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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                to                

Commission file number 001-33117 
GLOBALSTAR, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 41-2116508
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)  
 
1351 Holiday Square Blvd.
Covington, Louisiana 70433
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (985) 335-1500
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, par value $0.0001 per shareGSATNYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company) Emerging growth company
 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
 
As of July 28, 2023, 1.8 billion shares of voting common stock were outstanding, 0.1 million shares of preferred stock were outstanding, and no shares of nonvoting common stock were authorized or outstanding. Unless the context otherwise requires, references to common stock in this Report mean the Registrant’s voting common stock.



FORM 10-Q

GLOBALSTAR, INC.
TABLE OF CONTENTS
 
 




PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(Unaudited) 
 Three Months EndedSix Months Ended
June 30,
2023
June 30,
2022
June 30,
2023
June 30,
2022
Revenue:  
Service revenue$48,648 $33,048 $101,602 $62,392 
Subscriber equipment sales6,424 3,752 12,114 7,180 
Total revenue55,072 36,800 113,716 69,572 
Operating expenses:  
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)12,246 10,695 24,066 21,489 
Cost of subscriber equipment sales5,662 3,113 9,971 5,679 
Marketing, general and administrative12,654 9,693 26,045 19,034 
Reduction in the value of long-lived assets 525  525 
Depreciation, amortization and accretion21,890 24,130 43,823 47,913 
Total operating expenses52,452 48,156 103,905 94,640 
Income (loss) from operations2,620 (11,356)9,811 (25,068)
Other (expense) income:  
Loss on extinguishment of debt  (10,403) 
Interest income and expense, net of amounts capitalized(5,070)(7,187)(7,102)(16,717)
Derivative gain (loss)299 (1,242)299 (1,728)
Foreign currency gain (loss)2,038 (7,123)3,945 (3,891)
Other148 272 49 389 
Total other expense(2,585)(15,280)(13,212)(21,947)
Income (loss) before income taxes35 (26,636)(3,401)(47,015)
Income tax expense26 121 70 204 
Net income (loss)$9 $(26,757)$(3,471)$(47,219)
Other comprehensive loss:
Foreign currency translation adjustments(1,307)5,315 (2,736)4,636 
Comprehensive loss$(1,298)$(21,442)$(6,207)$(42,583)
Net loss attributable to common shareholders (Note 10)
(2,635)(26,757)(8,730)(47,219)
Net loss per common share:  
Basic$0.00 $(0.01)$0.00 $(0.03)
Diluted0.00 (0.01)0.00 (0.03)
Weighted-average shares outstanding:  
Basic1,813,393 1,799,886 1,812,617 1,798,784 
Diluted1,813,393 1,799,886 1,812,617 1,798,784 
See accompanying notes to unaudited interim condensed consolidated financial statements.
1


GLOBALSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)
(Unaudited) 
 June 30, 2023December 31, 2022
ASSETS
Current assets:  
Cash and cash equivalents$65,334 $32,082 
Accounts receivable, net of allowance for credit losses of $2,022 and $2,892, respectively
30,188 26,329 
Inventory10,661 9,264 
Prepaid expenses and other current assets14,819 13,569 
Total current assets121,002 81,244 
Property and equipment, net605,502 560,371 
Operating lease right of use assets, net32,557 30,859 
Prepaid satellite construction costs and customer receivable24,188 27,570 
Intangible and other assets, net of accumulated amortization of $11,660 and $10,908, respectively
49,190 38,425 
Total assets$832,439 $738,469 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$29,800 $ 
Accounts payable3,022 3,843 
Vendor financing 59,575 
Accrued expenses29,718 22,554 
Accrued satellite construction costs54,228 36,139 
Payables to affiliates284 326 
Deferred revenue, net56,724 74,639 
Total current liabilities173,776 197,076 
Long-term debt306,786 132,115 
Operating lease liabilities27,720 27,635 
Deferred revenue, net4,920 62,877 
Other non-current liabilities3,871 3,995 
Total non-current liabilities343,297 226,622 
Commitments and contingencies (Note 8)
Stockholders’ equity:  
Preferred Stock of $0.0001 par value; 99,700,000 shares authorized and none issued and outstanding at June 30, 2023 and December 31, 2022, respectively
  
