AST SpaceMobile Inc

Previous wording

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2023, including our audited consolidated financial statements and related notes contained therein. Unless otherwise indicated, all references to “dollars” and “$” in this Annual Report are to, and all monetary amounts in this Annual Report are presented in, U.S. dollars.

Current wording

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report and with our Annual Report on Form 10-K for the year ended December 31, 2023, including our audited consolidated financial statements and related notes contained therein. Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report are to, and all monetary amounts in this Quarterly Report are presented in, U.S. dollars.

Previous wording

This Quarterly Report includes “forward-looking statements” for the purposes of federal securities laws that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” “plan,” “predict,” “potential,” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to Part I, Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Current wording

This Quarterly Report includes “forward-looking statements” for the purposes of federal securities laws that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” “plan,” “predict,” “potential,” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in, or implied by, the forward-looking statements, please refer to Part I, Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Previous wording

We are building the first and only global Cellular Broadband network in space 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. 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 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. Our IP portfolio is 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. As of March 31, 2024, we had more than 3,350 patent and patent pending claims worldwide, of which approximately 1,050 have been officially granted or allowed.

Current wording

We are building the first and only global Cellular Broadband network in space 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. 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 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. Our IP portfolio is 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. As of June 30, 2024, we had more than 3,400 patent and patent pending claims worldwide, of which approximately 1,240 have been officially granted or allowed.

Previous wording

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. On June 21, 2023, we announced that we had achieved repeated successful 4G download speeds of above 10 megabits per second (“Mbps”) to standard unmodified smartphones using the BW3 test satellite. On September 19, 2023, we announced that we had achieved repeated successful two-way voice calls directly to standard unmodified smartphones using 5G connectivity and successful download speeds of approximately 14 Mbps utilizing 5 megahertz (“Mhz”) of low band spectrum via the BW3 test satellite. We intend to continue testing capabilities of the BW3 test satellite, including further testing with cellular service providers and devices.

Current wording

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. On June 21, 2023, we announced that we had achieved repeated successful 4G download speeds of above 10 megabits per second (“Mbps”) to standard unmodified smartphones using the BW3 test satellite. On September 19, 2023, we announced that we had achieved repeated successful two-way voice calls directly to standard unmodified smartphones using 5G connectivity and successful download speeds of approximately 14 Mbps utilizing 5 megahertz (“Mhz”) of low band spectrum via the BW3 test satellite. Since then, we have achieved successful download speeds above 21 Mbps, spectral efficiency of approximately 3 bits per hertz, and have also successfully completed initial in-orbit and ground testing for non-communication government applications. We intend to continue testing capabilities of the BW3 test satellite, including further testing with cellular service providers and the government.

Previous wording

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 first generation of commercial BB satellites (“Block 1 BB satellites”). The Block 1 BB satellites are of similar size and weight to the BW3 test satellite, includes our own designed array solar panels and battery systems, and are expected to have ten times higher throughput than the BW3 test satellite. We now have all the parts, including the subsystems from the two suppliers who were previously delayed in meeting their delivery contractual timelines, to complete the assembly, integration, and testing of the five Block 1 BB satellites. We are currently in the advanced stages of assembling and testing the Block 1 BB satellites and estimate to transport the five Block 1 BB satellites from our assembly facilities to the launch site between July and August 2024 with an orbital launch scheduled shortly thereafter. The exact timing of the launch is contingent on a number of factors, including satisfactory and timely completion of assembly, integrating and testing of the satellites, regulatory approvals, confirmation of the launch slot timing by the launch provider, logistics, weather conditions, and other factors, many of which are beyond our control.

Current wording

In July 2024, we completed the final assembly, integration and testing of five of our first generation commercial BB satellites (“Block 1 BB satellites”). The Block 1 BB satellites are of similar size and weight to the BW3 test satellite, include our own designed array solar panels and battery systems, and are expected to have ten times higher throughput than the BW3 test satellite. The five Block 1 BB satellites are currently at the launch site awaiting an orbital launch in a 7-day launch window in September 2024. The exact timing of the launch is contingent on a number of factors, including satisfactory and timely completion of integration of the satellites with the launch vehicle, confirmation of the launch slot timing by the launch provider, weather conditions, and other factors, many of which are beyond our control.

