option will vest in full immediately prior to the completion of a change in control (as defined in the award agreement), subject
to Mr. Cisneros’ continued service until such event.
In
connection with the Business Combination, and assuming an exchange ratio of one Existing AST Common Unit to 14.50149869 shares
of Class A Common Stock, the Existing AST Common Units subject to the award granted to Ms. Cisneros were converted into 725,074
AST Incentive Equity Units at an exercise price of approximately $0.06 per unit. Each AST Incentive Equity Unit received by Ms.
Cisneros will be redeemable for one share of Class A Common Stock on the later of the (i) 24-month anniversary of the completion
of the Business Combination and (ii) six-month anniversary of the vesting date.
Post-Business
Combination Director Compensation Program
In
connection with the completion of the Business Combination, we approved and implemented a compensation program that consists of
annual retainer fees and long-term equity awards for the non-employee directors of our Board of Directors who are not affiliated
with Invesat LLC, Vodafone Ventures Limited, ATC TRS II LLC and Rakuten, or any of their affiliates (the “Director Compensation
Program”). The initial eligible directors will be Messrs. Coleman, Rubin, Sarnoff and Torres. The material terms of the
contemplated Director Compensation Program are summarized below.
The
Director Compensation Program consists of the following components:
Cash
Compensation
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●
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Annual
Retainer: $50,000
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●
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Annual
Committee Chair Retainer:
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Audit:
$20,000
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●
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Compensation:
$15,000
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●
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Nominating
and Corporate Governance: $10,000
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●
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Annual
Committee Member (Non-Chair) Retainer:
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●
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Audit:
$10,000
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●
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Compensation:
$7,500
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●
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Nominating
and Corporate Governance: $5,000
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Annual
cash retainers will be paid in quarterly installments in arrears and will be pro-rated for any partial calendar quarter of service.
Equity
Compensation
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●
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Initial
Grant: Each eligible director who was initially elected or appointed to serve on our Board of Directors after the completion
of the Business Combination was automatically granted a restricted stock unit award with a value of approximately $150,000
on the date on which such eligible director was appointed or elected to serve on our Board of Directors, which will vest in
full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the annual
meeting of the stockholders following the grant date, subject to such eligible director’s continued service through
the vesting date.
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●
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Annual
Grant: Further, an eligible director who is serving on the SpaceMobile Board as of the date of the annual meeting of the
stockholders each calendar year beginning with calendar year 2022 will be automatically granted, on such annual meeting date,
a restricted stock unit award with a value of approximately $150,000, which will vest in full on the earlier to occur of (i)
the one-year anniversary of the applicable grant date and (ii) the date of the next annual meeting following the grant date,
subject to the director’s continued service through the applicable vesting date.
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In
addition each such award will vest in full upon a change in control of SpaceMobile (as defined in the 2020 Plan).
Compensation
under the Director Compensation Program is subject to the annual limits on non-employee director compensation set forth in the
2020 Plan.
Equity
Incentive Award Plans
The
following summarizes the material terms of the AST Incentive Plan, under which AST has previously made periodic grants of equity
and equity-based awards to named executive officers and other key employees, and the 2020 Plan.
AST
Incentive Plan
In
April 2019, AST’s board of directors adopted, and its shareholders approved, the AST Incentive Plan.
A
total of 883,561 Existing AST Common Units are reserved for issuance under the AST Incentive Plan. As of December 31, 2020, 882,273
Existing AST Common Units were subject to outstanding options under the AST Incentive Plan and 1,288 Existing AST Common Units
remained available for future issuance under the AST Incentive Plan.
After
the effective date of the 2020 Plan no additional awards will be granted under the AST Incentive Plan. However, outstanding awards
granted under the AST Incentive Plan will remain outstanding, subject to the terms of the AST Incentive Plan and applicable award
agreement.
In
connection with the Business Combination, and upon the effectiveness of the A&R Operating Agreement, the AST Incentive Plan
was amended such that any Existing AST Common Units reserved for issuance or subject to outstanding AST Options were reclassified
into new AST Incentive Equity Units, and the number of AST Incentive Equity Units reserved for issuance or subject to outstanding
options was adjusted, such that, based on the exchange ratio of one Existing AST Common Unit to 14.50149869 shares of Class A
Common Stock, as of the date of the completion of the Business Combination, an aggregate of approximately 12,812,959 AST Incentive
Equity Units was reserved for issuance and approximately 12,794,281 AST Incentive Equity Units were subject to outstanding AST
Options under the AST Incentive Plan. Except as otherwise provided by the AST board of directors, each AST Incentive Equity Unit
will be redeemable for one share of Class A Common Stock on the later of the (i) 24-month anniversary of the completion of the
Business Combination and (ii) six-month anniversary of the vesting date.
Administration.
The AST board or directors administers the AST Incentive Plan. Subject to the terms and conditions of the AST Incentive Plan,
the administrator has the authority to determine the participants and the time or times at which awards may be granted, determine
the number of shares to be covered by each award, impose such terms, limitations, restrictions and conditions upon any such award,
including, but not limited to, those relating to the vesting of awards, if any, modify or amend outstanding awards (provided however
that any modification that would materially adversely affect any outstanding award will not be made without the consent of the
holder), and to take all other actions necessary or advisable for the administration of the AST Incentive Plan.
Eligibility.
Awards may be granted to individuals who are then AST employees, consultants and members of AST’s board of directors.
Awards.
The AST Incentive Plan permits the award of AST Options and awards of incentive shares. Each award is set forth in a separate
agreement with the person receiving the award and indicates the type, terms and conditions of the award. Each award is also subject
to forfeiture or AST’s right to repurchase vested Existing AST Common Units or incentive shares.
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●
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Options.
AST Options provide for the right to purchase Existing AST Common Units or incentive shares at a specified price which may
not be less than the fair market value of an Existing AST Common Unit on the date of grant, and usually will become exercisable
(at the discretion of AST’s board of directors) in one or more installments after the grant date, subject to the participant’s
continued employment or service with AST and/or subject to the satisfaction of performance targets established by AST’s
board of directors. AST Options may be granted for any term specified by AST’s board of directors, but the term may
not exceed 10 years.
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●
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Incentive
Shares. Incentive share awards are awards of nontransferable incentive shares of AST, which are intended to constitute
“profits interests” within the meaning of the relevant IRS Revenue Procedure guidance and that remain forfeitable
unless and until specified conditions are met. Awards of incentive shares are subject to the applicable terms and conditions
of the AST Incentive Plan and may be subject to any other terms and conditions as determined by AST’s board of directors.
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Certain
Transactions. In the event certain transactions and events affecting Existing AST Common Units, such as a dividend, split-up
or any other recapitalization or any extraordinary cash dividend, reorganization, merger, consolidation, spin-off, exchange of
Existing AST Common Units or other similar capital change, affects the Existing AST Common Units such that adjustment is required
in order to preserve the benefits or potential benefits of the AST Incentive Plan or any AST Option granted under the AST Incentive
Plan, the AST board or directors shall appropriately adjust (i) the number and kind of Existing AST Common Units or securities
that may be issued under the AST Incentive Plan, (ii) the number and kind of Existing AST Common Units subject to outstanding
awards, and (iii) the exercise price or repurchase price of incentive shares.
Additionally,
in the event of a merger or consolidation, or in the event of a sale of all or substantially all Existing AST Common Units or
assets, or in the event of a conversion of AST into a corporation, all Existing AST Common Units acquired under the AST Incentive
Plan and all AST Options and other awards outstanding on the effective date of the transaction shall be treated as described in
the definitive transaction agreement, which may include one or more of the following: (i) the continuation of outstanding rights
(if AST is the surviving entity); (ii) the substitution by the surviving entity or its parent of rights with substantially the
same terms for such outstanding rights; (iii) the cancellation of such outstanding rights without payment of any consideration
or in exchange for an amount in cash or other property with a value equal to the amount that would have been obtained upon exercise
or settlement of the vested portion of such award or realization of the participant’s rights under the vested portion of
such award; (iv) the suspension of the right to exercise any AST Options during a limited period of time preceding the closing
of the transaction if such suspension is administratively necessary to permit the closing of the transaction; and (v) the termination
of any rights to exercise AST Options prior to vesting, such that following the closing of the transaction options may only be
exercised to the extent vested. In the event the transaction or event does not entail a definitive agreement to which AST is party,
all outstanding rights shall be treated in the manner determined by the AST board or directors.
Amendment
or Termination of the AST Incentive Plan. AST’s board of directors may amend or terminate the AST Incentive Plan at
any time. However, the AST board of directors will determine whether stockholder approval of any amendment to the AST Incentive
Plan must be obtained to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule.
As described above, after the effective date of the 2020 Plan, no additional awards will be granted under the AST Incentive Plan.
SpaceMobile
2020 Incentive Award Plan
In
connection with the Business Combination, NPA’s board of directors adopted, and NPA’s stockholders approved, the 2020
Plan.
SpaceMobile
2020 Employee Stock Purchase Plan (the “ESPP”)
In
connection with the Business Combination, NPA’s board of directors adopted, and NPA’s stockholders approved, the ESPP.
Business
Combination-Related Compensation
The
information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of
information about certain compensation for each of AST’s named executive officers that is based on or otherwise relates
to the Business Combination. Please note that the amounts indicated below are estimates based on the material assumptions described
in the notes to the table below, which may or may not actually occur.
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Name
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Cash
($)
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Equity
($)
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Other(1)
($)
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Total
($)
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Abel Avellan
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—
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—
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—
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—
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Thomas Severson
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—
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—
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350,000
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350,000
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(1)
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Amount
in this column reflects a discretionary transaction bonus the AST board of directors awarded to Mr. Severson in connection with the
Business Combination in recognition of his efforts towards the completion of the Business Combination.
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DESCRIPTION
OF CAPITAL STOCK
The
following summary of the material terms of our capital stock is not intended to be a complete summary of the rights and preferences
of such securities. The full text of the Charter and Bylaws are included as exhibits to the registration statement of which this
prospectus forms a part. You are encouraged to read the applicable provisions of Delaware law, the Charter and the Bylaws in their
entirety for a complete description of the rights and preferences of our securities.
Authorized
and Outstanding Capital Stock
Our
Charter authorizes the issuance of 1,225,000,000 shares, of which 800,000,000 shares are shares of Class A Common Stock, par value
$0.0001 per share, 200,000,000 shares are shares of Class B Common Stock, par value $0.0001 per share, 125,000,000 shares are
shares of Class C Common Stock, par value $0.0001 per share, and 100,000,000 shares are shares of preferred stock, par value $0.0001
per share.
As
of May 5, 2021, we had approximately 51,729,704 shares of Class A Common Stock, 51,636,922 shares of Class B Common Stock, 78,163,078
shares of Class C Common Stock and warrants to purchase 17,600,000 shares of Class A Common Stock, issued and outstanding. As
of such date, there were 28 holders of record of Class A Common Stock, seven holders of record of Class B Common Stock, one holder
of record of Class C Common Stock and two holders of record of warrants.
Common
Stock
Voting
Under
our Charter, holders of Class A Common Stock, Class B Common Stock and Class C Common Stock will vote together as a single class
on all matters submitted to the stockholders for their vote or approval, except as required by applicable law. Holders of Class
A Common Stock and Class B Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their
vote or approval. Prior to the Sunset Date, the holders of Class C Common Stock are entitled to the lesser of (i) 10 votes per
share and (ii) the Class C Share Voting Amount on all matters submitted to stockholders for their vote or approval. From and after
the Sunset Date, holders of Class C Common Stock will be entitled to one vote per share.
The
Key Holders control, as a group, approximately 88.3% of the combined voting power of the Common Stock as a result of their ownership
of all of the Class C Common Stock. Accordingly, Avellan controls the Company’s business policies and affairs and can control
any action requiring the general approval of its stockholders, including the election of our Board of Directors, the adoption
of amendments to its certificate of incorporation and bylaws and approval of any merger or sale of substantially all of its assets.
Until the Sunset Date, Avellan will continue to control the outcome of matters submitted to the stockholders.
Dividends
The
holders of Class A Common Stock are entitled to receive dividends, as and if declared by our Board of Directors out of legally
available funds. With respect to stock dividends, holders of Class A Common Stock must receive Class A Common Stock.
The
holders of Class B Common Stock and Class C Common Stock will not have any right to receive dividends other than stock dividends
consisting of shares of Class B Common Stock or Class C Common Stock, as applicable, in each case paid proportionally with respect
to each outstanding share of Class B Common Stock or Class C Common Stock.
Liquidation
or Dissolution
Upon
our liquidation or dissolution, the holders of all classes of Common Stock are entitled to their respective par value, and the
holders of Class A Common Stock will then be entitled to share ratably in those of our assets that are legally available for distribution
to stockholders after payment of liabilities and subject to the prior rights of any holders of preferred stock then outstanding.
Other than their par value, the holders of Class B Common Stock and Class C Common Stock will not have any right to receive a
distribution upon a liquidation or dissolution of the Company.
Conversion,
Transferability and Exchange
Subject
to the terms of the A&R LLCA, the members of AST (other than the Company) may from time to time cause AST to redeem any or
all of their AST Common Units in exchange for, at the Company’s election (subject to certain exceptions), either cash (based
on the market price for a share of the Class A Common Stock) (the “Existing Equityholder Cash Out”) or shares of Class
A Common Stock (the “Existing Equityholder Share Settlement”); provided that the Company’s election to effect
such redemption as an Existing Equityholder Cash Out or an Existing Equityholder Share Settlement must be approved by a committee
of the our Board of Directors comprised solely of directors who were not nominated pursuant to the Stockholders’ Agreement
or other contractual right by, and are not otherwise affiliated with, holders of Class B Common Stock or Class C Common Stock.
At the Company’s election, such transaction may be effectuated via a direct exchange of Class A Common Stock or cash by
the Company for the redeemed AST Common Units (an “Existing Equityholder Direct Exchange”).
Our
Charter provides that (a) if a holder of Class B Common Stock exercises either the Existing Equityholder Cash Out, or the Existing
Equityholder Share Settlement or Existing Equityholder Direct Exchange, then the number of shares of Class B Common Stock held
by such holder equal to the number of AST Common Units so redeemed, cashed out or exchanged will automatically be cancelled by
the Company for no consideration and (b) if a holder of Class C Common Stock (i) exercises the Existing Equityholder Cash Out
or (ii) exercises the Existing Equityholder Share Settlement or Existing Equityholder Direct Exchange and subsequently transfers
the Class A Common Stock issued in connection with such redemption and exchange to a person or entity other than a Key Holder,
then the number of Class C Common Stock held by such holder equal to the number of AST Common Units so redeemed and exchanged
then transferred or cashed out will automatically be cancelled by the Company for no consideration. If the Key Holders exercise
the Existing Equityholder Conversion, then the voting power of the Class C Common Stock is reduced commensurate with the voting
power of the newly issued Class A Common Stock. The voting power of the Class C Common Stock will be further adjusted if Avellan
or his permitted transferees transfers Class A Common Stock to a person or entity that is not a Key Holder.
We
may not issue Class B Common Stock or Class C Common Stock such that after the issuance of Class B Common Stock or Class C Common
Stock the holder of such stock does not hold an identical number of AST Common Units.
Other
Provisions
None
of the Class A Common Stock, Class B Common Stock or Class C Common Stock has any pre-emptive or other subscription rights.
Preferred
Stock
We
are authorized to issue up to 100,000,000 shares of preferred stock. Our Board of Directors is authorized, subject to limitations
prescribed by Delaware law and our Charter, to determine the terms and conditions of the preferred stock, including whether the
shares of preferred stock will be issued in one or more series, the number of shares to be included in each series and the powers
(including the voting power), designations, preferences and rights of the shares. Our Board of Directors also will be authorized
to designate any qualifications, limitations or restrictions on the shares without any further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company and
may adversely affect the voting and other rights of the holders of Class A Common Stock, Class B Common Stock and Class C Common
Stock, which could have a negative impact on the market price of the Class A Common Stock. We have no current plan to issue any
shares of preferred stock.
Redeemable
Warrants
Public
Warrants
Each
whole warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject
to adjustment as discussed below, at any time commencing 30 days after the completion of the Business Combination. Pursuant to
the Warrant Agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A Common Stock. This
means that only a whole warrant may be exercised at any given time by a warrant holder. The warrants will expire five years after
the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We
are not obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A
Common Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to us satisfying
our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue
shares of Class A Common Stock upon exercise of a warrant unless Class A Common Stock issuable upon such warrant exercise has
been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder
of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to
a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire
worthless. In no event will we be required to net cash settle any warrant.
We
are obligated to file and maintain an effective registration statement under the Securities Act covering the shares of Class A
Common Stock issuable upon exercise of the warrants and to use commercially reasonable best efforts to cause such registration
statement to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration
of the warrants in accordance with the provisions of the Warrant Agreement. If a registration statement covering the shares of
Class A Common Stock is not effective by the 60th day after the completion of the Business Combination, warrant holders may, until
such time as there is an effective registration statement and during any period when we will have failed to maintain an effective
registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. Notwithstanding the above, if Class A Common Stock is at the time of any exercise of a warrant not listed
on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1)
of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to
file or maintain in effect a registration statement, and in the event we do not so elect, we will use our commercially reasonable
best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once
the warrants become exercisable, we may call the warrants for redemption:
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in
whole and not in part;
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●
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at
a price of $0.01 per warrant;
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●
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upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and
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●
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if,
and only if, the last reported sale price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading
day period ending three trading days before we send the notice of redemption to the warrant holders.
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If
and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of Class A Common
Stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we
are unable to effect such registration or qualification.
We
have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time
of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice
of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption
date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the
redemption notice is issued.
If
we call the warrants for redemption as described above, our management will have the option to require any holder that wishes
to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise
their warrants on a “cashless basis,” our management will consider, among other factors, its cash position, the number
of warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of Class
A Common Stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants
would pay the exercise price by surrendering their warrants for that number of shares of Class A Common Stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the
difference between the exercise price of the warrants and the “fair market value” (as defined below) over the exercise
price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale
price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice
of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will
contain the information necessary to calculate the number of shares of Class A Common Stock to be received upon exercise of the
warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce
the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an
attractive option to us if we do not need the cash from the exercise of the warrants. If we call our warrants for redemption and
our management does not take advantage of this option, the CF Sponsor and its permitted transferees would still be entitled to
exercise their private placement warrants for cash or on a cashless basis using the same formula described above that other warrant
holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis,
as described in more detail below.
A
holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have
the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s
affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount
as a holder may specify) of the shares of Class A Common Stock outstanding immediately after giving effect to such exercise.
If
the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common
Stock, or by a split-up of shares of Class A Common Stock or other similar event, then, on the effective date of such stock dividend,
split-up or similar event, the number of shares of Class A Common Stock issuable on exercise of each warrant will be increased
in proportion to such increase in the outstanding shares of Class A Common Stock. A rights offering to holders of Class A Common
Stock entitling holders to purchase shares of Class A Common Stock at a price less than the fair market value will be deemed a
stock dividend of a number of shares of Class A Common Stock equal to the product of (i) the number of shares of Class A Common
Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are
convertible into or exercisable for Class A Common Stock) and (ii) one (1) minus the quotient of (x) the price per share of Class
A Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering
is for securities convertible into or exercisable for Class A Common Stock, in determining the price payable for Class A Common
Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon
exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Common Stock as reported
during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Class A Common
Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In
addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash,
securities or other assets to the holders of Class A Common Stock on account of such shares of Class A Common Stock (or other
shares of our capital stock into which the warrants are convertible), other than (i) as described above, (ii) certain ordinary
cash dividends (initially defined as up to $0.50 per share in a 365 day period), (iii) to satisfy the redemption rights of the
holders of Class A Common Stock in connection with the Closing, or (iv) to satisfy the redemption rights of the holders of Class
A Common Stock in connection with a stockholder vote to amend our Charter with respect to any provision relating to stockholders’
rights, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the
amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect
of such event.
If
the number of outstanding shares of Class A Common Stock is decreased by a consolidation, combination, reverse stock split or
reclassification of shares of Class A Common Stock or other similar event, then, on the effective date of such consolidation,
combination, reverse stock split, reclassification or similar event, the number of shares of Class A Common Stock issuable on
exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A Common Stock.
Whenever
the number of shares of Class A Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the
warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction
(x) the numerator of which will be the number of shares of Class A Common Stock purchasable upon the exercise of the warrants
immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Common Stock so
purchasable immediately thereafter.
In
case of any reclassification or reorganization of the outstanding shares of Class A Common Stock (other than those described above
or that solely affects the par value of such shares of Class A Common Stock), or in the case of any merger or consolidation of
us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that
does not result in any reclassification or reorganization of our outstanding shares of Class A Common Stock), or in the case of
any sale or conveyance to another corporation or entity of our assets or other property an entirety or substantially as an entirety
in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive,
upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Class A Common Stock immediately
theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock
or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation,
or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder
had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders
of Class A Common Stock in such a transaction is payable in the form of Class A Common Stock in the successor entity that is listed
for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for
trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant
within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in
the Warrant Agreement based on the Black-Scholes value (as defined in the Warrant Agreement) of the warrant. The purpose of such
exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during
the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential
value of the warrants in order to determine and realize the option value component of the warrant. This formula is to compensate
the warrant holder for the loss of the option value portion of the warrant due to the requirement that the warrant holder exercise
the warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value
where no quoted market price for an instrument is available.
The
warrants are issued in registered form under the Warrant Agreement. You should review a copy of the warrant agreement, which is
filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms
and conditions applicable to the warrants. The Warrant Agreement provides that the terms of the warrants may be amended without
the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of
at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered
holders of public warrants.
The
warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied
by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to
us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A
Common Stock and any voting rights until they exercise their warrants and receive shares of Class A Common Stock. After the issuance
of shares of Class A Common Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held
of record on all matters to be voted on by stockholders.
No
fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled
to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Class
A Common Stock to be issued to the warrant holder.
Private
Placement Warrants
The
private placement warrants (including the shares of Class A Common Stock issuable upon exercise of the private placement warrants)
are not transferable, assignable or salable until 30 days after the Closing (except, among other limited exceptions, to our officers
and directors and other persons or entities affiliated with Sponsor) and they are not redeemable by us so long as they are held
by Sponsor or its permitted transferees. Sponsor, or its permitted transferees, has the option to exercise the private placement
warrants on a cashless basis. Except as described below, the private placement warrants have terms and provisions that are identical
to those of the public warrants, including as to exercise price, exercisability and exercise period. If the private placement
warrants are held by holders other than Sponsor or its permitted transferees, the private placement warrants will be redeemable
by us and exercisable by the holders on the same basis as the public warrants.
If
holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering
their warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of
the number of shares of Class A Common Stock underlying the warrants, multiplied by the excess of the “fair market value”
(defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall
mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third trading day
prior to the date on which the notice of warrant exercise is sent to the warrant agent.
Exclusive
Forum
Our
Bylaws provide that, to the fullest extent permitted by law, and unless we provide notice in writing to the selection of an alternative
forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or to our stockholders by any
of our directors, officers, employees or agents, (iii) any action asserting a claim arising pursuant to any provision of the DGCL,
our Charter or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any
action asserting a claim governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having
personal jurisdiction over the indispensable parties named as defendants therein. Our Bylaws further provide that the federal
district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising
under the Securities Act. There is uncertainty as to whether a court would enforce such a provision relating to causes of action
arising under the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations
thereunder. The clauses described above will not apply to suits brought to enforce a duty or liability created by the Exchange
Act or any other claim for which the federal courts have exclusive jurisdiction.
Anti-Takeover
Effects of Provisions of our Charter and Bylaws
The
provisions of our Charter and Bylaws and of the DGCL summarized below may have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that you might consider in your best interest, including an attempt that might result
in your receipt of a premium over the market price for your shares of Class A Common Stock.
Our
Charter and Bylaws will contain certain provisions that are intended to enhance the likelihood of continuity and stability in
the composition of our Board of Directors and that may have the effect of delaying, deferring or preventing our future takeover
or change in control unless such takeover or change in control is approved by our Board of Directors.
These
provisions include:
Action
by Written Consent; Special Meetings of Stockholders. Our Charter provides that stockholder action can be taken only at an
annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting. Our Charter and Bylaws
also provide that, subject to any special rights of the holders of any series of preferred stock and except as otherwise required
by applicable law, special meetings of the stockholders can only be called by our Board of Directors, the chairman of our Board
of Directors, or, until the earlier of (i) the Sunset Date or (ii) the time we are no longer a “controlled company,”
by our secretary at the request of holders representing a majority of the total voting power of our issued and outstanding capital
stock entitled to vote in the election of directors, voting together as a single class. Except as described above, stockholders
are not permitted to call a special meeting or to require our Board of Directors to call a special meeting.
Advance
Notice Procedures. Our Bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual
meeting of our stockholders, and for stockholder nominations of persons for election to our Board of Directors to be brought before
an annual or special meeting of stockholders. Stockholders at an annual meeting will only be able to consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the direction of our Board of Directors of directors
or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting
and who has given our Secretary timely written notice, in proper form, of the stockholder’s intention to bring that business
or nomination before the meeting. Although our Bylaws do not give our Board of Directors the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, as applicable,
our Bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed
or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors
or otherwise attempting to obtain control of us.
Authorized
but Unissued Shares. Our authorized but unissued shares of Common Stock and preferred stock will be available for future issuance
without stockholder approval, subject to rules of the securities exchange on which the Class A Common Stock is listed. These additional
shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate
acquisitions, in connection with the redemption or exchange of AST Common Units and employee benefit plans. The existence of authorized
but unissued shares of Common Stock and preferred stock, coupled with the extraordinary voting right of the Class C Common Stock,
could render more difficult or discourage an attempt to obtain control of a majority of our Common Stock by means of a proxy contest,
tender offer, merger or otherwise.
Business
Combinations with Interested Stockholders. Our Charter provides that we are not subject to Section 203 of the DGCL, an anti-takeover
law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a
merger, with an “interested stockholder” (which includes a person or group owning 15% or more of the corporation’s
voting stock) for a period of three years following the date the person became an interested stockholder, unless (with certain
exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a
prescribed manner. Accordingly, we are not subject to any anti-takeover effects of Section 203.
Limitations
on Liability and Indemnification of Officers and Directors
Our
Bylaws limit the liability of our directors and officers to the fullest extent permitted by the DGCL and provides that we will
provide them with customary indemnification and advancement and prepayment of expenses. We have entered into customary indemnification
agreements with each of our executive officers and directors that provide them, in general, with customary indemnification in
connection with their service to us or on our behalf.
Our
Bylaws provide that, to the fullest extent permitted by law, and unless we provide notice in writing to the selection of an alternative
forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action, suit
or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or to our stockholders
by any of our directors, officers, employees or agents, (iii) any action, suit or proceeding arising pursuant to any provision
of the DGCL or our Charter or Bylaws or (iv) any action, suit or proceeding asserting a claim against us governed by the internal
affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties
named as defendants therein. Our Charter further provides that the federal district courts of the United States will be the exclusive
forum for resolving any complaint asserting a cause of action arising under the Securities Act. There is uncertainty as to whether
a court would enforce such a provision relating to causes of action arising under the Securities Act, and investors cannot waive
compliance with the federal securities laws and the rules and regulations thereunder. The clauses described above will not apply
to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have
exclusive jurisdiction.
Registration
Rights Agreements
In
connection with our IPO, we entered into the 2019 Registration Rights Agreement with the Sponsor and certain other parties (collectively,
the “2019 Holders”) pursuant to which we granted the 2019 Holders certain registration rights with respect to, among
other things, the private placement warrants and the shares of Class A Common Stock that were issued at the Closing upon conversion
of the 2019 Holders’ founder shares. The 2019 Holders of the majority of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In addition, the 2019 Holders have certain “piggy-back”
registration rights and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities
Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
On
December 16, 2020, we entered into the PIPE Subscription Agreements with the PIPE Investors, pursuant to which we (i) issued an
aggregate of 23,000,000 shares of Class A Common Stock to the PIPE Investors at the Closing and (ii) agreed to register such shares.