Series A Preferred Convertible Stock of $0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at June 30, 2023 and December 31, 2022, respectively
  
Voting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,813,971,721 and 1,811,074,696 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
181 181 
Additional paid-in capital2,352,414 2,345,612 
Accumulated other comprehensive income6,506 9,242 
Retained deficit(2,043,735)(2,040,264)
Total stockholders’ equity315,366 314,771 
Total liabilities and stockholders’ equity$832,439 $738,469 
 See accompanying notes to unaudited interim condensed consolidated financial statements.
2


GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited) 
Preferred StockCommon StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Deficit
Total
 SharesAmountSharesAmount
Balances – January 1, 2023149 $ 1,811,075 $181 $2,345,612 $9,242 $(2,040,264)$314,771 
Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation— — 2,037 — 3,795 — — 3,795 
Contribution of services— — — — 47 — — 47 
Issuance and recognition of stock-based compensation of employee stock purchase plan— — — — 102 — — 102 
Series A Preferred Stock Dividends— — — — (3,952)— — (3,952)
Other comprehensive loss— — — — — (1,429)— (1,429)
Net loss— — — — — — (3,480)(3,480)
Balances – March 31, 2023149 $ 1,813,112 $181 $2,345,604 $7,813 $(2,043,744)$309,854 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 363 — 1,874 — — 1,874 
Contribution of services— — — — 47 — — 47 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation— — 497 — 636 — — 636 
Series A Preferred Stock Dividends— — — — (2,644)— — (2,644)
Fair value of Thermo guarantee associated with the 2023 Funding Agreement— — — — 6,897 — — 6,897 
Other comprehensive loss— — — — — (1,307)— (1,307)
Net income— — — — — — 9 9 
Balances – June 30, 2023149 $ 1,813,972 $181 $2,352,414 $6,506 $(2,043,735)$315,366 



3


Preferred StockCommon StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Deficit
Total
SharesAmountSharesAmount
Balances – January 1, 2022— $— 1,796,529 $180 $2,146,710 $1,890 $(1,783,349)$365,431 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 703 — 2,230 — — 2,230 
Contribution of services— — — — 47 47 
Recognition of stock-based compensation of employee stock purchase plan— — — — 117 — — 117 
Common stock issued in connection with conversion of 2013 8.00% Notes
— — 2,253  2,548 — — 2,548 
Other comprehensive loss— — — — — (679)— (679)
Net loss— — — — — — (20,462)(20,462)
Balances – March 31, 2022— $— 1,799,485 $180 $2,151,652 $1,211 $(1,803,811)$349,232 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 546 — 879 — — 879 
Contribution of services— — — — 47 — — 47 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation— — 446 — 617 — — 617 
Other comprehensive income— — — — — 5,315 — 5,315 
Net loss— — — — — — (26,757)(26,757)
Balances – June 30, 2022— $— 1,800,477 $180 $2,153,195 $6,526 $(1,830,568)$329,333 
See accompanying notes to unaudited interim condensed consolidated financial statements.
4