Previous wording

The SpaceMobile Service has not been launched and therefore has not yet generated any revenue. 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 are expanding our efforts on ground infrastructure development for commercial readiness and integrating our SpaceMobile service into the MNOs’ infrastructure to enable us to initiate commercial services. Prior to initiating such service, we will need to obtain regulatory approvals in each jurisdiction where we would provide such service and would need to enter into commercial agreements with MNOs relating to the offering of such service in each jurisdiction. Beginning in the first quarter of 2024, we have recognized revenue from completion of performance obligations under an agreement with a prime contractor for the U.S. government and expect to continue to recognize revenue throughout 2024 as and when we complete the remaining performance obligations under the agreement. In 2024, we expect to begin generating revenue from the resale of gateway equipment and associated services to MNOs and other third parties. 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.

Current wording

Beginning in the first quarter of 2024, we have recognized revenue from completion of performance obligations under an agreement with a prime contractor for the U.S. Government and expect to continue to recognize revenue throughout 2024 as and when we complete the remaining performance obligations under the agreement. In 2024, we expect to begin generating revenue from the resale of gateway equipment and associated services to MNOs and other third parties. 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 commercial BB satellites.

Previous wording

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. We have completed the design and have commenced the tape-out of our ASIC chip in March 2024. The Block 2 BB satellites are expected to be approximately 2,400 square feet in size, almost 3.5 times bigger than the Block 1 BB satellites, and will have the largest phased array ever deployed in a LEO for commercial use exceeding the phased array of the BW3 test satellite and planned Block 1 BB satellites. 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.

Current wording

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. As of the date of this report, we have completed the design and tape-out of our ASIC chip. Until the qualification and assembly of our ASIC chip is complete, we expect to continue to manufacture and launch Block 2 BB satellites that are based on a FPGA (“Field Programmable Gate Arrays”) chip. The Block 2 BB satellites are expected to be approximately 2,400 square feet in size, almost 3.5 times bigger than the Block 1 BB satellites, and will have the largest phased array ever deployed in a LEO for commercial use exceeding the phased array of the BW3 test satellite and the Block 1 BB satellites. 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.

Previous wording

We continue to make progress towards the completion of the design and development of our Block 2 BB satellites. We believe we will benefit from the skills, technological expertise, and manufacturing know-how derived from the assembly and testing of our Block 1 BB satellite in the development and assembly of our Block 2 BB satellites. We began the design and development of the Block 2 BB satellites prior to the design and development of Block 1 BB satellites. We have commenced planning and procurement activities to begin the assembly, integration and testing of the Block 2 BB satellites and have entered into agreements and placed orders for procurement of materials required for manufacturing the satellite components, and subsystems required for the assembly of Block 2 BB satellites. We plan to continue to manufacture the satellite components and subsystems for Block 2 BB satellites as soon as the assembly and testing of Block 1 BB satellites are complete. The first Block 2 BB satellite will be based on a FPGA chip. We expect to use the ASIC chip in the subsequent future Block 2 BB satellites, subject to completion of qualification and production of ASIC chips. We have entered into an agreement with a launch service provider to launch the first Block 2 BB satellite. The agreement has a launch window of December 15, 2024 to March 31, 2025. 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 have a contractual right under the launch services agreement to reschedule the date of our dedicated launch, subject to the launch vehicle provider’s launch schedule availability.

Current wording

We continue to make progress towards the completion of the design and development of our Block 2 BB satellites. We believe we will benefit from the skills, technological expertise, and manufacturing know-how derived from the assembly and testing of our Block 1 BB satellite in the development and assembly of our Block 2 BB satellites. We are vertically integrated for manufacturing of satellite components and subsystems to reduce our dependency on suppliers, ensure timely supply of satellite components and subsystems to meet our launch timeline, and lower the overall cost of BB satellites. We own or license the IP and control the manufacturing process, either internally or with contract manufacturers, for approximately 95% of the sub-systems planned to be used in our Block 2 BB satellites. We began the design and development of the Block 2 BB satellites prior to the design and development of Block 1 BB satellites. We have secured agreements and placed orders for procurement of components and subsystems required for manufacturing of Block 2 BB satellites. We have commenced manufacturing the components and subsystems for Block 2 BB satellites. We have entered into an agreement with a launch service provider to launch the first Block 2 BB satellite. While the agreement has a preliminary launch window in the first quarter of 2025, the agreement allows us to alter the launch window, at our option and at no additional cost, subject to the launch vehicle provider’s launch schedule availability. The exact timing of the launch has not been determined and 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.

