AST Spacemobile, Inc. annual report, FY2020

Business context and reporting period

This is New Providence Acquisition Corp.’s (NPA) 2020 Form 10-K for the year ended December 31, 2020, not an operating-company 10-K for AST SpaceMobile. NPA was a shell SPAC with no operating business or revenue. On December 15, 2020, it agreed to combine with AST & Science LLC; the transaction had not closed as of the filing. The proposed post-combination company would be named AST SpaceMobile, Inc.

Financial results and position

The 2019 comparison covers May 28, 2019 (inception) through December 31, 2019, not a full year. Net income in both periods primarily reflected trust-account interest, not operating earnings. The filing reports basic and diluted net loss per common share of $0.12 for 2020 versus $0.04 for the 2019 period, after allocating trust earnings to redeemable public shares. Margins are not meaningful because NPA had no revenue.

At year-end, NPA reported $131,000 cash outside the trust, a $337,000 working-capital deficit, total assets of $232.4 million, total liabilities of $8.7 million, and stockholders’ equity of $5.0 million. Liabilities included $8.05 million of deferred underwriting fees, payable only if a business combination closes. NPA reported no long-term debt or off-balance-sheet arrangements. Operating cash outflow increased year over year; NPA also withdrew $501,000 of trust interest to pay taxes.

Material changes and proposed transaction

• Compared with the 2019 inception period, 2020 operating costs rose and net income fell, while operating cash use increased.
• The AST transaction agreement contemplated an Up-C structure and a $230 million PIPE investment for 23 million Class A shares. Closing remained subject to conditions. The proposed transaction and PIPE proceeds were not completed or available at December 31, 2020.
• NPA held $232.2 million in trust, but only $131,000 outside the trust for working capital at year-end. Sponsor loans of up to $700,000 were agreed after year-end; $300,000 had been drawn by February 26, 2021.
• As of February 26, 2021, 23 million Class A and 5.75 million Class B shares were outstanding.

Outlook, risks and unusual items

Management said available cash and working capital were insufficient to fund planned activity without additional financing; the auditor’s report highlighted substantial doubt about NPA’s ability to continue as a going concern. Sponsor or affiliate funding was not assured. The filing states the SPAC’s then-current business-combination deadline was March 15, 2021 and that stockholders would consider extending it to June 15, 2021; the filing does not establish that the extension was approved.

Key risks include failure to close the AST transaction or obtain financing, public-share redemptions reducing cash available at closing, dilution from equity issuance and warrants, and potential creditor claims against trust funds. If NPA failed to complete a business combination within the permitted period, public shares would be redeemed from the trust, subject to claims and applicable law, while warrants would expire worthless. COVID-19 could affect transaction execution and target operations. Three stockholder lawsuits filed in January and February 2021 alleged deficiencies in merger disclosures; NPA said it believed the claims were without merit.

The audit opinion was unqualified, but included a going-concern explanatory paragraph. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.

Important facts for investors to verify

• Whether the AST merger and $230 million PIPE closed, and the final transaction terms, financing and share dilution.
• Whether the March 15, 2021 deadline was extended and whether the business combination was completed before the applicable deadline.
• Actual redemption levels, closing cash, and any financing needed to satisfy transaction conditions.
• Status and potential effects of the three disclosure-related lawsuits and any claims that could affect trust funds.
• Draws, repayment terms and any further sponsor funding; year-end cash outside trust was only $131,000.