Business context and reporting period
This unaudited Form 10-Q covers the three months ended March 31, 2021. At quarter-end, the registrant was New Providence Acquisition Corp. (NPA), a special purpose acquisition company, and had not begun operating AST SpaceMobile’s business or generating revenue.
On April 6, 2021, after the reporting period, NPA completed its business combination with AST & Science LLC, changed its name to AST SpaceMobile, Inc., and adopted an Up-C structure. Its Class A shares and warrants began trading as ASTS and ASTSW on April 7.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None | None |
| Operating costs | $1.43 million | $0.19 million |
| Net income | $0.60 million | $7.77 million |
| Net cash used in operating activities | $0.86 million | $0.19 million |
| Cash at quarter-end | $50.05 million | $0.13 million at Dec. 31, 2020 |
| Trust Account securities | $231.91 million | $232.20 million at Dec. 31, 2020 |
| Total liabilities | $125.99 million | $76.81 million at Dec. 31, 2020 |
Q1 net income included a $2.03 million noncash gain from the change in fair value of warrant liabilities and $21,197 of Trust Account interest, offset by operating costs and $17,309 of income tax expense. The comparable 2020 period included a larger warrant fair-value gain, higher Trust Account interest, and an unrealized investment gain; therefore, the decline in net income does not reflect operating revenue performance.
Working capital was $48.29 million at March 31, versus a $0.34 million deficit at year-end, as reported by management. The $50 million PIPE investor deposit in operating cash was recorded as a corresponding liability, not as unrestricted proceeds. The company reported no long-term debt, though it had a $600,000 related-party note payable at quarter-end. It also reported an $8.05 million deferred underwriting fee payable upon completion of a business combination and $66.09 million of warrant liabilities.
Material changes and subsequent transaction
- Operating costs rose to $1.43 million from $0.19 million, while net income fell to $0.60 million from $7.77 million, primarily reflecting lower warrant remeasurement gains and Trust Account income.
- Cash increased mainly because PIPE investors deposited $50 million ahead of the merger vote; the matching investor-deposit liability remained on the balance sheet.
- At the April 6 closing, AST received approximately $227 million of remaining Trust Account funds after transaction-related payments, redemptions, and repayment of the related-party loan. PIPE investors purchased 23 million Class A shares. The filing also reports that 8,460 shares were redeemed at closing for approximately $85,348.
Outlook, risks, and unusual items
- The Q1 financial statements principally reflect the pre-merger SPAC, not AST’s operating business. The filing provides no specific post-merger revenue, earnings, cash-flow, or operating guidance.
- Management disclosed a material weakness in internal control over financial reporting related to accounting for warrants. The warrant accounting error resulted in material misstatements in previously reported financial statement amounts; the company filed an amended 2020 Form 10-K and described remediation steps, but did not guarantee they would be effective.
- Management said the potential financial effects of COVID-19 were not readily determinable; no related adjustments were included in the statements.
- Warrants were classified as liabilities and remeasured at fair value, creating noncash income-statement volatility. The company also disclosed that warrants may expire worthless if a business combination is not completed, and that exercise depends on registration and other terms.
- The filing reports no material legal proceedings and no off-balance-sheet arrangements as of March 31, 2021. It states that risk factors had not materially changed from those in the company’s registration statement.
Important facts for investors to verify
- Post-merger liquidity: distinguish the $50 million pre-closing PIPE deposit from the approximately $227 million of Trust Account funds transferred at closing, and verify subsequent cash use.
- Whether the disclosed warrant-accounting control remediation has been completed and independently assessed, and whether any further restatements or control deficiencies arise.
- The post-combination capitalization, including share classes and voting rights, warrants, and any dilution from potential warrant exercises or AST unit exchanges.
- AST’s actual operating results, funding requirements, and management’s forward guidance, which are not provided by these pre-combination quarterly results.