Previous wording

We plan to achieve service in the selected, targeted geographical areas with the launch and operation of 25 BB satellites and achieve substantial service in all targeted geographical areas to meet our long term business goals with the launch and operation of approximately 95 BB satellites. We anticipate launching and deploying additional satellites beyond the initial 95 satellites in order to enhance coverage and system capacity in response to incremental market demand. 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 capital, proposed orbits and resulting satellite coverage, launch costs, ability to enter into agreements with MNOs, regulatory approvals, and other factors. 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.

Current wording

We plan to achieve service in the selected, targeted geographical areas with the launch and operation of 25 BB satellites and achieve substantial service in all targeted geographical areas to meet our long term business goals with the launch and operation of approximately 95 BB satellites. We anticipate launching and deploying additional satellites beyond the initial 95 satellites in order to enhance coverage and system capacity in response to incremental market demand. Our current plan is subject to numerous uncertainties, many of which are beyond our control, including timely supply of materials and components, satisfactory and timely completion of design, assembly and testing of the satellites, availability of launch vehicles aligned with our timeline, availability of launch windows by the launch providers, proposed orbits and resulting satellite coverage, launch costs, ability to enter into agreements with MNOs, regulatory approvals, our ability to raise capital, and other factors. 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.

Previous wording

Changes in the prices of satellite materials due to inflation, supply chain challenges, and other macroeconomic factors may affect our capital costs estimates to build and launch the satellite constellation and adversely affect our financial condition. The extent of impact of these factors on our business will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. To date, these factors have not had a material impact to our technology development efforts or results of our operations. However, if macroeconomic conditions deteriorate or there are unforeseen developments, our results of operations and financial condition may be adversely affected.

Current wording

Changes in the prices of satellite materials due to inflation, supply chain challenges, and other macroeconomic factors, as well as changes in the launch costs, may affect our capital costs estimates to build and launch the satellite constellation and adversely affect our financial condition. The extent of impact of these factors on our business will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. To date, these factors have not had a material impact to our technology development efforts or results of our operations. However, if macroeconomic conditions deteriorate or there are unforeseen developments, our results of operations and financial condition may be adversely affected.

Previous wording

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. Our operations in Israel constitute approximately 2% of our total assets as of March 31, 2024 and approximately 11% of total operating expenses for the three months ended March 31, 2024. To date, our operations in Israel have not been materially impacted by the geopolitical conflict in the Middle East. We currently do not expect potential interruptions to our operations in Israel to have a material impact on the Company.

Current wording

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. Our operations in Israel constitute approximately 2% of our total assets as of June 30, 2024 and approximately 9% and 10%, respectively, of total operating expenses for the three and six months ended June 30, 2024. To date, our operations in Israel have not been materially impacted by the geopolitical conflict in the Middle East. We currently do not expect potential interruptions to our operations in Israel to have a material impact on the Company.

Previous wording

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. Our future results of operations could differ materially from the historical results of operations as we expect to complete the assembly and launch the five Block 1 BB satellites, initiate the limited, noncontinuous SpaceMobile Service in certain targeted geographical areas, fulfill our obligations under the contracts for gateway stations and under an agreement with a prime contractor of a U.S. government contract, complete the tape-out of our ASIC chip, set up ground cellular and infrastructure for commercial readiness, complete the design of the Block 2 BB satellites, commence the assembly, integration and testing of the Block 2 BB satellites, and launch the first Block 2 BB satellite.

