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What changed in AST SpaceMobile, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AST SpaceMobile, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+449 added−381 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-31)

Top changes in AST SpaceMobile, Inc.'s 2023 10-K

449 paragraphs added · 381 removed · 254 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

80 edited+72 added−40 removed60 unchanged
Biggest changeOur 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. We are also industrializing our component manufacturing and satellite assembly process to automate the assembly, installation and testing of satellites.
Biggest changeWe continue to focus on research and development to bring our SpaceMobile Service to market for commercial service to end user customers of the MNOs and for certain government applications. 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.
Military and Government ● Service for military and governmental operations We expect that the majority of our revenue will be generated from SpaceMobile Service offerings similar to those described above through revenue-sharing arrangements with MNOs; however, the ultimate offerings and pricing will be subject to mutual agreement with the MNOs and there can be no assurance as to what model any MNO ultimately offers its customers and the level of customer acceptance of these models.
Military and Government ● Service for military and governmental operations 5 We expect that the majority of our revenue will be generated from SpaceMobile Service offerings similar to those described above through revenue-sharing arrangements with MNOs; however, the ultimate offerings and pricing will be subject to mutual agreement with the MNOs and there can be no assurance as to what model any MNO ultimately offers its customers and the level of customer acceptance of these models.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), impose joint and several liability, without regard to fault, for cleanup costs on persons who disposed of or released hazardous substances into the environment, including at third-party sites or offsite disposal locations, or those who currently own or operate (or formerly owned or operated) sites where such a release occurred.
Comprehensive Environmental Response, Compensation and 9 Liability Act of 1980, as amended (“CERCLA”), impose joint and several liability, without regard to fault, for cleanup costs on persons who disposed of or released hazardous substances into the environment, including at third-party sites or offsite disposal locations, or those who currently own or operate (or formerly owned or operated) sites where such a release occurred.
Nonetheless, there can be no assurance that the necessary licenses would be available on acceptable terms, if at all. 7 The industry in which we compete is characterized by rapidly changing technology, a large number of patents, and related litigation regarding patent and other intellectual property rights.
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 related litigation regarding patent and other intellectual property rights.
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 competition from other service providers that offer a range of mobile and fixed communications options.
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 competition from other service providers that offer a range of mobile and fixed communications options.
No payments have been made to date between us and American Tower under the Amended and Restated Letter Agreement. American Tower has the right to designate one individual to our Board of Directors. Currently, American Tower's designee is Ed Knapp, Chief Technology Officer, American Tower.
No payments have been made to date between us and American Tower under the Amended and Restated Letter Agreement. American Tower has the 11 right to designate one individual to our Board of Directors. Currently, American Tower’s designee is Ed Knapp, Chief Technology Officer, American Tower.
Rakuten 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”).
Rakuten On February 4, 2020, we entered into a commercial agreement with Rakuten, for the development of exclusive network capabilities in Japan compatible with the mobile network of Rakuten and its affiliates, which agreement was amended and restated as of December 15, 2020 (the “Rakuten Agreement”).
We are required to comply with operational and coordination requirements set forth as conditions to the experimental license grant. Material changes to the experimental license testing parameters would require prior approval by the FCC.
We 7 are required to comply with operational and coordination requirements set forth as conditions to the experimental license grant. Material changes to the experimental license testing parameters would require prior approval by the FCC.
The principle components of our strategy include the following: Develop Complementary Relationships with Mobile Network Operators. We intend on partnering with MNOs to offer the SpaceMobile Service to their end-user customers. We believe the strategy will enable our MNO partners to expand the coverage areas of their operations and increase their total addressable market with limited incremental capital investment.
The principal components of our strategy include the following: Develop Complementary Relationships with Mobile Network Operators. We intend on partnering with MNOs to offer the SpaceMobile Service to their end-user customers. We believe the strategy will enable our MNO partners to expand the coverage areas of their operations and increase their total addressable market with limited incremental capital investment.
In addition, the SEC maintains a website ( www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.
In addition, the SEC maintains a website ( www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically. 13
We plan to construct and launch satellites in phases to focus our constellation’s initial power and capacity on targeted geographical areas that provide the most attractive opportunities. This prioritization of coverage is designed to minimize the capital required to initiate commercial service and generate revenue sooner.
We plan to construct and launch satellites in phases to focus our constellation’s initial coverage on targeted geographical areas that provide the most attractive opportunities. This prioritization of coverage is designed to minimize the capital required to initiate commercial service and generate revenue sooner.
We also will need to secure FCC authority in the future for the ground segment of the SpaceMobile Service, consisting of approximately 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.
We also will need to secure FCC authority in the future for the ground segment of the SpaceMobile Service, consisting of approximately four 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.
We are also seeking regulatory approval for fixed earth stations in other jurisdictions around the world to operate satellite earth stations in connection with our service, including in connection with BW3 testing. Also, we are seeking regulatory approval to permit the commercial operation of our satellites using V-band frequencies in foreign jurisdictions where we intend to operate.
We are also seeking regulatory approval for fixed earth stations in other jurisdictions around the world to operate satellite earth stations in connection with our service, including in connection with BW3 testing. Also, we are seeking regulatory approval to permit the commercial operation of our satellites using V-band and cellular frequencies in foreign jurisdictions where we intend to operate.
On April 1, 2019, we launched our first test satellite, BlueWalker 1 (“BW1”), which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO and the effects of doppler in a satellite to ground cellular environment using the 4G LTE protocols.
On April 1, 2019, we launched our first test satellite, BlueWalker 1 (“BW1”), which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO and the effects of doppler in a satellite to ground cellular environment using the 4G-LTE protocol.
We believe this focus will enable us to avoid competing with existing incumbent carriers and reduce the complexity of our operations, thereby significantly reducing our overhead, marketing costs, customer acquisition costs, billing infrastructure and other customer support operations. Modular Deployment Schedule.
We believe this focus will enable us to avoid competing with existing incumbent MNOs and reduce the complexity of our operations, thereby significantly reducing our overhead, marketing costs, customer acquisition costs, billing infrastructure and other customer support operations. Modular Deployment Schedule.
We intend to work with MNOs to offer the SpaceMobile Service directly to the MNOs’ end-user customers. Our vision is that users will not need to subscribe to the SpaceMobile Service through us, nor will they need to purchase any new or additional equipment.
We intend to work with MNOs to offer the SpaceMobile Service to the MNOs’ end-user customers. Our vision is that users will not need to subscribe to the SpaceMobile Service directly through us, nor will they need to purchase any new or additional equipment or mobile device.
In comparison, the recently announced mobile satellite service LEOs are designed to support low data rate applications such as SOS, texting and in some instances, voice. We also compete with regional mobile satellite communications services in several geographic markets.
In comparison, the mobile satellite service LEOs are designed to support low data rate applications such as SOS, texting and in some instances, voice. We also compete with regional mobile satellite communications services in several geographic markets.
We will make $5.0 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.
Furthermore, we will make $5.0 million (or such lesser amount as mutually agreed upon the parties) in capital investments towards the design, assembly, 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.
We are developing a phased satellite deployment plan and corresponding commercial launch plan of the SpaceMobile Service based on targeted geographical areas to provide the SpaceMobile Service to the most commercially attractive MNO markets.
Satellite deployment and coverage plans We are developing a phased satellite deployment plan and corresponding commercial launch plan of the SpaceMobile Service based on targeted geographical areas to provide the SpaceMobile Service to the most commercially attractive MNO markets.
Customers, Sales and Marketing We have developed relationships with companies, such as Vodafone, Rakuten, American Tower, Nokia and others that have innovative technologies and products, skilled personnel, and potential end-user customers that complement our strategy.
Customers, Sales and Marketing We have developed relationships with companies, such as Vodafone, Rakuten, AT&T, Google, American Tower, and others that have innovative technologies and products, skilled personnel, and potential end-user customers that complement our strategy.
To date, we have secured 15 granted United States patents, one of which is exclusively licensed to us, and at least 7 United States patent applications that have been indicated as allowable and ready for issue pending completion of patent office formalities. We also have approximately 24 currently pending United States patent applications.
To date, we have secured 31 granted United States patents, one of which is exclusively licensed to us, and at least 4 United States patent applications that have been indicated as allowable and ready for issue pending completion of patent office formalities. We also have approximately 31 currently pending United States patent applications.
The SpaceMobile Service is expected to enable MNOs to augment and extend their coverage without building towers or other land-based infrastructure, including where it is not cost-justified or is difficult due to geographical challenges, such as mountainous or rugged terrain.
The SpaceMobile Service is expected to enable MNOs to augment and extend their coverage without building towers or other land-based infrastructure, including where it is not cost-justified or is difficult due to geographical challenges.
Currently, Vodafone’s designee is Luke Ibbetson, Head of Group Research & Development, Vodafone. 9 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.
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.
We also believe that these wireless infrastructure providers will assist us in developing innovative financing techniques to support our infrastructure roll out and help us identify and partner with MNOs around the world. Maintaining our Focus on Technology and Innovation. We continue to focus on research and development to bring our SpaceMobile Service to market.
We also believe that these wireless infrastructure providers will assist us in developing innovative financing techniques to support our infrastructure roll out and help us identify and partner with MNOs around the world. Maintaining our Focus on Technology and Innovation.
As of March 31, 2023, we have entered into over 35 preliminary agreements and understandings with MNOs. Many of these preliminary agreements and understandings will need to be renewed as their terms will end before we expect to launch the SpaceMobile Service.
To date, we have entered into over 45 preliminary agreements and understandings with MNOs. Many of these preliminary agreements and understandings will need to be renewed as their terms will end before we expect to launch the SpaceMobile Service.
We operate from multiple locations that include our corporate headquarters and 185,000 square feet satellite assembly, integrating and testing (“AIT”) facilities in Texas, and AIT and engineering and development locations elsewhere in the United States, India, Scotland, Spain and Israel.
We are headquartered in Texas where we operate 185,000 square feet of satellite assembly, integrating and testing (“AIT”) facilities and operate from multiple locations that include AIT and engineering and development locations elsewhere in the United States, India, Scotland, Spain and Israel.
Following the launch, deployment and testing of five Block 1 BB satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in certain targeted geographical areas and seek to generate revenue from such service.
Following the planned launch and deployment of five Block 1 BB satellites in 2024, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in targeted geographical areas, including in the United States, and seek to generate revenue from such service.
Moreover, we have secured 7 granted international patents providing protection in 15 different countries, including Europe, Australia, Japan, South Korea, and 2 patent applications in Australia and South Korea that have been indicated as allowable and ready for issue pending completion of patent office formalities.
Moreover, we have secured 9 granted international patents providing protection in 17 different countries, including Europe, Australia, Canada, India, Japan, and South Korea, and 4 patent applications in Australia and South Korea that have been indicated as allowable and ready for issue pending completion of patent office formalities.
We intend to contract with third parties for the usage of UHF and S-band frequencies in jurisdictions outside of the United States in connection with the commercial operation of the SpaceMobile Service. 6 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.
We intend to contract with third parties for the usage of UHF and S-band frequencies in jurisdictions outside of the United States in connection with the commercial operation of the SpaceMobile Service. The SpaceMobile Service will also operate under filings made by the United States with the ITU to enable us to operate our satellite system.
We made significant capital investments in buildings and equipment at our AIT facilities to manufacture certain satellite components at our facilities; streamline the assembly, integration and testing processes for BB satellites; and conduct various testing of satellites including vibration and environment testing at our facilities. We currently have the capacity to produce up to two satellites per month, if required.
We have made significant capital investments in buildings and equipment at our AIT facilities to manufacture satellite components at our facilities; streamline the assembly, integration and testing processes for BB satellites; and conduct various testing of satellites including vibration and environment testing at our facilities.
Our development of intellectual property portfolio and flight software are driven by our engineering and development centers in the United States. We intend upon continuing to expand and protect our intellectual property portfolio and register these patents in the United States.
Our strategy is to manufacture, assemble, integrate and test our satellites primarily in our facilities in the United States. Our development of intellectual property portfolio and flight software are driven by our engineering and development centers in the United States. We intend upon continuing to expand and protect our intellectual property portfolio and register these patents in the United States.