At
the Closing, we entered into the 2021 Registration Rights Agreement with the Existing Equityholders and the Sponsor (collectively,
the “Holders”) pursuant to which we granted the Holders certain registration rights with respect to the registrable
securities of the Company. Among other things, the 2021 Registration Rights Agreement requires us to register the shares of Class
A Common Stock issued in connection with the Business Combination and any shares of Class A Common Stock issued upon the redemption
of any AST Common Units. The Holders are entitled to (i) make a written demand for registration under the Securities Act of all
or part of their shares of Class A Common Stock (up to a maximum of two demands in any 12-month period) and not more than five
times in the aggregate and only if the offering will include registrable securities with a total offering price reasonably expected
to exceed, in the aggregate, $50 million, and (ii) “piggy-back” registration rights to registration statements filed
following the Business Combination. We will bear all of the expenses incurred in connection with the filing of any such registration
statement.
Transfer
Agent and Registrar
The
transfer agent for our Common Stock is Continental Stock Transfer & Trust Company. Each person investing in our Class A Common
Stock held through The Depository Trust Company must rely on the procedures thereof and on institutions that have accounts therewith
to exercise any rights of a holder of our Class A Common Stock.
For
as long as any shares of our Class A Common Stock are listed on Nasdaq or on any other stock exchange operating in the United
States, the laws of the State of New York shall apply to the property law aspects of our Class A Common Stock (including securities
exercisable for or convertible into our Class A Common Stock) reflected in the register administered by our transfer agent.
We
have listed shares of our Class A Common Stock in registered form and such shares, through the transfer agent, will not be certificated.
We have appointed Continental Stock Transfer & Trust Company as our agent in New York to maintain our stockholders’
register on behalf of our Board of Directors and to act as transfer agent and registrar for our Class A Common Stock. Shares of
our Class A Common Stock are traded on Nasdaq in book-entry form.
The
warrant agent for the warrants is Continental Stock Transfer & Trust Company.
Listing
of Class A Common Stock and Warrants
Our
Class A Common Stock and warrants are listed on Nasdaq under the symbols “ASTS” and “ASTSW,” respectively.
BENEFICIAL
OWNERSHIP OF SECURITIES
The
following table sets forth information regarding the beneficial ownership of our voting shares by:
|
|
●
|
each
person who is known to be the beneficial owner of more than 5% of our voting shares;
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|
|
|
|
|
|
●
|
each
of our executive officers and directors; and
|
|
|
|
|
|
|
●
|
all
of our executive officers and directors as a group.
|
Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a
security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants
that are currently exercisable or exercisable within 60 days. A person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership within 60 days, provided that any person who acquires any such
right with the purpose or effect of changing or influencing the control of the issuer, or in connection with or as a participant
in any transaction having such purpose or effect, immediately upon such acquisition shall be deemed to be the beneficial owner
of the securities which may be acquired through the exercise of such right. Under these rules, more than one person may be deemed
to be a beneficial owner of the same securities.
Our
authorized Common Stock consists of Class A Common Stock, Class B Common Stock and Class C Common Stock. Holders of Class A Common
Stock and Class B Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote
or approval. Until the Sunset Date, holders of Class C Common Stock are entitled to the lesser of (i) 10 votes per share and (ii)
the Class C Share Voting Amount on all matters submitted to stockholders for their vote or approval. From and after the Sunset
Date, holders of Class C Common Stock will be entitled to one vote per share. See “Description of Capital Stock.”
Beneficial
ownership of shares of our Common Stock is based on 51,729,704 shares of Class A Common Stock, 51,636,922 shares of Class B Common
Stock and 78,163,078 shares of Class C Common Stock issued and outstanding as of May 5, 2021.
Unless
otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to
all shares of voting shares beneficially owned by them. To our knowledge, none of our shares of Common Stock beneficially owned
by any executive officer or director have been pledged as security.
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Class A Common Stock
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|
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Class B Common Stock
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|
Class C Common Stock
|
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Combined Voting Power (%)(2)
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Name and Address of Beneficial Owner(1)
|
|
Number
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|
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%
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|
|
Number
|
|
|
%
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|
|
Number
|
|
|
%
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|
|
|
|
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Five Percent Holders:
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|
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|
|
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|
|
|
|
|
|
|
|
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|
|
|
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New Providence Management LLC(3)
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11,810,000
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20.4
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%
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—
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|
|
|
—
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|
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—
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|
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—
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1.3
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%
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Rakuten Mobile, Inc.(4)
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|
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2,500,000
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4.8
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%
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28,520,155
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|
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55.2
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%
|
|
|
—
|
|
|
|
—
|
|
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3.5
|
%
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|
Invesat LLC (5)
|
|
|
200,000
|
|
|
|
*
|
|
|
|
9,932,541
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|
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19.2
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%
|
|
|
—
|
|
|
|
—
|
|
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1.1
|
%
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|
Vodafone Ventures Limited (6)
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|
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1,000,000
|
|
|
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1.9
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%
|
|
|
9,044,454
|
|
|
|
17.5
|
%
|
|
|
—
|
|
|
|
—
|
|
|
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1.1
|
%
|
|
ATC TRS II LLC (7)
|
|
|
2,500,000
|
|
|
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4.8
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%
|
|
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2,170,657
|
|
|
|
4.2
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
*
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|
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Directors and Executive Officers:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abel Avellan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
88.3
|
%
|
|
Thomas Severson
|
|
|
—
|
|
|
|
—
|
|
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1,595,165
|
|
|
|
3.1
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
|
Brian Heller
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Rulfo Hernandez
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Tareq Amin
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Adriana Cisneros(5)
|
|
|
200,000
|
|
|
|
*
|
|
|
|
9,932,541
|
|
|
|
19.2
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
1.1
|
%
|
|
Alexander Coleman(3)
|
|
|
11,810,000
|
|
|
|
20.4
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.3
|
%
|
|
Luke Ibbetson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Edward Knapp
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Hiroshi Mikitani(4)
|
|
|
2,500,000
|
|
|
|
4.8
|
%
|
|
|
28,520,155
|
|
|
|
55.2
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
3.5
|
%
|
|
Ronald Rubin
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Richard Sarnoff
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Julio A. Torres
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
All directors and executive officers, as a group (13 individuals)
|
|
|
14,510,000
|
|
|
|
28.0
|
%
|
|
|
38,611,861
|
|
|
|
74.8
|
%
|
|
|
78,163,078
|
|
|
|
100
|
%
|
|
|
94.2
|
%
|
|
*
|
less
than 1%
|
|
|
|
|
(1)
|
Unless
otherwise noted, the business address of each of those listed in the table above is c/o AST SpaceMobile, Inc., Midland International
Air & Space Port, 2901 Enterprise Lane, Midland, Texas 79706.
|
|
(2)
|
Percentage
of combined voting power represents voting power with respect to all shares of Class A common stock, Class B Common Stock
and Class C common stock, voting together as a single class. Holders of Class A Common Stock and Class B Common Stock are
entitled to one vote per share on all matters submitted to the stockholders for their vote or approval. Until the Sunset Date,
holders of Class C Common Stock are entitled to the lesser of (i) 10 votes per share and (ii) (x) (A) 88.31% minus (B) the
total voting power of the outstanding stock of the Company (other than Class C Common Stock) owned or controlled by Avellan
and his permitted transferees, divided by (y) the number of shares of Class C Common Stock then outstanding on all matters
submitted to stockholders for their vote or approval. From and after the Sunset Date, holders of Class C Common Stock will
be entitled to one vote per share.
|
|
|
|
|
(3)
|
Includes
6,100,000 shares of Class A Common Stock underlying the private placement warrants held of record by the Sponsor that will
became exercisable on May 6, 2021. The business address of each of Sponsor and Mr. Coleman is 10900 Research Blvd,
Ste 160C, PMB 1081, Austin, Texas 78759. Mr. Coleman is a director of the Sponsor and as such has voting and investment discretion
with respect to the Class A Common Stock held of record by the Sponsor and may be deemed to have shared beneficial ownership
of the Class A Common Stock held directly by the Sponsor.
|
|
|
|
|
(4)
|
Includes
2,500,000 shares of Class A Common Stock held by Rakuten Mobile, Inc. (“Rakuten Mobile”) and 28,520,155 shares
of Class B Common Stock held by Rakuten USA. The business address of each of Mr. Mikitani Rakuten Mobile and Rakuten USA is
1-14-1 Tamagawa, Setagaya-ku, Tokyo 158-0094 Japan. Mr. Mikitani is the founder, Chairman and Chief Executive Officer of Rakuten
Mobile, which is the parent company of Rakuten USA, and as such has voting and investment discretion with respect to the shares
of Common Stock held of record by Rakuten Mobile and Rakuten USA and may be deemed to have shared beneficial ownership of
the shares of Common Stock held directly by Rakuten Mobile and Rakuten USA.
|
|
|
|
|
(5)
|
The
business address of each of Ms. Cisneros and Invesat LLC (“Invesat”) is c/o Cisneros Group of Companies, 700 NW
1st Avenue, Suite 1700, Miami, Florida 33136. Ms. Cisneros is the president of Invesat and as such has voting and investment
discretion with respect to the shares of Common Stock held of record by Invesat and may be deemed to have beneficial ownership
of the Common Stock held directly by Invesat.
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|
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(6)
|
The
business address of Vodafone Ventures Limited is c/o Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, United Kingdom.
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(7)
|
The
business address of ATC TRS II LLC is 116 Huntington Avenue, 11th floor, Boston, MA 02116.
|
SELLING
STOCKHOLDERS
This
prospectus relates to the resale from time to time of (i) an aggregate of 28,750,000 shares of Class A Common Stock and (ii) 6,100,000
private placement warrants. The Selling Stockholders may from time to time offer and sell any or all of the shares of Class A
Common Stock and warrants set forth below pursuant to this prospectus and any accompanying prospectus supplement. When we refer
to the “Selling Stockholders” in this prospectus, we mean the persons listed in the table below, and the pledgees,
donees, transferees, assignees, successors, designees and others who later come to hold any of the Selling Stockholders’
interest in the Class A Common Stock other than through a public sale.
The
following table sets forth, as of the date of this prospectus, the names of the Selling Stockholders, and the aggregate number
of shares of Class A Common Stock and warrants that the Selling Stockholders may offer pursuant to this prospectus.
|
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Before the Offering
|
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After the Offering
|
|
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Name of Selling Stockholder
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Number of Shares of Class A Common Stock
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|
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Number of Warrants
|
|
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Number of Shares of Class A Common Stock Being Offered
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Number of Warrants Being Offered
|
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Number of Shares of Class A Common Stock
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Percentage of Outstanding Shares of Class A Common Stock
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Number of Warrants
|
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New Providence Management LLC (1)
|
|
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5,710,000
|
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6,100,000
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5,710,000
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6,100,000
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|
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—
|
|
|
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—
|
|
|
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—
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ATC TRS II LLC(2)
|
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2,500,000
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|
|
—
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|
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2,500,000
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—
|
|
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—
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|
|
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—
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—
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Bell Canada(3)
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1,000,000
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|
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—
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|
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1,000,000
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|
|
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—
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|
|
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—
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|
|
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—
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|
|
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—
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Citadel Multi-Strategy Equities Master Fund Ltd.(4)
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2,600,000
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—
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2,600,000
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—
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—
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—
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—
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D.E. Shaw Oculus Portfolios, L.L.C.(5)
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|
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250,000
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|
—
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250,000
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|
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—
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|
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—
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—
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—
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D.E. Shaw Valence Portfolios,
L.L.C. (6)
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750,000
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—
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750,000
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—
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—
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—
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—
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Ghisallo Master Fund LP(7)
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250,000
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—
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250,000
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—
|
|
|
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—
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|
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—
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|
|
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—
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Green Sands Fund P, LLC(8)
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2,000,000
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|
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—
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2,000,000
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—
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|
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—
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—
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|
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—
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Greenlight Capital Inc.(9)
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570,000
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|
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—
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|
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500,000
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—
|
|
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70,000
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*
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—
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Hartford Growth Fund Limited(10)
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1,000,000
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—
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1,000,000
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—
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—
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—
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—
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Invesat LLC(11)
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200,000
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—
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200,000
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—
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|
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—
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|
|
|
—
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|
|
|
—
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Jane Street Global Trading,
LLC(12)
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200,000
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|
|
—
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200,000
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|
|
—
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|
|
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—
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|
|
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—
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|
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—
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Kepos Alpha Master Fund L.P.(13)
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1,000,000
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|
|
—
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|
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1,000,000
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|
|
|
—
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|
|
|
—
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|
|
|
—
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|
|
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—
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Nineteen77 Global Merger Arbitrage
Master Limited(14)
|
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1,153,750
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|
|
—
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|
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1,153,750
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|
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—
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|
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—
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|
|
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—
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|
|
|
—
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Nineteen77 Global Merger Arbitrage
Opportunity Fund(14)
|
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192,500
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|
—
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|
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192,500
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|
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—
|
|
|
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—
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|
|
|
—
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|
|
|
—
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Nineteen77 Global Multi-Strategy
Alpha Master Limited(14)
|
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1,153,750
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|
—
|
|
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|
1,153,750
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—
|
|
|
|
—
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|
|
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—
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|
|
|
—
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Polar Long/Short Master Fund(15)
|
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581,000
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|
|
—
|
|
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581,000
|
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|
|
—
|
|
|
|
—
|
|
|
|
—
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|
|
|
—
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Polar Multi-Strategy Master
Fund(15)
|
|
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419,000
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|
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—
|
|
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419,000
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—
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—
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—
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—
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PSAM WorldArb Master Fund
Ltd.(16)
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250,000
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—
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250,000
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—
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—
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—
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—
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Rakuten Mobile, Inc.(17)
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2,500,000
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|
|
—
|
|
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|
2,500,000
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|
|
—
|
|
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|
—
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|
|
|
—
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|
|
|
—
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Tech Opportunities LLC(18)
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|
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3,500,000
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|
|
|
—
|
|
|
|
3,500,000
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|
|
—
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|
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|
—
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|
|
|
—
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|
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|
—
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Vodafone Ventures Limited(19)
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|
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1,000,000
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|
|
|
—
|
|
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|
1,000,000
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|
—
|
|
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|
—
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|
|
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—
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|
—
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|
James Bradley
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
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|
|
|
—
|
|
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|
—
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|
|
—
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|
—
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|
|
John T. Gannon
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
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|
|
|
—
|
|
|
|
—
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|
|
|
—
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|
|
|
—
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|
|
Daniel Ginsberg
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
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|
|
|
—
|
|
|
|
—
|
|
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|
—
|
|
|
|
—
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|
|
Richard Mazer
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
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|
|
*
|
less
than 1%
|
|
|
|
|
(1)
|
Includes
shares of Class A Common Stock beneficially held by New Providence Management LLC, Alexander Coleman and Gary P. Smith, based
solely on the Schedule 13G filed jointly by New Providence Management LLC and Messrs. Coleman and Smith with the SEC on February
13, 2020. Messrs. Coleman and Smith are the directors of New Providence Management LLC and as such have voting and investment
discretion with respect to the Class A Common Stock held of record by New Providence Management LLC and may be deemed to have
shared beneficial ownership of the Class A Common Stock held directly by New Providence Management LLC.
The address of New Providence Management LLC is 10900 Research Blvd, Ste 160C, PMB 1081, Austin, Texas 78759.
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|
(2)
|
The
address of ATC TRS II LLC is 116 Huntington Avenue, 11th floor, Boston, Massachusetts 02116.
|
|
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|
(3)
|
The
address of Bell Canada is 1 Carrefour Alexander-Graham-Bell, Building A7, Verdun, Quebec, Canada H3E 3B3.
|
|
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|
(4)
|
The
address of Citadel Multi-Strategy Equities Master Fund Ltd. is c/o Citadel Enterprise Americas LLC, 131 South Dearborn Street,
Chicago, Illinois 60603.
|
|
(5)
|
The
address of D. E. Shaw Oculus Portfolios, L.L.C. (“Oculus”) is 1166 Avenue of the Americas, 9th Floor, New York,
New York 10036. Oculus has the power to vote or direct the vote of (and the power to dispose or direct the disposition of)
the shares of Class A Common Stock held by Oculus (the “Oculus Shares”). D. E. Shaw & Co., L.P. (“DESCO
LP”), as the investment adviser of Oculus, may be deemed to have the shared power to vote or direct the vote of (and
the shared power to dispose or direct the disposition of) the Oculus Shares. D. E. Shaw & Co., L.L.C. (“DESCO LLC”),
as the manager of Oculus, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose
or direct the disposition of) the Oculus Shares. Julius Gaudio, Maximilian Stone, and Eric Wepsic, or their designees, exercise
voting and investment control over the Oculus Shares on DESCO LP’s and DESCO LLC’s behalf. D. E. Shaw & Co.,
Inc. (“DESCO Inc.”), as general partner of DESCO LP, may be deemed to have the shared power to vote or direct
the vote of (and the shared power to dispose or direct the disposition of) the Oculus Shares. D. E. Shaw & Co. II, Inc.
(“DESCO II Inc.”), as managing member of DESCO LLC, may be deemed to have the shared power to vote or direct the
vote of (and the shared power to dispose or direct the disposition of) the Oculus Shares. None of DESCO LP, DESCO LLC, DESCO
Inc., or DESCO II Inc. owns any shares of the Company directly, and each such entity disclaims beneficial ownership of the
Oculus Shares. David E. Shaw does not own any shares of the Company directly. By virtue of David E. Shaw’s position
as President and sole shareholder of DESCO Inc., which is the general partner of DESCO LP, and by virtue of David E. Shaw’s
position as President and sole shareholder of DESCO II Inc., which is the managing member of DESCO LLC, David E. Shaw may
be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition
of) the Oculus Shares and, therefore, David E. Shaw may be deemed to be the beneficial owner of the Oculus Shares. David E.
Shaw disclaims beneficial ownership of the Oculus Shares.
|
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|
|
(6)
|
The
address of D. E. Shaw Valence Portfolios, L.L.C. (“Valence”) is 1166 Avenue of the Americas, 9th Floor, New York,
New York 10036. Valence has the power to vote or direct the vote of (and the power to dispose or direct the disposition of)
the shares of Class A Common Stock held by Valence (the “Valence Shares”). D. E. Shaw & Co., L.P. (“DESCO
LP”), as the investment adviser of Valence, may be deemed to have the shared power to vote or direct the vote of (and
the shared power to dispose or direct the disposition of) the Valence Shares. D. E. Shaw & Co., L.L.C. (“DESCO LLC”),
as the manager of Valence, may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose
or direct the disposition of) the Valence Shares. Julius Gaudio, Maximilian Stone, and Eric Wepsic, or their designees, exercise
voting and investment control over the Valence Shares on DESCO LP’s and DESCO LLC’s behalf. D. E. Shaw & Co.,
Inc. (“DESCO Inc.”), as general partner of DESCO LP, may be deemed to have the shared power to vote or direct
the vote of (and the shared power to dispose or direct the disposition of) the Valence Shares. D. E. Shaw & Co. II, Inc.
(“DESCO II Inc.”), as managing member of DESCO LLC, may be deemed to have the shared power to vote or direct the
vote of (and the shared power to dispose or direct the disposition of) the Valence Shares. None of DESCO LP, DESCO LLC, DESCO
Inc., or DESCO II Inc. owns any shares of the Company directly, and each such entity disclaims beneficial ownership of the
Valence Shares. David E. Shaw does not own any shares of the Company directly. By virtue of David E. Shaw’s position
as President and sole shareholder of DESCO Inc., which is the general partner of DESCO LP, and by virtue of David E. Shaw’s
position as President and sole shareholder of DESCO II Inc., which is the managing member of DESCO LLC, David E. Shaw may
be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition
of) the Valence Shares and, therefore, David E. Shaw may be deemed to be the beneficial owner of the Valence Shares. David
E. Shaw disclaims beneficial ownership of the Valence Shares.
|
|
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|
|
(7)
|
The address of Ghisallo Master Fund LP is 27
Hospital Road, Georgetown, Grand Cayman CI KY1-9008.
|
|
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|
|
(8)
|
The
address of Green Sands Fund P, LLC is 548 Palmer Lane, Menlo Park, CA 94025.
|
|
|
|
|
(9)
|
Greenlight
Capital, Inc. (“Greenlight Inc.”) is the investment advisor for Greenlight Capital Offshore Partners, Ltd., and
as such has voting and dispositive power over 315,000 shares of Class A Common Stock held by Greenlight Capital Offshore Partners,
Ltd. DME Advisors, LP (“DME Advisors”) is the investment advisor for Solasglas Investments, LP, and as such has
voting and dispositive power over 41,550 shares of Class A Common Stock held by Solasglas Investments, LP. DME Capital Management,
LP (“DME Management”) (i) is the investment advisor for Greenlight Capital Offshore Master, Ltd., and as such
has voting and dispositive power over 185,000 shares of Class A Common Stock held by Greenlight Capital Offshore Master, Ltd.,
and (ii) manages a portfolio for a private investment fund, and as such has voting and dispositive power over 28,450 shares
of Class A Common Stock held by such private investment fund. DME Advisors GP, LLC (“DME GP”) is the general partner
of DME Advisors and DME Management, and as such has voting and dispositive power over 255,000 shares of Class A Common Stock.
David Einhorn is the principal of Greenlight Inc., DME Advisors, DME Management and DME GP, and as such has voting and dispositive
power over 570,000 shares of Class A Common Stock held by these affiliates of Greenlight, Inc. Each of Mr. Einhorn, Greenlight
Inc., DME Advisors, DME Management and DME GP disclaims beneficial ownership of these shares of Class A Common Stock, except
to the extent of any pecuniary interest therein.
|
|
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|
|
(10)
|
The address of Hartford Growth Fund Limited is
c/o Ogier Global (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KY1-9009, Cayman Islands.
|
|
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|
|
(11)
|
Ms.
Cisneros is the president of Invesat and as such has voting and investment discretion with respect to the shares of Common
Stock held of record by Invesat and may be deemed to have beneficial ownership of the Common Stock held directly by Invesat.
The address of each of Ms. Cisneros and Invesat LLC is c/o Cisneros Group of Companies, 700 NW 1st Avenue, Suite 1700, Miami,
Florida 33136.
|
|
|
|
|
(12)
|
Jane
Street Global Trading, LLC is a wholly owned subsidiary of Jane Street Group, LLC. Michael A. Jenkins and Robert. A. Granieri
are the members of the Operating Committee of Jane Street Group, LLC.
The address of Jane Street Global Trading, LLC is 250 Vesey Street, New York, New York 10281.
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|
|
(13)
|
Kepos
Capital LP is the investment manager of the selling securityholder and Kepos Partners LLC is the General Partner of the selling
shareholder and each may be deemed to have voting and dispositive power with respect to the shares. The general partner of
Kepos Capital LP is Kepos Capital GP LLC (the “Kepos GP”) and the Managing Member of Kepos Partners LLC is Kepos
Partners MM LLC (“Kepos MM”). Mark Carhart controls Kepos GP and Kepos MM and, accordingly, may be deemed to have
voting and dispositive power with respect to the shares held by this selling securityholder. Mr. Carhart disclaims beneficial
ownership of the shares held by the selling securityholder. The address of Kepos Alpha Master Fund L.P. is c/o Kepos Capital
LP, 11 Times Square, 35th Floor, New York, NY 10036.
|
|
|
|
|
(14)
|
UBS
O’Connor LLC (“O’Connor”) is the investment manager of each of Nineteen77 Global Merger Arbitrage
Master Limited, Nineteen77 Global Merger Arbitrage Opportunity Fund and Nineteen77 Global Multi-Strategy Alpha Master Limited
(collectively, the “Nineteen77 Entities”) and, accordingly, has voting control and investment discretion over
the securities described herein held by the Nineteen77 Entities. Kevin Russell, the Chief Investment Officer of O’Connor,
also has voting control and investment discretion over the securities described herein held by the Nineteen77 Entities. As
a result, each of O’Connor and Mr. Russell may be deemed to have beneficial ownership of the securities described herein
held by the Nineteen77 Entities. The address of each of the Nineteen77 Entities, O’Connor and Mr. Russell is c/o UBS
O’Connor LLC, One North Wacker Drive, 31st Floor, Chicago, Illinois 60606.
|
|
(15)
|
The
registered holders of the referenced shares are funds (the “Funds”) under management by Polar Asset Management
Partners Inc. (“PAMPI”). PAMPI serves as investment advisor of the Funds and has control and discretion over the
shares held by the Funds. As such, PAMPI may be deemed the beneficial owner of the shares held by the Funds. PAMPI disclaims
any beneficial ownership of the reported shares other than to the extent of any pecuniary interest therein. The business address
of the Funds is c/o Polar Asset Management Partners Inc., 401 Bay Street, Suite 1900, Toronto, Ontario M5H 2Y4.
|
|
|
|
|
(16)
|
P. Schoenfeld Asset Management LP, or PSAM, is
the investment manager of PSAM WorldArb Master Fund, Ltd, or WAM. Peter Schoenfeld is the CEO of PSAM. PSAM and Peter Schoenfeld
have voting and investment power over the shares held directly by WAM. Each of PSAM and Peter Schoenfeld disclaim beneficial
ownership of the securities reported herein except to the extent of their pecuniary interest therein. The address for P. Schoenfeld
Asset Management LP is 1350 Avenue of the Americas, 21st Floor, New York, NY 10019.
|
|
|
|
|
(17)
|
The
business address of Rakuten Mobile is 1-14-1 Tamagawa, Setagaya-ku, Tokyo 158-0094 Japan. Mr. Mikitani is the founder, Chairman
and Chief Executive Officer of Rakuten Mobile, and as such has voting and investment discretion with respect to the shares
of Common Stock held of record by Rakuten Mobile and may be deemed to have shared beneficial ownership of the shares of Common
Stock held directly by Rakuten Mobile.
|
|
|
|
|
(18)
|
Hudson Bay Capital Management LP, the investment
manager of Tech Opportunities LLC, has voting and investment power over these securities. Sander Gerber is the managing member
of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Tech Opportunities
LLC and Sander Gerber disclaims beneficial ownership over these securities. The
address of Tech Opportunities LLC is c/o Hudson Bay Capital Management LP, 777 Third Avenue, 30th Floor, New York, New York,
10017.
|
|
|
|
|
(19)
|
The
business address of Vodafone Ventures Limited is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, United Kingdom.
|
We
cannot advise you as to whether the Selling Stockholders will in fact sell any or all of such shares of Class A Common Stock and
warrants.
Selling
Stockholder information for each additional Selling Stockholder, if any, will be set forth by prospectus supplement to the extent
required prior to the time of any offer or sale of such Selling Stockholder’s shares pursuant to this prospectus. To the
extent permitted by law, a prospectus supplement may add, update, substitute, or change the information contained in this prospectus,
including the identity of each Selling Stockholder and the number of shares of Class A Common Stock or warrants registered on
its behalf. A Selling Stockholder may sell or otherwise transfer all, some or none of such shares of Class A Common Stock or warrants
in this offering. See “Plan of Distribution.”
For
information regarding transactions between us and the Selling Stockholders, see the section entitled “Certain Relationships
and Related Person Transactions.”
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Stockholders’
Agreement
Upon
completion of the Business Combination, we entered into the Stockholders’ Agreement with the Stockholder Parties, under
which, among other things, the Existing Equityholders agreed to vote all the Company’s securities that may be voted in the
election of our directors held by such AST Equityholders in accordance with the provisions of the Stockholders’ Agreement,
and the Stockholder Parties agree to take all necessary action to cause Avellan to be the chairperson of our Board of Directors
until the Sunset Date. In addition, the Stockholder Parties agreed that, until such date as the Stockholder Parties collectively
control less than 50% of the total voting power of the Company, (i) the Stockholder Parties will take all necessary action to
cause us and our Board of Directors to maintain the Redemption Election Committee of our Board of Directors and its delegated
powers and (ii) the provisions of the Stockholders’ Agreement relating to the Redemption Election Committee cannot be amended
without the express approval of the Redemption Election Committee. The Stockholders’ Agreement contemplates that our Board
of Directors consists of 13 directors, with two director seats initially being vacant. Our equityholders may nominate directors
as follows: (i) Avellan may nominate seven members of our Board of Directors, which amount includes the two initial vacancies
on our Board of Directors for which Avellan will have the right, pursuant to the Stockholders’ Agreement, to designate directors
for appointment to such vacancies at any time, (ii) Invesat, Vodafone Sponsor and American Tower each may nominate one member
of our Board of Directors, and (iii) Rakuten USA may nominate two members of our Board of Directors. The Existing Equityholders
agree to vote for each of the foregoing nominees.