Current wording

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. We believe that our future results of operations could differ materially from the historical results of operations as we launch the five Block 1 BB satellites and initiate the limited, noncontinuous SpaceMobile Service in certain targeted geographical areas, fulfill our obligations under an agreement with a prime contractor of a U.S. Government contract, complete the tape-out and qualification of our ASIC chip, complete the development of the Block 2 BB satellites, increase our capacity and scale to manufacture BB satellites, launch the first Block 2 BB satellite, and enter into commercial arrangements with MNOs.

Previous wording

To date, we have not generated any revenues from our SpaceMobile Service and do not expect to generate revenue until we launch the SpaceMobile Service. All revenues recognized during the three months ended March 31, 2024 were generated from completion of performance obligations under an agreement with a prime contractor for the U.S. government. We expect to continue to recognize revenue under this agreement throughout 2024 as and when we complete the remaining performance obligations under the agreement. We expect to generate revenue from the resale of gateway equipment and associated services to the MNOs and third parties as and when we complete our performance obligations under the contracts with the customers.

Current wording

To date, we have not generated any revenues from our SpaceMobile Service and do not expect to generate revenue until we launch the SpaceMobile Service. All revenues recognized during the three and six months ended June 30, 2024 were generated from completion of performance obligations under an agreement with a prime contractor for the U.S. Government. We expect to continue to recognize revenue under this agreement throughout 2024 as and when we complete the remaining performance obligations under the agreement. We also expect to generate revenue from the resale of gateway equipment and associated services to the MNOs and third parties as and when we complete our performance obligations under these contracts with the customers.

Previous wording

Engineering services costs are charged to expense as incurred. Engineering services costs consist primarily of the cost of employees and consultants involved in the design and development of the BB satellites and fulfillment of performance obligations under contracts with the customers, managing the network and satellite operations centers, and indirect costs related to the assembly, integration and testing of the BB satellites, license cost, and general expenses related to AIT facilities and engineering development centers.

Current wording

Engineering services costs are charged to expense as incurred. Engineering services costs consist primarily of the cost of employees and consultants involved in the design and development of the BB satellites and fulfillment of performance obligations under contracts with the customers, managing the network and satellite operations centers, indirect costs related to the assembly, integration and testing of the BB satellites, license cost, and general expenses related to AIT facilities and engineering development centers.

Previous wording

R&D costs are charged to expense as incurred. R&D costs consist principally of development activities in which we typically engage third-party vendors and are largely driven by the achievement of milestones that trigger payments and costs of materials and supplies consumed in the R&D activities. R&D costs are expected to fluctuate quarter over quarter depending on achievement of milestones.

Current wording

R&D costs are charged to expense as incurred. R&D costs consist principally of development activities in which we typically engage third-party vendors and are largely driven by the achievement of milestones that trigger payments. It also includes costs of materials and supplies consumed in the R&D activities such as development of prototype components and subsystems, and production of engineering models to support assembly, integration and testing of the BB satellites. R&D costs are expected to fluctuate quarter over quarter depending on achievement of milestones.

Previous wording

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. We expect the BW3 test satellite to be fully depreciated by August 2024.

Current wording

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. We expect the BW3 test satellite to be fully depreciated by the end of August 2024.

Previous wording

Interest (expense) income, net consists of interest expense and amortization of debt issuance costs associated with our debt arrangements, net of interest earned on cash and cash equivalents held in interest bearing demand deposit accounts.

Current wording

Interest (expense) income, net consists of interest expense and amortization of debt issuance costs associated with our debt arrangements, including convertible notes, net of interest earned on cash and cash equivalents held in interest bearing demand deposit accounts.

Previous wording

Noncontrolling interest primarily represents the equity interest in AST LLC held by members other than us. As of March 31, 2024, noncontrolling interest in AST LLC was approximately 46.0%. We attribute a portion of net income or loss generated at AST LLC to the noncontrolling interest based on their ownership interests.

Current wording

Noncontrolling interest primarily represents the equity interest in AST LLC held by members other than us. As of June 30, 2024, noncontrolling interest in AST LLC was approximately 44.2%. We attribute a portion of net income or loss generated at AST LLC to the noncontrolling interest based on their ownership interests.