Because the SpaceMobile Service will communicate with end users using satellites transmitting on spectrum traditionally licensed to MNOs, in the U.S. we also will need the approval of the FCC’s Wireless Telecommunications Bureau, which handles terrestrial wireless licensing. We intend to seek this approval in connection with an agreement with a terrestrial MNO with which we have a cooperative arrangement.
Because the SpaceMobile Service will communicate with end users using satellites transmitting on spectrum traditionally licensed to MNOs, in the U.S. we also will need the approval of the FCC’s Wireless Telecommunications Bureau, which handles terrestrial wireless licensing. We have a lease agreement with AT&T, Inc.
Our SpaceMobile Service is being designed to provide cost-effective, high-speed mobile broadband services to end-users who are out of terrestrial cellular coverage. The SpaceMobile Service currently is planned to be provided by a constellation of high-powered, large phased-array satellites in Low Earth Orbit (“LEO”).
Our SpaceMobile Service is being designed to provide cost-effective, high-speed Cellular Broadband services to end-users who are out of terrestrial cellular coverage using existing mobile devices. The SpaceMobile Service currently is planned to be provided by a constellation of high-powered, large phased-array satellites in LEO using low band and middle band spectrum controlled by MNOs.
Our engineering and manufacturing facilities have injury prevention programs, and our procedures emphasize the need for the cause of injuries to be investigated and for action plans to be implemented to mitigate potential recurrence. Key Wireless Infrastructure Provider Relationships We have relationships with various wireless infrastructure providers. A summary of certain commercial relationships with wireless infrastructure providers is below.
We are committed to providing a safe working environment for our employees. Our engineering and manufacturing facilities have injury prevention programs, and our procedures emphasize the need for the cause of injuries to be investigated and for action plans to be implemented to mitigate potential recurrence. Key Wireless Infrastructure Provider Relationships We have relationships with various wireless infrastructure providers.
In addition, we believe the SpaceMobile Service could be used as a back up in the event of a disruption of service to the MNO’s terrestrial infrastructure due to a natural disaster such as a hurricane, civil unrest or a cyberattack. Satellites Designed for Greater Functionality, Power and Redundancy.
We also believe the SpaceMobile Service could be used as a back up in the event of a disruption of service to the MNO’s terrestrial infrastructure due to a natural disaster such as a hurricane, civil unrest or a cyberattack.
The timeline for the development and commercialization of our BB satellites has been, and continues to be, subject to numerous uncertainties, many of which are beyond our control, including, satisfactory and timely completion of satellite components and assembly and testing of the satellites, availability of launch windows by the launch providers, our ability to raise capital, proposed orbits and resulting satellite coverage, launch costs, ability to enter into definitive agreements with MNOs, regulatory approvals, and other factors.
Our current plan is subject to numerous uncertainties, many of which are beyond our control, including satisfactory and timely completion of assembly and testing of the satellites, availability of launch windows by the launch providers, our ability to raise additional capital, proposed orbits and resulting satellite coverage, launch costs, ability to enter into agreements with MNOs, regulatory approvals, and other factors.
Further licensing by Papua New Guinea may be required if material changes to the SpaceMobile Service are made. We expect to continue to register each of our satellites after launch with the United Nations Register of Objects Launched Into Outer Space via a European country where we have operations.
Further licensing by the United States may be required if material changes to the SpaceMobile Service are made. We expect to register each of our satellites after launch with the United Nations Register of Objects Launched Into Outer Space.
Vodafone We and Vodafone have agreed to enter into one or more definitive agreements for a commercial partnership that is anticipated to use the SpaceMobile Service (the “Vodafone Commercial Agreements”).
A summary of certain commercial relationships with wireless infrastructure providers is below. 10 Vodafone We and Vodafone have agreed to enter into one or more definitive agreements for a commercial partnership that is anticipated to use the SpaceMobile Service (the “Vodafone Commercial Agreements”).
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 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.
Instead, users will be able to access the SpaceMobile Service when prompted on their mobile device that they are no longer within range of the land-based facilities of the MNO operator or will be able to purchase a plan directly with their existing mobile provider. We generally seek to use a revenue-sharing business model in our agreements with MNOs.
Instead, users will be able to access the SpaceMobile Service when prompted on their mobile device that they are no longer within range of the land-based facilities of the MNO operator and will be able to purchase a plan directly with their existing mobile provider.
We mandate training for all our employees on topics of diversity, equity and inclusion and intend to continually reinforce our commitment to global diversity, equity and inclusion. Our success depends, in part, on our continuing ability to identify, hire, attract, train, develop, and maintain our employees' well-being.
We encourage training and development of our employees and provide on-the-job training and online platforms and mandate training for all our employees on topics of diversity, equity and inclusion. Our success depends, in part, on our continuing ability to identify, hire, attract, train, develop, and maintain our employees’ well-being.
We generally make available the following benefits for our employees, including, but not limited to, health insurance, flexible spending accounts, life insurance, long- and short-term disability, paid vacation, paid time off for holidays, sick time, and parental leave. We are committed to ensuring a safe working environment for our employees.
We generally make available the following benefits for our employees, including, but not limited to, a 401(k) retirement savings plan for our United States based employees, health insurance, flexible spending accounts, life insurance, long- and short-term disability, paid vacation, paid time off for holidays, sick time, and parental leave.
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.
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, Head of Group Research & Development, Vodafone.
Under the agreement, American Tower will provide us leased space and managed services at its current and future tower sites and data centers under the global master lease agreements to be entered into by the parties.
Under the agreement, American Tower will provide us leased space and managed services at its current and future tower sites and data centers under the global master lease agreements to be entered into by the parties. The usage of any American Tower services in a Vodafone market will be memorialized in a commercial agreement among all three parties.
We believe the deployment of Block 1 BB satellites and subsequent initiation of limited, noncontinuous SpaceMobile service will help to demonstrate the advantages of a satellite-based Cellular Broadband service in the marketplace.
We believe the deployment of Block 1 BB satellites and subsequent initiation of a limited, noncontinuous SpaceMobile Service will help to demonstrate the advantages of a satellite-based Cellular Broadband service in the marketplace. This market activity may commence while we continue the development and testing of the next generation of our BB satellites.
American Tower We and American Tower have 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 New Providence Acquisition Corp. (“NPA”) (the “Amended and Restated Letter Agreement”).
Also, Vodafone submitted a purchase order for network equipment from us to support planned commercial service. American Tower We and American Tower have 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 New Providence Acquisition Corp.
Accordingly, we may adopt a deployment and commercialization strategy, including the nature and type of services offered and the geographic areas where we may launch such services, that may differ materially from our previous and/or current plans.
We may adopt a strategy for commercial launch of the SpaceMobile Service, including the nature and type of services offered and the geographic areas where we may launch such services, that may differ materially from our current plan.
Also, we will need to execute definitive commercial agreements with MNOs that will supersede these preliminary agreements and understandings before we can offer our SpaceMobile Service. 4 We expect that the MNOs will market and sell the enhanced coverage of the SpaceMobile Service directly to their customers and offer the service at a differentiated price to the current terrestrial coverage using the following illustrative service offerings, among others.
We expect that the MNOs will market and sell the enhanced coverage of the SpaceMobile Service directly to their customers and offer the service at a differentiated price to the current terrestrial coverage using the following illustrative service offerings, among others.
We seek to attract a diverse population of employees by using a wide variety of recruiting platforms, such as online job portals (including portals targeted to diverse communities), recruiters, in-person job fairs, local university training and recruitment programs, and employee referrals. We encourage training and development of our employees and provide on-the-job training and online platforms.
We provide access and make training and development programs available to our employees which include technical programs, regulatory and compliance, business communications and leadership development. We seek to attract a diverse population of employees by using a wide variety of recruiting platforms, such as online job portals, recruiters, in-person job fairs, local university training and recruitment programs, and employee referrals.
Other parties have indicated that they may oppose this approval on procedural and substantive grounds. We have an experimental license with the FCC that permits the testing of the BW3 test satellite in LTE frequencies in multiple locations in the United States and permits the testing of V-band ground stations in Texas and Hawaii in connection therewith.
We have experimental licenses with the FCC that permit the testing of the BW3 test satellite in LTE frequencies in multiple locations in the United States and permits the testing of V-band ground stations in Texas and Hawaii in connection therewith.
We expect that, if approved, the FCC will apply routine conditions to a grant of authority authorizing market access pursuant to our PDR, including launch and operation milestones, that we must comply with.
We expect that, if approved, the FCC will apply routine conditions to a license grant authorizing launch and operation milestones for the NGSO satellite system that we must comply with.
As a result of the incremental coverage created by the planned SpaceMobile Service, we believe that our MNO partners will have the opportunity to increase subscribers’ average revenue per unit (“ARPU”) and help to reduce subscriber churn.
As a result of the incremental coverage created by the planned SpaceMobile Service, we believe that MNOs will have the opportunity to increase subscribers’ average revenue per user (“ARPU”) and enhance their return on invested capital.
Block 2 BB satellites will also benefit from the advantages of a larger aperture array which provides greater spectrum reuse, enhanced signal strength and increased capacity, thereby reducing the necessary number of satellites to achieve service as compared to smaller apertures.
We believe the larger aperture array of the Block 2 BB satellites is expected to provide greater spectrum reuse, enhanced signal strength and increased capacity thereby reducing the number of satellites required to achieve service coverage as compared to smaller aperture.
The Amended and Restated Letter Agreement contemplates that we and American Tower will enter into commercial agreements to allow us to use American Tower facilities for our terrestrial gateway facilities in certain markets. The term of the operational agreement between us and American Tower is for an anticipated five years after the initial launch of commercial mobile services by us.
(“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 allow us to use American Tower facilities for our terrestrial gateway facilities in certain markets.
The exact timing of the launch, which is expected to carry five Block 1 BB satellites, is contingent on a number of factors, including satisfactory and timely completion of production and testing of Block 1 BB satellites and other factors, many of which are beyond our control.
The exact timing of our launches is contingent on a number of factors, including satisfactory and timely completion of the design, assembly and testing of the BB satellites, regulatory approvals, availability of launch windows by the launch providers, logistics, and other factors, many of which are beyond our control.
The SpaceMobile Service in the United States is subject to a pending Petition for Declaration and accompanying application (“PDR Application”) before the FCC, seeking market access to permit the commercial operation of a foreign satellite in United States territory in V-band frequencies.
The SpaceMobile Service in the United States is subject to a pending Amendment to Petition for Declaratory Ruling and accompanying application (“Amendment Application”) before the FCC, requesting authority to launch and permit the commercial operation of a United States Non-Geostationary Orbit (“NGSO”) satellite system employing V-band frequencies.
Development and Commercial Launch Activities As part of our strategy, we are designing and assembling our own constellation of BlueBird (“BB”) satellites. We plan to leverage skills, know-how and technological expertise derived from the design and assembly of our BW3 test satellite in the development of our BB satellite platform.
We are leveraging skills, know-how and technological expertise derived from the design and assembly of our BW3 test satellite in the development and assembly of our BB satellite platform.
He is also a Chartered Accountant from The Institute of Chartered Accountants of India. 11 Available Information Our Company's internet website address is www.ast-science.com. We file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, proxy statements and other information with the SEC.
We file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, proxy statements and other information with the SEC.
We currently expect to launch five Block 1 BB satellites during the first quarter of 2024. The exact timing of the launch is contingent on a number of factors, including satisfactory and timely completion of assembly and testing of five Block 1 BB satellites and other factors, many of which are beyond our control.
The exact timing of this launch is contingent on a number of factors, including satisfactory and timely completion of the design, assembly and testing of the Block 2 BB satellite, regulatory approvals, availability of launch windows by the launch providers, logistics, and other factors, many of which are beyond our control.
We believe the SpaceMobile Service will be highly attractive to MNOs as it will enable them to improve their service offering without significant incremental capital investments.
We intend to seek to use a revenue-sharing business model for SpaceMobile Service in our agreements with MNOs. The SpaceMobile Service is expected to be highly attractive to MNOs as it will enable them to improve and differentiate their service offering without significant incremental capital investments.
We launched our BlueWalker 3 (“BW3”) test satellite on September 10, 2022. On November 14, 2022, we announced the completion of the deployment of the communication array of the BW3 test satellite in orbit.