Avellan’s
right to nominate directors will decrease in proportion to the Key Holders’ ownership interests in the Company’s aggregate
outstanding voting power, such that if the Key Holders, at any point after the Closing Date: (i) own less than 50% of the Company’s
aggregate outstanding voting power, the Key Holders may only nominate five members of our Board of Directors, (ii) own less than
40% of the Company’s aggregate outstanding voting power, the Key Holders may only nominate three members of our Board of
Directors, (iii) own less than 30% of the Company’s aggregate outstanding voting power, the Key Holders may only nominate
two members of our Board of Directors, (iv) own less than 20% of the Company’s aggregate outstanding voting power, the Key
Holders may only nominate one member of our Board of Directors, and (v) own less than 5% of the Company’s aggregate outstanding
voting power, the Key Holders will no longer be entitled to nominate any members of our Board of Directors. If the size of our
Board of Directors is increased or decreased, the number of members that Avellan may designate will increase or decrease proportionately
to the size of our Board of Directors.
Invesat’s
nomination right will terminate if it (together with its permitted transferees) ceases to hold at least 5% of the Company’s
outstanding Class A Common Stock (assuming exchange of all AST Common Units for shares of Class A Common Stock). Vodafone’s
nomination right will terminate if it (together with its permitted transferees) ceases to beneficially own either (i) at least
5% of the Company’s outstanding Class A Common Stock or (ii) at least 50% of the Class A Common Stock held by it immediately
after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock). Sponsor’s nomination right
will terminate at the second annual meeting of the Company’s stockholders following the Closing. American Tower’s
nomination right will terminate if it (together with its permitted transferees) ceases to hold at least 50% of the Class A Common
Stock held by it immediately after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock). Rakuten’s
nomination right with respect to its first designee will terminate if it (together with its permitted transferees) ceases to hold
either (a) at least 5% of the Company’s outstanding Class A Common Stock or (b) at least 50% of the Class A Common Stock
held by it immediately after the Closing (assuming exchange of all AST Common Units for shares Class A Common Stock), and Rakuten’s
nomination right with respect to its second designee will terminate if it (together with its permitted transferees) ceases to
hold at least 10% of the Company’s outstanding Class A Common Stock (assuming exchange of all AST Common Units for shares
Class A Common Stock).
In
addition to the provisions of the preceding paragraph, the rights of Invesat, Vodafone, Sponsor, American Tower, and Rakuten to
nominate any director to our Board of Directors will terminate if, following the Closing, such party becomes a “Competitor”
of the Company (as defined below), initiates a legal proceeding against the Company or a member of our Board of Directors or (C)
obtains the right to appoint a member or observer to the board (or similar governing body of any Competitor of the Company). For
purposes of the Stockholders’ Agreement, a “Competitor” is any person directly or indirectly engaged in the
provision of connectivity to standard and nonstandard handsets, sensors, and Internet of things devices using satellites, high-altitude
systems or other aerial systems, but a “Competitor” does not include any financial investment firm or investment vehicle
that holds (with affiliates) less than 20% of the outstanding equity of any Competitor and does not have the right to designate
any member of the board of a Competitor. Vodafone is not deemed to be a Competitor with respect to its current lines of business
and UBS O’Connor LLC (and its affiliates) is not deemed to be an affiliate of Sponsor for purposes of the Stockholders’
Agreement.
Under
the Stockholders’ Agreement, each nominee to our Board of Directors who is nominated by Invesat, Vodafone, Sponsor, American
Tower or Rakuten must at all times, satisfy all requirements for service as a director under applicable law, Nasdaq Rules, and
other qualifications as our Board of Directors may adopt. Additionally, any such members of or nominees to our Board of Directors
cannot have been disqualified as a “Bad Actor” under Section 506 of Regulation D of the Securities Act, involved in
any event enumerated under Item 2(d) or (e) of Schedule 14D under the Exchange Act or Item 401(f) (other than Item 401(f)(1)),
of Regulation S-K of the Securities Act, or be subject to any governmental order prohibiting service as a director as a public
company. Further, any such nominee or director must agree to be bound to a confidentiality agreement in a form acceptable to us
and must recuse themselves from deliberations and discussions that, in the reasonable determination of our Board of Directors,
present and actual or potential conflict of interest with us.
In
addition to any vote or consent required by our Board of Directors or our stockholders, we may not change the size of our Board
of Directors, establish any committee of our Board of Directors, change the composition or powers of any committees of our Board
of Directors (subject to certain exceptions), engage any professional advisers or materially change the nature or scope of our
business or enter into or abandon a line of business, in each case without the consent of a majority of the shares held by the
Key Holders. This consent right terminates automatically on the first date on which the combined voting power of the Stockholder
Parties no longer exceeds 50% of the Company’s total voting power then outstanding.
We
covenant that we (i) will take any and all action reasonably necessary to effect the provisions of the Stockholders’ Agreement
and the intention of the parties thereto, (ii) will not take any action that would reasonably be expected to adversely frustrate,
obstruct or otherwise affect the rights of the Stockholder Parties thereto without the prior consent of Avellan, (iii) will purchase
director and officer liability insurance in an amount determined by our Board of Directors to be reasonable and customary and
to maintain such coverage for Avellan’s director designee for so long as such director serves on our Board of Directors
and (iv) will cause the Charter and Bylaws to at all times provide for indemnification, exculpation and advancement of expenses
of all directors of our Board of Directors. We must extend the director and officer liability insurance for six years from the
date that Avellan’s designee to our Board of Directors is removed or resigns from our Board of Directors. We will pay the
reasonable out-of-pocket expenses incurred by members of our Board of Directors in connection with the performance of his or her
duties.
Each
Stockholder Party also agreed to a one-year lock-up period with respect to our Common Stock (other than approximately 2,500,000
shares of Class A Common Stock purchased by certain Existing Equityholders in the PIPE Investment) following the Closing. However,
prior to the expiration of the lock-up period, Sponsor is permitted to transfer up to one-third of its shares of Class A Common
Stock if the stock price equals or exceeds $12.00 for any 20 trading days within any 30 trading-day period commencing at least
150 days after the closing.
The
Stockholder Agreement also contains certain provisions intended to maintain, following the Closing, our qualification as a “controlled
company”. Each of the Stockholder Parties also make certain customary representations and warranties on behalf of itself.
Subject
to certain exceptions, each Stockholder Party’s obligation to vote its shares of the Company in accordance with the Stockholder
Agreement is terminated on the first date on which such Stockholder Party no longer has the right to designate a director to our
Board of Directors. Certain other obligations of each Stockholder Party terminate automatically when such Stockholder Party ceases
to own shares of the Company
Sponsor
Voting Agreement
At
the Closing, we and Sponsor entered into the Sponsor Voting Agreement, pursuant to which, among other things, Sponsor agreed to
vote all the Company’s securities owned by it eligible to vote in the election of our directors in any election of our directors
in such manner as may be necessary to elect and/or maintain in office as members of our Board of Directors those individuals designated
by the AST Equityholders and Sponsor pursuant to the Stockholders’ Agreement. Sponsor also agreed not to take, directly
or indirectly, any actions (including removing our directors in a manner inconsistent with the Sponsor Voting Agreement) that
would knowingly frustrate, obstruct or otherwise affect the provisions of the Sponsor Voting Agreement and the intention of the
parties to the Sponsor Voting Agreement with respect to the composition of our Board of Directors as stated in the Sponsor Voting
Agreement. The Sponsor Voting Agreement will terminate on the first date in which Sponsor no longer has the right to designate
a director to our Board of Directors.
Registration
Rights Agreements
In
connection with our IPO, we entered into the 2019 Registration Rights Agreement with the Sponsor and certain other parties (collectively,
the “2019 Holders”) pursuant to which we granted the 2019 Holders certain registration rights with respect to, among
other things, the private placement warrants and the shares of Class A Common Stock that were issued at the Closing upon conversion
of the 2019 Holders’ founder shares. The 2019 Holders of the majority of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In addition, the 2019 Holders have certain “piggy-back”
registration rights and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities
Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
On
December 16, 2020, we entered into the PIPE Subscription Agreements with the PIPE Investors, pursuant to which we (i) issued an
aggregate of 23,000,000 shares of Class A Common Stock to the PIPE Investors at the Closing and (ii) agreed to register such shares.
At
the Closing, we entered into the 2021 Registration Rights Agreement with the Existing Equityholders and the Sponsor (collectively,
the “Holders”) pursuant to which we granted the Holders certain registration rights with respect to the registrable
securities of the Company. Among other things, the 2021 Registration Rights Agreement requires us to register the shares of Class
A Common Stock issued in connection with the Business Combination and any shares of Class A Common Stock issued upon the redemption
of any AST Common Units. The Holders are entitled to (i) make a written demand for registration under the Securities Act of all
or part of their shares of Class A Common Stock (up to a maximum of two demands in any 12-month period) and not more than five
times in the aggregate and only if the offering will include registrable securities with a total offering price reasonably expected
to exceed, in the aggregate, $50 million, and (ii) “piggy-back” registration rights to registration statements filed
following the Business Combination. We will bear all of the expenses incurred in connection with the filing of any such registration
statement.
Tax
Receivable Agreement
At
the Closing of the Business Combination, we entered into the Tax Receivable Agreement with AST, the Existing Equityholders and
the TRA Holder Representative.
Under
the Tax Receivable Agreement, we are generally required to pay the TRA Holders 85% of the amount of savings, if any, in U.S. federal,
state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related
thereto that the Tax realizes, or is deemed to realize, as a result of certain Tax Attributes, which include:
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existing
tax basis in certain assets of AST and certain of its direct or indirect Subsidiaries, including assets that will eventually
be subject to depreciation or amortization, once placed in service, attributable to AST Common Units acquired by the Company
from a TRA Holder (including AST Common Units held by a Blocker Corporation acquired by the Company in a Reorganization Transaction
(as defined in the Tax Receivable Agreement)), each as determined at the time of the relevant acquisition;
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tax
basis adjustments resulting from taxable exchanges of AST Common Units (including any such adjustments resulting from certain
payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the
terms of the A&R Operating Agreement;
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tax
deductions in respect of portions of certain payments made under the Tax Receivable Agreement; and
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certain
tax attributes of Blocker Corporations holding AST Common Units that are acquired directly or indirectly by the Company pursuant
to a Reorganization Transaction.
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Under
the Tax Receivable Agreement, the Tax Group will generally be treated as realizing a tax benefit from the use of a Tax Attribute
on a “with and without” basis, thereby generally treating the Tax Attributes as the last item used, subject to several
exceptions including without limitation: (i) if we enter into any other agreement after the date of the Tax Receivable Agreement
that obligates us to make payments to another party in exchange for tax benefits conferred upon us, unless otherwise agreed by
the TRA Holder Representative, such tax benefits and such payments are ignored for purposes of the “with and without”
calculation under the Tax Receivable Agreement (and otherwise), with the effect that the Tax Attributes are deemed used prior
to any such other tax attributes or tax benefits, (ii) carrybacks of tax items arising from other tax attributes are ignored and
will not impact a prior year’s “with and without” calculation, (iii) state and local tax savings are calculated
using an assumed tax rate, (iv) the determination of any incremental basis adjustment in respect of payments under the TRA is
made on an iterative basis continuing until any incremental basis adjustment is immaterial as reasonably determined by the TRA
Holder Representative and us in good faith and in consultation with an advisory firm, (v) as described below in the event that
any Tax Attributes initially claimed or utilized by the Tax Group are disallowed, the TRA Holders will not be required to reimburse
us for any excess payments that may previously have been made, rather any such excess payments made to such TRA Holders will be
applied against and reduce any future cash payments otherwise required to be made by us under the Tax Receivable Agreement to
applicable TRA Holders after the determination of such excess, and (vi) upon the occurrence of certain Early Termination Events
or upon the transfer of certain assets of AST or its subsidiaries several assumptions are used in determining the “with
and without” calculation as described below.
Payments
under the Tax Receivable Agreement generally will be based on the tax reporting positions that we determine (with the amount of
subject payments determined in consultation with an advisory firm and subject to the TRA Holder Representative’s review
and consent), and the IRS or another taxing authority may challenge all or any part of a position taken with respect to Tax Attributes
or the utilization thereof, as well as other tax positions that we take, and a court may sustain such a challenge. In the event
that any Tax Attributes initially claimed or utilized by the Tax Group are disallowed, the TRA Holders will not be required to
reimburse us for any excess payments that may previously have been made pursuant to the Tax Receivable Agreement, for example,
due to adjustments resulting from examinations by taxing authorities. Rather, any excess payments made to such TRA Holders will
be applied against and reduce any future cash payments otherwise required to be made by us under the Tax Receivable Agreement
after the determination of such excess. However, a challenge to any Tax Attributes initially claimed or utilized by the Tax Group
may not arise for a number of years following the initial time of such payment and, even if challenged earlier, such excess cash
payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of
the Tax Receivable Agreement and, as a result, there might not be future cash payments against which such excess can be applied.
As a result, in certain circumstances we could be required to make payments under the Tax Receivable Agreement in excess of the
Tax Group’s actual savings in respect of the Tax Attributes, which could materially impair the financial condition of the
Company and the Tax Group.
The
Tax Receivable Agreement will provide that, in the event of certain Early Termination Events, we will be required to make a lump-sum
cash payment to all the TRA Holders equal to the present value of all forecasted future payments that would have otherwise been
made under the Tax Receivable Agreement, which lump-sum payment would be based on certain assumptions, including those relating
to there being sufficient future taxable income of the Tax Group to fully utilize the Tax Attributes over certain specified time
periods and that all AST Common Units (including AST Common Units held by Blocker Corporations) that had not yet been exchanged
for Class A Common Stock or cash are deemed exchanged for cash. The lump-sum payment could be material and could materially exceed
any actual tax benefits that the Tax Group realizes subsequent to such payment. In addition, if certain assets of AST or its Subsidiaries
are transferred this may result in a deemed sale of such assets for purposes of the Tax Receivable Agreement and deemed accelerated
utilization of certain associated Tax Attributes.
As
a result of the foregoing, in some circumstances (i) we could be required to make payments under the Tax Receivable Agreement
that are greater than or less than the actual tax savings that the Tax Group realizes in respect of the Tax Attributes and (ii)
it is possible that we may be required to make payments years in advance of the actual realization of tax benefits (if any, and
may never actually realize the benefits paid for) in respect of the Tax Attributes (including if any Early Termination Events
occur). In these situations, our obligations under the Tax Receivable Agreement could have a material and adverse impact on our
liquidity and could have the effect of delaying, deferring, or preventing certain mergers, asset sales, other forms of business
combinations or other changes of control. There can be no assurance that we will be able to finance our obligations under the
Tax Receivable Agreement in a manner that does not adversely affect our working capital and growth requirements.
We
are required to notify and keep the TRA Holder Representative reasonably informed regarding tax audits or other proceedings the
outcome of which is reasonably expected to reduce or defer payments to any TRA Holder under the Tax Receivable Agreement and the
TRA Holder Representative and any affected TRA Holder has the right to (i) discuss with the us, and provide input and comment
to us regarding, any portion of any such tax audit or proceeding and (ii) participate in, at the affected TRA Holders’ and
TRA Holder Representative’s expense, any such portion of any such tax audit or other tax proceeding to the extent it relates
to issues the resolution of which would reasonably be expected to reduce or defer payments to any TRA Holder under the Tax Receivable
Agreement. We will not be permitted to settle or fail to contest any issue pertaining to income taxes that is reasonably expected
to materially and adversely affect the TRA Holders’ rights and obligations under the Tax Receivable Agreement without the
consent of the TRA Holder Representative (which is not to be unreasonably withheld or delayed).
Under
the Tax Receivable Agreement, we are required to provide the TRA Holder Representative with a schedule showing the calculation
of payments that are due under the Tax Receivable Agreement with respect to each taxable year. This calculation will be based
upon the advice of our tax advisors and an advisory firm. Payments under the Tax Receivable Agreement will generally be required
to be made to the TRA Holders a short period of time after this schedule becomes final pursuant to the procedures set forth in
the Tax Receivable Agreement, although interest on such payments will begin to accrue at from the due date (without extensions)
of our U.S. federal income tax return. Any late payments that may be made under the Tax Receivable Agreement will continue to
accrue interest (generally at a default rate) until such payments are made.
PIPE
Subscription Agreements
In
connection with the execution of the Equity Purchase Agreement, we entered into the PIPE Subscription Agreements with the PIPE
Investors, under which the PIPE Investors agreed to purchase, in the aggregate, 23,000,000 shares of Class A Common Stock at $10.00
per share for an aggregate commitment amount of $230,000,000. The shares of Class A Common Stock issued under such PIPE Subscription
Agreements have not been registered under the Securities Act, in reliance upon an exemption provided in Section 4(a)(2) of the
Securities Act and/or Regulation D promulgated thereunder. The closings under the PIPE Subscription Agreements occurred substantially
concurrently with the Closing. Certain Existing Equityholders, including American Tower, Invesat, Rakuten Mobile, Inc. and Vodafone,
purchased shares of Class A Common Stock in the PIPE Investment.
AST
Relationships
Transactions
with Executive Officers
Founder
Note
On
July 11, 2019, AST entered into a promissory note agreement with its Chief Executive Officer and Chairman of the Board, Abel Avellan
(the “Founder Note”). Under the terms of the Founder Note dated September 10, 2019, AST borrowed $1.75 million from
Mr. Avellan bearing interest at 2.37% per annum. The balance outstanding under the Founder Note was $1.75 million and interest
expense related to the Founder Note was $22,000 for the year ended December 31, 2019. AST repaid all principal and interest outstanding
relating to the Founder Note on March 3, 2020.
CFO
Note
On
December 15, 2017, AST issued 110,000 Existing AST Common Units to its Chief Financial and Operating Officer, Thomas Severson,
in exchange for a $100,000 promissory note in favor of AST (the “CFO Note”). The CFO Note accrues interest monthly
at a rate of 2.0% and is payable on the earlier of (1) December 15, 2027 and (2) the occurrence of any of the following with respect
to AST: (i) a sale, (ii) merger, (iii) other transaction where AST is not the majority, by voting power, of the surviving or resulting
company, or (iv) the sale, lease, transfer, exclusive license or other disposition by AST of all or substantially all of its assets.
Mr. Severson repaid all principal and interest amounts under the CFO Note in December 2020.
InMotion
Holdings LLC
AST
owns 51% of and controls NanoAvionika UAB, a private limited liability company organized and existing under the law of the Republic
of Lithuania (“Nano Lithuania”). Pursuant to that certain Investment Agreement dated November 7, 2017 (the “Investment
Agreement”) by and among Nano Lithuania, InMotion Holdings, LLC, a Delaware limited liability company wholly-owned by AST’s
Chief Executive Officer and Chairman of the Board, Abel Avellan (“InMotion”), and the other parties to the Investment
Agreement, InMotion owns one share of Nano Lithuania. Pursuant to the terms of a Service Agreement between Nano Lithuania and
InMotion dated March 1, 2018 (the “Services Agreement”), InMotion is to provide consulting services including but
not limited to marketing, sale support and general management support to Nano Lithuania. In connection with the Service Agreement,
InMotion is entitled to receive an option to acquire 2,919 newly issued shares of Nano Lithuania at EUR 305.64 per share (the
“Option”) and a management fee totaling $15,000 per month; however, during the term of the Service Agreement, no management
fees have been billed to, or collected from, Nano Lithuania, and InMotion intends to enter into an amendment to the Service Agreement
prior to the Closing to provide that its sole compensation under the Service Agreement will be the Option. In addition, AST owns
51% of and controls NanoAvionics US LLC, a Delaware limited liability company (“Nano US”). Pursuant to that certain
Limited Liability Company Operating Agreement dated February 21, 2020 (the “Operating Agreement”) by and among Nano
US, InMotion, and the other parties to the Operating Agreement, InMotion owns one share of Nano US and an option to acquire 2,919
newly issued shares of Nano US at an equivalent price per share as the option in Nano Lithuania, representing collectively with
such one share, a 13% interest on a fully-diluted basis.
Transactions
with Directors
Option
Grant
On
April 17, 2019, AST granted Invesat LLC, of which Ms. Cisneros is president, an option to acquire 22,000 AST Series A Preferred
Units. The option is exercisable for a period of 10 years at an exercise price of $0.93 per unit. Upon completion of the Business
Combination, this option was converted to an option to acquire 319,033 AST Common Units at a per unit exercise price of $0.0642.
On
May 16, 2019, AST granted Richard Sarnoff an option to acquire 24,000 Existing AST Common Units. The option is exercisable
for a period of 10 years at an exercise price of $0.93 per unit. Upon completion of the Business Combination, this option was
converted to an option to acquire 348,036 AST Common Units at a per unit exercise price of $0.0642.
Support
Services Agreement
On
January 20, 2020, AST entered into a support services agreement (the “Support Services Agreement”) with Finser Corporation
(“Finser”), which is part of the Cisneros Group of Companies, of which Ms. Cisneros is the Chief Executive Officer.
Under the terms of the Support Services Agreement, Finser provides AST with certain administrative support services, including
back-office functions, accounting, financial planning and analysis and IT consulting. For such services, Finser receives a minimum
monthly amount equal to $15,000, which amount covers up to 120 hours of support services, with additional hours billed at $50.00
per hour for financial planning and analysis and $45.00 per hour for all other services. During the year ended December 31, 2020,
Finser received fees of approximately $162,000 pursuant to the Support Services Agreement. Either party may terminate the Support
Services Agreement on prior written notice to the other party.
Production
Services Agreement
On
January 28, 2021, AST entered into a production services agreement (the “Production Services Agreement”) with Cisneros
Media Distribution LLC (“Cisneros Media”), which is part of the Cisneros Group of Companies, of which Ms. Cisneros
is the Chief Executive Officer. Under the terms of the Production Services Agreement, Cisneros Media serves as a producer of a
series of 12 videos for AST. For such services, Cisernos Media is entitled to a fee of $180,000, comprised of $36,000, which was
payable upon signing of the Production Services Agreement, and installments of $12,000 for each video produced by Cisneros Media
and accepted by AST. Either party may terminate the Support Services Agreement.
Agreements
with Stockholders
Rakuten
Agreement
In
connection with the Series B Purchase Agreement, AST entered into the Rakuten Agreement. Under the terms of the Rakuten Agreement,
AST agreed to make investments in building network capabilities in Japan that are compatible with the mobile network of Rakuten
and its affiliates. Furthermore, AST will collaborate with Rakuten to ensure network capability with Rakuten’s licensed
frequencies, including full coverage in Japan with 3GPP Band 3 frequencies with MIMO capability. Upon the launch of such coverage,
Rakuten will receive unlimited, exclusive rights and usage capacity in Japan in exchange for a $500,000 annual maintenance fee
payable to AST or its successors. AST will make $5 million (or such lesser amount as mutually agreed upon the parties) in capital
investments towards the design, construction, acquisition and implementation of ground communication assets. AST and Rakuten will
receive unlimited rights and usage of the ground assets for their respective operations, including, but not limited to, satellite
and other telecommunication communications.
The
Rakuten Agreement includes a commercial roadmap for AST satellite launches with KPIs that AST must meet. If AST does not meet
the applicable KPIs for the last two phases of its satellite launch program in accordance with such commercial roadmap or if AST
becomes subject to any bankruptcy proceeding or becomes insolvent, AST shall pay to Rakuten a penalty of $10 million.
The
term of the Rakuten Agreement shall continue for so long as Rakuten or its affiliates own a majority of the AST Series B Preferred
Units purchased by Rakuten; provided, however, that if Rakuten no longer owns such AST Series B Preferred Units as a result of
change of control of AST, all provisions of the Rakuten Agreement remain in effect until AST or its successor fulfill the obligations
of AST under the Rakuten Agreement. No payments have been made to date between AST and Rakuten pursuant to the Rakuten Agreement.
Vodafone
Agreement
In
connection with the Series B Purchase Agreement, AST and Vodafone agreed to enter into one or more Vodafone Commercial Agreements.
Under the Series B Purchase Agreement, AST agreed that AST, its subsidiaries, and affiliates would not enter into any agreement,
term sheet, or letter of intent that grants another party the rights related to the provision of mobile services in the Vodafone
markets or Vodafone partner markets prior to the execution of the Vodafone Commercial Agreements.
The
Vodafone Commercial Agreements are to include mutual exclusivity, conditioned upon Vodafone making the SpaceMobile Service available
to all of its customers and certain promotional efforts, within all Vodafone markets for five years commencing on the launch of
a commercial service based on Phase 3 of the SpaceMobile Service; preferential commercial terms in Vodafone partner markets; equal
revenue share for the SpaceMobile Service in Vodafone exclusivity markets; and the procurement, building and operating of mobile
network ground stations at a mutually agreed cost by Vodafone.
No
payments have been made to date between AST and Vodafone pursuant to the anticipated Vodafone Commercial Agreements. Vodafone
has the right to designate one individual to AST’s board of directors. Currently, Vodafone’s designee is Luke Ibbetson.
This right will terminate upon completion of the Business Combination and adoption of the A&R Operating Agreement; however,
pursuant to the Stockholders’ Agreement, Vodafone will have the right to designate one member to our Board of Directors.
Vodafone has designated Luke Ibbetson.
Also,
AST has entered into a side letter with Vodafone dated December 15, 2020, under which AST has agreed (i) not to enter into any
material corporate strategic relationship or material commercial agreement with a party other than Vodafone and its affiliates
that would be reasonably expected to materially frustrate AST’s ability to satisfy its obligations under the Vodafone Commercial
Agreements with certain exceptions, (ii) to allocate sufficient funds in the capital budget to facilitate compliance with AST’s
obligations under the Vodafone Commercial Agreements; and (iii) not to alter AST’s business plan in a manner that is materially
detrimental to AST’s ability to satisfy its obligations under the Vodafone Commercial Agreements.
American
Tower Agreement
In
connection with the Series B Preferred Shares Purchase Agreement (the “Purchase Agreement”), AST and American Tower
entered into a side letter agreement that was subsequently amended and restated on December 15, 2020 to reflect the transactions
and agreements contemplated by the Equity Purchase Agreement between AST and New Providence Acquisition Corp. (the “Amended
and Restated Letter Agreement”). Under the Amended and Restated Letter Agreement, provided that American Tower and its affiliates
continue to own all the AST Series B Preferred Units purchased by it pursuant to the Purchase Agreement, AST agrees to not issue
or sell any equity securities in the PIPE offering contemplated under the Equity Purchase Agreement to a cellular tower company,
which is defined as an entity primarily engaged in the neutral host business but excludes wireless mobile network operators or
financial sponsors.
The
Amended and Restated Letter Agreement also contemplates that AST and American Tower will enter into commercial agreements to use
American Tower facilities for AST’s terrestrial gateway facilities in certain markets. AST’s space platform and gateway
facilities will provide MNOs with mobile service infrastructure in areas not well served by terrestrial networks. The term of
the operational agreement between AST and American Tower is five years after the initial launch of commercial mobile services
by AST.
In
markets in which Vodafone operates, AST will work with Vodafone and American Tower to evaluate and plan deployments with preferred
vendor status. The usage of any American Tower services in a Vodafone market will be memorialized in a commercial agreement among
all three parties. In markets where Vodafone does not operate (“Carrier Neutral Markets”), AST and American Tower
may enter into an agreement for American Tower to manage the operation of the AST-deployed gateway facility in such market. In
Carrier Neutral Markets where AST requires a third party to provide a gateway facility or services, AST agrees to not accept any
bid that is inferior to American Tower’s best and final proposal for such gateway facility or services. AST also agrees
to use commercially reasonable efforts to utilize American Tower facilities in (i) Vodafone markets where Vodafone decides to
not use its facilities, (ii) in Carrier Neutral Markets, and (iii) instances where AST requires a third-party vendor.