Previous wording

Total general and administrative costs increased by $2.4 million, or 25%, to $12.3 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily driven by an increase in stock-based compensation expense.

Current wording

Total general and administrative costs increased by $7.6 million, or 75%, to $17.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily driven by a $6.7 million increase in stock-based compensation expense and other employee related costs, a $0.4 million increase in professional services fees, a $0.3 million increase in travel expenses, and a $0.3 million increase in office and facilities expenses.

Previous wording

Total R&D costs decreased by $12.1 million, or 74% to $4.3 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease in R&D costs were driven by a decrease in R&D costs related to Block 2 BB satellites as design and development of several sub systems were completed in 2023, completion of design and development for Block 1 BB satellites, and completion of the design phase of ASIC chip.

Current wording

Total R&D costs decreased by $6.5 million, or 59%, to $4.5 million for the three months ended June 30, 2024 as compared to three months ended June 30, 2023. The decrease in R&D costs were driven by completion of design and development of certain sub systems for the Block 2 BB satellites, completion of certain milestones related to the development of ground infrastructure programs for commercial readiness, completion of design and development for Block 1 BB satellites, and completion of the design phase of our ASIC chip.

Previous wording

Total depreciation and amortization expense increased by $18.2 million, or 1051%, to $19.9 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily due to depreciation of the BW3 test satellite which did not commence until April 25, 2023, the date on which we determined that BW3 had met its intended use.

Current wording

Total depreciation and amortization expense increased by $6.3 million, or 44%, to $20.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily due to the commencement of the BW3 test satellite depreciation from April 25, 2023.

Previous wording

Decrease in fair value of warrant liabilities resulted in a gain of $18.2 million for the three months ended March 31, 2024 as compared to the gain of $7.5 million for the three months ended March 31, 2023.

Current wording

The increase in fair value of warrant liabilities resulted in a loss of $66.1 million for the three months ended June 30, 2024 largely due to a significant increase in our share price as compared to a gain of $6.5 million for the three months ended June 30, 2023.

Previous wording

Total interest (expense) income, net was ($2.2) million for the three months ended March 31, 2024 as compared to $2.1 million for the three months ended March 31, 2023. The increase in interest expense, net by $4.3 million was driven by an increase of $4.4 million in interest expense and amortization of debt issuance costs incurred in connection with our debt arrangements, partially offset by an increase of $0.1 million in interest income earned on cash and cash equivalents held in interest bearing demand deposit accounts.

Current wording

Interest expense, net was $2.2 million for the three months ended June 30, 2024, as compared to interest income, net of $1.7 million for the three months ended June 30, 2023. The net change of $3.9 million was primarily attributed to an increase of $4.8 million in interest expense and amortization of debt issuance costs incurred in connection with our debt arrangements, partially offset by an $0.8 million increase in interest income earned on cash and cash equivalents held in interest bearing demand deposit accounts.

Previous wording

The provision for income taxes was $0.3 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively. The consolidated effective tax rate for the three months ended March 31, 2024 and March 31, 2023 was (0.74)% and (0.26)%, respectively. Refer to Note 10: Income Taxes in the accompanying notes to the unaudited condensed consolidated financial statements for further information.

Current wording

The provision for income taxes was $(0.2) million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively. The consolidated effective tax rate for the three months ended June 30, 2024 and 2023 was (0.18)% and 1.57%, respectively. Refer to Note 10: Income Taxes in the accompanying notes to the unaudited condensed consolidated financial statements for further information.

Previous wording

Net loss attributable to noncontrolling interest was $20.1 million for the three months ended March 31, 2024 as compared to $28.9 million in the three months ended March 31, 2023. This decrease in net loss correlates with the decrease in net loss generated at AST LLC given the noncontrolling interest represents a portion of such net loss.

Current wording

Net loss attributable to noncontrolling interest was $58.8 million for the three months ended June 30, 2024 as compared to $31.2 million in the three months ended June 30, 2023. 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.