We launched our BlueWalker 3 (“BW3”) test satellite on September 10, 2022, and announced the completion of the deployment of the communication phased array antenna of the BW3 test satellite in orbit on November 14, 2022. On April 25, 2023, we announced that we had successfully completed two-way voice calls directly to standard unmodified smartphones using the BW3 test satellite.
Our engineering development activities 5 primarily take place at development offices located in Maryland, Scotland, Spain and Israel as well as at our Texas assembly and testing facilities. In December 2022, we established a new research and development center in India to support our global engineering and development activities.
Our engineering development activities primarily take place at development offices located in Maryland, Scotland, Spain, India and Israel as well as at our Texas assembly and testing facilities. In addition, we utilize third-party technology partners to assist in the development of our certain satellite technology.
Significant Coverage Advantages : We believe wireless carriers and wireless infrastructure providers will integrate our Cellular Broadband coverage capabilities in order to more cost effectively deliver wireless services in hard to reach remote areas that experience coverage gaps and in rural areas which are prohibitively expensive to cover.
Delivery of Cellular Broadband Coverage at a Competitive Cost: We believe MNOs and wireless infrastructure providers will integrate our Cellular Broadband coverage capabilities to more cost effectively deliver wireless services in hard to reach areas and other areas that experience coverage gaps as compared to existing technology.
If approved in its current form with some modifications, we believe that it will create a favorable regulatory framework for the satellite-to-device services industry. Intellectual Property Our intellectual property (“IP”) portfolio is expansive and technologically diverse, containing numerous and various innovations of the direct-to-cell satellite ecosystem from space to Earth. Our IP portfolio consists of 32 patent families worldwide.
Intellectual Property Our intellectual property (“IP”) portfolio is expansive and technologically diverse, containing numerous and various innovations of the direct-to-cell satellite ecosystem from space to Earth. Our IP portfolio consists of 36 patent families worldwide.
The mobile traffic will be transmitted by the SpaceMobile constellation and connected via high-throughput Q/V-band links to in-country gateways which are collocated with the MNOs’ cellular network infrastructure. We anticipate that users will be able to connect to the SpaceMobile Service as if they were using a local cell tower.
The operation of SpaceMobile Service will require mobile traffic to be transmitted by our BB constellation and connected via high-throughput Q/V-band links to ground station gateways which will be collocated with the MNOs’ cellular network infrastructure.
There can be no assurance, however, that these rights can be successfully enforced against competitors or competitive products in any particular jurisdiction.
We have filed or registered a number of patents and trademarks in the United States and in other countries and have a number of patent filings pending. There can be no assurance, however, that these rights can be successfully enforced against competitors or competitive products in any particular jurisdiction.
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. 8 Human Capital Management As of December 31, 2022, we had approximately 342 employees and consultants worldwide, which included approximately 180 employees and consultants in the U.S. and approximately 162 in other jurisdictions, primarily Scotland, Spain and Israel.
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.
We are also investing in scaling our procurement and inventory management processes which are expected to lower cost and increase the production volume of satellites. We protect our innovations by filing numerous patent applications and intellectual property registrations in the United States (“U.S.”) and worldwide. We own most of the intellectual property we use.
We protect our innovations by filing numerous patent applications and intellectual property registrations in the United States (“U.S.”) and worldwide. We own most of the intellectual property we use. We also systematically monitor and review potential infringements on our intellectual property. Focus on United States Manufacturing and Intellectual Property Development Activities .
We believe our ability to adapt to these changes, and to develop the SpaceMobile Service and the related components, will be an important factor in our ability to execute our business plan.
Technology Development Activities 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 area. We believe our ability to adapt to these changes and to develop the SpaceMobile Service will be an important factor in our ability to execute our business plan.
Manufacturing, Assembly and Launch Our strategy is to manufacture satellite components and assemble, integrate and test BB satellites primarily in our AIT facilities in Texas.
Manufacturing, Assembly and Launch Our strategy is to control the manufacturing and supply chain of the components used in our BB satellites, and assemble, integrate and test BB satellites primarily in our AIT facilities in Texas. We believe this strategy will result in a faster turn to market, greater control and lower overall costs.
The PDR Application seeks authority to utilize 243 satellites operating in 16 orbital planes in an approximate altitude of 700 kilometers. The PDR Application for satellite space station authorization has been accepted for filing and is under consideration by the FCC. Third parties have filed letters of support for, and of opposition to, our PDR Application.
The Amendment Application seeks authority to utilize 248 satellites operating in 17 orbital planes of which 243 satellites will operate at an approximate 730-740 kilometers and the remaining five satellites will operate from a lower altitude of approximately 515-525 kilometers. The Amendment Application for satellite space station authorization is under consideration by the FCC.
Some components, subsystems and services necessary for the assembly of our satellites are obtained from a sole source supplier or a limited group of suppliers. We have entered into agreements and placed orders for procurement of critical and long lead components and subsystems required for the assembly of Block 1 BB satellites.
We utilize a range of domestic and international contract manufacturers and vendors to manufacture specific components, subsystems, software and other electronic components used in our BB satellites. Some components, subsystems and services necessary for the assembly of our satellites are currently obtained from a sole source supplier or a limited group of suppliers.
Rakuten has the right to designate two individuals to our Board of Directors. Currently, Rakuten’s designees are Mickey Mikitani, Founder, Chairman and Chief Executive Officer, Rakuten, Inc., and Tareq Amin, Chief Executive Officer, Rakuten Mobile.
The term of the Rakuten Agreement shall remain in effect until we fulfil our obligations under the Rakuten Agreement. Rakuten has the right to designate two individuals to our Board of Directors. Currently, Rakuten has designated Hiroshi Mikitani, Founder, Chairman and Chief Executive Officer, Rakuten, Inc. as a director and has the right to designate another individual.
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 also seek to maintain our trade secrets and confidential information through nondisclosure policies, the use of appropriate confidentiality agreements and other security measures. We maintain IP infringement enforcement and defense insurance (current coverage of $7.0 million for defending infringement claims and $10.0 million to bring offensive infringement claims).
We are currently assembling the first generation of commercial BB satellites (“Block 1 BB satellites”). We expect the Block 1 BB satellites will be of similar size and weight to the BW3 test satellite and have design improvements for enhanced power efficiency and throughput designed to increase capacity.
Our first generation of commercial BB satellites, Block 1 BB satellites, will be of similar size and weight to the BW3 test satellite, includes our own designed array solar panels and battery systems, and will have ten times higher throughput than the BW3 test satellite.
As of December 31, 2022, GSMA reports approximately 5.5 billion mobile subscribers are constantly moving in and out of coverage, approximately 3.5 billion people have no cellular broadband coverage and approximately 400.0 million people have no connectivity or mobile cellular coverage. 1 Superior Interoperability and Service Quality : Due to the combination of our innovative technology and the location of our LEO satellites, we believe that our SpaceMobile Service will have significant advantages versus other mobile satellite services.
According to Groupe Speciale Mobile Association (“GSMA”), as of December 31, 2023, approximately 5.6 billion mobile subscribers are constantly moving in and out of coverage, approximately 3.4 billion people have no cellular broadband coverage and approximately 400.0 million people have no connectivity or mobile cellular coverage.
We have approximately 62 pending international patent applications in the countries noted above, Canada and India, as well as under the Patent Cooperation Treaty. In total, as of March 31, 2023, we have more than 2,600 patent and patent pending claims worldwide, of which approximately 800 have been officially granted or allowed.
We have approximately 72 pending international patent applications in the countries noted above as well as under the Patent Cooperation Treaty.
Item 1. Business Our Company We are building the first space-based Cellular Broadband network designed to be accessible by standard, unmodified, off-the-shelf mobile phones or 2G/3G/4G LTE/5G devices using low band and middle band spectrum controlled by Mobile Network Operators (“MNOs”).
Item 1. Business Our Company We are building the first and only global Cellular Broadband network in space designed to be accessible directly by everyday smartphones (2G/4G-LTE/5G devices) for commercial use, and other applications for government use utilizing our extensive intellectual property (“IP”) and patent portfolio.
The SpaceMobile Service is designed to provide connectivity to any standard, unmodified, off-the-shelf 2G/3G/4G LTE/5G mobile phone using low and mid band cellular frequencies currently used by MNOs. This technology eliminates the need to purchase expensive, specialized equipment or to carry antennas.
Cellular Broadband Directly to Unmodified Devices: Our large phased array, based on our innovative technology, is designed to provide high speed Cellular Broadband including voice, text, data and video services directly to any off-the-shelf and unmodified 2G/4G-LTE/5G mobile device using low and middle band cellular spectrum currently used by MNOs.
The distributed design is also expected to enable the SpaceMobile Service to be able to continue operations when a portion of the Microns or solar panels fail in space versus total loss which typically occurs on a conventional satellite. 2 Our Strategy We intend to build a SpaceMobile Service which leverages our technology to provide Cellular Broadband services to MNO end-user customers around the world using existing mobile handsets.
We believe that having satellites to support both commercial and governmental applications will enable us to better optimize and monetize the capacity and capabilities of our satellites. Our Strategy We intend to build a SpaceMobile Service which leverages our technology to provide Cellular Broadband services to MNO end-user customers around the world using existing mobile devices, and for government use.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+33 added−15 removed222 unchanged
Biggest changePursuant to the Tax Receivable Agreement, we are generally required to pay the TRA Holders (as defined in the Tax Receivable Agreement) 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 LLC and certain of its direct or indirect Subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to AST Common Units acquired by us from a TRA Holder (including AST Common Units held by a Blocker Corporation (as defined in the Tax Receivable Agreement) 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. 26 Payments under the TRA 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.
Biggest changePursuant to the Tax Receivable Agreement, we are generally required to pay the TRA Holders (as defined in the Tax Receivable Agreement) 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 LLC and certain of its direct or indirect Subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to AST Common Units acquired by us from a TRA Holder (including AST Common Units held by a Blocker Corporation (as defined in the Tax Receivable Agreement) 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.
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: • 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; • 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 or golden parachute payments not previously approved.
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: • 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; 31 • 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 or golden parachute payments not previously approved.
This may make comparison of our 28 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. We are also a smaller reporting company, as defined in the Exchange Act.
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. We are also a smaller reporting company, as defined in the Exchange Act.
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 bankruptcies of OneWeb and Intelsat. The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand.
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 past bankruptcies of OneWeb and Intelsat. The provision of satellite-based services and products is subject to downward price pressure when capacity exceeds demand.
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 23 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.
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.
The success of our business plan is dependent on a number of factors outside of our control, including: • the ability to maintain the functionality, capacity and control of the SpaceMobile Service and satellite network once launched; • the ability to access MNO or other spectrum on suitable terms to us; • the level of market acceptance and demand for our products and services from MNOs and their end-user customers; • the ability to introduce products and services that satisfy market demand; • the ability to comply with all applicable regulatory requirements in the countries in which we plan to operate; 14 • the effectiveness of competitors in developing and offering similar services and products; • consumer acceptance of initial phases of the SpaceMobile Service which is not expected to provide continuous service; • the ability to find third parties to successfully launch our satellites; and • the ability to maintain competitive prices for our products and services and to control our expenses.
The success of our business plan is dependent on a number of factors outside of our control, including: • the ability to maintain the functionality, capacity and control of the SpaceMobile Service and satellite network once launched; • the ability to access MNO or other spectrum on suitable terms to us; • the level of market acceptance and demand for our products and services from MNOs and their end-user customers; • the ability to introduce products and services that satisfy market demand; • the ability to comply with all applicable regulatory requirements in the countries in which we plan to operate; • the effectiveness of competitors in developing and offering similar services and products; • consumer acceptance of initial phases of the SpaceMobile Service which is not expected to provide continuous service; 16 • the ability to find third parties to successfully launch our satellites; and • the ability to maintain competitive prices for our products and services and to control our expenses.
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: • any patent applications we submit may not result in the issuance of patents; 20 • the scope of our issued patents, including our patent claims, may not be broad enough to protect our proprietary rights; • our issued patents may be challenged or invalidated by our competitors; • our employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us; • third parties may independently develop technologies that are the same or similar to ours; • the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable; and • current and future competitors may circumvent our intellectual property.
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: • any patent applications we submit may not result in the issuance of patents; 23 • the scope of our issued patents, including our patent claims, may not be broad enough to protect our proprietary rights; • our issued patents may be challenged or invalidated by our competitors; • our employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us; • third parties may independently develop technologies that are the same or similar to ours; • the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable; and • current and future competitors may circumvent our intellectual property.