Additionally,
AST will work with American Tower to evaluate and plan gateway facility and radio access network data center deployments with
preferred vendor status to offer carrier-neutral hosting facilities in certain equatorial markets. American Tower will serve as
the preferred vendor for carrier neutral hosting facilities. AST will pay American Tower a monthly connection fee for use of a
carrier neutral hosting facility, which will be charged back to each applicable MNO. If AST and American Tower agree to construct
a new carrier neutral hosting facility or improve an existing one and American Tower elects to fund all such capital expenditures,
American Tower will provide ATS with a fair-market, long-term lease to such facility.
Employment
Arrangements
AST
has entered into offer letters with certain of its executive officers. See “Executive and Director Compensation —
Executive Compensation Arrangements.”
NPA
Relationships
Founder
Shares
On
June 2019, we issued an aggregate of 3,593,750 shares of NPA’s Class B common stock, which were convertible into shares
of NPA’s Class A common stock (the “Founder Shares”) to our Sponsor for an aggregate purchase price of $25,000
in cash, or approximately $0.007 per share. In August 2019, we effected a stock split resulting in an increase in the total number
of shares of NPA Class B Common Stock outstanding from 3,593,750 to 5,750,000, such that the total number of Founder Shares would
represent 20% of the total number of shares of NPA Common Stock outstanding upon completion of our IPO. Subsequent to such stock
split, in August 2019, our Sponsor transferred 10,000 Founder Shares to each of Mr. Bradley, our former Chief Financial Officer,
and Messrs. Gannon, Ginsberg and Mazer, our former independent directors. The number of Founder Shares issued was determined based
on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of our IPO. In connection
with the Business Combination, the Founder Shares were converted into shares of Class A Common Stock.
Private
Placement Warrants
In
addition, our Sponsor purchased an aggregate of 6,100,000 warrants at a price of $1.00 per warrant in a private placement that
occurred simultaneously with the closing of our IPO. As such, our Sponsor’s interest in this transaction is valued at $6,100,000.
Each private placement warrant entitles the holder thereof to purchase one share of Class A Common Stock at a price of $11.50
per share. The private placement warrants (including the Class A Common Stock issuable upon exercise thereof) may not, subject
to certain limited exceptions, be transferred, assigned or sold by the holder.
The
securities underlying the private placement warrants are identical to the respective securities underlying the units sold in our
IPO, except that any such warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable,
(ii) may not (including the Class A Common Stock issuable upon exercise of these warrants), subject to certain limited exceptions,
be transferred, assigned or sold by the Sponsor until 30 days after the Business Combination, (iii) may be exercised by the holders
on a cashless basis, (iv) are entitled to registration rights and (v) for so long as they are held by the Sponsor, will not be
exercisable more than five years from the effective date of the registration statement relating to the IPO, in accordance with
FINRA Rule 5110(f)(2)(G)(i). Any such securities may not, subject to certain limited exceptions, be transferred, assigned or sold
by the holder until 30 days after the Business Combination.
Related
Party Loans
Prior
to the closing of the IPO, the Sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our IPO. At
September 30, 2019, the outstanding balance under the promissory note in the aggregate amount of $155,093 was repaid.
Also,
to finance transaction costs in connection with an initial business combination, our Sponsor or an affiliate of our Sponsor or
certain of our officers and directors agreed, but were not obligated to, loan us funds as may be required.
On
January 28, 2021, Sponsor loaned the Company $200,000 under a promissory note to fund its working capital requirements and finance
transaction expenses in connection with a business combination. The promissory note was non-interest bearing, non-convertible
and payable on the earlier of (i) June 30, 2021 and (ii) the date on which the Company consummates a business combination. Such
loan was repaid upon completion of the Business Combination.
On
February 18, 2021, Sponsor loaned the Company $500,000 under a promissory note to fund its working capital requirements and finance
transaction expenses in connection with a business combination. The promissory note was non-interest bearing, non-convertible
and payable on the earlier of (i) June 30, 2021 and (ii) the date on which the Company consummates a business combination. Such
loan was repaid upon completion of the Business Combination.
Policies
and Procedures for Related Person Transactions
Our
Board of Directors has adopted a written related person transaction policy that sets forth the following policies and procedures
for the review and approval or ratification of related person transactions.
A
“related person transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will
have a direct or indirect material interest. A “related person” means:
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any
person who is, or at any time during the applicable period was, one of our executive officers or one of our directors;
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●
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any
person who is known by us to be the beneficial owner of more than 5% of our voting shares;
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●
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any
immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer
or a beneficial owner of more than 5% of our voting shares, and any person (other than a tenant or employee) sharing the household
of such director, executive officer or beneficial owner of more than 5% of our voting shares;
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●
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any
firm, corporation or other entity, including not-for-profit entities, in which any of the foregoing persons is employed as
an executive officer or is a general partner, managing member or principal or in a position of having the possession, direct
or indirect, of the power to direct or cause the direction of management and policies of an entity through ownership, by contract,
or otherwise, or significant influence or in which such person has a 5% or greater beneficial ownership interest; and
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●
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any
firm, corporation or other entity in which any of the foregoing persons is employed (whether or not as an executive officer).
|
We
have policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our
affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist
from time to time. Specifically, pursuant to our audit committee charter, the audit committee has the responsibility to review
related party transactions.
PLAN
OF DISTRIBUTION
The
Selling Stockholders, which as used herein includes donees, pledgees, transferees, distributees or other successors-in-interest
selling shares of our Class A Common Stock or warrants or interests in our Class A Common Stock or warrants received after the
date of this prospectus from the Selling Stockholders as a gift, pledge, partnership distribution or other transfer, may, from
time to time, sell, transfer, distribute or otherwise dispose of certain of their shares of Class A Common Stock or warrants or
interests in our Class A Common Stock or warrants on any stock exchange, market or trading facility on which shares of our Class
A Common Stock or warrants, as applicable, are traded or in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at
the time of sale, or at negotiated prices.
The
Selling Stockholders may use any one or more of the following methods when disposing of their shares of Class A Common Stock or
warrants or interests therein:
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●
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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●
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one
or more underwritten offerings;
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●
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block
trades in which the broker-dealer will attempt to sell the shares of Class A Common Stock or warrants as agent, but may position
and resell a portion of the block as principal to facilitate the transaction;
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●
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its accounts;
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●
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an
exchange distribution in accordance with the rules of the applicable exchange;
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●
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privately
negotiated transactions;
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●
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distributions
to their members, partners or shareholders;
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●
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short
sales effected after the date of the registration statement of which this prospectus is a part is declared effective by the
SEC;
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●
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through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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●
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in
market transactions, including transactions on a national securities exchange or quotations service or over-the-counter market;
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●
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directly
to one or more purchasers;
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●
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through
agents;
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●
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broker-dealers
may agree with the Selling Stockholders to sell a specified number of such shares of Class A Common Stock or warrants at a
stipulated price per share or warrant; and
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●
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a
combination of any such methods of sale.
|
The
Selling Stockholders may, from time to time, pledge or grant a security interest in some shares of our Class A Common Stock or
warrants owned by them and, if a Selling Stockholder defaults in the performance of its secured obligations, the pledgees or secured
parties may offer and sell such shares of Class A Common Stock or warrants, from time to time, under this prospectus, or under
an amendment or supplement to this prospectus amending the list of the Selling Stockholders to include the pledgee, transferee
or other successors in interest as the Selling Stockholders under this prospectus. The Selling Stockholders also may transfer
shares of our Class A Common Stock or warrants in other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.
In
connection with the sale of shares of our Class A Common Stock or warrants or interests therein, the Selling Stockholders may
enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of
our Class A Common Stock or warrants in the course of hedging the positions they assume. The Selling Stockholders may also sell
shares of our Class A Common Stock or warrants short and deliver these securities to close out their short positions, or loan
or pledge shares of our Class A Common Stock or warrants to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities that require the delivery to such broker-dealer or other financial institution of shares
of our Class A Common Stock or warrants offered by this prospectus, which shares or warrants such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The
aggregate proceeds to the Selling Stockholders from the sale of shares of our Class A Common Stock or warrants offered by them
will be the purchase price of such shares of our Class A Common Stock or warrants less discounts or commissions, if any. The Selling
Stockholders reserve the right to accept and, together with their agents from time to time, to reject, in whole or in part, any
proposed purchase of share of our Class A Common Stock or warrants to be made directly or through agents. We will not receive
any of the proceeds from any offering by the Selling Stockholders.
The
Selling Stockholders also may in the future resell a portion of our Class A Common Stock or warrants in open market transactions
in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that
rule, or pursuant to other available exemptions from the registration requirements of the Securities Act.
Any
discounts, commissions, concessions or profit they earn on any resale of shares of our Class A Common Stock or warrants may be
underwriting discounts and commissions under the Securities Act. If any Selling Stockholder is an “underwriter” within
the meaning of Section 2(11) of the Securities Act, then the Selling Stockholder will be subject to the prospectus delivery requirements
of the Securities Act. Underwriters and their controlling persons, dealers and agents may be entitled, under agreements entered
into with us and the Selling Stockholders, to indemnification against and contribution toward specific civil liabilities, including
liabilities under the Securities Act.
To
the extent required, our Class A Common Stock or warrants to be sold, the respective purchase prices and public offering prices,
the names of any agent, dealer or underwriter, and any applicable discounts, commissions, concessions or other compensation with
respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
To
facilitate the offering of shares of our Class A Common Stock or warrants offered by the Selling Stockholders, certain persons
participating in the offering may engage in transactions that stabilize, maintain or otherwise affect the price of our Class A
Common Stock or warrants. This may include over-allotments or short sales, which involve the sale by persons participating in
the offering of more shares of Class A Common Stock or warrants than were sold to them. In these circumstances, these persons
would cover such over-allotments or short positions by making purchases in the open market or by exercising their over-allotment
option, if any. In addition, these persons may stabilize or maintain the price of our Class A Common Stock or warrants by bidding
for or purchasing shares of Class A Common Stock or warrants in the open market or by imposing penalty bids, whereby selling concessions
allowed to dealers participating in the offering may be reclaimed if shares of Class A Common Stock or warrants sold by them are
repurchased in connection with stabilization transactions. The effect of these transactions may be to stabilize or maintain the
market price of our Class A Common Stock or warrants at a level above that which might otherwise prevail in the open market. These
transactions may be discontinued at any time.
Under
the Registration Rights Agreements and the PIPE Subscription Agreements, we have agreed to indemnify the Selling Stockholders
party thereto against certain liabilities that they may incur in connection with the sale of the securities registered hereunder,
including liabilities under the Securities Act, and to contribute to payments that the Selling Stockholders may be required to
make with respect thereto. In addition, we and the Selling Stockholders may agree to indemnify any underwriter, broker-dealer
or agent against certain liabilities related to the selling of the securities, including liabilities arising under the Securities
Act.
We
have agreed to maintain the effectiveness of this registration statement until all such securities have been sold under this registration
statement or Rule 144 under the Securities Act or are no longer outstanding. We have agreed to pay all expenses in connection
with this offering, other than underwriting fees, discounts, selling commissions, stock transfer taxes and certain legal expenses.
The Selling Stockholders will pay, on a pro rata basis, any underwriting fees, discounts, selling commissions, stock transfer
taxes and certain legal expenses relating to the offering.
Selling
Stockholders may use this prospectus in connection with resales of shares of our Class A Common Stock or warrants. This prospectus
and any accompanying prospectus supplement will identify the Selling Stockholders, the terms of our Class A Common Stock or warrants
and any material relationships between us and the Selling Stockholders. Selling Stockholders may be deemed to be underwriters
under the Securities Act in connection with shares of our Class A Common Stock or warrants they resell and any profits on the
sales may be deemed to be underwriting discounts and commissions under the Securities Act. Unless otherwise set forth in a prospectus
supplement, the Selling Stockholders will receive all the net proceeds from the resale of shares of our Class A Common Stock or
warrants.
A
Selling Stockholder that is an entity may elect to make an in-kind distribution of Class A Common Stock or warrants to its members,
partners or shareholders pursuant to the registration statement of which this prospectus is a part by delivering a prospectus.
To the extent that such members, partners or shareholders are not affiliates of ours, such members, partners or shareholders would
thereby receive freely tradable shares of Class A Common Stock or warrants pursuant to the distribution through a registration
statement.
We
are required to pay all fees and expenses incident to the registration of shares of our Class A Common Stock or warrants to be
offered and sold pursuant to this prospectus, which we expect to be approximately $350,000.
LEGAL
MATTERS
Latham
& Watkins LLP has passed upon the validity of the Class A Common Stock and warrants offered by this prospectus and certain
other legal matters related to this prospectus.
EXPERTS
The financial statements
of New Providence Acquisition Corp. as of and for the years ended December 31, 2020 and 2019 appearing in this prospectus have
been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere
herein and are included in reliance on such report given the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of AST & Science, LLC at December 31, 2020 and 2019, and for the years then ended, included
in this prospectus, have been so included in reliance on the report of BDO USA LLP, an independent registered public accounting
firm, appearing elsewhere herein, given the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed a registration
statement on Form S-1, including exhibits, under the Securities Act with respect to the shares of Class A Common Stock offered
by this prospectus. This prospectus is part of the registration statement, but does not contain all of the information included
in the registration statement or the exhibits. Our SEC filings are available to the public on the internet at a website maintained
by the SEC located at http://www.sec.gov.
INDEX
TO FINANCIAL STATEMENTS
|
I.
AST’s Financial Statements As of and for the Years Ended December 31, 2020 and 2019
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|
Independent
Registered Public Accounting Firm’s Report
|
|
F-2
|
|
Consolidated Balance Sheets as of December 31, 2020 and 2019
|
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F-3
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|
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019
|
|
F-4
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|
Consolidated Statements of Comprehensive Loss for years ended December 31, 2020 and 2019
|
|
F-5
|
|
Consolidated Statements of Members’ Equity for years ended December 31, 2020 and 2019
|
|
F-6
|
|
Consolidated Statements of Cash Flows for years ended December 31, 2020 and 2019
|
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F-7
|
|
Notes to the Financial Statements for years ended December 31, 2020 and 2019
|
|
F-8
|
|
|
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|
|
II.
NPA’s Financial Statements As of and for the year ended December 31, 2020 and as of December 31, 2019 and for the period
from May 28, 2019 (inception) through December 31, 2019
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|
Independent Auditors’ Report
|
|
F-27
|
|
Balance Sheet as of December 31, 2020 and 2019
|
|
F-28
|
|
Statement of Operations for the year ended December 31, 2020 and the period from May 28, 2019 (inception) through December 31, 2019
|
|
F-29
|
|
Statement of Changes in Stockholders’ Equity for year ended December 31, 2020 and the period from May 28, 2019 (inception) through December 31, 2019
|
|
F-30
|
|
Statement of Cash Flows for the year ended December 31, 2020 and the period from May 28, 2019 (inception) through December 31, 2019
|
|
F-31
|
|
Notes to the Financial Statements for the year ended December 31, 2020 and the period from May 28, 2019 (inception) through December 31, 2019
|
|
F-32
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Members of
AST
& Science, LLC
Midland,
TX
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of AST & Science, LLC and Subsidiaries (the “Company”)
as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, redeemable convertible
preferred stock and members’ equity and cash flows for the years then ended, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United
States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
BDO USA LLP
We
have served as the Company’s auditor since 2017.
Fort
Lauderdale, FL
February
26, 2021
AST & SCIENCE LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
|
|
|
As of December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,777
|
|
|
$
|
26,498
|
|
|
Accounts receivable, net
|
|
|
2,081
|
|
|
|
328
|
|
|
Inventory
|
|
|
2,591
|
|
|
|
182
|
|
|
Prepaid expenses
|
|
|
1,249
|
|
|
|
445
|
|
|
Other current assets
|
|
|
2,234
|
|
|
|
286
|
|
|
Total current assets
|
|
|
50,932
|
|
|
|
27,739
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
BlueWalker 3 Satellite – construction in progress
|
|
|
27,013
|
|
|
|
2,097
|
|
|
Property and equipment, net
|
|
|
10,057
|
|
|
|
1,685
|
|
|
Total property and equipment, net
|
|
|
37,070
|
|
|
|
3,782
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
|
7,045
|
|
|
|
—
|
|
|
Intangible assets, net
|
|
|
526
|
|
|
|
672
|
|
|
Goodwill
|
|
|
3,912
|
|
|
|
3,593
|
|
|
Other assets and deposits
|
|
|
160
|
|
|
|
162
|
|
|
Total other long-term assets, net
|
|
|
11,643
|
|
|
|
4,427
|
|
|
TOTAL ASSETS
|
|
$
|
99,645
|
|
|
$
|
35,948
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,990
|
|
|
$
|
1,552
|
|
|
Accrued expenses and other current liabilities
|
|
|
4,222
|
|
|
|
1,948
|
|
|
Deferred revenue
|
|
|
3,401
|
|
|
|
949
|
|
|
Note payable to Founder
|
|
|
—
|
|
|
|
1,750
|
|
|
Current operating lease liabilities
|
|
|
504
|
|
|
|
—
|
|
|
Total current liabilities
|
|
|
13,117
|
|
|
|
6,199
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current operating lease liabilities
|
|
|
6,541
|
|
|
|
—
|
|
|
Total liabilities
|
|
|
19,658
|
|
|
|
6,199
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members’ equity:
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $0.01 par value, authorized 684,932 shares, 684,932 shares issued and outstanding as of December 31, 2020 and 2019 (liquidation preference of $20,000 at December 31, 2020 and 2019)
|
|
|
9,394
|
|
|
|
9,394
|
|
|
Series B convertible preferred stock, $0.01 par value per share - 2,765,027 and 1,995,810 shares authorized as of December 31, 2020 and 2019, respectively; 2,765,027 and 773,376 shares issued and outstanding as of December 31, 2020 and 2019, respectively (liquidation preference of $119,636 and $31,520 at December 31, 2020 and 2019, respectively)
|
|
|
102,717
|
|
|
|
28,847
|
|
|
Members’ common equity, 10,000,000 shares authorized as of December 31, 2020 and 2019; 5,500,840 and 5,500,000 issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
5,462
|
|
|
|
5,171
|
|
|
Promissory note from common shareholder
|
|
|
—
|
|
|
|
(100
|
)
|
|
Accumulated other comprehensive income (loss)
|
|
|
(168
|
)
|
|
|
(329
|
)
|
|
Accumulated Deficit
|
|
|
(39,908
|
)
|
|
|
(15,847
|
)
|
|
Noncontrolling interest
|
|
|
2,490
|
|
|
|
2,613
|
|
|
Total members’ equity
|
|
|
79,987
|
|
|
|
29,749
|
|
|
TOTAL LIABILITIES AND MEMBERS’ EQUITY
|
|
$
|
99,645
|
|
|
$
|
35,948
|
|
See
accompanying notes to the consolidated financial statements
AST & SCIENCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019
(dollars in thousands, except per share data)
|
|
|
2020
|
|
|
2019
|
|
|
Revenues
|
|
$
|
5,967
|
|
|
$
|
1,414
|
|
|
Cost of sales
|
|
|
(3,025
|
)
|
|
|
(954
|
)
|
|
Gross profit
|
|
|
2,942
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Engineering services
|
|
|
13,081
|
|
|
|
4,668
|
|
|
General and administrative costs
|
|
|
12,320
|
|
|
|
5,404
|
|
|
Research and development costs
|
|
|
1,011
|
|
|
|
1,062
|
|
|
Depreciation and amortization
|
|
|
887
|
|
|
|
388
|
|
|
Total operating expenses
|
|
|
27,299
|
|
|
|
11,522
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and expense:
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
71
|
|
|
|
2
|
|
|
Interest expense
|
|
|
(10
|
)
|
|
|
(22
|
)
|
|
Other income and (expense), net
|
|
|
22
|
|
|
|
(15
|
)
|
|
Total other income (expense)
|
|
|
83
|
|
|
|
(35
|
)
|
|
Net loss before income taxes
|
|
|
(24,274
|
)
|
|
|
(11,097
|
)
|
|
Income taxes
|
|
|
(131
|
)
|
|
|
(44
|
)
|
|
Net loss
|
|
|
(24,405
|
)
|
|
|
(11,141
|
)
|
|
Add: Net loss attributable to noncontrolling interests
|
|
|
344
|
|
|
|
256
|
|
|
Net loss attributable to AST&Science
|
|
$
|
(24,061
|
)
|
|
$
|
(10,885
|
)
|
|
Cumulative convertible preferred stock dividends
|
|
$
|
(8,290
|
)
|
|
$
|
(523
|
)
|
|
Income available to common shareholders
|
|
$
|
(32,351
|
)
|
|
$
|
(11,408
|
)
|
|
Basic and diluted net loss per share
|
|
$
|
(5.88
|
)
|
|
$
|
(2.07
|
)
|
|
Basic and diluted shares used in computing net loss per share
|
|
|
5,500,404
|
|
|
|
5,500,000
|
|
See
accompanying notes to the consolidated financial statements
AST & SCIENCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019
(dollars in thousands, except per share data)
|
|
|
2020
|
|
|
2019
|
|
|
Net loss
|
|
$
|
(24,405
|
)
|
|
$
|
(11,141
|
)
|
|
Foreign currency translation adjustments
|
|
|
382
|
|
|
|
(145
|
)
|
|
Comprehensive loss
|
|
|
(24,023
|
)
|
|
|
(11,286
|
)
|
|
Comprehensive loss attributable to noncontrolling interest:
|
|
|
|
|
|
|
|
|
|
Add: Net loss attributable to noncontrolling interests
|
|
|
344
|
|
|
|
256
|
|
|
Foreign currency translation adjustments
|
|
|
(221
|
)
|
|
|
65
|
|
|
Comprehensive loss attributable to AST&Science
|
|
$
|
(23,900
|
)
|
|
$
|
(10,965
|
)
|
See
accompanying notes to the consolidated financial statements
AST & SCIENCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND MEMBERS’ EQUITY
(dollars in thousands)
|
|
|
Series
B
Redeemable
Preferred Stock
|
|
|
Series
A
Preferred Stock
|
|
|
Series
B
Preferred Stock
|
|
|
Common
Equity
|
|
|
Promissory
Note from
Common
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Values
|
|
|
Shares
|
|
|
Values
|
|
|
Shares
|
|
|
Values
|
|
|
Shares
|
|
|
Values
|
|
|
Shareholder
|
|
|
Loss
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
|
|
Balance, December 31,
2018
|
|
|
—
|
|
|
$
|
—
|
|
|
|
684,932
|
|
|
$
|
9,394
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,500,000
|
|
|
$
|
5,039
|
|
|
$
|
(100
|
)
|
|
$
|
(249
|
)
|
|
$
|
(4,962
|
)
|
|
$
|
2,934
|
|
|
$
|
12,056
|
|
|
Issuance of Series B Convertible Preferred Stock, net of issuance
costs of $2,153
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
773,376
|
|
|
|
28,847
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
28,847
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132
|
|
|
Unrealized foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(80
|
)
|
|
|
—
|
|
|
|
(65
|
)
|
|
|
(145
|
)
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,885
|
)
|
|
|
(256
|
)
|
|
|
(11,141
|
)
|
|
Balance, December 31,
2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
684,932
|
|
|
$
|
9,394
|
|
|
|
773,376
|
|
|
$
|
28,847
|
|
|
|
5,500,000
|
|
|
$
|
5,171
|
|
|
$
|
(100
|
)
|
|
$
|
(329
|
)
|
|
$
|
(15,847
|
)
|
|
$
|
2,613
|
|
|
$
|
29,749
|
|
|
Stock options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
840
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Issuance of Series B Redeemable Convertible Preferred Stock, net
of issuance costs of $5,889
|
|
|
1,966,704
|
|
|
|
72,944
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Issuance of Series B Convertible Preferred Stock, net of issuance
costs of $69
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,947
|
|
|
|
926
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
926
|
|
|
Modification upon amendment of Series B Convertible Preferred Stock
|
|
|
(1,966,704
|
)
|
|
|
(72,944
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,966,704
|
|
|
|
72,944
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
72,944
|
|
|
Payment of Promissory Note by Common Shareholder
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
290
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
290
|
|
|
Unrealized foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
161
|
|
|
|
—
|
|
|
|
221
|
|
|
|
382
|
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(24,061
|
)
|
|
|
(344
|
)
|
|
|
(24,405
|
)
|
|
Balance, December 31,
2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
684,932
|
|
|
$
|
9,394
|
|
|
|
2,765,027
|
|
|
$
|
102,717
|
|
|
|
5,500,840
|
|
|
$
|
5,462
|
|
|
$
|
—
|
|
|
$
|
(168
|
)
|
|
$
|
(39,908
|
)
|
|
$
|
2,490
|
|
|
$
|
79,987
|
|
See
accompanying notes to the consolidated financial statements
AST & SCIENCE LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019
(dollars in thousands)
|
|
|
2020
|
|
|
2019
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(24,405
|
)
|
|
$
|
(11,141
|
)
|
|
Adjustments to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
670
|
|
|
|
174
|
|
|
Amortization of intangible assets
|
|
|
217
|
|
|
|
214
|
|
|
Non-cash operating lease expense
|
|
|
219
|
|
|
|
—
|
|
|
Stock-based compensation
|
|
|
290
|
|
|
|
132
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,568
|
)
|
|
|
118
|
|
|
Prepaid expenses and other current assets
|
|
|
(1,485
|
)
|
|
|
(159
|
)
|
|
Inventory
|
|
|
(2,236
|
)
|
|
|
(148
|
)
|
|
Accounts payable and accrued expenses
|
|
|
3,476
|
|
|
|
881
|
|
|
Operating lease liabilities
|
|
|
(219
|
)
|
|
|
—
|
|
|
Deferred revenue
|
|
|
2,235
|
|
|
|
595
|
|
|
Other current assets and current liabilities
|
|
|
6
|
|
|
|
34
|
|
|
Net cash used in operating activities
|
|
|
(22,800
|
)
|
|
|
(9,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(8,123
|
)
|
|
|
(1,557
|
)
|
|
Purchase of intangible asset
|
|
|
(23
|
)
|
|
|
—
|
|
|
BlueWalker 3 Satellite – construction in process
|
|
|
(22,265
|
)
|
|
|
(2,097
|
)
|
|
Net cash used in investing activities
|
|
|
(30,411
|
)
|
|
|
(3,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from Founder bridge loan
|
|
|
—
|
|
|
|
1,750
|
|
|
Repayment for Founder bridge loan
|
|
|
(1,750
|
)
|
|
|
—
|
|
|
Proceeds from issuance of Series B Redeemable Preferred Stock
|
|
|
78,833
|
|
|
|
—
|
|
|
Issuance costs from issuance of Series B Redeemable Preferred Stock
|
|
|
(5,889
|
)
|
|
|
—
|
|
|
Proceeds from issuance of Series B Preferred Stock
|
|
|
1,000
|
|
|
|
31,000
|
|
|
Issuance costs from issuance of Series B Preferred Stock
|
|
|
(1,856
|
)
|
|
|
(371
|
)
|
|
Proceeds from promissory note with common shareholder
|
|
|
100
|
|
|
|
—
|
|
|
Direct and incremental costs incurred for the merger with NPA
|
|
|
(775
|
)
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
|
69,663
|
|
|
|
32,379
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(173
|
)
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
16,279
|
|
|
|
19,379
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
26,498
|
|
|
|
7,119
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
42,777
|
|
|
$
|
26,498
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
Non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of accrued construction in process
|
|
|
2,615
|
|
|
|
—
|
|
|
Purchase of accrued property and equipment
|
|
|
794
|
|
|
|
—
|
|
|
Right-of-use assets obtained in exchange for operating lease liabilities as of January 1, 2020 upon adoption of ASC 842
|
|
|
6,472
|
|
|
|
—
|
|
|
Right-of-use assets obtained in exchange for operating lease liabilities
|
|
|
734
|
|
|
|
—
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
Accrued direct and incremental costs incurred for the merger with NPA
|
|
|
376
|
|
|
|
—
|
|
|
Transaction costs accrued in connection with issuance of Series B Preferred Stock
|
|
|
—
|
|
|
|
1,782
|
|
|
Cash paid during the fiscal year for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
25
|
|
|
|
7
|
|
|
Income taxes
|
|
|
134
|
|
|
|
6
|
|
See
accompanying notes to the consolidated financial statements
AST
& Science LLC and Subsidiaries
Notes
to Consolidated Financial Statements
As
of and for the Years Ended 2020 and 2019
|
1.
|
Nature
of Business and Basis of Presentation
|
Nature
of Business
AST
& Science LLC and its subsidiaries (“AST” or the “Company”) is an innovative satellite designer and
manufacturer. AST is currently in the process of testing, developing and building its BlueWalker 3 test satellite in advance of
manufacturing and launching the first space based global cellular network distributed through a constellation of Low Earth Orbit
Satellites (the “AST Satellite Constellation”). Once deployed and operational, the AST Satellite Constellation will
provide connectivity directly to standard/unmodified cellular phones or any 2G/3G/4G LTE/5G and IoT-enabled device (the “SpaceMobile
Service”). The SpaceMobile Service will be made available to cellular subscribers and others through wholesale commercial
roaming agreements with cellular service providers on a global basis.