Previous wording

Total engineering services costs increased by $3.0 million, or 18%, to $19.5 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase was primarily attributable to an increase of $2.4 million in AIT facilities and engineering development centers costs including managing mission operations and ground infrastructure, an increase of $0.4 million in travel expenses, and an increase of $0.2 million in payroll and employee related costs.

Current wording

Total engineering services costs increased by $1.4 million, or 4%, to $40.7 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily attributable to an increase of $3.3 million in AIT facilities and engineering development centers costs including managing mission operations and ground infrastructure and an increase of $1.1 million in travel expenses, partially offset by a $3.0 million decrease in payroll and employee related costs.

Previous wording

Total other expense, net was less than $0.1 million for the three months ended March 31, 2024, as compared to $10.2 million for the three months ended March 31, 2023. The decrease was primarily due to a nonrecurring $10.0 million payment due to a related party recognized in the first quarter of 2023, and a decrease of $0.2 million of foreign exchange loss.

Current wording

Other income, net was $0.3 million for the six months ended June 30, 2024 as compared to other expense, net of $10.7 million for the six months ended June 30, 2023. The net change of $11.0 million was primarily due to a nonrecurring $10.0 million payment due to a related party recognized in the first quarter of 2023, a $2.6 million increase in other non-operating income, and a $0.4 million decrease in foreign exchange loss, partially offset by a $2.2 million increase in loss on disposal of fixed assets.

Previous wording

Our current sources of liquidity are cash and cash equivalents on hand and access to the equity program currently in place, which consists of an ATM Equity Program (as defined herein). As of March 31, 2024, we had $212.4 million of cash and cash equivalents on hand, which included $2.5 million of restricted cash, which reflects proceeds of the issuance of the Convertible Notes and the January 2024 Common Stock Offering. We believe our cash and cash equivalents on hand, together with our ability to raise capital through access to the ATM Equity Program, will be sufficient to meet our current working capital needs, planned operating expenses and capital expenditures for a period of 12 months from the date of this Quarterly Report on Form 10-Q.

Current wording

Our current sources of liquidity are cash and cash equivalents on hand. As of June 30, 2024, we had $287.6 million of cash and cash equivalents on hand, which included $2.5 million of restricted cash, which reflects proceeds from the issuance of the Convertible Notes (as described below), the sale of shares of our Class A Common Stock under the ATM Equity Program (as described below) and the January 2024 Common Stock Offering (as described below). We believe our cash and cash equivalents on hand will be sufficient to meet our current working capital needs, planned operating expenses and capital expenditures for a period of 12 months from the date of this Quarterly Report.

Previous wording

The design, assembly, integration, testing and launch of satellites and related ground infrastructure is capital intensive. We currently estimate the capital expenditure, primarily direct materials and launch costs, required for the assembly, integration, testing and launch of the five Block 1 BB satellites to be approximately $115.0 million, and we have paid over 95% of this expenditure as of the date of this Quarterly Report on Form 10-Q.

Current wording

The design, assembly, integration, testing and launch of satellites and related ground infrastructure is capital intensive. We currently estimate the capital expenditure, primarily direct materials and launch costs, for the assembly, integration, testing and launch of the five Block 1 BB satellites to not materially exceed $115.0 million. We expect to leverage our experience of Block 1 manufacturing to improve and optimize the manufacturing costs for our Block 2 satellites. We have fully paid the Block 1 estimated cost as of the date of this Quarterly Report.

Previous wording

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. In addition to the cash and cash equivalents we had on hand as of March 31, 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.

Current wording

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. In addition to the cash and cash equivalents we had on hand as of June 30, 2024, we currently estimate we will need to raise approximately $275.0 million to $325.0 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.

Previous wording

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 ATM Equity Program. 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. 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.

Current wording

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. We also intend to seek to draw the remaining available credit under the Senior Secured Credit Facility (as described below). 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. 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.