As restrictions on resale end, the sale or possibility of sale of these shares of Class A Common could have the effect of increasing the volatility in the market price of our Class A Common Stock, or decreasing the market price itself. We require substantial amounts of capital, and we expect such requirements will increase in the future.
As restrictions on resale end, the sale or possibility of sale of these shares of Class A Common could have the effect of increasing the volatility in the market price of our Class A Common Stock, or decreasing the market price itself. 32 We require substantial amounts of capital, and we expect such requirements will increase in the future.
Due to the recurring fair value measurement, 31 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. An active trading market for our securities may not be maintained.
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. An active trading market for our securities may not be maintained.
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.
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. 24 Our networks and those of our third-party service providers and MNOs may be vulnerable to security risks.
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 TRA will be our obligations and not obligations of AST LLC.
The lump-sum payment could be material and could materially exceed any actual tax benefits that the Tax Group realizes subsequent to such payment. 30 Payments under the TRA will be our obligations and not obligations of AST LLC.
Some of these competitors, as well as other existing companies that may seek to enter the markets we serve, may be larger amounts of capital and other resources, have access to financing and capital resources on more advantageous terms, and may provide more efficient products or services than we will be able to provide, any of which could reduce our market share and adversely affect our revenues and business. 16 We will be dependent on third parties to market and sell our products and services.
Some of these competitors, as well as other existing companies that may seek to enter the markets we serve, may be larger amounts of capital and other resources, have access to financing and capital resources on more advantageous terms, and may provide more efficient products or services than we will be able to provide, any of which could reduce our market share and adversely affect our revenues and business. 18 We will be dependent on third parties to market and sell our products and services.
As a result of the recurring fair value measurement, our audited consolidated financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our control.
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.
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. 19 Our satellites may experience operational problems, which could affect our ability to provide an acceptable level of service to the end-user customers.
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. 22 Our satellites may experience operational problems, which could affect our ability to provide an acceptable level of service to the end-user customers.
Development of the SpaceMobile Service, which is utilizing new technology, may continue to suffer from delays, interruptions or increased costs due to many factors, some of which may be beyond our control, including: • the failure of the SpaceMobile Service to work as expected as a result of technological or manufacturing and assembling difficulties, design issues or other unforeseen matters; • lower than anticipated demand and acceptance for the SpaceMobile Service and mobile satellite services in general; • the inability to obtain capital in the public and private markets to finance the SpaceMobile Service and related infrastructure, products and services on acceptable terms or at all; • engineering and/or manufacturing performance failing or falling below expected levels of output or efficiency; • denial or delays in receipt of regulatory approvals or non-compliance with conditions imposed by regulatory authorities; • the breakdown or failure of equipment or systems; • the inability to reach commercially viable agreements with launch providers that can accommodate the technical specifications of our satellites, proposed orbits and resulting satellite coverage, and proposed launch timing; • launch costs which may exceed our estimates; • non-performance by third-party contractors or suppliers; • the inability to develop or license necessary technology on commercially reasonable terms or at all; • launch delays or failures or deployment failures or in-orbit satellite failures once launched; • the inability to reach commercially viable cooperative agreements to license spectrum with one or more MNOs; • the inability to negotiate agreements with mobile network operators relating to the SpaceMobile Service that would supersede memoranda of understanding; • labor disputes or disruptions in labor productivity or the unavailability of skilled labor; • increases in the costs of materials or services, including due to inflation; • changes in project scope; 12 • increased competition including competitors who may have more resources than we do; • additional requirements imposed by changes in laws or regulations; • geopolitical events, such as the outbreak of war or hostilities, as well as related sanctions and other trade restrictions; • the COVID-19 pandemic and other public health events; or • severe weather or catastrophic events such as fires, earthquakes, storms (including space storms and adverse weather in space) or explosions.
Development of the SpaceMobile Service, which is utilizing new technology, may continue to suffer from delays, interruptions or increased costs due to many factors, some of which may be beyond our control, including: • the failure of the SpaceMobile Service to work as expected as a result of technological or manufacturing and assembling difficulties, design issues or other unforeseen matters; • lower than anticipated demand and acceptance for the SpaceMobile Service and mobile satellite services in general; • the inability to obtain capital in the public and private markets to finance the SpaceMobile Service and related infrastructure, products and services on acceptable terms or at all; • engineering and/or manufacturing performance failing or falling below expected levels of output or efficiency; • denial or delays in receipt of regulatory approvals or non-compliance with conditions imposed by regulatory authorities; • the breakdown or failure of equipment or systems; • the inability to reach commercially viable agreements with launch providers that can accommodate the technical specifications of our satellites, proposed orbits and resulting satellite coverage, and proposed launch timing; • launch costs which may exceed our estimates; • non-performance by third-party contractors or suppliers; • the inability to develop or license necessary technology on commercially reasonable terms or at all; • launch delays or failures or deployment failures or in-orbit satellite failures once launched; • the inability to reach commercially viable cooperative agreements to license spectrum with one or more MNOs; • the inability to negotiate agreements with mobile network operators relating to the SpaceMobile Service that would supersede memoranda of understanding; • labor disputes or disruptions in labor productivity or the unavailability of skilled labor; • increases in the costs of materials or services, including due to inflation; • changes in project scope; • increased competition including competitors who may have more resources than we do; • additional requirements imposed by changes in laws or regulations; • geopolitical events, such as the outbreak of war or hostilities, as well as related sanctions and other trade restrictions; • pandemics, epidemics or other global public health events; or 14 • severe weather or catastrophic events such as fires, earthquakes, storms (including space storms and adverse weather in space) or explosions.
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, 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 existing service providers such as Inmarsat, Globalstar, ORBCOMM, Thuraya Telecommunications Co. and Iridium Communications that offer a range of mobile and fixed communications options.
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 and assembly expenses and the investments required to design, assemble 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.
We expect to have quarter-to-quarter fluctuations in expenses and capital expenditures, some of which could be significant, due to research, development, manufacturing and assembly expenses and the investments required to design, assemble and launch the SpaceMobile Service constellation. 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 will not deliver service over spectrum allocated for mobile satellite use. Rather, the SpaceMobile Service is being designed to deliver service over spectrum allocated for terrestrial mobile use.
Unlike traditional mobile satellite services, the SpaceMobile Service is not being designed to deliver service over spectrum allocated for mobile satellite use. Rather, the SpaceMobile Service is being designed to deliver service over spectrum allocated for terrestrial mobile use.
For example, in 2023, Apple introduced a new service supported by Globalstar which provides SOS Emergency Service capabilities to its latest generation iPhones. In September 2022, SpaceX and T-Mobile US announced that they plan to offer a text based service from a constellation that will be built in the future.
In 2023, Apple introduced a new service supported by Globalstar which provides SOS Emergency Service capabilities to its latest generation iPhones. In September 2022, SpaceX and T-Mobile US announced that they plan to offer a text based service from a constellation that will be built in the future.
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.
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 launch satellites in a timely manner or provide products or services to customers in a competitive manner, which could in turn negatively affect our financial results and reputation.
We intend to continue to conduct our operations so that we will not be deemed to be an 25 investment company under the Investment Company Act.
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.
If slower growth in the global economy continues for a significant period, if there is significant deterioration in the global economy or if improvements in the global economy don’t benefit the markets we serve, our business and financial condition could be adversely affected. Item 1B. Unresolved Staff Comments Not applicable.
If slower growth in the global economy continues for a significant period, if there is significant deterioration in the global economy or if improvements in the global economy do not benefit the markets we serve, our business and financial condition could be adversely affected. Item 1B. Unresolved Staff Comments Not applicable.
We rely on certain of these exemptions. As a result, we do not have a nominating and corporate governance 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.
As a result, we do not have a nominating and corporate governance 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.
Avellan and his permitted transferees holdings, control approximately 86.5% 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 Mr.
Avellan and his permitted transferees holdings, control approximately 81.5% 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 Mr.
As of March 28, 2023, there are 17,597,600 outstanding warrants to purchase 17,597,600 shares of our Class A Common Stock at an exercise price of $11.50 per share, which may be exercised at any time.
As of March 28, 2024, there are 17,597,600 outstanding warrants to purchase 17,597,600 shares of our Class A Common Stock at an exercise price of $11.50 per share, which may be exercised at any time.
The development of a satellite-based 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 direct wireless broadband network from LEO satellites, referred to as SpaceMobile Service, our business will not succeed.
The development of a satellite-based Cellular 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 Cellular Broadband network from LEO satellites, referred to as SpaceMobile Service, our business will not succeed.
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.
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. 27 We rely on certain of these exemptions.
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 rely on third 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 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 will also need to reach commercial agreements with MNOs under which they will agree to provide us with access to their licensed spectrum on suitable terms and conditions.
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 March 31, 2023, Mr.
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 March 28, 2024, Mr.
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.
To the extent such warrants are exercised, and/or notes are converted, 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.
As a result, included on our audited Consolidated Balance Sheets as of December 31, 2022 and 2021 contained elsewhere in this report are derivative liabilities related to embedded features contained within our warrants.
As a result, included on our consolidated balance sheets as of December 31, 2023 and 2022 contained elsewhere in this report 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.
ASC 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.
We cannot assure you that the market price of our Class A Common Stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • the realization of any of the risk factors presented in this report; • developments involving our competitors; • variations in our operating performance and the performance of our competitors in general; • difficult global market and economic conditions; • loss of investor confidence in the global financial markets and investing in general; • inability to attract, retain or motivate our directors, officers or other key personnel; • 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; • failure to meet securities analysts’ earnings estimates; 30 • 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; • speculation in the press or investment community about our business; • additions and departures of key employees and personnel; • competition for talent and skill-sets required; • commencement of, or involvement in, litigation involving us; • the volume of shares of our Class A Common Stock available for public sale; • 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; • 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 • adverse publicity about our industry.
We cannot assure you that the market price of our Class A Common Stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • the realization of any of the risk factors presented in this report; • developments involving our competitors; • variations in our operating performance and the performance of our competitors in general; • difficult global market and economic conditions; • loss of investor confidence in the global financial markets and investing in general; • inability to attract, retain or motivate our directors, officers or other key personnel; 34 • 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; • failure to meet securities analysts’ earnings estimates; • 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; • speculation in the press or investment community about our business; • additions and departures of key employees and personnel; • competition for talent and skill-sets required; • commencement of, or involvement in, litigation involving us; • the volume of shares of our Class A Common Stock available for public sale; • 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; • 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 • adverse publicity about our industry. 35 Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to the Company and may not be reliable or accurate.
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.
The SpaceMobile Service will utilize end-user frequencies that are not allocated to 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.
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 permits can be very time-consuming and time-sensitive, and require compliance with a wide array of administrative and procedural rules.
Our ability to secure all requisite governmental approvals is not assured, and the process of obtaining governmental authorizations and permits can be very time-consuming and time-sensitive, and require compliance with a wide array of administrative and procedural rules.
As of March 31, 2023, Mr. Avellan and his permitted transferees controlled approximately 86.5% 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.
As of March 28, 2024, Mr. Avellan and his permitted transferees controlled approximately 81.5% 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 and his permitted transferees, divided by (2) the number of shares of our Class C Common Stock then outstanding. As a result, as of March 31, 2023, Mr.
Avellan and his permitted transferees, divided by (2) the number of shares of our Class C Common Stock then outstanding. As a result, as of March 28, 2024, Mr.
Operating in foreign countries poses substantial risks, including : • difficulties in developing products and services that are tailored to the needs of local customers; • unavailability of, or difficulties in establishing, relationships with local MNOs; • instability of international economies and governments, including geo-political conflicts; such as the recent conflict in Ukraine and resulting economic sanctions; • changes in laws and policies affecting trade and investment in other jurisdictions, • exposure to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions; • difficulties in obtaining required regulatory authorizations; • difficulties in enforcing legal rights in other jurisdictions; • local domestic ownership requirements; • requirements that certain operational activities be performed in-country; • changing and conflicting national and local regulatory requirements; • foreign currency exchange rates and exchange controls; and • ongoing compliance with the U.S.