GLOBALSTAR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended
 June 30,
2023
June 30,
2022
Cash flows provided by operating activities:  
Net loss$(3,471)$(47,219)
Adjustments to reconcile net loss to net cash provided by operating activities:  
Depreciation, amortization and accretion43,823 47,913 
Stock-based compensation expense6,292 2,380 
Noncash consideration, net, associated with wholesale capacity contract(1,203) 
Reduction in value of long-lived assets and inventory 541 
Noncash interest and accretion expense9,760 16,522 
Unrealized foreign currency (gain) loss(4,008)4,139 
Write off of debt discount and deferred financing costs upon extinguishment of debt10,194  
Other, net(487)(424)
Changes in operating assets and liabilities:  
Accounts receivable(2,100)3,737 
Inventory12 (1,840)
Prepaid expenses and other current assets(1,151)(227)
Other assets42 605 
Accounts payable and accrued expenses(3,445)(8,106)
Payables to affiliates(42)(33)
Other non-current liabilities21 (370)
Deferred revenue(11,244)3,153 
Net cash provided by operating activities42,993 20,771 
Cash flows used in investing activities:  
Payments under the satellite procurement agreement(108,664) 
Other network upgrades to support the Service Agreements(6,898)(18,511)
Payments of capitalized interest(5,263) 
Network upgrades to support product development(3,422)(3,198)
Purchase of intangible assets(389)(683)
Net cash used in investing activities(124,636)(22,392)
Cash flows provided by financing activities:  
Principal and Interest payments of the 2019 Facility Agreement(148,281) 
Proceeds from 2023 13% Notes
190,000  
Proceeds from 2023 Funding Agreement87,730  
Dividends paid on Series A Preferred Stock(6,595) 
Payments for debt issuance costs(8,530) 
Proceeds from issuance of common stock and exercise of options498 449 
Net cash provided by financing activities114,822 449 
Effect of exchange rate changes on cash, cash equivalents and restricted cash73 9 
Net increase (decrease) in cash, cash equivalents and restricted cash33,252 (1,163)
Cash, cash equivalents and restricted cash, beginning of period32,082 14,304 
Cash, cash equivalents and restricted cash, end of period$65,334 $13,141 

As of:
June 30,
2023
December 31,
2022
Reconciliation of cash and cash equivalents
Cash and cash equivalents$65,334 $32,082 
Total cash and cash equivalents cash shown in the statement of cash flows$65,334 $32,082 
 Six Months Ended
 June 30,
2023
June 30,
2022
Supplemental disclosure of cash flow information:  
Cash paid for interest$7,554 $ 
Supplemental disclosure of non-cash financing and investing activities:  
Increase in capitalized accrued interest for network upgrades$1,609 $5,059 
Capitalized accretion of debt discount and amortization of prepaid financing costs1,772 754 
Satellite construction assets acquired through vendor financing arrangement 73,575 
Re-characterization of 2021 Funding Agreement to debt87,950  

See accompanying notes to unaudited interim condensed consolidated financial statements.
5


GLOBALSTAR, INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION

Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications and wholesale capacity services through its global satellite network. The Company’s only reportable segment is its MSS business. Thermo Companies, through commonly controlled affiliates, (collectively, “Thermo”) is the principal owner and largest stockholder of Globalstar. The Company’s Executive Chairman of the Board controls Thermo.

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); however, management believes the disclosures made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023 (the “2022 Annual Report”). 

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. The Company evaluates estimates on an ongoing basis. The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation.

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recently Issued Accounting Pronouncements 

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2022-04: Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04 added certain disclosure requirements for buyers in supplier finance programs. The amendments in the update require that buyers disclose qualitative and quantitative information about their supplier finance programs. Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted this standard when it became effective on January 1, 2023 and revised its disclosures pursuant to ASU 2022-04.

6


2. REVENUE

Disaggregation of Revenue

The following table discloses revenue disaggregated by type of product and service (amounts in thousands):

Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Service revenue:
Subscriber services
Duplex$6,359 $6,936 $12,110 $13,082 
SPOT11,039 11,536 22,353 22,791 
Commercial IoT5,356 5,038 10,534 9,708 
Wholesale capacity services25,478 8,825 55,889 15,668 
Engineering and other services416 713 716 1,143 
Total service revenue48,648 33,048 101,602 62,392 
Subscriber equipment sales:
Duplex$17 $143 $36 $273 
SPOT2,513 1,674 4,439 3,149 
Commercial IoT3,901 1,908 7,713 3,714 
Other(7)27 (74)44 
Total subscriber equipment sales6,424 3,752 12,114 7,180 
Total revenue$55,072 $36,800 $113,716 $69,572 

In September 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). The Company is the satellite operator for these Services pursuant to the agreement (the “Service Agreement”) and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Service Agreements generally require Globalstar to allocate network capacity to support the Services, which launched in November 2022. Revenue associated with the Service Agreements is included in "Wholesale capacity services" in the table above.