Previous wording

On January 16, 2024, we entered into a Convertible Security Investment Agreement (the “Investment Agreement”) with AT&T Venture Investments, LLC (“AT&T”), Google LLC (“Google”) and Vodafone Ventures Limited (“Vodafone”, and together, the “Investors”) to issue subordinated convertible notes for an aggregate principal amount of $110.0 million (such notes, the “Convertible Notes” and such investments, the “Investments”) to the Investors. The Convertible Notes bear interest at a rate of 5.50% per year, payable semi-annually in arrears beginning on June 30, 2024, in cash or in kind at our option. We intend to elect to pay the contractual interest amount in kind. The Convertible Notes have a ten-year term unless earlier converted. The net proceeds are expected to be used for general corporate purposes.

Current wording

Pursuant to the Convertible Security Investment Agreement (as described below) which we entered into with certain investors, we issued subordinated convertible notes (the “Convertible Notes”) for an aggregate principal amount of $110.0 million on January 16, 2024 to AT&T Venture Investments, LLC (“AT&T”), Google LLC (“Google”) and Vodafone Ventures Limited (“Vodafone”), and for an aggregate principal amount of $35.0 million on May 23, 2024 to Verizon Communications, Inc. (“Verizon”). The Convertible Notes bear interest at a rate of 5.50% per year, payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30, 2024. The AT&T, Google and Vodafone Convertible Notes have a 10-year term and the Verizon Convertible Notes have a 9 years and 9 months term unless earlier converted into Class A Common Stock at the option of the holder or us in accordance with the terms of the Convertible Security Investment Agreement.

Previous wording

In January 2024, we entered into the Investment Agreement (as defined herein) to issue subordinated convertible notes in the amount of $110.0 million. The Convertible Notes bear interest at a rate of 5.50% per year, payable semi-annually in arrears beginning on June 30, 2024, in cash or in kind at our option. The Convertible Notes have a ten-year term unless earlier converted into Class A Common Stock at the option of the holder or us in accordance with the terms of the Investment Agreement. During the three months ended March 31, 2024, there were no material changes in the contractual minimum principal and interest payments required on all of our outstanding debt, other than above, and operating leases described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

During the six months ended June 30, 2024, there were no material changes in the contractual minimum principal and interest payments required on all of our outstanding debt, other than above, and operating leases described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

As of March 31, 2024, we had contractual commitments with third parties in the aggregate amount of $94.6 million related to the procurement of BB satellite components, R&D programs, capital improvements, and future launch payments for Block 2 BB satellite. We expect these commitments will continue to increase as we make progress to assemble, integrate and test Block 2 BB satellites, and enter into launch agreements for the launch of Block 2 BB satellites.

Current wording

As of June 30, 2024, we had contractual commitments with third parties in the aggregate amount of $100.5 million related to the procurement of BB satellite components, R&D programs, capital improvements, and future launch payments for Block 2 BB satellites. We expect these commitments will continue to increase as we make progress to assemble, integrate and test Block 2 BB satellites, and enter into launch agreements for the launch of Block 2 BB satellites.

Previous wording

On September 8, 2022, we entered into an Equity Distribution Agreement (the “Sales Agreement” or “ATM Equity Program”) with Evercore Group L.L.C. and B. Riley Securities, Inc. (collectively, the “agents”) to sell shares of our Class A Common Stock having an aggregate sales price of up to $150.0 million through an “at the market offering” program under which the agents will act as sales agents. 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. Proceeds from the sale of our Class A Common Stock under the Sales Agreement were and will continue to be used for general corporate purposes.

Current wording

On September 8, 2022, we entered into an Equity Distribution Agreement (the “Sales Agreement” or “ATM Equity Program”) with Evercore Group L.L.C. and B. Riley Securities, Inc. (collectively, the “agents”) to sell shares of our Class A Common Stock having an aggregate sales price of up to $150.0 million through an “at the market offering” program under which the agents acted as sales agents. The agents were entitled to total compensation at a commission rate of up to 3.0% of the gross sales price per share sold. As of the date of this Quarterly Report, we have sold shares of our Class A Common Stock up to the authorized amount under the Sales Agreement; accordingly, the Sales Agreement has terminated pursuant to its terms. Proceeds from the sale of our Class A Common Stock under the Sales Agreement were and will continue to be used for general corporate purposes.