Operating in foreign countries poses substantial risks, including : • difficulties in developing products and services that are tailored to the needs of local customers; • unavailability of, or difficulties in establishing, relationships with local MNOs; • instability of international economies and governments, including geopolitical conflicts, acts of hostility or war; • changes in laws and policies affecting trade and investment in other jurisdictions, • exposure to varying legal standards, including data privacy, security and intellectual property protection in other jurisdictions; • difficulties in obtaining required regulatory authorizations; • difficulties in enforcing legal rights in other jurisdictions; • local domestic ownership requirements; • requirements that certain operational activities be performed in-country; • changing and conflicting national and local regulatory requirements; • foreign currency exchange rates and exchange controls; and • ongoing compliance with the U.S.
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. 24 We cannot predict the impact our multi-class structure may have on the stock price of our Class A Common Stock.
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.
Design, assembly and launch of satellite systems are highly complex and historically have been subject to frequent delays and cost over-runs. For example, the BW3 launch was delayed, the BW3 development costs exceeded initial estimates and BW3 testing is taking longer than expected.
Design, assembly and launch of satellite systems are highly complex and historically have been subject to frequent delays and cost over-runs. For example, the BW3 launch was delayed, the BW3 development costs exceeded initial estimates and BW3 testing took longer than expected; launch of Block 1 BB satellites was delayed.
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.
Unexpected malfunctions of these components may significantly affect the intended operational efficiency. 19 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.
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. 29 As a holding company, we will depend on the ability of AST LLC to make distributions to us .
Sales of substantial numbers of such shares in the public market or the fact that such dilution is possible could adversely affect the market price of our Class A Common Stock. As a holding company, we will depend on the ability of AST LLC to make distributions to us .
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.
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, and improve our business processes and controls.
We currently estimate we will need to raise additional capital of approximately $550.0 million to $650.0 million for operating and capital expenditures to design, assemble and launch 20 Block 2 BB satellites and operate a constellation of 25 BB satellites to continue to provide SpaceMobile service.
We currently estimate we will need to raise additional capital of approximately $350.0 million to $400.0 million for operating and capital expenditures to design, assemble and launch 20 Block 2 BB satellites and operate a constellation of 25 BB satellites.
If the distributions received from AST LLC 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.
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 material. 29 If the distributions received from AST LLC 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.
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 17 when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency.
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.
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. 22 Our ability to provide service to our customers and generate revenues could be harmed by adverse governmental regulatory actions.
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.
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.
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. 20 Pursuing strategic transactions may cause us to incur additional risks.
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 rely on third parties to launch our satellites.
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.
Changes to tax laws may also adversely affect our ability to attract and retain key personnel. 27 Risks Related to Owning our Class A Common Stock 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.
Risks Related to Owning our Class A Common Stock 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.
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.
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.
We incurred a net loss attributable to common stockholders of $34.8 million for the year ended December 31, 2022 and have incurred net losses of approximately $105.3 million from our inception through December 31, 2022. To date, we have not generated any revenue from our SpaceMobile Service.
We incurred a net loss attributable to common stockholders of $87.6 million for the year ended December 31, 2023 and have incurred net losses attributable to common stockholders of approximately $189.7 million from our inception through December 31, 2023. To date, we have not generated any revenues from our SpaceMobile Service.
Also, geopolitical events, such as the outbreak of war or hostilities, as well as related sanctions and other trade restrictions, could impair our ability to provide services in important areas. The inability to offer or provide the SpaceMobile Service in certain markets could impair us from achieving our revenue and growth plans.
Also, geopolitical events, such as the outbreak of war or hostilities, as well as related sanctions and other trade restrictions, could impair our ability to provide services in important areas.
Information provided by third parties may not be reliable or accurate, may travel quickly through social media, and could materially impact the trading price of our Class A Common Stock. We may be subject to securities class action litigation, which may harm our business, financial condition and results of operations.
Information provided by third parties may not be reliable or accurate, may travel quickly through social media, and could materially impact the trading price of our Class A Common Stock.
As of March 28, 2023, the Stockholder Parties collectively owned approximately 69.5% of our outstanding common stock, representing approximately 93.2% of the voting power of our common stock, and the AST Equityholders, in turn, owned approximately 67.2% of the AST Common Units.
As of March 28, 2024, the Stockholder Parties collectively owned approximately 53.7% of our outstanding common stock, representing approximately 87.6% of the voting power of our common stock, and the AST Equityholders, in turn, owned approximately 52.5% of the AST Common Units.
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.
In the event that we are required to, and able to, borrow additional funds it could adversely affect our liquidity and subject us to additional restrictions imposed by lenders. 28 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.
Our future expansion will include: • hiring and training new personnel; • assembling, operating, and servicing the satellite network; • developing new technologies; • controlling expenses and investments in anticipation of expanded operations; 15 • upgrading the existing operational management and financial reporting systems to comply with requirements as a public company; and • implementing and enhancing administrative infrastructure, systems and processes.
Our future expansion will include: • hiring and training new personnel; • assembling, operating, and servicing the satellite network; • developing new technologies; • controlling expenses and investments in anticipation of expanded operations; and • implementing and enhancing administrative infrastructure, systems and processes.
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 satellite services.
The inability to offer or provide the SpaceMobile Service in certain markets could impair us from achieving our revenue and growth plans. 26 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.
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. The ongoing COVID-19 pandemic may disrupt our operations.
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.
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.
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.
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 currently expected to begin until 2024 at the earliest, and may continue to incur operating or net losses even after we begin generating revenue.
Following the completion of the sale of Nano on September 6, 2022, we did not generate any revenue. 15 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 and may continue to incur operating or net losses even after we begin generating revenue.
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.
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 and our customers may be vulnerable to unauthorized access, computer attacks, viruses and other security problems.
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.
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.
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.
We are already a party to securities class action litigation and 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 reputation, business, financial condition and results of operations.
If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could be materially adversely affected. We will incur significant expenses and capital expenditures in the future to execute our business plan and develop the SpaceMobile Service, and we may be unable to adequately forecast or control our expenses.
We will incur significant expenses and capital expenditures in the future to execute our business plan and develop the SpaceMobile Service, and we may be unable to adequately forecast or control our expenses.
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.
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.
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.
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. 36 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.
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 which was remediated.
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.
Pursuing strategic transactions may cause us to incur additional risks. 18 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.
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.
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.
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. 17 Also, as we introduce new services or enter into new markets, we may face new market, technological, operational, compliance and administrative risks and challenges, including risks and challenges unfamiliar to us.
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.
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. 25 Risks Related to Our Legal and Regulatory Matters Our business is subject to extensive government regulation worldwide, which mandates how we may operate our business and may increase the cost of providing services and expansion into new markets.
Also, we have not yet filed a request with the FCC for direct to handset market access. A failure by us to obtain required approvals could compromise our ability to generate revenue or conduct our business in one or more countries.
Also, we have not yet obtained permission from the FCC to operate service links directly to end user handsets and other devices. A failure by us to obtain required approvals could compromise our ability to generate revenue or conduct our business in one or more countries.
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.
It is difficult to predict future revenues and 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.
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.
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.
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.
We may be subject to litigation, including securities class action litigation or other claims relating to our business operations, which may harm our reputation, 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.
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.
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.
We intend to seek to raise additional capital prior to the commencement of the commercial services through the issuance of equity, equity related or debt securities, secured loan facilities, or through obtaining credit from government or financial institutions or commercial partners.
We intend to seek to raise additional capital prior to the commencement of the commercial services through the issuance of equity, equity-linked or debt securities (secured or unsecured), secured or unsecured loans or other debt facilities, and credit from government or financial institutions or commercial partners, including through our existing Equity Line of Credit and the ATM Equity Program (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”).
Given the substantial capital needs of our business and business plans, any such dilution may be substantial. Exercise of outstanding warrants to purchase our Class A Common Stock will result in dilution to our stockholders.
If we were to receive a going concern qualification in our financial statements, the trading price of our Class A Common Stock could be significantly negatively impacted. Exercise of outstanding warrants to purchase our Class A Common Stock and any conversion of our Notes will result in dilution to our stockholders.
To the extent we seek to raise funds in the capital markets, our ability to do so will depend upon market conditions, and volatility in the capital markets. We cannot be certain that additional funds will be available to us on the timelines we may need, on favorable terms if required, or at all.
There can be no assurance that additional funds will be available to us on favorable terms or at all. If we cannot raise additional funds when needed in the future, our financial condition, results of operations, business and prospects may be materially and adversely affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperty Location Leased / Owned AIT Facility (100,000 square feet) Midland, Texas Owned AIT Facility (85,000 square feet) Midland, Texas Leased Engineering and Development Center Lanham, Maryland Leased Corporate Office Miami, Florida Leased Engineering and Development Center Scotland Leased AIT and Engineering and Development Center (10,500 square feet) Spain Leased AIT Facility and Engineering and Development Center (33,000 square feet) Israel Leased 32
Biggest changeProperty Location Leased / Owned Assembly, Integration and Testing Facility (100,000 square feet) Midland, Texas Owned Assembly, Integration and Testing Facility (85,000 square feet) Midland, Texas Leased Engineering and Development Center Lanham, Maryland Leased Office Miami, Florida Leased Engineering and Development Center Israel Leased Engineering and Development Center Spain Leased Engineering and Development Center United Kingdom Leased Research and Development Center India Leased

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. 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.
Biggest changeItem 3. Legal Proceedings We are subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully adjudicated.
Removed
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. Refer to Note 13: Commitments and Contingencies in the accompanying notes to the audited consolidated financial statements for further information. Item 4.
Added
In the opinion of management, there was not at least a reasonable possibility we may have incurred a material loss, or a material loss in excess of any recorded accrual, with respect to loss contingencies. However, the outcome of litigation is inherently uncertain.
Removed
Mine Safety Disclosures Not Applicable. 33 PART II
Added
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against us in a reporting period for amounts in excess of management’s expectations, our consolidated financial statements for that reporting period could be materially adversely affected.
Added
Refer to Note 10: Commitments and Contingencies in the accompanying notes to the consolidated financial statements for further information. 38 Delaware Class Action Litigations Following books and records demands pursuant to 8 Del.
Added
C. § 220, two stockholders have filed putative class action complaints in the Delaware Court of Chancery against the Company, certain current and former directors of the Company and its predecessor entity and manager, New Providence Acquisition Corp. and New Providence Management LLC, and Abel Avellan, alleging claims of breach of fiduciary duties and aiding and abetting such breaches, relating to the de-SPAC merger.
Added
The first of those complaints, Taylor v. Coleman, et al. (C.A. No. 2023-1292), was filed on December 27, 2023, and the second, Drulias v. New Providence Management LLC, et al., was filed on March 29, 2024 (collectively, the “Delaware Stockholder Class Actions”). Both complaints seek equitable relief and unspecified monetary damages.
Added
On March 15, 2024, prior to the filing of the Drulias action, Defendants had moved to dismiss the Taylor action. No schedule has been set for either of the Delaware Stockholder Class Actions. Item 4. Mine Safety Disclosures Not Applicable. 39 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, prospects and other factors that our board of directors may deem relevant.
Biggest changeAny future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, prospects and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Equity Securities None. Issuer Purchases of Equity Securities None.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our 2022 Proxy Statement and is incorporated herein by reference. Item 6. Reserved 34
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our 2024 Proxy Statement and is incorporated herein by reference. Item 6. Reserved 40
Holders As of March 28, 2023 we had approximately 21 holders of record of our Class A Common Stock, six holders of record of Class B Common Stock, one holder of Class C Common Stock and five holders of record of Private Placement and Public warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share.
Holders As of March 28, 2024 we had approximately 25 holders of record of our Class A Common Stock, four holders of record of Class B Common Stock, one holder of Class C Common Stock and five holders of record of Private Placement and Public warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share.
Removed
Recent Sales of Unregistered Equity Securities On May 6, 2022, we entered into the Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the Common Stock Purchase Agreement, we have the right, in our sole discretion, to sell to B.
Removed
Riley up to $75.0 million of shares of our Class A Common Stock at 97% of the volume weighted average price (“VWAP”) of the Class A Common Stock calculated in accordance with the Common Stock Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Common Stock Purchase Agreement.
Removed
Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Common Stock Purchase Agreement. As consideration for B.
Removed
Riley’s commitment to purchase shares of the Company’s Class A Common Stock, we have issued 43,938 shares of our Class A Common Stock as commitment shares and will issue up to an aggregate of 43,938 shares of our Class A Common Stock if certain conditions are met.