The
Company operates from six locations that include its corporate headquarters and 85,000 square foot satellite assembly, integrating
and testing facility in Midland, Texas, as well as operations in Maryland, Spain, the United Kingdom, and Israel. In addition,
its 51% owned and controlled subsidiary, NanoAvionika, is located in Lithuania. The accounts of all entities wholly owned by AST
are fully consolidated and all intercompany balances are eliminated. NanoAvionika, AST’s only non-wholly owned subsidiary,
is also fully consolidated, with all intercompany balances eliminated. NanoAvionika’s non-controlling equity interest and
related losses are presented separately in the accompanying financial statements.
There
continues to be uncertainties regarding the pandemic of the novel coronavirus (“COVID-19”), and the Company is closely
monitoring the impact of COVID-19 on all aspects of its business, including how it will impact its customers, employees, suppliers,
vendors, and business partners. Any estimates made herein may change as new events occur and additional information is obtained,
and actual results could differ materially from any estimates made herein under different assumptions or conditions. The Company
has evaluated the impact of the COVID-19 pandemic for the year ended December 31, 2020 and has not realized a material impact
to the Company’s technology development efforts or operations. The Company is unable to predict the impact that COVID-19
may have on its financial position and operations moving forward due to the numerous uncertainties. The Company will continue
to assess the evolving impact of COVID-19.
CARES
Act
On
March 27, 2020, former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”). The CARES act was enacted as a response to the COVID-19 outbreak discussed above and is meant to provide companies
with economic relief. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment
of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications
to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections
to tax depreciation methods for qualified improvement property.
The
impact of the CARES Act on the Company’s financial position and statement of operations was immaterial as of December 31,
2020. The Company has not incurred any indebtedness with respect to loans available under the CARES Act, and given the Company
is not taxable, the tax implications of the CARES Act do not apply. The Company will continue to assess the evolving impact of
the CARES Act.
Basis
of Presentation
The
accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and intercompany transactions are eliminated during consolidation.
The
Company has incurred recurring losses since its inception, including net losses of $24.4 million and $11.1 million for the years
ended December 31, 2020 and 2019, respectively.
As
of December 31, 2020, the Company held cash and cash equivalents of $42.8 million. Management believes that its cash and cash
equivalents on hand as of December 31, 2020 will be sufficient to continue funding the Company’s increased operations through
at least one year from the date these financial statements are available to be issued. The Company’s success is dependent
upon its ability to continue to raise capital in order to fund ongoing research and development, successfully commercialize its
products, generate revenue, meet its obligations, and ultimately obtain profitable operations. The Company will seek additional
financing to continue to fund its research and development efforts and the capital required to fund the AST Satellite Constellation.
The ability of the Company to secure this additional capital cannot be assured.
|
2.
|
Summary
of Significant Accounting Policies
|
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 and Nano. However, given no goodwill has been allocated to
the AST reporting unit, the Company identifies Nano as the sole reporting unit for purposes of goodwill impairment testing.
Our
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 years ended
December 31, 2020 and 2019.
Long-Lived
Assets
Long-lived
assets, except for goodwill, consist of property and equipment and finite-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
finite-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 years ended December 31, 2020 and 2019.
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 common stock and preferred stock, valuation and impairment of goodwill and intangible 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 Equivalents
The
Company’s cash and cash equivalents consist of cash maintained within standard checking accounts for its operating subsidiaries
and an interest bearing Money Market Demand and Deposit account with JPMorgan Chase Bank, N.A. (the “Chase Bank”)
(“Chase Bank Investment Account”). 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.
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.
Our
subsidiary, NanoAvionika, typically derives its revenue from a small number of customers. Two customers accounted for approximately
76% of the Company’s trade receivables as of December 31, 2020, and two customers accounted for approximately 24% of the
Company’s trade receivables as of December 31, 2019. Three customers accounted for approximately 50% of the Company’s
revenue as of December 31, 2020, and two customers accounted for approximately 28% of the Company’s revenue as of December
31, 2019. 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.
Inventory
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 construction 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.
Inventories
consisted of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Raw material
|
|
$
|
2,285
|
|
|
$
|
182
|
|
|
Work-in-process
|
|
|
306
|
|
|
|
—
|
|
|
Total
|
|
$
|
2,591
|
|
|
$
|
182
|
|
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
on the 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:
|
|
|
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
|
Foreign
Currency Translation
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 AST’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 members’ capital.
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 other comprehensive income on the Company’s Consolidated Balance Sheets.
Fair
Value Measurements
Certain
assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value
must maximize the use of observable inputs and minimize the use of unobservable inputs. A framework is used for measuring fair
value utilizing a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Financial
assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair
value hierarchy, of which the first two are considered observable and the last is considered unobservable:
|
|
●
|
Level
1 — defined as observable inputs, such as quoted prices unadjusted in active markets for identical securities;
|
|
|
|
|
|
|
●
|
Level
2 — defined as inputs other than quoted prices included in Level 1 that are either directly or indirectly observable;
and
|
|
|
|
|
|
|
●
|
Level
3 — defined as significant unobservable inputs in which little or no market data exists, therefore, requiring an
entity to develop its own assumptions
|
The
Company’s financial assets have been classified as Level 1. The carrying amounts of the Company’s financial assets
(which include cash, cash equivalents, and accounts receivable) and liabilities (which include accounts payable) approximate fair
value because of the short maturity of these instruments. No financial assets have been classified as Level 2 or Level 3.
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 technical feasibility of our products, as well as the cost of internal staff (such as engineers and consultants)
to support these efforts. Currently, major engineering activities include procuring and manufacturing the satellite components
required for the BW3 satellite. AST intends to assemble and test the BW3 satellite at its Midland, Texas facility during the first
half of 2021. The BW3 is scheduled to be launched during the second half of 2021. Additionally, AST 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 AST’s BW3 developments are capitalized to its construction
in progress (“CIP”) account, and presented on its 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 developments in which the Company typically engages third party vendors, including 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.
Government
and Space Agency Grants
The
Company’s subsidiary, NanoAvionika, receives grant funding in exchange for satellite technology development efforts made
by the Company to the European Space Agency and other governmental bodies. If the Company fails to maintain required commitments,
the funds received may have to be repaid or other adverse consequences may arise, which could affect our cash flows and profitability.
When
the Company has been awarded grant funding, cost reimbursements are recognized when it is probable that the Company will comply
with the conditions attached to the grant arrangement and the grant proceeds will be received. Grants are recognized in the Company’s
results of operations on a systematic basis over the periods in which the Company recognizes the related costs for which the grant
is intended to compensate. Specifically, when grants are related to reimbursements, the grants are recognized as a reduction of
the related expense in the Company’s results of operations. For grants related to reimbursements of capital expenditures,
the grants are recognized as a reduction of the basis of the asset and recognized in the Company’s results of operations
over the estimated useful life of the depreciable asset as reduced depreciation expense. The Company recognized a reduction to
cost of sales related to grants for a total of $0.3 million and $1.6 million for the years ended December 31, 2020 and 2019, respectively.
Income
Taxes
AST
& Science LLC and subsidiaries elected to be taxed as Limited Liability Companies which are treated as partnerships for federal
and state income tax purposes. Accordingly, for federal and state income tax purposes, all income, losses, and other tax attributes
pass through to the members’ income tax returns, and no provision for income taxes has been recorded for these entities
in the consolidated financial statements. Notwithstanding its disregarded status, the Company does have controlling ownership
interest in a Lithuanian subsidiary that is subject to foreign income taxes. None of the Company’s other subsidiaries were
subject to material income tax consequences during the periods presented.
Convertible
Preferred Stock
As
of December 31, 2020 and 2019, the Company’s outstanding Series A and B Convertible Preferred Stock does not meet any of
the criteria requiring presentation in mezzanine equity, and as such, the Preferred Stock will be presented in permanent equity.
In February 2020, the Company issued Series B Preferred Stock to Rakuten Mobile Singapore Pte. Ltd. (“Rakuten”), which
the Company classified within mezzanine equity as the redemption of the shares was outside of the control of the Company. In December
2020, the Rakuten Series B Preferred Stock was amended to remove the redemption feature, which triggered a reclassification from
mezzanine equity to permanent equity. The amendment to the Rakuten Series B Preferred Stock is discussed further in Note 5.
Stock-Based
Compensation
The
Company estimates the grant date fair value of share-based awards 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,
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.
Collaboration
Arrangements
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 Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements,
as amended by ASU 2018-18 (“ASC 808”), and applies a systematic and rational approach to recognize revenue (unless
parts of the arrangement are within the scope of other authoritative accounting literature or can be appropriately analogized
to other authoritative accounting literature).
Revenue
Recognition
The
Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts
with Customers (Topic 606) and its related amendments (collectively known as “ASC 606”). In accordance with ASC
606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue reflects the consideration
to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle,
the Company applies the following five steps: (1) identify the contract with the customer, (2) identify the performance obligations
in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract,
and (5) recognize revenue when or as the Company satisfies a performance obligation.
Costs
to obtain the Company’s contracts are capitalized and amortized over the expected customer benefit period, and typically
include commissions paid to external parties or distributors. Sales commissions are considered incremental costs in obtaining
a new contract and thus are appropriately capitalized. Costs to fulfill the Company’s contracts, such as our overhead costs
and third-party costs to 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 December 31, 2020 and 2019.
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.
Recent
Accounting Pronouncements
Adopted
accounting standards
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-02, Leases (Topic 842). This ASU requires a lessee to record, for all leases with a lease term of more than 12 months,
an asset representing its right to use the underlying asset for the lease term and a liability to make lease payments. For leases
with a lease term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying
asset, not to recognize a right-of-use asset or lease liability. A lessee making this accounting policy election would recognize
lease expense over the term of the lease, generally in a straight-line pattern. This guidance is effective for financial statements
issued for fiscal years beginning after December 15, 2020. Early adoption is permitted. In transition, a lessee and a lessor will
recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified
retrospective approach includes a number of optional practical expedients. These practical expedients relate to identifying and
classifying leases that commenced before the effective date, initial direct costs for leases that commenced before the effective
date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying
asset. ASU 2018-11 was issued in June 2018 that also permits entities to choose to initially apply ASU 2016-02 at the adoption
date and recognize a cumulative-effect adjustment to the opening balance of net assets in the period of adoption.
The
Company early adopted ASC 842 as of January 1, 2020 using the modified retrospective method which did not require it to restate
prior periods and did not have an impact on retained earnings. The Company has elected the “package of 3” practical
expedients permitted under the transition guidance which eliminates the requirements to reassess prior conclusions about lease
identification, lease classification, and initial direct costs. The Company also adopted an accounting policy 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 elected
an accounting policy to combine the non-lease components (which include common area maintenance, taxes and insurance) with the
related lease component. The Company elected to apply this practical expedient to all asset classes upon the adoption of ASC 842.
At
the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances
present. 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. The Company includes renewal options to extend the lease in the
lease term where it is reasonably certain that it will exercise these options. Lease liabilities and the corresponding right-of-use
assets are recorded based on the present values of lease payments over the lease terms. 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. Variable payments that do not depend on a rate or index are not included in the lease liability
and are recognized as incurred. Lease contracts do not include residual value guarantees nor do they include restrictions or other
covenants. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid, incentives
received, or lease prepayments. 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.
See
the Commitments and Contingencies footnote (Note 6) for the effects of the adoption of this ASU on the Company’s financial
statements.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326). The ASU changes the impairment
model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model
to an expected loss model. Entities will be required to estimate credit losses over the entire contractual term of an instrument.
The ASU includes financial assets recorded at amortized cost basis such as loan receivables, trade and certain other receivables
as well as certain off-balance sheet credit exposures such as loan commitments and financial guarantees. The ASU does not apply
to financial assets measured at fair value, and loans and receivables between entities under common control. The ASU is effective
for fiscal years beginning after December 15, 2022. Early adoption may be selected for fiscal years beginning after December 15,
2018. An entity must apply the amendments in the ASU through a cumulative-effect adjustment to net assets as of the beginning
of the first reporting period in which the guidance is effective except for certain exclusions.
The
Company early adopted ASU 2016-13 as of January 1, 2020. The adoption primarily impacts the Company’s trade receivables
and grant receivables in relation to sales made by our subsidiary, NanoAvionika. The Company monitors its credit exposure through
active review of customer balances. The Company’s expected loss methodology for accounts receivable is developed using historical
collection experience, current and future economic and market conditions and a review of the current status of customers’
account balances. Historical credit losses have not been significant due to the financial stability and creditworthiness of our
limited number of customers. The Company considers credit losses immaterial to our business and, therefore, have not provided
all of the disclosures otherwise required by the standard.
Accounting
standards to be adopted in future periods
In
August 2020, the FASB issued 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 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. For all other entities, the amendments are effective for fiscal years
beginning after December 15, 2023. 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 new standard will be effective in the first quarter of 2021. The Company is currently evaluating
the impact the standard will have on the consolidated financial statements.
|
3.
|
Property
and Equipment
|
Property
and equipment, net consisted of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
2020
|
|
|
2019
|
|
|
Computers, software, and equipment
|
|
$
|
1,707
|
|
|
$
|
699
|
|
|
Leasehold improvements
|
|
|
3,536
|
|
|
|
340
|
|
|
Satellite antenna
|
|
|
1,338
|
|
|
|
293
|
|
|
Test and lab equipment
|
|
|
2,666
|
|
|
|
—
|
|
|
Phased array test facility
|
|
|
704
|
|
|
|
234
|
|
|
Assembly and integration equipment
|
|
|
616
|
|
|
|
—
|
|
|
Furniture and fixtures
|
|
|
338
|
|
|
|
268
|
|
|
Vehicles
|
|
|
67
|
|
|
|
67
|
|
|
Property and equipment
|
|
|
10,972
|
|
|
|
1,901
|
|
|
Accumulated depreciation
|
|
|
(915
|
)
|
|
|
(216
|
)
|
|
Property and equipment, net
|
|
|
10,057
|
|
|
|
1,685
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueWalker 3 Satellite – construction in progress
|
|
|
27,013
|
|
|
|
2,097
|
|
|
Total property and equipment, net
|
|
$
|
37,070
|
|
|
$
|
3,782
|
|
Depreciation
expense for the years ended December 31, 2020 and 2019 was $0.7 million and $0.2 million, respectively. In addition, the Company
is currently manufacturing, testing and integrating its Blue Walker 3 Test Satellite. As of December 31, 2020, the Company incurred
$27 million relating to this effort.
Pursuant
to the Fourth Amended and Restated Limited Liability Company Operating Agreement dated February 4, 2020, the Company is authorized
to issue a total of 10,000,000 common shares, of which 5,500,840 common shares were issued and outstanding at December 31, 2020
and 4,499,160 common shares were available for future issuance at December 31, 2020.
The
holders of common shares are entitled to one vote for each common share held at all meetings of Shareholders. Holders of common
shares may receive distributions at the sole discretion of the Board of Directors.
The
Company reserved the following shares of common stock for future issuance as of December 31, 2020 and 2019:
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Convertible preferred stock
|
|
|
3,449,959
|
|
|
|
1,458,308
|
|
|
Options outstanding
|
|
|
815,233
|
|
|
|
635,730
|
|
|
Options available for future grants
|
|
|
67,488
|
|
|
|
242,832
|
|
|
Total common shares reserved for future issuance
|
|
|
4,332,680
|
|
|
|
2,336,870
|
|
|
5.
|
Convertible
Preferred Stock
|
On
June 26, 2018, the Company entered into a Series A Preferred Stock Purchase Agreement. Under the Agreement, the Company issued
an aggregate of 684,932 shares of Series A Preferred Stock (“Series A”) at a purchase price of $14.60 per share for
aggregate proceeds of $10 million. The Company incurred issuance costs of approximately $0.6 million in connection with the issuance
of the Series A Preferred Shares.
On
October 16, 2019, the Company entered into a Series B Preferred Stock Purchase Agreement. Under the Agreement, the Company issued
an aggregate of 773,376 shares (the “Initial Series B Issuance”) of Series B Preferred Stock (“Series B”)
at a purchase price of $40.08 per share for aggregate proceeds of $31 million. The proceeds are presented net of incurred issuance
costs of approximately $2.1 million in connection with the issuance of the Series B Preferred Shares.
In
connection with the Initial Series B Issuance, the Company entered into a commercial agreement on October 26, 2019 with Vodafone
Ventures Limited (“Vodafone”), whereby Vodafone is provided exclusivity to operate the AST commercial service in agreed
upon markets as defined in the agreement. As part of this agreement, Vodafone will promote the service as an element of its normal
business and the Company is provided a 50/50 revenue share for all services enabled by the Company’s SpaceMobile satellite
segment. The term of the agreement is five (5) years starting with the initial launch of commercial service based on the Phase
3 constellation anticipated in 2023. The Vodafone Agreement is considered a collaborative arrangement under ASC 808 as both parties
are active participants and share in the significant risks and rewards of the activities. The Company will not assign any value
to the Vodafone Agreement at inception and will recognize their share of expenses as they are performed up to the time the activities
are revenue generating. For the years ended December 31, 2020 and 2019, the Company has not recognized any revenue under the Vodafone
collaborative arrangement.
On
February 14, 2020, the Company entered into a Series B Preferred Stock Purchase Agreement. Under the Agreement, the Company issued
an aggregate of 1,966,704 shares (the “Second Series B Issuance”) of Series B Preferred Stock at a purchase price
of $40.08 per share for aggregate proceeds of $78.8 million (the “Rakuten Shares”) to Rakuten. In conjunction with
the Second Series B Issuance, the Company also entered into a commercial agreement with Rakuten (the “Rakuten Commercial
Agreement”) (see Note 13). The Rakuten Commercial Agreement requires that the Company adhere to certain key performance
indicators (“KPIs”) beginning on September 30, 2023 (the “First Measurement Date”) and December 31, 2024
(the “Second Measurement Date”). If the Company is unable to meet or exceed these KPIs on the First Measurement Date
or the Second Measurement Date, or voluntarily or involuntary becomes subject to bankruptcy proceedings, Rakuten will have the
option to require the Company to redeem the Rakuten Shares at the redemption price of $30 per share (the “Rakuten Redemption
Clause”). Rakuten’s redemption rights will be extended for a period of no later than 6 months if the Company’s
failure to meet the KPIs as required arises from any failure or delays in obtaining any governmental or third party approvals
required in connection with the launch of the SpaceMobile Service (see Note 13) or in connection with the delivery of the KPIs.
The Rakuten shares carry the same terms as the previously issued shares of Series B Preferred Stock, other than the Rakuten Redemption
Clause noted herein. Upon issuance, the Rakuten Shares were classified outside of members’ equity, within mezzanine equity,
because the Rakuten Redemption Clause was not solely within the control of the Company.
On
December 15, 2020 (the “Amendment Date”), the Company executed the Amended and Restated Commercial Agreement (the
“A&R Commercial Agreement”) with Rakuten, which amended the Rakuten Commercial Agreement. The A&R Commercial
Agreement removes the Rakuten Redemption Clause from the Rakuten Shares and replaces it with a one-time cash payment penalty (the
“Penalty Payment”) of $10 million. The Penalty Payment is payable upon the Company’s failure to meet the KPIs
at the measurement dates originally established in the Rakuten Commercial Agreement.
The
amendment to Rakuten Commercial Agreement to replace the Rakuten Redemption Clause with the Penalty Payment was accounted for
as a modification of the Rakuten Shares for accounting purposes. In making this determination, the Company considered the significance
of the revisions to existing contractual terms. These revisions were not considered qualitatively or quantitatively significant
as the redemption clause was not deemed probable to be triggered when the shares were originally issued or as of the amendment
date. The Company determined that any incremental difference in the fair value of the shares as a result of the modification was
de minimis, and accordingly, the carrying value remained unchanged. Additionally, as the Rakuten Redemption Clause was removed
as part of the A&R Commercial Agreement, the Rakuten Shares are no longer redeemable outside of the control of the Company
and have been reclassified from temporary to permanent equity. The Penalty Payment, which replaced the Rakuten Redemption Clause,
is considered a revenue component of the A&R Commercial Agreement accounted for under ASC 606. The Company considers this
a form of variable consideration which is fully constrained as of execution of the A&R Commercial Agreement as well as of
December 31, 2020.
On
March 1, 2020, the Company entered into another Series B Preferred Stock Purchase Agreement with Samsung Next Fund LLC. Under
the Agreement, the Company issued an aggregate of 24,947 shares (the “Third Series B Issuance”) of Series B Preferred
Stock for a purchase price of $40.08 per share for aggregate proceeds of $1 million. The Samsung shares carry the same terms as
the previously issued shares of Series B Preferred Stock.
As
of December 31, 2020, the Company has $8.8 million in aggregate preferred cumulative dividends equal to $3.19 per share.
As
of December 31, 2020, the Series A and Series B Preferred Stock have the following rights, preferences and privileges:
Conversion
Rights
Each
share of Series A and Series B Preferred Stock is convertible at the option of the holder at any time after the date of issuance.
The number of shares of common stock to be issued in the event of a conversion is determined by dividing the original issue price
of $14.60 for the Series A preferred stock and $40.08 for the Series B preferred stock by the conversion price of then in effect
for Series A preferred stock and Series B preferred stock. The conversion price for Series A preferred stock was initially $14.60
and Series B preferred stock was initially $40.08, subject to adjustment under certain circumstances, including but not limited
to certain additional issuances of common shares.
The
Series A Preferred Stock and Series B Preferred Stock automatically converts at the either (a) the closing of a Qualified IPO,
all outstanding Series A Preferred Shares and Series B Preferred Shares shall automatically be converted into Common Shares, at
the then effective Series A Conversion Price and Series B Conversion Price or (b) at the election of the Required Series A Holders
and Required Series B Holders, all or any portion of the outstanding Series A Preferred Shares and Series B Preferred Shares shall
automatically be converted into Common Shares, at the then effective Series A Conversion Price and Series B Conversion Price.
Liquidation
Preference
Upon
liquidation, dissolution, or winding-up of the Company, or a merger, consolidation, lease or transfer of the Company (a “Deemed
Liquidation Event”), shareholders of Series A Preferred stock and Series B Preferred Stock are entitled to receive a liquidation
preference, first, to each holder of Series B Preferred Shares on a pari passu basis in proportion to amounts distributable, until
each holder of Series B Preferred Shares has received, in the aggregate, the greater of (i) cumulative distributions equal to
one (1) times the Series B Original Issue Price paid by such holder in respect of each of such holder’s Series B Preferred
Shares, plus any accrued but unpaid dividends or (ii) distributions that would have been made to such holder had its Series B
Preferred Shares been converted into Common Shares prior the distribution; and second, to each holder of Series A Preferred Shares
on a pari passu basis in proportion to amounts distributable, until each holder of Series A Preferred Shares has received,
in the aggregate, the greater of (i) cumulative distributions equal to two (2) times the Series A Original Issue Price paid by
such holder in respect of each of such holder’s Series A Preferred Shares; or (ii) distributions that would have been made
to such holder had its Series A Preferred Shares been converted into Common Shares prior the distribution; and thereafter, to
all holders of Common Shares, pro rata, in proportion to their percentage interests.
Dividends
Subject
to the terms of the Dissolution or Deemed Liquidation Event, the Board of Directors may, in its sole discretion with the consent
of the Required Series A Holders, cause the Company to distribute cash or property from time to time to the Shareholders in such
amounts as the Board of Directors deems appropriate. Any such distributions shall be made to the Shareholders, pro rata, in proportion
to their percentage interests. As of December 31, 2020 and 2019, no dividends have been paid or declared.
The
Company shall not declare, pay or set aside any dividends on any class or series of Shares unless the holders of the Series B
Preferred Shares then outstanding shall first receive, on a pro rata basis, a dividend on each outstanding share of the Series
B Preferred Shares equaling the greater of (i) eight percent (8%) of the Series B Original Issue Price and (ii) the corresponding
dividend the holder of the Series B Preferred Shares would receive on an as-converted to Common Share basis. The foregoing dividend
shall be cumulative (non-compounding) and will accrue daily and be payable when declared or upon a Deemed Liquidation Event.
Voting
Rights
Except
as provided by law or by other provisions of the Preferred Stock Agreements, Preferred Stock and common stockholders’ vote
together as one class on an “as-converted basis”. On any matter presented to the stockholders of the Corporation for
their action or consideration at any meeting of stockholders of the Corporation, each holder of Series A Preferred Stock and Series
B Preferred Stock is entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares
of Series A Preferred Stock and Series B Preferred Stock held by such holder are convertible as of the record date for determining
stockholders entitled to vote on such matter. The holders of the shares of Series A Preferred Stock, exclusively and as a separate
class, are entitled to elect 1 director of the Corporation. The holders of the shares of Series B Preferred Stock, exclusively
and as a separate class, are entitled to elect 1 director of the Corporation. The holders of the shares of Common Stock, exclusively
and as a separate class, are entitled to elect 2 directors of the Corporation.
|
6.
|
Commitments
and Contingencies
|
On
November 13, 2018, the Company entered into both an Economic Development Agreement (the “EDA”) and a sublease agreement
with Midland Development Corporation. The premise of the EDA was to create jobs in the Midland Texas area, as well as, to have
AST improve the land, office and hangar spaces at the Midland International Air & Space Port in Midland, Texas.
The
rentable spaces included office space (44,988 SF), hangar A (28,480 SF), hangar B (11,900 SF), and land (approximately 238,000
SF). The term of the lease commenced on November 21, 2018 and extends through November 20, 2033. Pursuant to the agreement, the
base rental payments for the first five years will be abated, provided that the Company prepays the rent in each period and achieves
an increasing level of financial commitments, measured annually on March 31st of each of the first five years of the
lease. The Company can qualify for an additional five years (years six through ten of the term) of abatements which are contingent
upon the Company achieving its commitments through the first five years of the lease and maintaining or exceeding those year five
commitment levels in years six through year ten of the term. These commitments include 1) the total number of full-time jobs and
the related annual payroll costs and 2) cumulative capital investments in personal property and improvements to the existing land/structures.
The Company recognizes the lease reimbursements as an offset to the lease asset, liability and rent expense for the related reimbursable
month when the contingency is probable of being resolved.
The
Company’s other outstanding operating leasehold obligations include additional office space in Maryland, Illinois, Spain,
Israel, United Kingdom and Lithuania. The Company’s leases have established fixed payment terms which are subject to annual
rent increases throughout the term of each lease agreement. The Company’s lease agreements have varying non-cancellable
rental periods which include options for the Company to extend portions of its lease terms. Management considered that it was
not reasonably certain to exercise any extension options present in its lease arrangements that are outstanding as of the adoption
date, with the exception of the Texas sublease. In addition, the Company’s leases have similar terms in which they may terminate
the lease prior to the end date but must provide advanced notice. The Company is not reasonably certain to exercise the right
to terminate their agreements.