Previous wording

Upon closing, we received net proceeds of $37.2 million, net of debt issuance costs of $9.5 million and deposit of $1.8 million into an interest reserve escrow account. Debt issuance costs of $9.5 million consist of agent fees, offering expenses, and two years of cash premium coverage. The net proceeds were and are expected to continue to be used for general corporate purposes as permitted under the Atlas Credit Agreement.

Current wording

Upon closing, we received net proceeds of $37.2 million, net of debt issuance costs of $9.5 million and deposit of $1.8 million into an interest reserve escrow account. Debt issuance costs of $9.5 million consist of agent fees, offering expenses, and two years of cash premium coverage. The net proceeds were used for general corporate purposes as permitted under the Atlas Credit Agreement.

Previous wording

On August 14, 2023, we entered into a loan agreement with Lone Star State Bank of West Texas (“Lone Star”) as lender, providing for $15.0 million principal term loan commitment secured by certain real property fixtures and equipment in one of our Texas facilities (the “Lone Star Loan Agreement”).

Current wording

On August 14, 2023, we entered into a loan agreement with Lone Star as lender, providing for a $15.0 million principal term loan commitment secured by certain real property fixtures and equipment in one of our Texas facilities (the “Lone Star Loan Agreement”).

Previous wording

We drew the entire $15.0 million facility on September 19, 2023 and incurred $0.1 million of transaction costs. The net proceeds were and are expected to continue to be used for general corporate purposes.

Current wording

We drew the entire $15.0 million facility on September 19, 2023 and incurred $0.1 million of transaction costs. The net proceeds were used for general corporate purposes.

Previous wording

The holders of the Convertible Notes (the “Holders”) may at their option convert the Convertible Notes (subject to certain exceptions) at any time on or after January 16, 2025 at an initial conversion rate of 173.9130 shares of Class A Common Stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of $5.75 per share of Class A Common Stock). On or after January 16, 2025, we also have an option to require the Holders to convert the Convertible Notes (subject to certain exceptions) at the same initial conversion rate of 173.9130 shares of Class A Common Stock per $1,000 principal amount of Convertible Notes if the VWAP of the Class A Common Stock has been at least 130% of the conversion price then in effect for 30 consecutive trading days, on the immediately succeeding trading day after the last trading day of such 30 day period. The Convertible Notes may be accelerated upon the occurrence of certain events of default and fundamental change.

Current wording

The Holders of the Convertible Notes may convert the Convertible Notes (subject to certain exceptions) at an initial conversion rate of 173.9130 shares of Class A Common Stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of $5.75 per share of Class A Common Stock). The Holders may convert their Convertible Notes at their option on the Conversion Date, which is on or after January 16, 2025. On or after the Conversion Date, we may require the Holders to convert the Convertible Notes (subject to certain exceptions), at an initial conversion rate of 173.9130 shares of Class A Common Stock per

Previous wording

On January 23, 2024, we issued 32,258,064 shares of Class A Common Stock in a public offering and received proceeds of $93.6 million, net of underwriting commissions of $6.0 million and transaction costs of $0.4 million. We provided a 30-day option to the underwriting agent to purchase up to an additional 4,838,709 shares of Class A Common Stock (the “Option Shares”) from us on the same terms and conditions. On January 25, 2024, the Option Shares were exercised in full. The offering of the Option Shares closed on January 29, 2024 for proceeds of $14.1 million, net of underwriting commissions of $0.9 million. Proceeds from the sale of our Class A common stock under the January 2024 Common Stock Offering were and are expected to be used for general corporate purposes.

Current wording

On January 23, 2024, we issued 32,258,064 shares of Class A Common Stock in a public offering and received proceeds of $93.6 million, net of underwriting commissions of $6.0 million and transaction costs of $0.4 million. We provided a 30-day option to the underwriting agent to purchase up to an additional 4,838,709 shares of Class A Common Stock (the “Option Shares”) from us on the same terms and conditions. On January 25, 2024, the Option Shares were exercised in full. The offering of the Option Shares closed on January 29, 2024 for proceeds of $14.1 million, net of underwriting commissions of $0.9 million. Proceeds from the sale of our Class A common stock under the January 2024 Common Stock Offering were used for general corporate purposes.