Removed
Other than the issuance of the commitment shares of our Class A Common Stock to B. Riley, we issued 1,756,993 shares of our Class A Common Stock to raise capital under the Common Stock Purchase Agreement as of December 31, 2022, aggregating to net proceeds of $13.4 million under the Common Stock Purchase Agreement.
Removed
Proceeds from the sale of our Class A Common Stock under the Common Stock Purchase Agreement were and will continue to be used for general corporate purposes. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

88 edited+84 added−64 removed18 unchanged
Biggest changeYear ended December 31, 2022 2021 $ Change % Change Revenues $ 13,825 $ 12,405 $ 1,420 11 % Cost of sales (exclusive of items shown separately below) 6,714 7,563 (849 ) (11 ) Gross profit 7,111 4,842 2,269 47 Operating expenses: Engineering services 54,212 29,599 24,613 83 General and administrative costs 48,332 35,636 12,696 36 Research and development costs 45,620 23,440 22,180 95 Depreciation and amortization 4,711 2,913 1,798 62 Total operating expenses 152,875 91,588 61,287 67 Other income: Gain on remeasurement of warrant liabilities 19,114 15,766 3,348 21 Other income (expense), net 24,154 (1,950 ) 26,104 (1,339 ) Total other income, net 43,268 13,816 29,452 213 Loss before income tax expense (102,496 ) (72,930 ) (29,566 ) 41 Income tax expense 617 331 286 86 Net loss before allocation to noncontrolling interest (103,113 ) (73,261 ) (29,852 ) 41 Net loss attributable to noncontrolling interest (71,473 ) (42,708 ) (28,765 ) 67 Net loss attributable to common stockholders $ (31,640 ) $ (30,553 ) $ (1,087 ) 4 % Revenues Total revenues increased by $1.4 million, or 11%, to $13.8 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Biggest changeYear ended December 31, 2023 2022 $ Change % Change Revenues $ - $ 13,825 $ (13,825 ) (100 ) % Cost of sales (exclusive of items shown separately below) - 6,714 (6,714 ) (100 ) Gross profit - 7,111 (7,111 ) (100 ) Operating expenses: Engineering services 78,811 54,212 24,599 45 General and administrative costs 41,601 48,332 (6,731 ) (14 ) Research and development costs 47,486 45,620 1,866 4 Depreciation and amortization 54,469 4,711 49,758 1,056 Total operating expenses 222,367 152,875 69,492 45 Other income (expense): Gain on remeasurement of warrant liabilities 8,986 19,114 (10,128 ) (53 ) Interest income (expense), net 2,675 2,633 42 2 Other (expense) income, net (10,290 ) 21,521 (31,811 ) (148 ) Total other income (expense), net 1,371 43,268 (41,897 ) (97 ) Loss before income tax expense (220,996 ) (102,496 ) (118,500 ) 116 Income tax expense (1,681 ) (617 ) (1,064 ) 172 Net loss before allocation to noncontrolling interest (222,677 ) (103,113 ) (119,564 ) 116 Net loss attributable to noncontrolling interest (135,116 ) (71,473 ) (63,643 ) 89 Net loss attributable to common stockholders $ (87,561 ) $ (31,640 ) $ (55,921 ) 177 % Revenues All revenues during the year ended December 31, 2022 were generated from sales and services provided by our former subsidiary, Nano.
The extent of impact of these factors on our business will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. To date, these factors have not had a material impact on our technology development efforts or results of our operations.
The extent of impact of these factors on our business will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. To date, these factors have not had a material impact to our technology development efforts or results of our operations.
Gain (Loss) on Remeasurement of Warrant Liabilities Public and private placement warrants issued by us are accounted for as liability-classified instruments at their initial fair value on the date of issuance.
Gain (Loss) on Remeasurement of Warrant Liabilities Public Warrants and Private Placement Warrants issued by us are accounted for as liability-classified instruments at their initial fair value on the date of issuance.
We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Impairment of Long-Lived Assets We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Our assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our 45 control, among other conditions for equity classification.
Our assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification.
Issued or modified warrants that do not meet all the criteria for equity classification are recorded at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the audited Consolidated Statements of Operations.
Issued or modified warrants that do not meet all the criteria for equity classification are recorded at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the consolidated statements of operations.
Critical Accounting Policies Our audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Preparation of the financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities.
Critical Accounting Policies Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Preparation of the financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities.
We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our audited consolidated financial statements.
We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements.
Factors we consider important in the determination of an impairment include significant underperformance relative to historical or projected future operating results, significant changes in the manner that we use the acquired asset and significant negative industry or economic trends. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2022.
Factors we consider important in the determination of an impairment include significant underperformance relative to historical or projected future operating results, significant changes in the manner that we use the acquired asset and significant negative industry or economic trends. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2023.
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 Class A common stock.
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.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes thereto included in Item 8-Financial Statements and Supplementary Data of this Annual Report on Form 10-K for the year ended December 31, 2022, including our audited consolidated financial statements and related notes contained therein.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for the year ended December 31, 2023, including our consolidated financial statements and related notes contained therein.
We expect that such a successful commercial service would enable us to attract additional capital to continue to assemble and launch additional BB satellites to expand our capacity and geographic coverage area, although there can be no assurance that such capital would be available on terms acceptable to us.
We expect that such a successful commercial service would enable us to attract additional capital to continue to assemble and launch additional BB satellites to expand our capacity and geographic coverage area, although there can be no assurance that such capital would be available on terms acceptable to us, or at all.
We believe we need to launch and operate 25 BB satellites (5 Block 1 BB satellites and 20 Block 2 BB satellites) in order to provide coverage to the most commercially attractive MNO markets.
We believe we need to launch and operate 25 BB satellites (five Block 1 BB satellites and 20 Block 2 BB satellites) in order to provide coverage to the most commercially attractive MNO markets.
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 development and commercialization efforts or grant rights to develop and market other services even if we would otherwise prefer to develop and market these services ourselves, or potentially discontinue operations.
If we are unable to raise additional funds through equity offerings, debt financings or commercial arrangements when needed, we may be required to delay, limit, reduce or terminate our commercialization efforts or grant rights to develop and market other services even if we would otherwise prefer to develop and market these services ourselves, or potentially discontinue operations.
The Credit Agreement contains certain customary events of default, and certain covenants that limit AST Texas’ ability to, among other things, create liens on collateral, consolidate, merge, sell, or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with its affiliates.
The Term Loan Credit Agreement contains certain customary events of default, and certain covenants that limit AST Texas’ ability to, among other things, create liens on collateral, consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates.
Borrowings under the term loan bear interest at a fixed rate equal to 4.20% per annum until December 7, 2026, and from December 8, 2026 until December 8, 2028 at a fixed rate per annum equal to 4.20% subject to adjustment if the index rate as defined in the Credit Agreement is greater than 4.20%.
Borrowings under the term loan bear interest at a fixed rate equal to 4.20% per annum until December 7, 2026, and from December 8, 2026 until December 8, 2028 at a fixed rate per annum equal to 4.20% plus adjustment if the index rate as defined in the Term Loan Credit Agreement is greater than 4.20%, subject to a maximum interest rate of 4.90% per annum.
The following table sets forth a summary of our audited Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 (in thousands) and the discussion that follows compares the year ended December 31, 2022, to the year ended December 31, 2021.
The following table sets forth a summary of our consolidated statements of operations for the years ended December 31, 2023 and 2022 (in thousands) and the discussion that follows compares the year ended December 31, 2023, to the year ended December 31, 2022.
The other non-recurring costs primarily include third-party engineers who are hired solely for the design, assembly and testing of the BW3 test satellite and are responsible for the value and progression of the project.
The other non-recurring costs primarily include third-party vendors who are hired solely for the design, assembly, and testing of the test satellite and are responsible for the value and progression of the project.
Following the launch, deployment and testing of five Block 1 BB satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in targeted geographical areas and seek to generate revenue from such service.
Following the launch and deployment of five Block 1 BB satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in targeted geographical areas, including in the United States, and seek to generate revenue from such service.
We attribute a portion of net income or loss generated at AST LLC and Nano to the noncontrolling interests based on their ownership interests. 39 Results of Operations We report our results of operations under one operating segment.
We attributed a portion of net income or loss generated at AST LLC and Nano to the noncontrolling interest based on their ownership interests. Results of Operations We report our results of operations under one operating segment.
Income Tax Expense AST LLC is treated as a partnership for U.S. federal and state income tax purposes. Also, we had a controlling ownership interest in our former subsidiary, Nano, a Lithuanian company, through September 6, 2022, that is subject to foreign income taxes and is also treated as a partnership for U.S. federal and state and local taxes.
Also, we had a controlling ownership interest in our former subsidiary, Nano, a Lithuanian company, through September 6, 2022, that is subject to foreign income taxes and is also treated as a partnership for U.S. federal and state and local taxes.
Common Stock Purchase Agreement On May 6, 2022, we entered into the Common Stock Purchase Agreement (the “Common Stock Purchase Agreement” or “Equity Line of Credit”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the Common Stock Purchase Agreement, we have the right, in our sole discretion, to sell to B.
Common Stock Purchase Agreement On May 6, 2022, we entered into the Common Stock Purchase Agreement (the “Common Stock Purchase Agreement” or “Equity Line of Credit”) with B. Riley Principal Capital, LLC (“B. Riley”) to sell, at our sole discretion, to B.
The SpaceMobile Service is expected to enable MNOs to augment and extend their coverage without building towers or other land-based infrastructure, including where it is not cost-justified or is difficult due to geographical challenges, such as mountainous or rugged terrain.
The SpaceMobile Service is expected to enable MNOs to augment and extend their coverage without building towers or other land-based infrastructure, including where it is not cost-justified or is difficult due to geographical challenges.
Impact of COVID-19 Pandemic and Global Macroeconomic Conditions We continue to closely monitor the impact of the COVID-19 pandemic and macroeconomic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policies, higher interest rates, volatility in the capital markets, and supply chain challenges, on all aspects of our business across geographies, including how it has and may continue to impact our operations, workforce, suppliers, and our ability to raise additional capital to fund operating and capital expenditures.
Impact of Global Macroeconomic and Geopolitical Conflicts We continue to closely monitor the impact of macroeconomic conditions, including heightened inflation, changes to fiscal and monetary policies, higher interest rates, volatility in the capital markets, supply chain challenges, and geopolitical conflicts on all aspects of our business across geographies, including how it has and may continue to impact our operations, workforce, suppliers, and our ability to raise additional capital to fund operating and capital expenditures.
Future capital requirements will depend on many factors, including: • Establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support our satellite development; • Technological or manufacturing and assembling difficulties, design issues or other unforeseen matters; 44 • Negotiation of launch agreements (including launch costs), launch delays or failures, deployment failures, or in-orbit satellite failures; • Timing of the launch of our satellites and subsequent initiation of service in various markets, delays in which will result in increased operating expenses; • Addressing any competing technological and market developments; • Seeking and obtaining market access approvals; and • Attracting, hiring, and retaining qualified personnel.
Future capital requirements will depend on many factors, including: • Establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support our satellite development; • Technological or manufacturing and assembling difficulties, design issues or other unforeseen matters; • Negotiation of launch agreements (including launch costs), launch delays or failures, deployment failures, or in-orbit satellite failures; • Seeking and obtaining necessary regulatory approvals; • Timing of the launch of our satellites and subsequent initiation of service in various markets, delays in which will result in increased operating expenses; • Addressing any competing technological and market developments; • Ability to adjust our expenditures and contractual commitments based on capital availability; • Ability to operate under the covenants in our debt agreements; and • Attracting, hiring, and retaining qualified personnel.
Investing activities Cash used in investing activities was $31.4 million for the year ended December 31, 2022, as compared to cash used in investing activities of $54.8 million for the year ended December 31, 2021.
Investing activities Cash used in investing activities was $118.8 million for the year ended December 31, 2023, as compared to cash used in investing activities of $31.4 million for the year ended December 31, 2022.
Gain on Remeasurement of Warrant Liabilities Decrease in fair value of warrant liabilities resulted in a gain of $19.1 million for the year ended December 31, 2022 as compared to the gain of $15.8 million during the year ended December 31, 2021.