Based
on an evaluation of the impact of the adoption of ASC 842, the Company determined that it will apply the modified retrospective
approach, in which the Company will not adjust comparative periods. There was no cumulative-effect adjustment to the opening balance
of retained earnings. As of the adoption date on January 1, 2020, the Company recognized a right-of-use asset and lease liability
of $6.4 million. The Company identified and assessed significant assumptions in recognizing the right-of-use asset and lease liability
on January 1, 2020 as follows:
Incremental
Borrowing Rate
The
Company derives its incremental borrowing rate from information available at the lease commencement date in determining the present
value of lease payments. The incremental borrowing rate represents a collateralized rate of interest the Company would have to
pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company’s
lease agreements do not provide implicit rates. As the Company did not have any external borrowings at the transition date with
comparable terms to its lease agreements, the Company estimated its incremental borrowing rate based on the lowest grade of debt
available in the marketplace for the same term as the associated lease(s). The Company elected to use an 11.9% discount rate for
its main, shorter-term operating leases (generally two (2) to five (5) year leases). For the Texas sublease, which is greater
than 10 years, the Company elected to use a 15% discount rate. The weighted average discount rate at December 31, 2020 is 14%.
Operating
Leases
The
components of lease expense were as follows (in thousands):
|
|
|
Year Ended
December 31,
2020
|
|
|
Short-term operating lease expense
|
|
$
|
41
|
|
|
Operating lease expense
|
|
|
301
|
|
|
Total lease expense
|
|
$
|
342
|
|
Additional
lease information is summarized in the following table (in thousands, except lease term and discount rate):
|
|
|
Year Ended
December 31,
2020
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
349
|
|
|
Operating right-of-use assets obtained in exchange for lease obligations
|
|
$
|
759
|
|
|
Weighted-average remaining lease term – operating leases (years)
|
|
|
11.3
|
|
|
Weighted-average discount rate – operating leases
|
|
|
14
|
%
|
Maturities
of lease liabilities as of December 31, 2020 are as follows (in thousands):
|
Year ending December 31,
|
|
Amount
|
|
|
2021
|
|
$
|
1,432
|
|
|
2022
|
|
|
1,294
|
|
|
2023
|
|
|
1,310
|
|
|
2024
|
|
|
1,257
|
|
|
2025
|
|
|
1,156
|
|
|
Thereafter
|
|
|
7,701
|
|
|
Total lease payments
|
|
|
14,151
|
|
|
Less effects of discounting
|
|
|
(7,106
|
)
|
|
Present value of lease liabilities
|
|
$
|
7,045
|
|
Under
the prior lease standard (ASC 840), as of December 31, 2019 future minimum lease payments under operating leases were as follows:
|
Year ending December 31,
|
|
Amount
|
|
|
2020
|
|
$
|
1,174
|
|
|
2021
|
|
|
1,174
|
|
|
2022
|
|
|
1,045
|
|
|
2023
|
|
|
1,047
|
|
|
2024
|
|
|
983
|
|
|
Thereafter
|
|
|
8,678
|
|
|
Total minimum lease payments
|
|
$
|
14,101
|
|
Lease
balances as of December 31, 2020 are as follows (in thousands):
|
Operating lease right-of-use assets
|
|
$
|
7,045
|
|
|
Short-term operating lease liabilities
|
|
$
|
504
|
|
|
Non-current operating lease liabilities
|
|
|
6,541
|
|
|
Total operating lease liabilities
|
|
$
|
7,045
|
|
Net
rent expense under operating lease arrangements at the Company was $0.3 million for the year ended December 31, 2020. Net rent
expense reported under ASC 840 was $0.2 million for the year ended December 31, 2019.
Legal
Proceedings
The
Company is not a party to any material litigation and does not have contingency reserves established for any litigation liabilities
as of December 31, 2020 and 2019.
|
7.
|
Goodwill
and Intangible Assets
|
Goodwill
The
change in the carrying amount of goodwill for the years ended December 31, 2020 and 2019 is summarized as follows (in thousands):
|
|
|
2020
|
|
|
2019
|
|
|
Balance at beginning of the year
|
|
$
|
3,593
|
|
|
$
|
3,666
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
—
|
|
|
Translation adjustments
|
|
|
319
|
|
|
|
(73
|
)
|
|
Balance at the end of the year
|
|
$
|
3,912
|
|
|
$
|
3,593
|
|
Intangible
Assets
Identified
intangible assets are comprised of the following as of December 31, 2020 and 2019 (in thousands):
|
|
|
Useful Lives
|
|
|
2020
|
|
|
2019
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology
|
|
|
5
|
|
|
$
|
1,161
|
|
|
$
|
1,067
|
|
|
Trademarks and domain name
|
|
|
15
|
|
|
|
23
|
|
|
|
—
|
|
|
Total gross intangible assets subject to amortization
|
|
|
|
|
|
$
|
1,184
|
|
|
$
|
1,067
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
(658
|
)
|
|
|
(395
|
)
|
|
Total net intangible assets subject to amortization
|
|
|
|
|
|
$
|
526
|
|
|
$
|
672
|
|
The
aggregate amortization expense for the years ended December 31, 2020 and 2019 was $0.2 million. Based on the carrying value of
identified intangible assets recorded at December 31, 2020, and assuming no subsequent impairment of the underlying assets, the
amortization expense is expected to be as follows (in thousands):
|
Fiscal Year
|
|
Amortization Expense
|
|
|
2021
|
|
$
|
234
|
|
|
2022
|
|
|
234
|
|
|
2023
|
|
|
40
|
|
|
2024
|
|
|
2
|
|
|
2025 and Thereafter
|
|
|
16
|
|
|
|
|
$
|
526
|
|
Impairments
In
the fourth quarter of 2020, the Company performed its annual goodwill impairment test and completed a quantitative assessment
for the Nano reporting unit. The fair value of the Nano reporting unit was based upon an equal weighting of the income and market
approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk
of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating
performance of the reporting unit. There was no impairment as a result of the annual test performed in the fourth quarter of 2020.
In
the fourth quarter of 2019, the Company performed the annual goodwill impairment test and completed a qualitative assessment for
the Nano reporting unit. This qualitative assessment included reviewing factors such as macroeconomic conditions, industry and
market considerations, cost factors, entity-specific financial performance and other events, such as changes in the Company’s
management or strategy. There was no impairment as a result of the annual test performed in the fourth quarter of 2019.
The
Company is required to evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. The Company routinely assesses whether impairment indicators are present. As of December
31, 2020 or 2019, no impairment charges were recorded.
|
8.
|
Accrued
Expenses and Other Current Liabilities
|
As
of December 31, 2020, accrued expenses includes accruals relating to the construction in process of $1.6 million and accrued payroll
of $1.0 million. The remaining balance within the account relates to other general accruals.
As
of December 31, 2019, accrued expenses includes transaction costs of $1.8 million, incurred in connection with the issuance of
Series B Preferred Stock in the Initial Closing and subsequently paid in March 2020.
Disaggregation
of Revenue
The
Company’s subsidiary, NanoAvionika, recognizes revenue related to sales of manufactured small satellites and their components
as well as launch related services. In general, the Company recognizes revenue for services provided over time as the Company’s
performance does not result in an asset with an alternative use and the Company is entitled to be compensated for performance
completed to date. The Company recognizes revenue for services provided over time based on an output method, under which the total
value of revenue is recognized based on each contract’s deliverable(s) as they are completed and when value is transferred
to a customer. Certain of the Company’s performance obligations do not meet the criteria for over time recognition. In these
scenarios, the Company recognizes revenue upon transfer of control of the performance obligation to the customer. Revenue recognized
over time versus revenue recognized upon transfer for the periods ending December 31, 2020 and 2019 was as follows (in thousands):
|
|
|
2020
|
|
|
2019
|
|
|
Revenue from performance obligations recognized over time
|
|
$
|
5,037
|
|
|
$
|
1,236
|
|
|
Revenue from performance obligations recognized at point-in-time transfer
|
|
|
930
|
|
|
|
178
|
|
|
Total
|
|
$
|
5,967
|
|
|
$
|
1,414
|
|
Contract
Balances
Contract
assets relate to our conditional right to consideration for our completed performance under the contract. Contract liabilities
relates to payments received in advance of performance under the contract. Contract liabilities (i.e., deferred revenue) are recognized
as revenue as (or when) the Company perform under the contract. During the years ended December 31, 2020 and 2019, the Company
recognized approximately $0.6 million and $0.4 million, respectively, of revenue related to its deferred revenue balance at January
1, 2020 and 2019, respectively.
As
of December 31, 2020 and 2019, the Company had deferred revenue of $3.4 million and $0.9 million, respectively, classified in
current liabilities related to performance obligations that have not yet been satisfied. The Company expects to recognize the
revenue associated with satisfying these performance obligations within the next 12 months.
Accounts
Receivable
The
Company receives payments from customers based on a billing schedule as established in our contracts. Accounts receivable includes
amounts billed and currently due from customers. Accounts receivable are recorded when the right to consideration becomes unconditional.
The Company did not reserve an allowance for doubtful accounts for the years ended December 31, 2020 and 2019 given historical
experience and management’s evaluation of outstanding accounts receivable at the end of the fiscal year.
|
10.
|
Share-Based
Compensation
|
Share-Based
Compensation Expense
Share-based
compensation, measured at the grant date based on the fair value of the award, is typically recognized ratably over the requisite
services period, using the straight-line method of expense attribution. The Company recorded share-based compensation expense
in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):
|
|
|
2020
|
|
|
2019
|
|
|
Engineering services
|
|
$
|
211
|
|
|
$
|
68
|
|
|
General and administrative costs
|
|
|
72
|
|
|
|
64
|
|
|
BlueWalker 3 Satellite – construction in progress
|
|
|
7
|
|
|
|
—
|
|
|
Total
|
|
$
|
290
|
|
|
$
|
132
|
|
Equity
Incentive Plan
Under
the 2019 Equity Incentive Plan (“Option Plan”), the Company is authorized to issue ordinary shares, as well as options
exercisable for ordinary shares, as incentives to its employees, consultants, and members of its Board of Directors. The issuance
of share options and ordinary shares is administered by the Board of Directors using standardized share option and share subscription
agreements.
There
are two types of options granted under the Option Plan: (1) service-based options and (2) performance-based options. Service-based
options typically vest over a five year service period with 20% of the award vesting on the first anniversary of the employee’s
commencement date, and the balance thereafter in 48 equal monthly installments. Certain service-based options also provide for
accelerated vesting if there is a change in control or other performance condition as defined by the Option Plan. Performance-based
options typically vest on the earliest date that any of the following occurs: (i) the Company effects an initial public offering
and becomes a reporting company, (ii) the Company experiences a change of control, or (iii) other specified performance conditions.
Both service-based and performance-based options typically expire no later than 10 years from the date of grant.
As
of December 31, 2020, the Company was authorized to issue a total of 883,561 ordinary service-based and performance-based shares
under a reserve set aside for equity awards. As of December 31, 2020, there were 67,488 ordinary shares available for future issuance
and 815,233 options outstanding.
The
following table summarizes the Company’s option activity for the year ended December 31, 2020:
|
|
|
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
|
|
Outstanding at December 31, 2019
|
|
|
635,730
|
|
|
$
|
0.93
|
|
|
|
—
|
|
|
Granted
|
|
|
263,600
|
|
|
|
8.71
|
|
|
|
—
|
|
|
Exercised
|
|
|
(840
|
)
|
|
|
0.93
|
|
|
|
—
|
|
|
Cancelled or forfeited
|
|
|
(83,257
|
)
|
|
|
6.04
|
|
|
|
—
|
|
|
Outstanding at December 31, 2020
|
|
|
815,233
|
|
|
$
|
2.92
|
|
|
|
2.04
|
|
|
Options exercisable as of December 31, 2020
|
|
|
365,174
|
|
|
$
|
1.27
|
|
|
|
2.03
|
|
|
Vested and expected to vest at December 31, 2020
|
|
|
815,233
|
|
|
$
|
2.92
|
|
|
|
2.04
|
|
On
May 20, 2020, the Board approved the issuance of 248,600 non-statutory common share option grants under the 2019 Equity Incentive
Plan. On November 14, 2020, the Board approved the issuance of 15,000 performance-based option grants, for which 100% of the shares
fully vest on the date of the launch of the Company’s Blue Walker 3 test satellite. The weighted average grant date fair
value of share options granted was $4.76 per share, with an aggregate fair value of $1.3 million for the year ended December 31,
2020. The Company recorded share-based compensation expense of $0.3 million for the year ended December 31, 2020, with a portion
capitalized to BlueWalker 3 satellite construction-in-progress on the Consolidated Balance Sheets.
During
the twelve months ended December 31, 2020, the Company granted 181,600 service-based options for the purchase of an aggregate
of 42 service-based awards, and the Company granted 82,000 performance-based options for the purchase of an aggregate of 7 performance-based
awards. Performance-based conditions vary by employee contract and may include triggers pertaining to successful completion of
Company initiatives, transactions, or change-in-control clauses. The Company concluded that the performance conditions associated
with 2 of these performance-based awards were probable as of the grant dates, and therefore began to recognize expense at the
time of the grant of the award. The Company recorded expense of less than $0.1 million during the twelve months ended December
31, 2020 related to these 2 performance awards, which includes the acceleration of vesting expense. For the remaining 5 performance-based
awards, the Company determined that the achievement of the performance targets was not probable as of the grant dates and as of
the reporting date, and therefore has not recognized any expense related to these awards during the year ended December 31, 2020.
The total unrecognized compensation expense for these performance awards was $0.4 million for the year ended December 31, 2020.
The
following table summarizes the Company’s unvested option activity for the year ended December 31, 2020:
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
|
Unvested at December 31, 2019
|
|
|
410,044
|
|
|
$
|
0.59
|
|
|
Granted
|
|
|
263,600
|
|
|
|
4.76
|
|
|
Vested
|
|
|
(153,440
|
)
|
|
|
1.24
|
|
|
Forfeited
|
|
|
(70,146
|
)
|
|
|
3.30
|
|
|
Unvested at December 31, 2020
|
|
|
450,058
|
|
|
$
|
2.37
|
|
For
the year ended December 31, 2020, total unrecognized compensation expense related to the unvested employee and director share-based
awards was $1.0 million, which is expected to be recognized over a weighted average period of 1.82 years.
The
Company estimates the fair value of the stock-based awards to employees and non-employees using the Black-Scholes option pricing
model, which requires the input of subjective assumptions, including (i) the expected volatility of our stock, (ii) the expected
term of the award, (iii) the risk-free interest rate, and (iv) any expected dividends. Due to the lack of company-specific historical
and implied volatility data, the Company based the estimate of expected volatility on the estimated and expected volatilities
of a representative group of publicly traded companies. For these analyses, the Company selects companies with comparable characteristics
including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient
to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing
prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based
awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility
of the Company’s stock price becomes available. For awards that qualify as “plain-vanilla” options, the Company
estimates the expected life of the employee stock options using the “simplified” method, whereby, the expected life
equals the average of the vesting term and the original contractual term of the option. The expected term of stock options granted
to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference
to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected
term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect
to pay any cash dividends in the foreseeable future. The Company elects to account for forfeitures as they occur rather than apply
an estimated forfeiture rate to share based payment expense.
The
following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option pricing model to determine
the fair value of share options granted to employees and directors:
|
|
|
2020
|
|
|
2019
|
|
|
Exercise price
|
|
$
|
8.71
|
|
|
$
|
0.93
|
|
|
Fair market value
|
|
$
|
4.83
|
|
|
$
|
0.58 – $0.59
|
|
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Expected term (in years)
|
|
|
6.32
|
|
|
|
5.60 – 6.20
|
|
|
Expected volatility
|
|
|
60.00
|
%
|
|
|
70.00
|
%
|
|
Weighted-average risk-free rate
|
|
|
0.43
|
%
|
|
|
2.21% – 2.45
|
%
|
The
Company presents basic net loss per share using the two-class method. The two-class method is an earnings allocation formula that
treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and
that determines basic net loss per share for each class of common stock and participating security according to dividends declared
(or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating
security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital
structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are
the Series B Preferred Stock and the Series A Preferred Stock. The Company determines the diluted net income per share by using
the more dilutive of the two-class method or the treasury stock method and by including the basic weighted average of the outstanding
preferred shares in the calculation of diluted net income per share under the two-class method and including all potential common
shares assumed issued in the calculation of diluted net income per share under the treasury stock method.
The
following table sets forth the computation of basic and diluted net loss per share:
|
|
|
Fiscal Year Ended
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(dollars in thousands,
except per share amounts)
|
|
|
Numerator – basic and diluted:
|
|
|
|
|
|
|
|
|
|
Net loss attributable to AST & Science
|
|
$
|
(24,061
|
)
|
|
$
|
(10,885
|
)
|
|
Cumulative convertible preferred stock dividends
|
|
|
(8,290
|
)
|
|
|
(523
|
)
|
|
Income available to common shareholders
|
|
|
(32,351
|
)
|
|
|
(11,408
|
)
|
|
Denominator – basic and diluted:
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per share attributable to common stockholders
|
|
|
5,500,404
|
|
|
|
5,500,000
|
|
|
Basic and diluted net loss per share attributable to common stockholders
|
|
$
|
(5.88
|
)
|
|
$
|
(2.07
|
)
|
For
the year ended December 31, 2020, 3,449,959 shares of preferred stock convertible into common stock and 815,233 shares of underlying
stock options were excluded from the calculation of diluted earnings per share as their effect on the calculation would have been
anti-dilutive.
On
December 15, 2017, the Company exchanged 110,000 common shares for a $0.1 million promissory note receivable due from an executive
officer of the Company. The note receivable accrues interest monthly at a rate of two percent and is payable on December 15, 2027
or upon a Deemed Liquidation event. As the executive officer paid fair value for the shares, the Company determined that the transaction
would be presented as a reduction to Members’ Equity. The executive officer repaid all amounts outstanding relating to the
promissory note receivable in December 2020.
On
July 11, 2019, the Company entered into a promissory note agreement with the Founder and Chief Executive Officer of AST (the “Founder
Note”). Under the terms of the original and amended agreement dated September 10, 2019, the principal amount borrowed by
the Company was $1.75 million bearing interest at 2.37% per annum. The balance outstanding under the Founder Note was $1.75 million
and interest expense related to the Founder Note was less than $0.1 million for the year ended December 31, 2020. The Company
repaid all amounts outstanding relating to the Founder Note on March 3, 2020.
On
March 1, 2018, NanoAvionika entered into the Option Agreement with InMotion Holdings, LLC, a Delaware limited liability company
wholly-owned by AST’s Chief Executive Officer and Chairman of the Board, Abel Avellan, whereby Nano granted InMotion 2,919
option shares in connection with a Service Agreement between Nano and InMotion dated March 1, 2018 (the “Services Agreement”)
pursuant to which InMotion is to provide consulting services to Nano. The option shares vest over a three-year period and for
so long as the Service Agreement is in effect. In addition, the options shares are only exercisable upon a change of control.
For this reason, the Company has not recognized any expense related to the grant of these shares. For such consulting services,
InMotion is also entitled to receive, but has never billed to or collected from Nano a management fee totaling $15,000 per month.
On
January 20, 2020, the Company entered into the Support Services Agreement with Finser Corporation (“Finser”), which
is part of the Cisneros Group of Companies, of which a member of the Board of Directors is the Chief Executive Officer, whereby
Finser will provide the Company consulting and administrative support services. The Company incurred $0.2 million in consulting
services for the year ended December 31, 2020, which were included within the general and administrative expenses on the Consolidated
Statement of Operations.
|
13.
|
Significant
Agreements
|
Launch
Services Agreement with GK Launch Services
On
July 17, 2020, the Company entered into an agreement with GK Launch Services (“the Contractor”) as part of the testing
and development of the BlueWalker 3 Satellite (the “Launch Services Agreement”). Under the Launch Services Agreement,
the Contractor will provide payload and launch services for the BlueWalker 3 Satellite. The Company has agreed to pay the Contractor
up to $7.8 million in exchange for its services on a milestone-based schedule, commencing at the inception of the contract and
continuing until the Company’s final acceptance of the results of the launch services. In July 2020, the Company paid the
Contractor an upfront, nonrefundable amount of $1.6 million. In September 2020, the Company paid the Contractor an additional
nonrefundable installment of $1.2 million. Total additional payments of $5.0 million are due to the Contractor beginning in 2021
based on the completion of certain contingent milestones and the completion of services.
The
Company may terminate the Launch Services Agreement at any time, without obligation to pay future milestone payments, unless the
Contractor has commenced services in relation to that milestone, in which case the Company must pay a portion of that future milestone
payment proportionate to the services provided to-date. In the event of termination, the Contractor is entitled to retain all
payments made by the Company for any milestones achieved to-date. As of December 31, 2020, the Company classified $3.6 million
of costs incurred made to-date within BlueWalker 3 Satellite – Construction in progress on the Consolidated Balance Sheets.
Rakuten
Commercial Agreement and Amended and Restated Commercial Agreement
In
connection with the Second Series B Issuance, the Company entered into a commercial agreement on February 14, 2020 (the “Rakuten
Commercial Agreement”) with Rakuten, whereby Rakuten will receive unlimited exclusive rights and usage of the AST Satellite
Constellation capacity in Japan and AST will receive a fixed $0.5 million annual maintenance fee payable to the Company upon the
launch of such coverage. The Company does not expect to launch the AST Satellite Constellation capacity in Japan until 2023.
The
terms of the Rakuten Commercial Agreement will continue for so long as Rakuten owns a majority of the Series B Preferred Stock
or the equity interest into which those shares convert (see Note 5). The Rakuten Agreement also provides that Rakuten will receive
preferential commercial terms in certain Rakuten partner markets where the SpaceMobile Service will be made to cellular subscribers.
The
Company has determined that its sole performance obligation in the Rakuten Commercial Agreement is to provide the unlimited exclusive
rights and usage of the AST Satellite Constellation capacity in Japan over the contract term, which includes the maintenance of
Rakuten’s earth stations in Japan, commencing on the date of coverage launch (the “Coverage Term”). The Company
will therefore recognize the annual payments associated with the exclusive rights and maintenance over the Coverage Term using
a time-based measure toward complete satisfaction of the performance obligation. During the year ended December 31, 2020, the
Company did not receive any payments or recognize any revenue pursuant to the Rakuten Commercial Agreement.
On
December 15, 2020, the Company executed the Amended and Restated Commercial Agreement (the “A&R Commercial Agreement”).
The A&R Commercial Agreement did not substantively impact the terms of the Rakuten Commercial Agreement except the Rakuten
Redemption Clause as described in Note 5.
Dialog
Design and Manufacturing Agreement
On
September 29, 2020, the Company entered into a Design and Manufacturing Agreement with Dialog Semiconductor Operations Services
Ltd (“Dialog”). Dialog will provide the delivery of design and supply chain services for four radio-frequency integrated
circuits (“RFICs”), in addition to materials, facilities, and equipment required for the design and validation of
these RFICs.
The
Company has agreed to pay Dialog up to $7.0 million for its services on a milestone-based schedule, commencing with $0.5 million
due to Dialog at project start, with an additional $3.6 million due in the first two stages of the SOW (design and qualification).
Additionally, the Company has agreed to pay $2.9 million under an optional third stage (production), including the purchase of
production units from Dialog, under the condition that the Company completes an additional financing. The Company incurred $0.8
million in costs related to this during the year ended December 31, 2020, which have been recorded to Research and development
costs in the Consolidated Statement of Operations.
Equity
Purchase Agreement
On
December 15, 2020, the Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with New
Providence Acquisition Corp. (“NPA”), a blank check company formed as a Delaware corporation, whereby AST and NPA
will enter into a business combination transaction (the “Business Combination”), subject to approval of NPA’s
current shareholders to affect the merger.
The
Company has evaluated subsequent events for financial statement purposes occurring through February 26, 2021, the date these financial
statements were issued, and determined that no additional subsequent events had occurred that would require recognition in these
financial statements and that all subsequent events that require disclosure have been disclosed.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and Board of Directors of New Providence Acquisition Corp.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of New Providence Acquisition Corp. (the “Company”) as of December 31,
2020 and 2019, the related statements of operations, changes in stockholders’ equity and cash flows for year ended December
31, 2020 and for the period from May 28,2019 (inception) through December 31, 2019, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
the year ended December 31, 2020 and for the period from May 28, 2019 (inception) through December 31, 2019, in conformity with
accounting principles generally accepted in the United States of America.
Restatement of 2020 Financial Statements
As discussed in Note 2 to the financial statements, the accompanying financial statements as of December
31, 2020 and 2019 and for the year ended December 31, 2020 and the period from May 28, 2019 (inception) through December 31,
2019 have been restated.
Explanatory
Paragraph – Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination
and the Company’s cash and working capital as of December 31, 2020 are not sufficient to complete its planned activities.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
Marcum LLP
Marcum
LLP
We
have served as the Company’s auditor since 2019.
Houston,
Texas
February
26, 2021, except for the effects of the restatement discussed in Notes 2, 6 and 10 as to which the date is May 6,
2021
NEW
PROVIDENCE ACQUISITION CORP.
BALANCE
SHEETS
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
131,151
|
|
|
$
|
493,128
|
|
|
Prepaid expenses
|
|
|
23,278
|
|
|
|
131,226
|
|
|
Prepaid income tax
|
|
|
54,439
|
|
|
|
-
|
|
|
Total Current Assets
|
|
|
208,868
|
|
|
|
624,354
|
|
|
Marketable securities held in Trust Account
|
|
|
232,196,027
|
|
|
|
231,214,831
|
|
|
TOTAL ASSETS
|
|
$
|
232,404,895
|
|
|
$
|
231,839,185
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
634,286
|
|
|
$
|
240,138
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
25,684
|
|
|
Total Current Liabilities
|
|
|
634,286
|
|
|
|
265,822
|
|
|
Deferred tax liability
|
|
|
9,680
|
|
|
|
3,611
|
|
|
Deferred underwriting fee payable
|
|
|
8,050,000
|
|
|
|
8,050,000
|
|
|
Warrant liabilities
|
|
|
68,114,000
|
|
|
|
15,962,000
|
|
|
Total Liabilities
|
|
|
76,807,966
|
|
|
|
24,281,433
|
|
|
Commitments and Contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption, 14,922,915 and 20,157,878 shares at redemption value as of December 31, 2020 and 2019, respectively
|
|
|
150,596,928
|
|
|
|
202,557,751
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 8,077,085 and 2,842,122 shares issued and outstanding (excluding 14,922,915 and 20,157,878 shares subject to possible redemption) as of December 31, 2020 and 2019, respectively
|
|
|
941
|
|
|
|
409
|
|
|
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of December 31, 2020 and 2019
|
|
|
575
|
|
|
|
575
|
|
|
Additional paid-in capital
|
|
|
59,840,653
|
|
|
|
7,880,362
|
|
|
Accumulated Deficit
|
|
|
(54,842,168
|
)
|
|
|
(2,881,345
|
)
|
|
Total Stockholders’ Deficit
|
|
|
5,000,001
|
|
|
|
5,000,001
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
232,404,895
|
|
|
$
|
231,839,185
|
|
The
accompanying notes are an integral part of the financial statements.
NEW
PROVIDENCE ACQUISITION CORP.
STATEMENTS
OF OPERATIONS
|
|
|
For the Year Ended December 31, 2020
|
|
|
For the Period from May 28, 2019 (inception) through December 31, 2019
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
Operating costs
|
|
$
|
1,124,693
|
|
|
$
|
384,857
|
|
|
Loss from operations
|
|
|
(1,124,693
|
)
|
|
|
(384,857
|
)
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
Changes in fair value of warrant liabilities
|
|
|
(52,152,000
|
)
|
|
|
(3,053,000
|
)
|
|
Interest income on marketable securities held in Trust Account
|
|
|
1,479,986
|
|
|
|
1,197,637
|
|
|
Issuance costs allocated to warrant liabilities
|
|
|
-
|
|
|
|
(484,024
|
)
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
1,830
|
|
|
|
17,194
|
|
|
Other (expense), net
|
|
|
(50,670,184
|
)
|
|
|
(2,322,193
|
)
|
|
Loss before income taxes
|
|
|
(51,794,877
|
)
|
|
|
(2,707,050
|
)
|
|
Provision for income taxes
|
|
|
(165,946
|
)
|
|
|
(174,295
|
)
|
|
Net loss
|
|
$
|
(51,960,823
|
)
|
|
$
|
(2,881,345
|
)
|
|
Weighted average common shares subject to possible redemption outstanding, basic and diluted
|
|
$
|
20,151,440
|
|
|
$
|
10,207,641
|
|
|
Basic and diluted income per common share subject to possible redemption
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
8,598,542
|
|
|
|
6,111,484
|
|
|
Basic and diluted net loss per non-redeemable common share
|
|
$
|
(6.13
|
)
|
|
$
|
(0.61
|
)
|
The
accompanying notes are an integral part of the financial statements.