As consideration for the services provided by Globalstar under the Service Agreements, Partner makes payments to Globalstar, including a recurring service fee, payments relating to certain service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and other related criteria. In February 2023, Partner agreed to pay the Company $6.5 million as consideration related to performance obligations completed in prior periods. The Company recognized this revenue during the first quarter of 2023.

7


The Company attributes equipment revenue to various countries based on the location where equipment is sold. Service revenue is generally attributed to the various countries based on the Globalstar entity that holds the customer contract. The following table discloses revenue disaggregated by geographical market (amounts in thousands):

Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Service revenue:
United States$40,643 $24,875 $85,704 $47,163 
Canada3,640 4,128 7,469 7,817 
Europe1,706 1,671 3,219 3,154 
Central and South America2,477 2,248 4,844 3,984 
Others182 126 366 274 
Total service revenue$48,648 $33,048 $101,602 $62,392 
Subscriber equipment sales:
United States$2,562 $2,227 $4,545 $3,783 
Canada2,129 879 4,435 1,677 
Europe907 309 1,727 945 
Central and South America825 328 1,402 757 
Others1 9 5 18 
Total subscriber equipment sales$6,424 $3,752 $12,114 $7,180 
Total revenue$55,072 $36,800 $113,716 $69,572 

Accounts Receivable

The Company records trade accounts receivable from its customers, including MSS subscribers and its Partner under the Service Agreements, when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future. In addition to receivables arising from the sale of goods or services, the Company also has certain arrangements whereby it acts as an agent to procure goods and perform services on behalf of Partner under the Service Agreements.

Receivables are included in "Accounts receivable, net of allowance for credit losses," on the Company's consolidated balance sheets except for the long-term portion of the wholesale capacity accounts receivable, which is included in "Prepaid satellite construction costs and customer receivable." The Company's receivable balances by type and classification are presented in the table below net of allowance for credit losses and may include amounts related to earned but unbilled receivables (amounts in thousands).

As of:
June 30, 2023December 31, 2022
Accounts receivable, net of allowance for credit losses
Subscriber accounts receivable$20,816 $14,850 
Wholesale capacity accounts receivable7,481 7,234 
Agency agreement accounts receivable1,891 4,245 
Total accounts receivable, net of allowance for credit losses$30,188 $26,329 
Long-term wholesale capacity accounts receivable16,100 16,100 
Total accounts receivable (short-term and long-term), net of allowance for credit losses$46,288 $42,429 

In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constellation. Under the Service Agreements, subject to certain terms and conditions, Partner has agreed to make service payments equal to 95% of the approved capital expenditures under the satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA") and certain other costs incurred for the new satellites; these payments are expected to be paid on a straight-line basis commencing with the launch of these satellites through their estimated useful life ("Phase 2 Service Period"). Based on construction in progress incurred by the Company, amounts expected to be billed to Partner associated with this phase of the Service Agreements were $162.5 million as of June 30, 2023.
8



In prior filings, the Company recorded a long-term unbilled receivable and related long-term deferred revenue reflecting its Partner’s obligation to fund 95% of the construction costs associated with the satellites that are being constructed to provide service during the Phase 2 Service Period. During the second quarter 2023, the Company revised this presentation and applied this change to its December 31, 2022 balance sheet. This change in accounting presentation has no impact on Partner’s obligation to provide funding for the satellite construction costs nor the expected revenue the Company will recognize during the Phase 2 Service Period.

Contract Liabilities

Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. Contract liabilities reflect balances from its customers, including MSS subscribers and the Partner under the Service Agreements. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands).

As of:
June 30, 2023December 31, 2022
Short-term contract liabilities
Subscriber contract liabilities$24,074 $21,987 
Wholesale capacity contract liabilities32,650 52,652 
Total short-term contract liabilities$56,724 $74,639 
Long-term contract liabilities
Subscriber contract liabilities$1,770 $1,704 
Wholesale capacity contract liabilities, net of contract asset3,150 61,173 
Total long-term contract liabilities$4,920 $62,877 
Total contract liabilities$61,644 $137,516 

For subscriber contract liabilities, the amount of revenue recognized during the six months ended June 30, 2023 and 2022 from performance obligations included in the contract liability balance at the beginning of these periods was $14.0 million and $18.3 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the six months ended June 30, 2023 and 2022 from performance obligations included in the contract liability balance at the beginning of these periods was $33.5 million and less than $0.1 million, respectively.