Gain on Remeasurement of Warrant Liabilities Decrease in fair value of warrant liabilities resulted in a gain of $9.0 million for the year ended December 31, 2023 as compared to the gain of $19.1 million during the year ended December 31, 2022.
Accordingly, for U.S. federal and state income tax purposes, all income, losses, and other tax attributes pass through to the members’ income tax returns, and no U.S. federal and state and local provision for income taxes has been recorded for these entities in the audited consolidated financial statements.
Accordingly, all income, losses, and other tax attributes pass through to the members’ income tax returns, and no U.S. federal and state and local provision for income taxes has been 45 recorded for AST LLC in the consolidated financial statements.
As a result of the incremental coverage created by the planned SpaceMobile Service, we believe that our MNO partners will have the opportunity to increase subscribers’ average revenue per unit (“ARPU”).
As a result of the incremental coverage created by the planned SpaceMobile Service, we believe that MNOs will have the opportunity to increase subscribers’ average revenue per user (“ARPU”).
Texas Financing Agreement In December 2021, concurrent with the purchase of real property and equipment in Midland, Texas, our wholly owned subsidiary, AST & Science Texas, LLC (“AST Texas”), entered into a new Credit Agreement providing for a $5.0 million term loan secured by the property.
Term loan In December 2021, concurrent with the purchase of real property and equipment in Midland, Texas, our wholly-owned subsidiary, AST & Science Texas, LLC (“AST Texas”), entered into a credit agreement with Lone Star State Bank of West Texas (the “Term Loan Credit Agreement”) providing for a $5.0 million term loan secured by the property.
Also, our ability to raise necessary financing could be impacted by the COVID-19 pandemic, recent geopolitical events, and inflationary economic conditions and their effects on the market conditions.
Also, our ability to raise necessary financing could be impacted by recent geopolitical events, higher interest rates and inflationary economic conditions and their effects on the market conditions.
We may adopt a strategy for commercial launch of the SpaceMobile Service, including the nature and type of services offered and the geographic areas where we may launch such services, that may differ materially from our current plan. The SpaceMobile Service has not been launched and therefore has not yet generated revenue.
We may adopt a strategy for commercial launch of the SpaceMobile Service, including the nature and type of services offered and the geographic areas where we may launch such services, that may differ materially from our current plan.
On April 1, 2019, we launched our first test satellite, BlueWalker 1 (“BW1”), which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO and the effects of doppler in a satellite to ground cellular environment using the 4G-LTE protocols. We launched our BlueWalker 3 (“BW3”) test satellite on September 10, 2022.
On April 1, 2019, we launched our first test satellite, BW1, which was used to validate our satellite to cellular architecture and was capable of managing communications delays from LEO and the effects of doppler in a satellite to ground cellular environment using the 4G-LTE protocol.
We believe our cash and cash equivalents on hand, together with our ability to raise capital through access to the Equity Line of Credit and the ATM Equity Program, will be sufficient to meet our current working capital needs, planned operating and capital expenditures for a period of the next 12 months from the date of this Annual Report on Form 10-K.
We believe our cash and cash equivalents on hand, which is estimated at $210.8 million as of March 31, 2024, and our ability to raise capital through access to the Equity Line of Credit and the ATM Equity Program, will be sufficient to meet our current working capital needs, planned operating expenses and capital expenditures for a period of the next 12 months from the date of this Annual Report on Form 10-K.
Also, noncontrolling interest includes approximately 49% equity interests in our former subsidiary, Nano, held by equityholders other than us up to September 6, 2022. On September 6, 2022, the noncontrolling interest was eliminated in connection with the sale of the Company’s 51% interest in Nano.
For the year ended December 31, 2022, noncontrolling interest also included approximately 49.0% equity interests in our former subsidiary, Nano, held by equityholders other than us. On September 6, 2022, the noncontrolling interest was eliminated in connection with the sale of the Company’s 51% interest in Nano.
Instead, users will be able to access the SpaceMobile Service when prompted on their mobile device that they are no longer within range of the land-based facilities of the MNO operator or will be able to purchase a plan directly with their existing mobile provider. We generally seek to use a revenue-sharing business model in our agreements with MNOs.
Instead, users will be able to access the SpaceMobile Service when prompted on their mobile device that they are no longer within range of the land-based facilities of the MNO operator or will be able to purchase a plan directly with their existing mobile provider.
Sales and timing of any sales of Class A common stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Common Stock Purchase Agreement. As consideration for B.
Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Common Stock Purchase Agreement. We plan to raise capital, as and when needed, under the Common Stock Purchase Agreement at our sole discretion.
Our vision is that users will not need to subscribe to the SpaceMobile Service directly through us, nor will they need to purchase any new or additional equipment.
We intend to work with MNOs to offer the SpaceMobile Service to the MNOs’ end-user customers. Our vision is that users will not need to subscribe to the SpaceMobile Service directly through us, nor will they need to purchase any new or additional equipment.
We are leveraging skills, know-how and technological expertise derived from the design and assembly of our BW3 test satellite in the development of our BB 35 satellite platform. We are currently assembling the first generation of commercial BB satellites (“Block 1 BB satellites”).
We are leveraging skills, know-how and technological expertise derived from the design and assembly of our BW3 test satellite in the development and assembly of our BB satellite platform.
We capitalize only those expenditures and ancillary costs that are directly attributable to assembly and testing and necessarily incurred to place the BW3 test satellite into its intended location and use. To date, capitalized expenditures include the costs for satellite parts, launch cost, and other non-recurring costs directly associated with the BW3 test satellite developments.
We capitalize only those expenditures and ancillary costs that are directly attributable to assembly and testing and necessarily incurred to place the test satellites into their intended location and use. These costs include materials costs, launch cost, and other non-recurring costs directly associated with the development of the test satellites.
General and Administrative Costs General and administrative costs include the costs of insurance, cost of non-engineering personnel and personnel related expenses such as recruiting and travel and lodging expenses, software licensing and subscriptions, office and facilities expenses, investor relations, and professional services, including public relations, accounting and legal fees.
General and Administrative Costs General and administrative costs include the costs of insurance, cost of non-engineering personnel and personnel related expenses, software licensing and subscriptions, office and facilities expenses, investor relations, and professional services, including public relations, accounting and legal fees. Research and Development Costs R&D costs are charged to expense as incurred.
We intend to seek to raise additional capital prior to the commencement of the commercial services through the issuance of equity, equity related or debt securities, secured loan facilities, or through obtaining credit from government or financial institutions or commercial partners, including through our existing Equity Line of Credit and the ATM Equity Program.
We plan to raise additional capital through the issuance of equity, equity-linked or debt securities (secured or unsecured), secured or unsecured loans or other debt facilities, and credit from government or financial institutions or commercial partners, including through our existing Equity Line of Credit and the ATM Equity Program.
Accordingly, our current sources of liquidity are cash and cash equivalents on hand and access to equity programs currently in place, which consist of an Equity 41 Line of Credit and an At The Market Equity Program (“ATM Equity Program”).
Liquidity and Capital Resources Our current sources of liquidity are cash and cash equivalents on hand and access to equity programs currently in place, which consist of an Equity Line of Credit (as defined herein) and the ATM Program (as defined herein).
Other Income (expense), net Total other income (expense), net was $24.2 million for the year ended December 31, 2022 as compared to $(2.0) million in the year ended December 31, 2021.
Other (Expense) Income, net Total other (expense) income, net was $(10.3) million for the year ended December 31, 2023 as compared to $21.5 million in the year ended December 31, 2022.
Our next generation of BB satellites (“Block 2 BB satellites”) are expected to derive greater performance through the introduction of our own AST5000 Application Specific Integrated Circuit (“ASIC”) chip, which will provide materially greater throughput capacity, require less power and offer a lower overall unit cost.
Our next generation of commercial BB satellites (“Block 2 BB satellites”) are expected to derive greater performance through the introduction of our own AST5000 Application Specific Integrated Circuit (“ASIC”) chip, which we believe will enable materially greater throughput capacity of up to 40 MHz per beam to support 120 Mbps peak data rates and up to 10,000 MHz of processing bandwidth per Block 2 BB satellite, require less power and offer a lower overall unit cost.
Financing activities Cash provided by financing activities was $102.3 million for the year ended December 31, 2022, as compared to cash provided by financing activities of $416.9 million for the year ended December 31, 2021. Cash provided by financing activities for the year ended December 31, 2021 was attributable to the proceeds from the Business Combination.
Financing activities Cash provided by financing activities was $116.7 million for the year ended December 31, 2023, as compared to cash provided by financing activities of $102.3 million for the year ended December 31, 2022.
We currently believe that the average capital expenditure required for the design, assembly and launch of a Block 2 BB satellite to be approximately $16.0 million to $18.0 million.
We currently believe that the estimated average capital costs, consisting primarily of direct materials and launch costs, required for the assembly, integration, testing and launch of a constellation of 95 Block 2 BB satellites to be approximately $16.0 million to $18.0 million per satellite.
The costs for internal, recurrent engineers and consultants are expensed as engineering services and not capitalized to the CIP account on our audited Consolidated Balance Sheets, as these employees are not directly associated with the development of the BW3 test satellite.
The costs for internal, recurrent engineering employees and consultants are expensed as engineering services costs and not capitalized to the cost of the test satellites, as these employees are not directly associated with the development of the test satellites.
The exact timing of the launch, which is expected to carry five Block 1 BB satellites, is contingent on a number of factors, including satisfactory and timely completion of assembly and testing of five Block 1 BB satellites and other factors, many of which are beyond our control.
The exact timing of this launch is contingent on a number of factors, including satisfactory and timely completion of the design, assembly and testing of the Block 2 BB satellite, regulatory approvals, availability of launch windows by the launch providers, 42 logistics, and other factors, many of which are beyond our control.
The SpaceMobile Service is expected to be highly attractive to MNOs as it will enable them to improve their service offering without significant incremental capital investments.
We intend to seek to use a revenue-sharing business model for SpaceMobile Service in our agreements with MNOs. The SpaceMobile Service is expected to be highly attractive to MNOs as it will enable them to improve and differentiate their service offering without significant incremental capital investments.
Our ability to access the capital markets during this period of volatility may require us to modify our current expectations. The additional capital will be necessary to fund ongoing operations, continue research, development and design efforts, improve infrastructure, and launch satellites. There can be no assurance that additional funds will be available to us on favorable terms or at all.
We also intend to seek to draw the remaining available credit under the Senior Secured Credit Facility. Our ability to access the capital markets during this period of volatility may require us to modify our current expectations. There can be no assurance that additional funds will be available to us on favorable terms or at all.
We expect that the Block 2 BB satellites will also benefit from the advantages of a larger aperture array which provides greater spectrum reuse, enhanced signal strength and increased capacity, thereby reducing the necessary number of satellites to achieve service as compared to smaller apertures.
We believe the larger aperture array is expected to provide greater spectrum reuse, enhanced signal strength and increased capacity, thereby reducing the necessary number of satellites to achieve service coverage as compared to smaller apertures. We continue to make progress towards the completion of the design and development of our Block 2 BB satellites.
We believe the deployment of Block 1 BB satellites and subsequent initiation of limited noncontinuous SpaceMobile Service will help to demonstrate the advantages of a satellite-based Cellular Broadband service in the marketplace. This market activity may commence while we continue the development and testing of the next generation of the BB satellites.
We believe initiation of limited, noncontinuous SpaceMobile Service as well as completing the milestones under the agreement with a prime contractor for the U.S. government will help to demonstrate the advantages of our satellite-based Cellular Broadband service in the market. These market activities will commence while we continue the development and testing of the next generation of BB satellites.
We currently estimate we will need to raise approximately $550.0 million to $650.0 million to fund operating and capital expenditures necessary to design, assemble and launch 20 Block 2 BB satellites and operate a constellation of 25 BB satellites to continue to provide SpaceMobile service. We require capital to fund our operating and capital expenditures.
In addition to the cash and cash equivalents we had on hand as of March 28, 2024, we currently estimate we will need to raise approximately $350.0 million to $400.0 million to fund operating expenses and capital expenditures necessary to design, assemble and launch 20 Block 2 BB satellites and operate a constellation of 25 BB satellites.