NEW
PROVIDENCE ACQUISITION CORP.
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
Class A
common stock
|
|
|
Class B
common stock
|
|
|
Additional Paid
|
|
|
Accumulated
|
|
|
Total Stockholder’s
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
in Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance – May 28, 2019 (inception) (restated)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Class B common stock issued to the Sponsor
|
|
|
-
|
|
|
|
-
|
|
|
|
5,750,000
|
|
|
|
575
|
|
|
|
24,425
|
|
|
|
-
|
|
|
|
25,000
|
|
|
Sale of 23,000,000 Units, net of warranty liability, underwriting discounts, and offering expenses
|
|
|
23,000,000
|
|
|
|
2,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
208,825,797
|
|
|
|
-
|
|
|
|
208,828,097
|
|
|
Payment above fair value upon sale of 6,100,000 Private Placement Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,586,000
|
|
|
|
-
|
|
|
|
1,586,000
|
|
|
Class A common stock subject to possible redemption
|
|
|
(20,157,878
|
)
|
|
|
(1,891
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(202,555,860
|
)
|
|
|
-
|
|
|
|
(202,557,751
|
)
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,881,345
|
)
|
|
|
(2,881,345
|
)
|
|
Balance - December 31, 2019 (restated)
|
|
|
2,842,122
|
|
|
$
|
409
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
7,880,362
|
|
|
$
|
(2,881,345
|
)
|
|
$
|
5,000,001
|
|
|
Change in value of Class A common stock subject to possible redemption
|
|
|
5,234,963
|
|
|
|
532
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,960,291
|
|
|
|
-
|
|
|
|
51,960,823
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51,960,823
|
)
|
|
|
(51,960,823
|
)
|
|
Balance – December 31, 2020 (restated)
|
|
|
8,077,085
|
|
|
$
|
941
|
|
|
|
5,750,000
|
|
|
$
|
575
|
|
|
$
|
59,840,653
|
|
|
$
|
(54,842,168
|
)
|
|
$
|
5,000,001
|
|
The
accompanying notes are an integral part of the financial statements.
NEW
PROVIDENCE ACQUISITION CORP.
STATEMENTS
OF CASH FLOWS
|
|
|
For the Year Ended
December 31,
2020
|
|
|
For the Period from May 28,
2019 (inception)
through December 31,
2019
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(51,960,823
|
)
|
|
|
(2,881,345
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Interest earned on securities held in Trust Account
|
|
|
(1,479,986
|
)
|
|
|
(1,197,637
|
)
|
|
Unrealized gain on securities held in Trust Account
|
|
|
(1,830
|
)
|
|
|
(17,194
|
)
|
|
Deferred income provision
|
|
|
6,069
|
|
|
|
3,611
|
|
|
Change in fair value of warrant liabilities
|
|
|
52,152,000
|
|
|
|
3,053,000
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
107,948
|
|
|
|
(131,226
|
)
|
|
Prepaid income taxes
|
|
|
(54,439
|
)
|
|
|
-
|
|
|
Accounts payable and accrued expenses
|
|
|
394,148
|
|
|
|
240,138
|
|
|
Income tax payable
|
|
|
(25,684
|
)
|
|
|
25,684
|
|
|
Net
cash used in operating activities
|
|
|
(862,597
|
)
|
|
|
(904,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Investment of cash in trust
|
|
|
-
|
|
|
|
(230,000,000
|
)
|
|
Interest withdrawn for tax payments
|
|
|
500,620
|
|
|
|
-
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
500,620
|
|
|
|
(230,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
-
|
|
|
|
225,884,024
|
|
|
Proceeds from sale of Private Placement Warrants
|
|
|
-
|
|
|
|
6,100,000
|
|
|
Proceeds from promissory note - related party
|
|
|
-
|
|
|
|
155,093
|
|
|
Repayment of promissory note - related party
|
|
|
-
|
|
|
|
(155,093
|
)
|
|
Payments of offering costs
|
|
|
-
|
|
|
|
(585,927
|
)
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
231,398,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(361,977
|
)
|
|
|
493,128
|
|
|
Cash – Beginning
|
|
|
493,128
|
|
|
|
-
|
|
|
Cash – Ending
|
|
$
|
131,151
|
|
|
$
|
493,128
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
240,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Initial classification of ordinary shares subject to redemption
|
|
$
|
-
|
|
|
$
|
204,953,910
|
|
|
Change in value of shares subject to redemption
|
|
$
|
(51,960,823
|
)
|
|
$
|
(2,396,159
|
)
|
|
Deferred offering costs paid directly by Sponsor from proceeds from issuance of ordinary shares
|
|
$
|
-
|
|
|
$
|
25,000
|
|
|
Deferred underwriting fee
|
|
$
|
-
|
|
|
$
|
8,050,000
|
|
The
accompanying notes are an integral part of the financial statements.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
New
Providence Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on May 28, 2019. The
Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (the “Business Combination”).
The
Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with
early stage and emerging growth companies.
As
of December 31, 2020, the Company had not commenced any operations. All activity through December 31, 2020 relates to the Company’s
formation, the initial public offering (“Initial Public Offering”), which is described below, and, after the Initial
Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues
until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in
the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on September 10, 2019. On September
13, 2019, the Company consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to
the shares of Class A common stock included in the Units sold, the “Public Shares”), generating gross proceeds of
$200,000,000, which is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 5,500,000 warrants (the “Private Placement
Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to New Providence Management LLC, a
Delaware limited liability company (the “Sponsor”), generating gross proceeds of $5,500,000, which is described in
Note 5.
Following
the closing of the Initial Public Offering on September 13, 2019, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account
(the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out
as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the completion of a Business
Combination or (ii) the distribution of the Trust Account to the Company’s stockholders, as described below.
On
September 19, 2019, in connection with the underwriters’ election to fully exercise their over-allotment option, the Company
consummated the sale of an additional 3,000,000 Units at $10.00 per Unit and the sale of an additional 600,000 Private Placement
Warrants at $1.00 per Private Placement Warrant, generating total gross proceeds of $30,600,000. Following the closing, an additional
$30,000,000 of net proceeds was deposited into the Trust Account, resulting in $230,000,000 held in the Trust Account.
Transaction
costs incurred in connection with the Initial Public Offering amounted to $13,260,927, consisting of $4,600,000 of underwriting
fees, $8,050,000 of deferred underwriting fees and $610,927 of other offering costs.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied
generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business
Combination successfully. The Company must complete an initial Business Combination having an aggregate fair market value of at
least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable) at the time
of the agreement to enter into the initial Business Combination. The Company will only complete a Business Combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment
Company Act.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii)
by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their
shares for a pro rata portion of the amount then in the Trust Account ($10.00 per share, plus any pro rata interest earned on
the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount
to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company
will pay to the underwriters (as discussed in Note 8). There will be no redemption rights upon the completion of a Business Combination
with respect to the Company’s warrants.
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such
consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted
are voted in favor of the Business Combination. If a stockholder vote is not required and the Company does not decide to hold
a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of
Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”)
and file tender offer documents containing substantially the same information as would be included in a proxy statement with the
SEC prior to completing a Business Combination. If the Company seeks stockholder approval in connection with a Business Combination,
the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased by it
during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder
may elect to redeem their Public Shares, regardless of whether they vote for or against a Business Combination.
If
the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer
rules, the Company’s Amended and Restated Certificate of Incorporation provides that a public stockholder, together with
any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from seeking redemption rights with respect to 15% or more of the Public Shares, without the Company’s prior written consent.
The
Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection
with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation
that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company
does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment.
The
Company will have until March 15, 2021 (the “Combination Period”) to consummate a Business Combination or obtain a
Charter Extension from Shareholders. If the Company is unable to complete a Business Combination in the Combination Period or
obtain a Charter Extension from Shareholders, the Company will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each
case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will
expire worthless if the Company fails to complete a Business Combination within the Combination Period.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, the Sponsor will be entitled to liquidating distributions from the Trust Account
with respect to any Public Shares purchased by it during or after the Initial Public Offering if the Company fails to complete
its Business Combination. The underwriters have agreed to waive their rights to their deferred underwriting commission held in
the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of
the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available
for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The
Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of
intent, confidentiality or similar agreement or business combination agreement, reduce the amounts in the Trust Account to below
the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date
of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of trust assets,
provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver
of any and all rights to the monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity
of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against
a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will
seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavouring
to have all vendors, service providers (except the Company’s independent registered accounting firm), prospective target
businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Liquidity
and Going Concern
As
of December 31, 2020, the Company had $131,151 in its operating bank accounts, $232,196,027 in marketable securities held in the
Trust Account to be used for a Business Combination or to repurchase or redeem its Public Shares in connection therewith and an
adjusted working capital deficit of $337,484 (excluding franchise taxes payable and prepaid income tax). As of December 31, 2020,
$2,196,027 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s
tax obligations, if any.
On
January 28, 2021 and on February 18, 2021, the Sponsor agreed to loan the Company $200,000 and $500,000 for an aggregate up to
$700,000, respectively. The promissory notes (“Notes”) are provided to cover certain expenses related to the business
combination, of which $300,000 was drawn down as of February 26, 2021 (see Note 12).
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluating target businesses, performing due diligence on prospective target businesses, traveling to and from the offices,
plants or similar location of prospective target businesses or their representatives or owners, reviewing corporate documents
and material agreements of prospective target businesses and structuring, negotiating and completing a Business Combination.
The
Company will need to raise additional capital through loans or additional investments from its Sponsor, an affiliate of the Sponsor,
or its officers or directors. The Company’s officers, directors and Sponsor, or their affiliates, may, but are not obligated
to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion,
to meet the Company’s working capital needs.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Accordingly,
the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required
to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that
new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern through March 31, 2021, which is the date the Company is required cease
all operations except for the purpose of winding up if it has not completed a Business Combination. These financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE
2 — RESTATEMENT OF FINANCIAL STATEMENTS
Restatement
Background and Explanation
The
Company has restated its financial statements as of December 31, 2020 and 2019 and for the year ended December 31, 2020 and for
the period from May 28, 2019 (inception) through December 31, 2019, and the interim periods ended September 30, 2020 and
2019, March 31, 2020, and June 30, 2020, as well as the financial statements as of September 13, 2019 (collectively “Affected
Periods”), to correct misstatements in those prior periods related to misstatements identified in improperly applying accounting
guidance on certain warrants, recognizing them as equity instead of warrant liabilities, under the guidance of the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-40, Contracts in Entity’s
Own Equity.
The
Company issued Public and Private Warrants in September 2019, collectively, aggregating to 11,500,000 and 6,100,000 warrants,
respectively, issued between two closings. Each whole Public and Private Warrant is exercisable to purchase one share of Class
A Common Stock at a price of $11.50 per share.
Upon
issuance of the warrants, the Company conducted an evaluation pursuant to ASC 815 to determine the appropriate classification
within the financial statements. The Company concluded that the warrants should be recorded at their issuance price within stockholders’
equity in the balance sheet. The determination to classify the warrants within stockholders’ equity was primarily based
on the understanding that the settlement provisions of the warrants did not allow for net cash settlement in an event that was
outside of the Company’s control in which all holders of the underlying shares, into which the warrants are exercisable,
also would receive cash.
Upon
the release of the SEC Statement on April 12, 2021, the Company re-assessed its classification of its warrants under ASC 815 pursuant
to the accounting policy described in Note 3. Pursuant to the terms of the warrants, upon a cash tender offer in which 50% or
more of the outstanding shares of common stock participate, the holders of the warrants shall be entitled to redeem the warrants
and receive the highest amount of cash, securities, or other property to which such holder would have been entitled as a stockholder
if the holder of the warrants had exercised the warrants prior to the expiration of such tender offer and accepted such tender
offer. Upon the occurrence of such event, which is outside of the control of the Company, the warrants would be net cash settled
and not all holders of the common stock may receive cash (assuming not all outstanding shares accepted the tender offer). The
Company recognized that ASC 815 precludes the classification of a freestanding financial instrument within stockholder’s
equity when an event that is outside the entity’s control could require net cash settlement in which not all of the holders
of the underlying shares also receive cash.
Therefore,
based on the results of the Company’s assessment, the Company has concluded that the warrants issued in September 2019 are
freestanding instruments which should be accounted for as warrant liabilities rather than as a component of additional paid-in
capital on the balance sheet, with any subsequent changes in the estimated fair value of the warrants reported in the statement
of operations.
Impact
of the Restatement
The
impact of the restatement on the balance sheets, statements of operations, and statements of cash flows for the Affected Periods
is presented below.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Impact
of the Restatement – 2020
Balance
Sheets
|
|
|
December 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
68,114,000
|
|
|
$
|
68,114,000
|
|
|
Total liabilities
|
|
|
8,693,966
|
|
|
|
68,114,000
|
|
|
|
76,807,966
|
|
|
Class A common stock subject to possible redemption
|
|
|
218,710,925
|
|
|
|
(68,113,997
|
)
|
|
|
150,596,928
|
|
|
Class A common stock
|
|
|
133
|
|
|
|
808
|
|
|
|
941
|
|
|
Addition paid-in capital
|
|
|
4,152,440
|
|
|
|
55,688,213
|
|
|
|
59,840,653
|
|
|
Retained earnings (accumulated deficit)
|
|
|
846,856
|
|
|
|
(55,689,024
|
)
|
|
|
(54,842,168
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,004
|
|
|
|
(3
|
)
|
|
|
5,000,001
|
|
Statements
of Operations
|
|
|
For the Year Ended December 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
(52,152,000
|
)
|
|
$
|
(52,152,000
|
)
|
|
Other income (expense), net
|
|
|
1,481,816
|
|
|
|
(52,152,000
|
)
|
|
|
(50,670,184
|
)
|
|
Net income (loss)
|
|
|
191,177
|
|
|
|
(52,152,000
|
)
|
|
|
(51,960,823
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
7,008,667
|
|
|
|
1,589,875
|
|
|
|
8,598,542
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.12
|
)
|
|
$
|
(6.01
|
)
|
|
$
|
(6.13
|
)
|
Statements
of Cash Flows
|
|
|
For the Year Ended December 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Net income (loss)
|
|
$
|
191,177
|
|
|
$
|
(52,152,000
|
)
|
|
$
|
(51,960,823
|
)
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
52,152,000
|
|
|
|
52,152,000
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of shares subject to redemption
|
|
|
191,177
|
|
|
|
(52,152,000
|
)
|
|
|
(51,960,823
|
)
|
Balance
Sheets
|
|
|
September 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
21,357,000
|
|
|
$
|
21,357,000
|
|
|
Total liabilities
|
|
|
8,310,507
|
|
|
|
21,357,000
|
|
|
|
29,667,507
|
|
|
Class A common stock subject to possible redemption
|
|
|
219,259,970
|
|
|
|
(21,356,993
|
)
|
|
|
197,902,977
|
|
|
Class A common stock
|
|
|
127
|
|
|
|
338
|
|
|
|
465
|
|
|
Additional paid-in capital
|
|
|
3,603,401
|
|
|
|
8,931,679
|
|
|
|
12,535,080
|
|
|
Retained earnings (accumulated deficit)
|
|
|
1,395,905
|
|
|
|
(8,932,024
|
)
|
|
|
(7,536,119
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,008
|
|
|
|
(7
|
)
|
|
|
5,000,001
|
|
Statements
of Operations
|
|
|
Three Months Ended September 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
(3,696,000
|
)
|
|
$
|
(3,696,000
|
)
|
|
Other income (expense), net
|
|
|
83,140
|
|
|
|
(3,696,000
|
)
|
|
|
(3,612,860
|
)
|
|
Net income (loss)
|
|
|
(55,049
|
)
|
|
|
(3,696,000
|
)
|
|
|
(3,751,049
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
7,007,989
|
|
|
|
1,750,840
|
|
|
|
8,758,829
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
(0.43
|
)
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Statements
of Operations
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
(5,395,000
|
)
|
|
$
|
(5,395,000
|
)
|
|
Other income (expense), net
|
|
|
1,429,005
|
|
|
|
(5,395,000
|
)
|
|
|
(3,965,995
|
)
|
|
Net income (loss)
|
|
|
740,226
|
|
|
|
(5,395,000
|
)
|
|
|
(4,654,774
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,307,098
|
|
|
|
3,111,439
|
|
|
|
8,418,537
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.66
|
)
|
Statements
of Cash Flows
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Net income (loss)
|
|
$
|
740,226
|
|
|
$
|
(5,395,000
|
)
|
|
$
|
(4,654,774
|
)
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
5,395,000
|
|
|
|
5,395,000
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of shares subject to redemption
|
|
|
740,222
|
|
|
|
(4,491,271
|
)
|
|
|
(3,751,049
|
)
|
Balance
Sheets
|
|
|
June 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
17,661,000
|
|
|
$
|
17,661,000
|
|
|
Total liabilities
|
|
|
8,256,307
|
|
|
|
17,661,000
|
|
|
|
25,917,307
|
|
|
Class A common stock subject to possible redemption
|
|
|
219,315,022
|
|
|
|
(17,660,996
|
)
|
|
|
201,654,026
|
|
|
Class A common stock
|
|
|
126
|
|
|
|
301
|
|
|
|
427
|
|
|
Additional paid-in capital
|
|
|
3,548,350
|
|
|
|
5,235,719
|
|
|
|
8,784,069
|
|
|
Retained earnings (accumulated deficit)
|
|
|
1,450,954
|
|
|
|
(5,236,024
|
)
|
|
|
(3,785,070
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,005
|
|
|
|
(4
|
)
|
|
|
5,000,001
|
|
Statements
of Operations
|
|
|
Three Months Ended June 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
(8,624,000
|
)
|
|
$
|
(8,624,000
|
)
|
|
Other income (expense), net
|
|
|
88,138
|
|
|
|
(8,624,000
|
)
|
|
|
(8,535,862
|
)
|
|
Net income (loss)
|
|
|
(51,977
|
)
|
|
|
(8,624,000
|
)
|
|
|
(8,675,977
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
7,005,122
|
|
|
|
895,798
|
|
|
|
7,900,920
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.10
|
)
|
Statements
of Operations
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
(1,699,000
|
)
|
|
$
|
(1,699,000
|
)
|
|
Other income (expense), net
|
|
|
1,345,865
|
|
|
|
(1,699,000
|
)
|
|
|
(353,135
|
)
|
|
Net income (loss)
|
|
|
795,275
|
|
|
|
(1,699,000
|
)
|
|
|
(903,725
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
7,004,380
|
|
|
|
1,242,141
|
|
|
|
8,246,521
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.22
|
)
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Statements
of Cash Flows
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Net income (loss)
|
|
$
|
795,275
|
|
|
$
|
(1,699,000
|
)
|
|
$
|
(903,725
|
)
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
1,699,000
|
|
|
|
1,699,000
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of shares subject to redemption
|
|
|
795,274
|
|
|
|
(9,471,251
|
)
|
|
|
(8,675,977
|
)
|
Balance
Sheets
|
|
|
March 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
9,037,000
|
|
|
$
|
9,037,000
|
|
|
Total liabilities
|
|
|
8,548,277
|
|
|
|
9,037,000
|
|
|
|
17,585,277
|
|
|
Class A common stock subject to possible redemption
|
|
|
219,367,001
|
|
|
|
(9,036,998
|
)
|
|
|
210,330,003
|
|
|
Class A common stock
|
|
|
126
|
|
|
|
215
|
|
|
|
341
|
|
|
Additional paid-in capital
|
|
|
3,496,371
|
|
|
|
(3,388,193
|
)
|
|
|
108,178
|
|
|
Retained earnings
|
|
|
1,502,931
|
|
|
|
3,387,976
|
|
|
|
4,890,907
|
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,003
|
|
|
|
(2
|
)
|
|
|
5,000,001
|
|
Statements
of Operations
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
$
|
-
|
|
|
$
|
6,925,000
|
|
|
$
|
6,925,000
|
|
|
Other income, net
|
|
|
1,257,727
|
|
|
|
6,925,000
|
|
|
|
8,182,727
|
|
|
Net income
|
|
|
847,252
|
|
|
|
6,925,000
|
|
|
|
7,772,252
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
7,003,637
|
|
|
|
1,588,485
|
|
|
|
8,592,122
|
|
|
Basic and diluted net income (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
0.81
|
|
|
$
|
0.80
|
|
Statements
of Cash Flows
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Net income
|
|
$
|
847,252
|
|
|
$
|
6,925,000
|
|
|
$
|
7,772,252
|
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(6,925,000
|
)
|
|
|
(6,925,000
|
)
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of shares subject to redemption
|
|
|
847,253
|
|
|
|
6,924,999
|
|
|
|
7,772,252
|
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Impact
of the Restatement – 2019
Balance
Sheets
|
|
|
December 31, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
15,962,000
|
|
|
$
|
15,962,000
|
|
|
Total liabilities
|
|
|
8,319,433
|
|
|
|
15,962,000
|
|
|
|
24,281,433
|
|
|
Class A common stock subject to possible redemption
|
|
|
218,519,748
|
|
|
|
(15,961,997
|
)
|
|
|
202,557,751
|
|
|
Class A common stock
|
|
|
125
|
|
|
|
284
|
|
|
|
409
|
|
|
Addition paid-in capital
|
|
|
4,343,625
|
|
|
|
3,536,737
|
|
|
|
7,880,362
|
|
|
Retained earnings (accumulated deficit)
|
|
|
655,679
|
|
|
|
(3,537,024
|
)
|
|
|
(2,881,345
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,004
|
|
|
|
(3
|
)
|
|
|
5,000,001
|
|
Statements
of Operations
|
|
|
For the Period From May 28, 2019 (inception)
through December 31, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(3,053,000
|
)
|
|
|
(3,053,000
|
)
|
|
Issuance costs allocated to warrant liabilities
|
|
|
-
|
|
|
|
(484,024
|
)
|
|
|
(484,024
|
)
|
|
Other income (expense), net
|
|
|
1,214,831
|
|
|
|
(3,537,024
|
)
|
|
|
(2,322,193
|
)
|
|
Net income (loss)
|
|
|
655,679
|
|
|
|
(3,537,024
|
)
|
|
|
(2,881,345
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
6,075,732
|
|
|
|
35,752
|
|
|
|
6,111,484
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
(0.61
|
)
|
Statements
of Cash Flows
|
|
|
For the Period From May 28, 2019 (inception)
through December 31, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
655,679
|
|
|
$
|
(3,537,024
|
)
|
|
$
|
(2,881,345
|
)
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
3,053,000
|
|
|
|
3,053,000
|
|
|
Net cash used in operating activities
|
|
|
(420,945
|
)
|
|
|
(484,024
|
)
|
|
|
(904,969
|
)
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
225,400,000
|
|
|
|
484,024
|
|
|
|
225,884,024
|
|
|
Net cash provided by financing activities
|
|
|
230,914,073
|
|
|
|
484,024
|
|
|
|
231,398,097
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial classification of ordinary shares subject to redemption
|
|
|
217,862,910
|
|
|
|
(12,909,000
|
)
|
|
|
204,953,910
|
|
|
Change in value of shares subject to redemption
|
|
|
656,838
|
|
|
|
(3,052,997
|
)
|
|
|
(2,396,159
|
)
|
Balance
Sheets
|
|
|
September 30, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
13,085,000
|
|
|
$
|
13,085,000
|
|
|
Total liabilities
|
|
|
8,125,774
|
|
|
|
13,085,000
|
|
|
|
21,210,774
|
|
|
Class A common stock subject to possible redemption
|
|
|
217,950,740
|
|
|
|
(13,085,000
|
)
|
|
|
204,865,740
|
|
|
Class A common stock
|
|
|
122
|
|
|
|
253
|
|
|
|
375
|
|
|
Additional paid-in capital
|
|
|
4,912,636
|
|
|
|
659,771
|
|
|
|
5,572,407
|
|
|
Retained earnings (accumulated deficit)
|
|
|
86,668
|
|
|
|
(660,024
|
)
|
|
|
(573,356
|
)
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Statements
of Operations
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(176,000
|
)
|
|
|
(176,000
|
)
|
|
Issuance costs allocated to warrant liabilities
|
|
|
-
|
|
|
|
(484,024
|
)
|
|
|
(484,024
|
)
|
|
Other income (expense), net
|
|
|
205,420
|
|
|
|
(660,024
|
)
|
|
|
(454,604
|
)
|
|
Net income (loss)
|
|
|
87,761
|
|
|
|
(660,024
|
)
|
|
|
(572,263
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,307,098
|
|
|
|
228,499
|
|
|
|
5,535,597
|
|
|
Basic and diluted net income (loss) per common share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.13
|
)
|
Statements
of Operations
|
|
|
For the Period From May 28, 2019 (inception)
through September 30, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Changes in fair value of warrant liabilities
|
|
|
-
|
|
|
|
(176,000
|
)
|
|
|
(176,000
|
)
|
|
Issuance costs allocated to warrant liabilities
|
|
|
-
|
|
|
|
(484,024
|
)
|
|
|
(484,024
|
)
|
|
Other income (expense), net
|
|
|
205,420
|
|
|
|
(660,024
|
)
|
|
|
(454,604
|
)
|
|
Net income (loss)
|
|
|
86,668
|
|
|
|
(660,024
|
)
|
|
|
(573,356
|
)
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,274,301
|
|
|
|
(760,101
|
)
|
|
|
4,514,200
|
|
|
Basic and diluted net income (loss) per common share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.16
|
)
|
Statements
of Cash Flows
|
|
|
For the Period From May 28, 2019 (inception)
through September 30, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
86,668
|
|
|
$
|
(660,024
|
)
|
|
$
|
(573,356
|
)
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
176,000
|
|
|
|
176,000
|
|
|
Net cash used in operating activities
|
|
|
(208,689
|
)
|
|
|
(484,024
|
)
|
|
|
(692,713
|
)
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
225,400,000
|
|
|
|
484,024
|
|
|
|
225,884,024
|
|
|
Net cash provided by financing activities
|
|
|
230,914,073
|
|
|
|
484,024
|
|
|
|
231,398,097
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial classification of ordinary shares subject to redemption
|
|
|
217,862,910
|
|
|
|
(12,908,991
|
)
|
|
|
204,953,919
|
|
|
Change in value of shares subject to redemption
|
|
|
87,830
|
|
|
|
(176,009
|
)
|
|
|
(88,179
|
)
|
Balance Sheets
|
|
|
September 13, 2019
|
|
|
|
|
As Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
11,370,000
|
|
|
$
|
11,370,000
|
|
|
Total liabilities
|
|
|
8,084,093
|
|
|
|
11,370,000
|
|
|
|
19,454,093
|
|
|
Class A common stock subject to possible redemption
|
|
|
188,912,910
|
|
|
|
(11,369,991
|
)
|
|
|
177,542,919
|
|
|
Class A common stock
|
|
|
111
|
|
|
|
114
|
|
|
|
225
|
|
|
Additional paid-in capital
|
|
|
5,000,477
|
|
|
|
423,676
|
|
|
|
5,424,153
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(1,153
|
)
|
|
|
(423,799
|
)
|
|
|
(424,952
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
5,000,010
|
|
|
|
(9
|
)
|
|
|
5,000,001
|
|
NOTE
3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it 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 independent registered public accounting firm attestation requirements of Section 404 of
the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non- emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2020 and, 2019.
Cash
and Marketable Securities Held in Trust Account
At
December 31, 2020 and, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. During
the year ended December 31, 2020, the Company withdrew $500,620 of interest earned on the Trust Account to pay its franchise and
income taxes.
Class
A common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480, Distinguishing
Liabilities from Equity (“ASC 480”). Shares of Class A common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common
stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheets.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 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 ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”).
Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether
they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the
warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control,
among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted
at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional
paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
they are recorded at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with
changes in the estimated fair value of the warrants to be recognized as a non-cash gain or loss in the statement of operations.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes (“ASC 740”).
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
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 to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for
interest and penalties as of December 31, 2020 and 2019. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations
by major taxing authorities since inception.
On
March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The
CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit
for certain net operating losses (“NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five
prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum
tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other
technical corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will
have a significant impact on Company’s financial position or statement of operations.
Net
Loss Per Common Share
Net
loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the
period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible
redemption at December 31, 2020 and 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded
from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust
Account earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement
to purchase an aggregate of 17,600,000 shares of common stock. As a result, diluted loss per common share is the same as basic
loss per common share for the periods presented.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Reconciliation
of Net Loss Per Common Share
The
Company’s net income (loss) is adjusted for the portion of income that is attributable to common stock subject to
possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the
Company. Accordingly, basic and diluted net loss per common share is calculated as follows:
|
|
|
For the year Ended December 31, 2020
|
|
|
For the Period from May 28, 2019 (inception)
through December 31, 2019
|
|
|
Net loss
|
|
$
|
(51,960,823
|
)
|
|
$
|
(2,881,345
|
)
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(723,829
|
)
|
|
|
(848,726
|
)
|
|
Adjusted net loss
|
|
|
(52,684,652
|
)
|
|
|
(3,730,070
|
)
|
|
Weighted average common shares subject to possible redemption outstanding,
basic and diluted
|
|
|
20,151,440
|
|
|
|
10,207,641
|
|
|
Basic and diluted income per common share subject to possible redemption
|
|
|
0.04
|
|
|
|
0.08
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
8,598,542
|
|
|
|
6,111,484
|
|
|
Basic and diluted net loss per non-redeemable common share
|
|
$
|
(6.13
|
)
|
|
$
|
(0.61
|
)
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
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.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
NOTE
4 — INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 20,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of
one share of Class A common stock and one-half of one warrant (“Public Warrant”). On September 19, 2019, in connection
with the underwriters’ exercise of the over-allotment option in full, the Company sold an additional 3,000,000 Units at
a price of $10.00 per Unit. Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an
exercise price of $11.50 per whole share (see Note 7).
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
5 — PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,500,000 Private Placement Warrants at
a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $5,500,000. On September 19, 2019, in connection
with the underwriters’ exercise of the over-allotment option in full, the Company sold an additional 600,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant. Each Private Placement Warrant is exercisable to purchase one share
of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement
Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete
a Business Combination within the Combination Period, certain of the proceeds from the sale of the Private Placement Warrants
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement
Warrants will expire worthless.
NOTE
6 — FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820, Fair Value Measurement, for its financial assets and liabilities that are re-measured
and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported
at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
|
|
|
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of December 31, 2020 and 2019 and indicates the fair value hierarchy of the valuation inputs the Company utilized to
determine such fair value:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Description
|
|
Level
|
|
|
2020
|
|
|
2019
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
232,196,027
|
|
|
$
|
231,214,831
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public warrant liability
|
|
|
1
|
|
|
$
|
43,470,000
|
|
|
$
|
10,350,000
|
|
|
Private placement warrant liability
|
|
|
2
|
|
|
$
|
24,644,000
|
|
|
$
|
5,612,000
|
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Initial
Measurement
The
Company established the initial fair value for the Public Warrants in September 2019 using a Monte Carlo simulation model. The
Company established the initial fair value for the Private Warrants in September 2019 using a Black-Scholes-Merton model. The
key inputs into the Monte Carlo simulation model for the Public Warrants and Black-Scholes-Merton model for the Private Warrants
were as follows at initial measurement:
|
|
|
September 2019 (Initial Measurement)
|
|
|
Exercise price
|
|
$
|
11.50
|
|
|
Fair value of Units
|
|
$
|
10.04
|
|
|
Contractual term (years)
|
|
|
6
|
|
|
Volatility (annual)
|
|
|
11.00
|
%
|
|
Risk-free rate
|
|
|
1.62
|
%
|
The
Company’s use of a Monte Carlo simulation model and Black-Scholes-Merton model required the use of subjective assumptions:
|
|
●
|
The
risk-free interest rate assumption was based on the five-year U.S. Treasury rate, which was commensurate with the contractual
term of the Warrants, which expire on the earlier of (i) five years after the completion of the initial business combination
and (ii) upon redemption or liquidation. An increase in the risk-free interest rate, in isolation, would result in an increase
in the fair value measurement of the warrant liabilities and vice versa.
|
|
|
|
|
|
|
●
|
The
expected term was determined to be one year, as the Warrants become exercisable on the later of (i) 30 days after the completion
of a business combination and (ii) 12 months from the Initial Public Offering date. An increase in the expected term, in isolation,
would result in an increase in the fair value measurement of the warrant liabilities and vice versa.
|
|
|
|
|
|
|
●
|
The
expected volatility assumption was based on the implied volatility from a set of comparable publicly-traded warrants as determined
based on the size and proximity of other similar business combinations. An increase in the expected volatility, in isolation,
would result in an increase in the fair value measurement of the warrant liabilities and vice versa.
|
|
|
|
|
|
|
●
|
The
fair value of the Units, which each consist of one Class A ordinary share and one-half of one Public Warrant, represents the
closing price on the measurement date.
|
Subsequent
Measurement
The
Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of December 31,
2020 and 2019 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker ASTSW.
As the transfer of Private Warrants to anyone outside of a small group of individuals who are permitted transferees would result
in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the
volatility of each Private Warrant is equivalent to that of each Public Warrant. As such, the Private Warrants are classified
as Level 2.
The
following table presents the changes in the fair value of warrant liabilities:
|
|
|
Public warrant liability
|
|
|
Private placement warrant liability
|
|
|
Warrant liabilities
|
|
|
Balance at May 28, 2019 (inception)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Initial measurement
|
|
|
8,395,000
|
|
|
|
4,514,000
|
|
|
|
12,909,000
|
|
|
Changes in fair value
|
|
|
1,955,000
|
|
|
|
1,098,000
|
|
|
|
3,053,000
|
|
|
Balance at December 31, 2019
|
|
|
10,350,000
|
|
|
|
5,612,000
|
|
|
|
15,962,000
|
|
|
Changes in fair value
|
|
|
33,120,000
|
|
|
|
19,032,000
|
|
|
|
52,152,000
|
|
|
Balance at December 31, 2020
|
|
|
43,470,000
|
|
|
|
24,644,000
|
|
|
|
68,114,000
|
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Due
to the use of quoted prices in an active market (Level 1) and the use of observable inputs for similar assets or liabilities (Level
2) to measure the fair values of the Public Warrants and Private Warrants, respectively, subsequent to initial measurement, the
Company had transfers out of Level 3 totaling $13,085,000 during the period from September 2019, through December 31, 2019.
NOTE
7 — RELATED PARTY TRANSACTIONS
Founder
Shares
In
June 2019, the Sponsor purchased 3,593,750 shares of Class B common stock (the “Founder Shares”) for an aggregate
purchase price of $25,000. On August 23, 2019, the Company effected a stock split resulting in an increase on the total
number of shares of Class B common stock outstanding from 3,593,750 to 5,750,000 shares. Subsequent to such stock split, in August
2019, the Sponsor transferred 10,000 Founder Shares to each of Mr. Bradley, the Company’s Chief Financial Officer and, and
Messrs. Gannon, Ginsberg and Mazer, the Company’s independent directors. The 5,750,000 Founder Shares included an aggregate
of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised
in full or in part, so that the Sponsor will own, on an as-converted basis, 20% of the Company’s issued and outstanding
shares after the Initial Public Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering).
As a result of the underwriters’ election to fully exercise their over-allotment option, 750,000 Founder Shares are no longer
subject to forfeiture. The Founder Shares will automatically convert into shares of Class A common stock upon consummation of
a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note 8.
The
Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier
to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the
last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital
stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange
their shares of common stock for cash, securities or other property.
Promissory
Note — Related Party
On
June 20, 2019, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial
Public Offering pursuant to a promissory note (the “Promissory Note”). The Promissory Note is non-interest bearing
and payable on the earlier of December 31, 2019 or the completion of the Initial Public Offering. At September 30, 2019, the outstanding
balance under the Promissory Note in the aggregate amount of $155,093 was repaid.
Administrative
Support Agreement
The
Company entered into an agreement whereby, commencing on September 13, 2019 through the earlier of the Company’s consummation
of a Business Combination and its liquidation, the Company will pay an affiliate of the Sponsor a total of $10,000 per month
for office space, utilities and secretarial and administrative support services. For the year ended December 31, 2020 and for
the period from May 28, 2019 (inception) through December 31, 2019, the Company incurred $120,000 and $35,000 in fees for these
services, respectively. As of December 31, 2020, and 2019, $30,000 and $35,000 is included in accounts payable and accrued expenses
in the accompanying balance sheets, respectively.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may
be converted upon consummation of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be
identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion
of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would
be used to repay the Working Capital Loans.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
8 — COMMITMENTS
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Registration
and Stockholder Rights
Pursuant
to a registration rights and stockholder agreement entered into on September 13, 2019, the holders of the Founder Shares, Private
Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common
stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans and upon conversion of the Founder Shares) will be entitled to registration and stockholder rights requiring the
Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s
Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short
form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require
the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters of the Initial Public Offering are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate.
Up to 40% of such amount (or $3,220,000) may be paid at the sole discretion of the Company’s management team to the underwriters
in the allocations determined by the management team and/or to third parties not participating in the Initial Public Offering
(but who are members of FINRA) that assist the Company in consummating a Business Combination. The deferred fee will become payable
to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a Business Combination,
subject to the terms of the underwriting agreement.
Equity
Purchase Agreement
On
December 15, 2020, the Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with AST
& Science LLC, a Delaware limited liability company (“AST”), the existing equityholders of AST (the “Existing
Equityholders”), the Sponsor and Abel Avellan (“Existing Equityholder Representative”) in his capacity as Existing
Equityholder Representative. The transactions contemplated by the Equity Purchase Agreement are referred to herein as the “AST
Business Combination.”
Following
the closing of the AST Business Combination (the “Closing”), the Company will be organized as an umbrella partnership-C
corporation structure, in which substantially all of the operating assets of AST’s business will be held by AST, and the
Company’s only assets will be its equity interests in AST. The Company will be renamed AST SpaceMobile, Inc. (“SpaceMobile”)
at Closing.
At
the Closing, the Company will (i) amend and restate its existing Certificate of Incorporation (the “A&R Certificate
of Incorporation”) to, among other things, (a) change the name of the Company to AST SpaceMobile, Inc., (b) convert all
then-outstanding Founder Shares, excluding any Forfeited Founder Shares into shares of Class A common stock, par value $0.0001
per share, of SpaceMobile (“Class A Common Stock”) and (c) authorize the issuance of Class B common stock, par value
$0.0001 per share, of SpaceMobile (“Class B Common Stock”) and Class C common stock, par value $0.0001 per share,
of SpaceMobile (“Class C Common Stock”) and (ii) replace the Amended and Restated By-Laws of the Company (the “Existing
Bylaws”), by adopting the Bylaws of AST SpaceMobile, Inc. (the “SpaceMobile Bylaws”).
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Concurrently
with the Equity Purchase Agreement, the Company entered into various subscription agreements (the “Subscription Agreements”)
with certain third-party investors (the “PIPE Investors”) pursuant to which the PIPE Investors have committed to make
private investments in public equity in the form of Class A Common Stock in an aggregate amount of $230 million (the “PIPE
Investment”). In exchange for the PIPE Investment, the PIPE Investors will receive an aggregate of 23 million shares of
Class A Common Stock.
The
Equity Purchase Agreement contains customary representations, warranties and covenants by the parties thereto and the Closing
is subject to certain conditions as further described in the Equity Purchase Agreement.
Upon
closing the business combination, the Company and AST anticipate incurring transaction costs to investment bankers, attorneys
and other service providers.
NOTE
9 — STOCKHOLDERS’ EQUITY
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share
with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s
board of directors. At December 31, 2020 and 2019, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value
of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2020 and
2019, there were 8,077,085 and 2,842,122 shares of Class A common stock issued and outstanding, excluding 14,922,915 and 20,157,878
shares of Class A common stock subject to possible redemption, respectively.
Class
B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2020 and 2019, there were
5,750,000 shares of Class B common stock issued and outstanding.
Holders
of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders
except as required by law; provided that only holders of shares of Class B common stock have the right to vote on the election
of the Company’s directors prior to the initial Business Combination.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business
Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted
(unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect
to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all
shares of Class B common stock will equal, in the aggregate, on an as- converted basis, 20% of the sum of the total number of
all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock
and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked
securities issued, or to be issued, to any seller in a Business Combination and any private placement-equivalent warrants issued
to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert
their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided
above, at any time.
NOTE
10 — WARRANT LIABILITIES
Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b)
12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of
a Business Combination or earlier upon redemption or liquidation.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have
no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares
of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the
Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated
to issue shares of Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such warrant
exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered
holder of the warrants.
The
Company has agreed that, as soon as practicable, but in no event later than fifteen (15) business days, after the closing of a
Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares
of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to
maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified
in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the
warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such
time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective
registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their
warrants on a cashless basis.
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
|
|
●
|
in
whole and not in part;
|
|
|
●
|
at
a price of $0.01 per warrant;
|
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
|
|
●
|
if,
and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for
any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption
to the warrant holders.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and
number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not
be adjusted for issuance of Class A common stock at a price below its exercise price. If the Company is unable to complete a Business
Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants
will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes
in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share
(with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and
in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the
Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross
proceeds from such issuances represent more than 60% of the total equity proceed, and interest thereon, available for the funding
of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted
average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to
the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per
share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market
Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest
cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except
that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants
will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain
limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable
so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held
by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the Public Warrants.
The
warrants contain a settlement alternative which is triggered upon the occurrence of a tender, exchange or redemption offer which
has been made to and accepted by more than 50% of the outstanding shares of common stock (other than a tender, exchange, or redemption
offer made by the Company in connection with the redemption rights previously discussed). Upon the occurrence of such an event
(the “Alternative Issuance”), the holders of the warrants shall be entitled to receive the highest amount of cash,
securities, or other property to which such holder would have been entitled as a stockholder if the holder of the warrants had
exercised the warrants prior to the expiration of such tender, exchange, or redemption offer and accepted such offer. If an Alternative
Issuance were to occur in which a cash tender offer is made by a third party and accepted by 50% or more of outstanding shares
of common stock, the warrants would be net cash settled, in an event that is outside of the Company’s control, and for which
not all holders of the underlying shares also would receive cash (assuming not all shareholders accepted the tender offer). The
presence of this potential settlement alternative precludes the Company from classifying the warrants within stockholders’
equity, regardless of the likelihood of such an event occurring.
As
of the issuance of the public warrants in September 2019 in connection with the offering, the Company recorded the public warrants
at fair value of $8,395,000 with the remaining consideration received in the offering allocated to stockholders’ equity.
The Company incurred $13,260,927 in issuance costs associated with the offering, of which $484,024 was allocated to the public
warrants and expensed in the statement of operations in 2019. The remaining issuance costs were allocated to the stockholders’
equity component of the offering and recorded as an offset to additional paid-in capital. As of the issuance of the private placement
warrants in September 2019, the Company recorded the warrants at a fair value of $4,514,000, with the difference of
$1,586,000 between the issuance price and the fair value, recorded as a capital contribution to additional paid-in
capital.
As
of December 31, 2020 and 2019, the Company recorded warrant liabilities of $68,114,000 and $15,962,000, respectively, in the balance
sheets. For the year ended December 31, 2010 and for the period from May 28, 2019 through December 31, 2019, the Company recognized
a loss on the change in the fair value of the warrant liabilities of $52,152,000 and $3,053,000, respectively, in the statements
of operations.
NOTE
11 — INCOME TAX
The
Company’s net deferred tax liability are as follows:
|
|
|
Year Ended
December 31,
2020
|
|
|
For
the Period from May 28,
2019 (inception)
through
December 31,
2019
|
|
|
Deferred tax liability
|
|
|
|
|
|
|
|
|
|
Unrealized gain on marketable securities
|
|
$
|
(9,680
|
)
|
|
$
|
(3,611
|
)
|
|
Total deferred tax liability
|
|
|
(9,680
|
)
|
|
|
(3,611
|
)
|
|
Valuation Allowance
|
|
|
—
|
|
|
|
—
|
|
|
Deferred tax liability, net of allowance
|
|
$
|
(9,680
|
)
|
|
$
|
(3,611
|
)
|
NEW
PROVIDENCE ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
provision for income taxes consists of the following:
|
|
|
Year Ended
December 31,
2020
|
|
|
For
the Period from
May 28,
2019 (inception) through December 31,
2019
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
159,877
|
|
|
$
|
170,684
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
State and Local
|
|
|
6,069
|
|
|
|
3,611
|
|
|
Current
|
|
|
—
|
|
|
|
—
|
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
Change in valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
Income tax provision
|
|
$
|
165,946
|
|
|
$
|
174,295
|
|
As
of December 31, 2020 and 2019, the Company had did not have any of U.S. federal and state net operating loss carryovers available
to offset future taxable income.
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion
of 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 temporary differences representing net future deductible amounts
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment.
A
reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:
|
|
|
As of December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
Change in fair value of warrant liabilities
|
|
|
(21.1
|
%)
|
|
|
(27.4
|
%)
|
|
Business Combination expenses
|
|
|
(0.2
|
%)
|
|
|
0.0
|
%
|
|
Income tax provision
|
|
|
(0.3
|
%)
|
|
|
(6.4
|
%)
|
The
Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities.
The Company’s tax returns for the year ended December 31, 2020 and 2019 remain open and subject to examination. The Company
considers Texas to be a significant state tax jurisdiction.
NOTE
12 — SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the financial statements.
On
January 28, 2021 and on February 18, 2021, the Sponsor agreed to loan the Company $200,000 and $500,000, respectively,
for an aggregate of $700,000. The promissory notes (“Notes”) are provided to cover certain expenses
related to the business combination. The Notes are non- interest bearing and payable on the earlier of June 30, 2021 or the completion
of the Business Combination. As of February 26, 2021, the Company borrowed $300,000 under the Notes.
PART
II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth the estimated expenses to be borne by the registrant in connection with the issuance and distribution
of the Class A Common Stock and warrants being registered hereby.
|
Securities and Exchange Commission registration fee
|
|
$
|
48,007.93
|
|
|
Accounting fees and expenses
|
|
|
210,376.00
|
|
|
Legal fees and expenses
|
|
|
75,000.00
|
|
|
Financial printing and miscellaneous expenses
|
|
|
*
|
|
|
Total
|
|
$
|
333,383.93
|
|
*
To be completed by amendment.
Item
14. Indemnification of Directors and Officers.
Subsection
(a) of Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”) empowers a corporation to
indemnify any person who was or is a party or who is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.
Subsection
(b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person acted in any of the capacities set forth above, against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the
person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section
145 further provides that to the extent a director or officer of a corporation has been successful on the merits or otherwise
in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably
incurred by such person in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; and the indemnification provided for by Section 145 shall,
unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of such person’s heirs, executors and administrators. Section 145 also empowers
the corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of his status as such, whether or not the corporation would have the power
to indemnify such person against such liabilities under Section 145.
Section
102(b)(7) of the DGCL provides that a corporation’s certificate of incorporation may contain a provision eliminating or
limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of
the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction
from which the director derived an improper personal benefit.
Additionally,
our Charter limits the liability of our directors to the fullest extent permitted by the DGCL, and our Bylaws provide that we
will indemnify them to the fullest extent permitted by such law. We have entered into and expect to continue to enter into agreements
to indemnify our directors, executive officers and other employees as determined by our Board of Directors. Under the terms of
such indemnification agreements, we are required to indemnify each of our directors and officers, to the fullest extent permitted
by the laws of the state of Delaware, if the basis of the indemnitee’s involvement was by reason of the fact that the indemnitee
is or was our director or officer or was serving at our request in an official capacity for another entity. We must indemnify
our officers and directors against all reasonable fees, expenses, charges and other costs of any type or nature whatsoever, including
any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating
in (including on appeal), or preparing to defend, be a witness or participate in any completed, actual, pending or threatened
action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing a right
to indemnification under the indemnification agreement. The indemnification agreements also require us, if so requested, to advance
all reasonable fees, expenses, charges and other costs that such director or officer incurred, provided that such person will
return any such advance if it is ultimately determined that such person is not entitled to indemnification by us. Any claims for
indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against
us and may reduce the amount of money available to us.
Item
15. Recent Sales of Unregistered Securities.
The
following list sets forth information as to all NPA’s and our securities sold in the last three years which were not registered
under the Securities Act. The descriptions of these issuances are historical and have not been adjusted to give effect to the
Business Combination.
On
June 20, 2019, NPA’s Sponsor, purchased an aggregate of 3,593,750 founder shares, for an aggregate offering price of $25,000
at an average purchase price of approximately $0.007 per share. In August 2019, we effected a stock split resulting in an increase
in the total number of founder shares outstanding from 3,593,750 to 5,750,000, such that the total number of founder shares would
represent 20% of the total number of shares of common stock outstanding upon completion of our initial public offering. The number
of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding
shares of common stock upon completion of NPA’s initial public offering.
On
September 13, 2019, NPA’s sponsor purchased an aggregate of 6,100,000 warrants at a price of $1.00 per warrant ($6,100,000
in the aggregate). This purchase took place on a private placement basis simultaneously with the completion of our initial public
offering.
On
April 6, 2021, we issued 23,000,000 shares of Class A Common Stock to certain qualified institutional buyers and accredited investors
that agreed to purchase such shares in connection with the Business Combination for aggregate consideration of $230,000,000 million.
On
April 6, 2021, we issued 51,636,922 shares of Class B Common Stock to the Existing Equityholders for aggregate consideration of
$5,163.70.
On
April 6, 2021, we issued 78,163,078 shares of our Class C Common Stock to Abel Avellan for aggregate consideration of $7,816.31.
We
issued the foregoing securities in transactions not involving an underwriter and not requiring registration under Section 5 of
the Securities Act of 1933, as amended, in reliance on the exemption afforded by Section 4(a)(2) thereof.
Item
16. Exhibits and Financial Statement Schedules.
The
financial statements filed as part of this registration statement are listed in the index to the financial statements immediately
preceding such financial statements, which index to the financial statements is incorporated herein by reference.
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Exhibit
No.
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Description
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2.1*
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Equity Purchase Agreement, dated as of December 15, 2020, by and among AST & Science LLC, New Providence Acquisition Corp., New Providence Management LLC, the AST Existing Equityholder Representative and the AST Existing Equityholders listed on Annex A thereto (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 16, 2020).
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3.1
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Amended and Restated Certificate of Incorporation of AST SpaceMobile, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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3.2
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Amended and Restated Bylaws of AST SpaceMobile, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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4.1
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Specimen Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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4.2
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Specimen Warrant Certificate of the Registrant (incorporated by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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4.3
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Warrant Agreement, dated September 13, 2019, between Continental Stock Transfer & Trust Company and New Providence Acquisition Corp. (incorporated by reference to the registrant’s Current Report on Current Report on Form 8-K filed with the SEC on September 16, 2019).
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5.1
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Opinion of Latham & Watkins LLP as to the validity of shares of AST SpaceMobile, Inc. Class A Common Stock and warrants.
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10.1*
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Stockholders’ Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.2*
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Sponsor Voting Agreement (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.3*
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Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.4*
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Tax Receivable Agreement (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.5*
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Fifth Amended and Restated Limited Liability Limited Company Agreement of AST & Science, LLC (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.6†
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AST SpaceMobile, Inc. 2020 Incentive Award Plan (incorporated by reference to Exhibit 10.6 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.7†
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AST SpaceMobile, Inc. 2020 Incentive Award Plan – Form of Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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Exhibit
No.
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|
Description
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10.8†
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AST SpaceMobile, Inc. 2020 Incentive Award Plan – Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.8 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.9†
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AST SpaceMobile, Inc. 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.9 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.10†
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Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.10 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.11†
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Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.11 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.12†
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Offer Letter between AST SpaceMobile, Inc. and Abel Avellan (incorporated by reference to Exhibit 10.12 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.13†
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Offer Letter between AST SpaceMobile, Inc. and Thomas Severson (incorporated by reference to Exhibit 10.13 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.14†
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Offer Letter between AST SpaceMobile, Inc. and Rulfo Hernandez (incorporated by reference to Exhibit 10.14 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.15*
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Amended and Restated Series B Preferred Shares Purchase Agreement, dated as of February 4, 2020, by and among AST & Science, LLC, Vodafone Ventures Limited, ATC TRS II LLC and Rakuten Mobile Singapore PTE. LTD. (incorporated by reference to Exhibit 10.15 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.16*
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Letter Agreement, dated as of December 15, 2020, by and between AST & Science, LLC and Vodafone Ventures Limited (incorporated by reference to Exhibit 10.16 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.17*
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Letter Agreement, dated as of December 15, 2020, by and between AST & Science, LLC and ATC TRS II LLC, as predecessor in interest to ATC TRS IV LLC (incorporated by reference to Exhibit 10.17 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.18*
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Amended and Restated Commercial Agreement, dated as of December 15, 2020, by and between AST & Science, LLC and Rakuten Mobile Singapore Pte. Ltd. (incorporated by reference to Exhibit 10.18 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.19*
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License Agreement, dated June 21, 2019, by and between SRS Space Limited and AST & Science, LLC (incorporated by reference to Exhibit 10.19 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.20*
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Launch Services Contract, dated July 17, 2020, by and between AST & Science, LLC and Joint Stock Company “GK Launch Services” (incorporated by reference to Exhibit 10.20 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.21*
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Design and Manufacturing Agreement, dated September 23, 2020, by and between Dialog Semiconductor Operations Services Limited and AST & Science LLC (incorporated by reference to Exhibit 10.21 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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10.22*
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Sublease Agreement, dated November 13, 2018, by and between the Midland Development Corporation and AST & Science, LLC (incorporated by reference to Exhibit 10.22 to the registrant’s Current Report on Form 8-K filed with the SEC on April 12, 2021).
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*
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Certain
schedules and exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5) or Item 601(b)(10)(iv), as applicable,
of Regulation S-K. The Registrant agrees to furnish supplemental copies of all omitted exhibits and schedules to the Securities
and Exchange Commission upon its request.
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†
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Indicates
a management contract or compensatory plan.
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Item
17. Undertakings.
The
undersigned registrant hereby undertakes:
(1)
to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration statement; provided, however, that paragraphs
(i), (ii) and (iii) do not apply if the registration statement is on Form S-1 and the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement;
(2)
that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof;
(3)
to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering;
(4)
that, for the purpose of determining liability under the Securities Act to any purchaser:
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use; and
(5)
that, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
(ii)
any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
the portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of an undersigned registrant; and
(iv)
any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Midland, State of Texas, on May 13, 2021.
|
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AST
SpaceMobile, Inc.
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By:
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/s/
Abel Avellan
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Name:
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Abel
Avellan
|
|
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Title:
|
Chief
Executive Officer
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Pursuant
to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
and on May 13, 2021.
|
Signature
|
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Title
|
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/s/
Abel Avellan
|
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Chairman
and Chief Executive Officer
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Abel
Avellan
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(Principal
Executive Officer)
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/s/
Thomas Severson
|
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Chief
Financial Officer and Director
|
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Thomas
Severson
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(Principal
Financial Officer)
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*
|
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Chief
Accounting Officer
|
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Rulfo
Hernandez
|
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(Principal
Accounting Officer)
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*
|
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Director
|
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Tareq
Amin
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*
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Director
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Adriana
Cisneros
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*
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Director
|
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Alexander
Coleman
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*
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Director
|
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Luke Ibbetson
|
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*
|
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Director
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Edward
Knapp
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*
|
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Director
|
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Hiroshi
Mikitani
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*
|
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Director
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Ronald Rubin
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*
|
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Director
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Richard
Sarnoff
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*
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Director
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Julio
A. Torres
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*By:
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/s/ Thomas Severson
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|
|
Thomas Severson
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Attorney-in-fact
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