The duration of the Company’s contracts with subscribers is generally one year or less. As of June 30, 2023, the Company expects to recognize $24.1 million of its remaining performance obligations to its subscribers during the next twelve months. The Service Agreements have no expiration date; therefore, the related contract liabilities may be recognized into revenue over various periods driven by the expected related service or recoupment periods. As of June 30, 2023, the Company expects to recognize $32.7 million of its remaining performance obligations to its Partner during the next twelve months.

9


The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands).

As of:
June 30, 2023December 31, 2022
Wholesale capacity contract liabilities, net:
Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1) (3)
$6,426 $99,671 
Additional consideration associated with the 2021 Funding Agreement (4)
10,519  
Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 during Phases 1 and 224,552 25,438 
Advanced payments contractually owed for services expected to be performed with the next-generation satellite constellation prior to the Phase 2 Service Period16,602 22,540 
Additional consideration associated with the 2023 Funding Agreement (5)
4,509  
Advanced payments for the Phase 1 service fee and service-related operating expenses and capital expenditures
19,871 18,872 
Contract asset (2)
(46,679)(52,696)
Wholesale capacity contract liabilities, net$35,800 $113,825 

(1)In accordance with applicable accounting guidance, the Company records imputed interest associated with the significant financing component, totaling $4.8 million and $5.3 million as of June 30, 2023 and December 31, 2022, respectively, which is included in deferred revenue and represents the remaining amount to be recognized over the Company's performance obligations.
(2)In November 2022, the Company issued warrants to Partner (the "Warrants"). The initial fair value of the Warrants at the time of issuance was $48.3 million and recorded in equity with an offset to a contract asset on the Company's consolidated balance sheets. The fair value of the Warrants is recorded as a reduction to revenue over the period in which the Company performs its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided.
(3)During 2021, the Company received payments from Partner totaling $94.2 million (the "2021 Funding Agreement"). In February 2023, the Service Agreements were amended. This amendment, which was effective in April 2023, changed certain terms in the 2021 Funding Agreement, including granting Partner a first lien security interest in substantially all of the assets of the Company and its domestic subsidiaries. This amendment resulted in $88.0 million previously recorded as deferred revenue to be re-characterized as debt during the second quarter of 2023. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements.
(4)In connection with the Company recording the fair value of the financial obligations in the amended 2021 Funding Agreement, it recorded a debt discount of $11.6 million, representing the difference between the present value of the future principal payments discounted using the prevailing market rate at the date of issuance of the debt and the effective rate. The offset was recorded to deferred revenue and is being recognized into revenue over the Phase 1 Service Period.
(5)In connection with the Company recording the fair value of the financial obligations in the 2023 Funding Agreement (as defined in Note 5: Long-Term Debt and Other Financing Arrangements), it recorded a debt discount of $4.5 million, representing the difference between the present value of the future principal payments discounted using the prevailing market rate at the date of issuance of the debt and the effective rate. The offset was recorded to deferred revenue and will be recognized into revenue over the Phase 2 Service Period.

10


3. LEASES

The following tables disclose the components of the Company’s finance and operating leases (amounts in thousands):

As of:
June 30, 2023December 31, 2022
Operating leases:
Right-of-use asset, net$32,557 $30,859 
Short-term lease liability (recorded in accrued expenses)2,727 2,747 
Long-term lease liability27,720 27,635 
Total operating lease liabilities$30,447 $30,382 
Finance leases:
Right-of-use asset, net (recorded in intangible and other current assets, net)$824 $104 
Short-term lease liability (recorded in accrued expenses)746 16 
Long-term lease liability (recorded in non-current liabilities)63 71 
Total finance lease liabilities$809 $87 

Lease Cost

The components of lease cost are reflected in the table below (amounts in thousands):

Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Operating lease cost:
Amortization of right-of-use assets$693 $604 $1,375 $1,324 
Interest on lease liabilities633 632 1,247 1,277 
Capitalized lease cost (244) (487)
Finance lease cost:
Amortization of right-of-use assets5 1 10 3 
Short-term lease cost266 144 511 208 
Total lease cost$1,597 $1,137 $3,143 $2,325 

In accordance with the Service Agreements, prior to the launch of Phase 1 services in November 2022, the Company capitalized certain costs to fulfill this contract, including lease expense, as shown in the table above. These capitalized lease costs are amortized over the expected term of the related performance obligation.