Cost of Sales Total cost of sales decreased by $(0.8) million, or (11)%, to $6.7 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
General and Administrative Costs Total general and administrative costs decreased by $6.7 million, or 14%, to $41.6 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Impact of inflation While inflation may impact our capital and operating expenditures, we believe the effects of inflation on our historical results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations, capital cost estimates, and financial condition will not be materially impacted by the current heightened levels of inflation.
Impact of inflation While inflation may impact our capital and operating expenditures, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant.
This increase in net loss correlates with the increase in net loss generated at AST LLC given the noncontrolling interest represents a portion of such net loss. Liquidity and Capital Resources We do not expect to generate revenue in future periods until we launch the SpaceMobile Service.
This increase in net loss correlates with the increase in net loss generated at AST LLC given the noncontrolling interest represents a portion of such net loss.
This prioritization of coverage is designed to minimize the capital required to initiate and operate commercial service that generates cash flows from operating activities sooner.
We are developing a phased satellite deployment plan and corresponding commercial launch plan of the SpaceMobile Service based on targeted geographical areas to provide the SpaceMobile Service to the most commercially attractive MNO markets. This prioritization of coverage is designed to minimize the capital required to initiate and operate commercial service that generates cash flows from operating activities sooner.
Certain foreign wholly-owned entities are taxed as corporations in the jurisdictions in which they operate, and accruals for such taxes are included in the audited consolidated financial statements.
Certain foreign wholly-owned entities are taxed as corporations in the jurisdictions in which they operate, and accruals for such taxes are included in the consolidated financial statements. Noncontrolling Interest Noncontrolling interest primarily represents the equity interest in AST LLC held by members other than us. As of December 31, 2023, noncontrolling interest in AST LLC was approximately 58.7%.
After we begin to launch and deploy our Block 1 BB satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in targeted geographical areas and seek to generate revenue from such service.
Following the launch and deployment of five Block 1 BB satellites, we currently plan to initiate a limited, noncontinuous SpaceMobile Service in targeted geographical areas, including in the United States, subject to obtaining regulatory approval and negotiating and executing definitive agreements with MNOs, and seek to 44 generate revenue from such service.
Our future results of operations will be driven by our ability to execute on our strategy and could differ materially from the historical results of operations.
Factors Affecting Comparability of Our Future Results of Operations to Our Historical Results of Operations Our historical financial performance has been, and we expect our financial performance in the future to be driven by our ability to execute on our strategy.
Refer to Note 17: Income Taxes in the accompanying notes to the audited consolidated financial statements for further information. Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest was $71.5 million for the year ended December 31, 2022 as compared to $42.7 million in the year ended December 31, 2021.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest was $135.1 million for the year ended December 31, 2023 as compared to $71.5 million in the year ended December 31, 2022.
If AST Texas fails to perform its obligations under these and other covenants, or should any event of default occur, the term loan may be terminated and any outstanding borrowings, together with unpaid accrued interest, could be declared immediately due and payable, and the lender will be authorized to take possession of the collateral.
If AST Texas fails to perform its obligations under these and other covenants, or should any event of default occur, the term loan may be terminated and any outstanding borrowings, together with unpaid accrued interest, could be declared immediately due and payable, and the lender will be authorized to take possession of the collateral. 49 Senior secured credit facility On August 14, 2023, we entered into a senior secured term loan credit agreement with ACP Post Oak Credit II LLC as administrative agent and collateral agent and Atlas Credit Partners, LLC (“Atlas”) as lender, providing for a principal loan commitment of up to $100.0 million (the “Atlas Credit Agreement”), of which $48.5 million was borrowed upon closing.
We operate from multiple locations that include our corporate headquarters and 185,000 square feet satellite assembly, integrating and testing (“AIT”) facilities in Texas, and AIT and engineering and development locations elsewhere in the United States, India, Scotland, Spain and Israel.
However, if macroeconomic conditions deteriorate or there are unforeseen developments, our results of operations and financial condition may be adversely affected. We operate from multiple locations that include our corporate headquarters and 185,000 square feet AIT facilities in Texas where the final AIT is performed, and engineering and development centers elsewhere in the United States, India, Scotland, Spain and Israel.
Engineering Services Costs Total engineering services costs increased by $24.6 million, or 83%, to $54.2 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Depreciation and Amortization Total depreciation and amortization expense increased by $49.8 million, or 1,056%, to $54.5 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
We expect the Block 1 BB satellites will be of similar size and weight to the BW3 test satellite and have design improvements for enhanced power efficiency and throughput designed to increase capacity.
The Block 1 BB satellites will be of similar size and weight to the BW3 test satellite, includes our own designed array solar panels and battery systems, and will have ten times higher throughput than the BW3 test satellite.
Overview We are building the first space-based Cellular Broadband network designed to be accessible by standard unmodified, off-the-shelf mobile phones or 2G/3G/4G LTE/5G devices using low band and middle band spectrum controlled by Mobile Network Operators (“MNOs”). Our SpaceMobile Service is being designed to provide cost-effective, high-speed Cellular Broadband services to end users who are out of terrestrial cellular coverage.
Our SpaceMobile Service is being designed to provide cost-effective, high-speed Cellular Broadband services to end-users who are out of terrestrial cellular coverage using existing mobile devices.
If Rakuten does not agree to amend or waive this $10.0 million payment, we expect to issue a promissory note in the aggregate principal amount of $10.0 million in June 2023. 43 Cash Flows Historical Cash Flows The following table summarizes our sources and uses of cash for the years ended December 31, 2022 and 2021 (in thousands): Year ended December 31, 2022 2021 Cash, cash equivalents and restricted cash $ 239,256 $ 324,537 Cash used in operating activities $ (156,464 ) $ (80,095 ) Cash used in investing activities (31,352 ) (54,792 ) Cash provided by financing activities 102,340 416,941 Operating activities Cash used in operating activities was $156.5 million for the year ended December 31, 2022, including $14.8 million of deposits paid to a launch provider related to the launch of five Block 1 BB satellites, as compared to cash used in operating activities of $80.1 million for the year ended December 31, 2021.
Cash Flows Historical Cash Flows The following table summarizes our sources and uses of cash for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 2022 Cash, cash equivalents and restricted cash $ 88,097 $ 239,256 Cash used in operating activities $ (148,942 ) $ (156,464 ) Cash used in investing activities (118,807 ) (31,352 ) Cash provided by financing activities 116,732 102,340 Operating activities Cash used in operating activities was $148.9 million for the year ended December 31, 2023, as compared to cash used in operating activities of $156.5 million for the year ended December 31, 2022.
R&D costs are expected to fluctuate quarter over quarter, as R&D costs are largely driven by the achievement of milestones that trigger payments. Depreciation and Amortization Total depreciation and amortization expense increased by $1.8 million, or 62%, to $4.7 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Research and Development Costs Total R&D costs increased by $1.9 million, or 4%, to $47.5 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Funding Requirements We believe our existing cash and cash equivalents and access to the Equity Line of Credit and ATM Equity Program will be sufficient to meet anticipated cash requirements for the next 12 months from the date hereof.
However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future, including by heightened levels of inflation experienced globally as a consequence of the rapidly changing market and economic conditions. 51 Funding Requirements We believe our existing cash and cash equivalents as of December 31, 2023, funds raised in January 2024 and access to the Equity Line of Credit and ATM Equity Program will be sufficient to meet anticipated cash requirements for the next 12 months from the date hereof.
All of these factors could result in materially different capital and operating expenses during future periods. Components of Results of Operations Revenues To date, we have not generated any revenues from our SpaceMobile Service. Our former subsidiary, Nano, generated revenue from the development and manufacture of satellite technology, and ancillary sales and services globally.
Components of Results of Operations Revenues To date, we have not generated any revenues from our SpaceMobile Service. All revenues during the year ended December 31, 2022 were generated from sales and services by our former subsidiary, Nano. Following the completion of the sale of Nano on September 6, 2022, we did not generate any revenue.
The agents are entitled to total compensation at a commission rate of up to 3.0% of the gross sales price per share sold. Under the Sales Agreement, the Company issued 2,697,091 shares of its Class A common stock as of December 31, 42 2022 aggregating to proceeds of $20.0 million, net of commissions paid to agents and transaction costs.
The agents are entitled to total compensation at a commission rate of up to 3.0% of the gross sales price per share sold. We plan to raise capital, as and when needed, under the Sales Agreement at our sole discretion.
The SpaceMobile Service currently is planned to be provided by a constellation of high-powered, large phased-array satellites in Low Earth Orbit (“LEO”). The mobile traffic will be transmitted by the SpaceMobile constellation and connected via high-throughput Q/V-band links to in-country gateways which are collocated with the MNOs’ cellular network infrastructure.
The SpaceMobile Service currently is planned to be provided by a constellation of high-powered, large phased-array satellites in Low Earth Orbit (“LEO”) using low band and middle band spectrum controlled by Mobile Network Operators (“MNOs”). We are headquartered in Texas where we operate 185,000 square feet satellite assembly, integrating and testing (“AIT”) facilities.
The design, assembly, integration, testing and launch of satellites and related ground infrastructure is capital intensive. We currently estimate the capital expenditure required for the design, assembly and launch of our first 5 Block 1 BB satellites to be between approximately $100.0 million and $110.0 million.
The design, assembly, integration, testing and launch of satellites and related ground infrastructure is capital intensive.
Our significant accounting policies are described in Note 2: Summary of Significant Accounting Policies of the audited consolidated financial statements included elsewhere in this Report. Our critical accounting policies are described below. BlueWalker 3 Capitalization We account for research and development costs related to the BW3 test satellite in accordance with ASC 730 – Research and Development (“ASC 730”).
Our significant accounting policies are described in Note 2: Summary of Significant Accounting Policies of the consolidated financial statements included elsewhere in this Report. Our critical accounting policies are described below. Property and Equipment We design and self-construct the BB satellites intended to be used to provide SpaceMobile Service to customers.
Cash provided by financing activities for the year ended December 31, 2022 was primarily attributable to the sale of shares of Class A common stock under the Equity Line of Credit, ATM Equity Program and Common Stock Offering.
The $14.4 million increase in cash provided by financing activities was primarily attributable to $53.4 million of net proceeds from borrowings on the Atlas Credit Agreement and Lone Star Loan Agreement, partially offset by $39.0 million decrease in net proceeds from the sale of Class A Common Stock under the secondary public offerings, ATM Equity Program and Equity Line of Credit.
The decrease in cost of sales relates to a decrease in cost under new and existing Nano sales contracts during the year ended December 31, 2022 prior to the sale of our 51% interest in Nano on September 6, 2022.
Cost of Sales Cost of sales during the year ended December 31, 2022 consisted of the costs incurred to fulfill Nano’s sales contracts. Following the completion of the sale of Nano on September 6, 2022, we did not incur any costs of sales.
The $23.4 million decrease in cash used in investing activities was primarily attributable to proceeds, net of transaction costs and cash balance of Nano deconsolidated as of the date of sale, of $25.9 million received from the Nano Share Sale and a $12.7 million decrease in BW3 test satellite assembly and testing costs offset by $15.2 million increase in purchases of property and equipment including construction costs incurred at our Texas and Israel facilities.
The $87.5 million increase in cash used in investing activities was primarily attributable to a $61.5 million increase in purchases of property and equipment, including procurement of BB satellite materials and advance launch payments, and $26.0 million proceeds from sale of Nano, net of cash deconsolidated and transaction costs, in September 2022.
The increase was primarily attributable to a $20.7 million increase in payroll and employee related costs, including stock-based compensation expense, as a result of an increase in headcount to support growing engineering operations in 2022.
The increase was primarily attributable to a $10.5 million increase in payroll and employee related costs, including stock-based compensation expense, due to an increase in headcount and milestones bonuses paid upon achievement of certain milestones, an increase of $10.2 million in AIT facilities and activities and engineering development centers costs including managing mission operations and ground infrastructure and travel expenses, and an increase of $3.9 million in indirect costs associated with testing and production activities.
Depreciation and Amortization Depreciation and amortization expense includes amounts related to property and equipment as well as definite lived intangible assets.
Depreciation and Amortization Depreciation and amortization expense includes depreciation expense related to property and equipment including the BW3 test satellite, as well as definite lived intangible assets. We began depreciating the BW3 test satellite as of April 25, 2023 over its expected remaining useful life of approximately 16 months.

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