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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
17.
Income Taxes

 

The Company, organized as a C corporation, owns an equity interest in AST LLC in what is commonly referred to as an “Up-C” structure. For U.S. federal and state income tax purposes, AST LLC has elected to be treated as a partnership and does not pay any income taxes since its income and losses are included in the returns of the members. The portion of the Company’s taxable income or loss attributable to the noncontrolling interests of AST LLC is taxed directly to such members. Consequently, no provision for income taxes, has been included in the financial statements related to this portion of taxable income. 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. The Company has operations in Scotland, Spain, Israel and Lithuania (through September 6, 2022) with tax filings in each foreign jurisdiction.

 

 

Income Tax Expense

 

The components of loss before income taxes were as follows (in thousands):

 

 

Year ended December 31,

 

 

2022

 

 

2021

 

United States

$

(98,774

)

 

$

(70,396

)

Foreign

 

(3,722

)

 

 

(2,534

)

Total

$

(102,496

)

 

$

(72,930

)

 

The income tax expense (benefit) was as follows (in thousands):

 

 

Year ended December 31,

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

Federal

$

-

 

 

$

-

 

State

 

-

 

 

 

-

 

Foreign

 

617

 

 

 

331

 

Total current

 

617

 

 

 

331

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

Federal

 

-

 

 

 

-

 

State

 

-

 

 

 

-

 

Foreign

 

-

 

 

 

-

 

Total deferred

 

-

 

 

 

-

 

Total income tax provision

$

617

 

 

$

331

 

 

The differences between the effective income tax rate and the statutory U.S. federal income tax rate are as follows:

 

 

Year ended December 31,

 

 

2022

 

 

2021

 

Statutory U.S. federal income tax rate

 

21

%

 

 

21

%

Income (loss) attributable to noncontrolling interest

 

(16

)%

 

 

(19

)%

Changes in fair value of warrant liabilities

 

4

%

 

 

5

%

Change in valuation allowance

 

(10

)%

 

 

(99

)%

Business Combination

 

0

%

 

 

89

%

R&D credit

 

2

%

 

 

0

%

Other

 

(2

)%

 

 

3

%

Effective income tax rate

 

(1

)%

 

 

0

%

 

Deferred Tax Assets and Liabilities.

 

Deferred income taxes reflect the net tax effects of tax carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the balances for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands):

 

 

As of December 31,

 

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

Net operating loss carryforwards

$

11,788

 

 

$

8,212

 

Basis difference in the equity of AST LLC

 

79,396

 

 

 

62,717

 

Other

 

3,680

 

 

 

1,495

 

Total deferred tax assets

 

94,864

 

 

 

72,425

 

Valuation allowance

 

(94,864

)

 

 

(72,425

)

Net deferred tax assets

$

-

 

 

$

-

 

 

At December 31, 2022 the Company had unused federal net operating loss carryforwards (gross) for federal income tax purposes of approximately $44.4 million, which can be carried forward indefinitely and may be used to offset future taxable income. In addition, the Company had unused net operating loss carryforwards (gross) for state income tax purposes of approximately $3.1

million, $0.7 million of which expire in 2041. The remaining $2.4 million state net operating loss can be carried forward indefinitely. The Company also had unused net operating loss carryforwards (gross) for foreign income tax purposes of approximately $9.5 million, which can be carried forward indefinitely.

 

Management assesses the need for a valuation allowance in each tax paying component or jurisdiction based upon the available positive and negative evidence to estimate whether sufficient taxable income will exist to permit realization of the deferred tax assets. On the basis of this evaluation, as of December 31, 2022 and 2021 the Company's valuation allowance was $94.9 million and $72.4 million, respectively. The change from December 31, 2021 to December 31, 2022 was primarily driven by the basis difference in the equity of AST LLC.

 

Unrecognized Tax Benefits.

 

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

 

Tax Receivable Agreement

 

In connection with the Closing, the Company entered into the Tax Receivable Agreement. Pursuant to the Tax Receivable Agreement, the Company is generally required to pay the TRA Holders 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company 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 LLC Common Units acquired by the Company from a TRA Holder (including AST LLC Common Units held by a Blocker Corporation acquired by us in a Reorganization Transaction (as defined in the Tax Receivable Agreement)), each as determined at the time of the relevant acquisition;
•
tax basis adjustments resulting from taxable exchanges of AST LLC Common Units (including any such adjustments resulting from certain payments made by us under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the terms of the A&R Operating Agreement;
•
tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement; and
•
certain tax attributes of Blocker Corporations holding AST LLC Common Units that are acquired directly or indirectly by the Company pursuant to a Reorganization Transaction.

 

Some circumstances, such as the Company’s election to terminate early the TRA or certain changes of control of the Company or AST LLC (as described in the A&R Operating Agreement), may require the Company to make lump-sum cash payments based on certain assumptions to all the TRA Holders equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement. Payments under the Tax Receivable Agreement will be the obligations of the Company and not obligations of AST LLC. Any payments made by the Company under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to the Company.

 

As of December 31, 2022, there have been no TRA liabilities recorded.