Interest on finance lease liabilities was less than $0.1 million for the three and six months ended June 30, 2023 and 2022; accordingly, these amounts are not shown in the table above.

11


Weighted-Average Remaining Lease Term and Discount Rate

The following table discloses the weighted-average remaining lease term and discount rate for finance and operating leases.
As of:
June 30, 2023December 31, 2022
Weighted-average lease term
Finance leases0.6 years4.6 years
Operating Leases10.2 years10.1 years
Weighted-average discount rate
Finance leases8.7 %10.2 %
Operating leases8.6 %8.5 %

Supplemental Cash Flow Information

The below table discloses supplemental cash flow information for operating leases (in thousands):

Six Months Ended
June 30, 2023June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$2,988 $2,536 

Operating and financing cash flows from finance leases were each less than $0.1 million for each of the six months ended June 30, 2023 and 2022; accordingly, these cash flows are not shown in the table above.

Maturity Analysis

The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of June 30, 2023 (amounts in thousands):

Operating LeasesFinance Leases
2023 (remaining)$2,662 $748 
20245,187 23 
20255,215 23 
20265,262 23 
20275,141 15 
Thereafter22,082  
Total lease payments$45,549 $832 
Imputed interest(15,102)(23)
Discounted lease liability$30,447 $809 

12


4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands): 

As of:
June 30,
2023
December 31,
2022
Globalstar System:  
Space component$1,246,343 $1,246,343 
Ground component99,585 102,567 
Construction in progress:  
Space component190,611 110,068 
Ground component11,211 5,316 
Other8,444 9,167 
Total Globalstar System1,556,194 1,473,461 
Internally developed and purchased software23,225 22,509 
Equipment9,312 8,042 
Land and buildings1,816 1,681 
Leasehold improvements2,085 2,083 
Total property and equipment1,592,632 1,507,776 
Accumulated depreciation(987,130)(947,405)
Total property and equipment, net$605,502 $560,371 

In 2022, the Company entered into an agreement with MDA for the purchase of new satellites that will replenish the Company's existing satellite constellation. This agreement has an initial contract price of $327 million, of which $166.0 million had been incurred as of June 30, 2023 and $98.5 million as of December 31, 2022. The "space component" of construction in progress in the table above includes costs incurred under the MDA contract as well as associated personnel costs and capitalized interest. Accrued satellite construction costs on the Company's condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 included $54.2 million and $36.1 million, respectively, of work completed, but not yet invoiced, under the satellite procurement agreement. As of June 30, 2023 and December 31, 2022, the Company also recorded $8.1 million and $11.5 million, respectively, as prepaid satellite construction costs for the first milestone payment made upon signing of the contract; these costs are recorded in Prepaid satellite construction costs and customer receivable on the Company's condensed consolidated balance sheets.
13


5. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS 
Long-term debt and vendor financing consists of the following (in thousands): 

As of:
 June 30, 2023December 31, 2022
 Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
2023 Funding Agreement$87,729 $11,891 $75,838 $ $ $ 
2021 Funding Agreement87,950 10,015 77,935    
2023 13% Notes
200,000 17,187 182,813    
2019 Facility Agreement   143,213 11,098 132,115 
Vendor financing   59,575  59,575 
Total debt and vendor financing$375,679 $39,093 $336,586 $202,788 $11,098 $191,690 
Less: current portion29,800  29,800 59,575  59,575 
Long-term debt and vendor financing$345,879 $39,093 $306,786 $143,213 $11,098 $132,115 

The principal amounts shown above include payment of in-kind interest, as applicable. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion. All amounts outstanding associated with the Company's vendor financing arrangement were due in March 2023 and, therefore, were reflected as a current liability on the Company's consolidated balance sheet as of December 31, 2022. As of June 30, 2023, the current portion of long-term debt is associated with the 2021 Funding Agreement and represents the amounts to be paid to Partner under the Service Agreements during the next twelve months.

2023 Funding Agreement

In February 2023, the Company and its Partner agreed to amend its Service Agreements to provide for, among other things, the Partner’s payment of up to $252 million to the Company (the “2023 Funding Agreement”) to fund 50% of the amounts due under its agreement with MDA, as well as launch, insurance and ancillary costs incurred in connection with the construction and launch of these satellites. The 2023 Funding Agreement replaces the Company’s requirement to raise third-party financing for such costs as previously required under the Service Agreements and will be funded on a quarterly basis, subject to certain conditions in the agreement. The remaining amount of the satellite costs is expected to be funded from Globalstar’s operating cash flows. Partner made the first payment under the 2023 Funding Agreement to the Company in April 2023 in the amount of $87.7 million. These proceeds were used to pay amounts owed to MDA for milestones completed as of the payment date.

The total amount paid to the Company under the 2023 Funding Agreement, including fees, is expected to be recouped from amounts payable by the Partner for services provided by the Company under the Service Agreements. The total balance is expected to be recouped in installments for a period of 16 quarters beginning no later than the third quarter of 2025. The balance may also be repaid over time through excess cash flow sweeps or voluntary prepayments, as provided under the terms of the 2023 Funding Agreement. For as long as any amount funded under the 2023 Funding Agreement is outstanding, the Company will be subject to certain covenants, including (i) maintenance of a minimum cash balance of $30 million, (ii) interest coverage and leverage ratios, and (iii) other customary negative covenants, including limitations on certain asset transfers, expenditures and investments.

Thermo has agreed to provide support of certain of the Company’s obligations under the 2023 Funding Agreement. Currently, this support agreement is directly between Thermo and Partner, and the parties have agreed to replace it with agreement between Thermo, the Company and the Partner. Entry into this guarantee agreement received shareholder approval in June 2023, and it is expected to be effective during the third quarter of 2023. See further discussion regarding Thermo's guarantee in Note 9: Related Party Transactions.

The Company recorded the fair value of the 2023 Funding Agreement using a discounted cash flow model. The Company recorded debt discounts for the difference between the fair value of the debt and the proceeds received. This difference is attributed to the fair value of the Thermo guarantee (recorded as additional paid in capital) and the fair value of the economic
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benefit received due to the existing customer relationship (recorded as deferred revenue); both of these debt discounts are netted against the face value of the 2023 Funding Agreement. The Company is accreting the debt discounts to interest expense through the maturity date using an effective interest rate method.

Additionally, the prepayment features included in the 2023 Funding Agreement required bifurcation from the debt and were valued separately. The Company recorded the embedded derivative liability as a non-current liability on its condensed consolidated balance sheet with a corresponding debt discount, which is netted against the face value of the 2023 Funding Agreement. The Company is accreting the debt discount associated with the embedded derivative liability to interest expense through the maturity date using an effective interest rate method. Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2023 Funding Agreement.

As the Company makes additional draws under the 2023 Funding Agreement, the amount of each draw will be recorded at fair value and the Company will assess the fair value of embedded features within the debt.

The table below outlines the components of the first draw under the 2023 Funding Agreement at funding (amounts in thousands):

Principal $87,729 
Debt Discount - Thermo Guarantee(6,897)
Debt Discount - Customer Relationship(4,509)
Debt Discount - Embedded Derivative(341)
Fair Value at Issuance$75,982 

2021 Funding Agreement

During 2021, the Company received payments from Partner under the 2021 Funding Agreement totaling $94.2 million. In connection with the February 2023 amendment of the Service Agreements (discussed above), certain terms of the 2021 Funding Agreement with Partner were amended to align with the terms of the 2023 Funding Agreement, including granting Partner a first-priority lien in substantially all of the assets of the Company and its domestic subsidiaries to secure the Company's repayment of amounts funded by Partner. This amendment resulted in the Company re-characterizing the previously recorded deferred revenue to debt.

The Company recorded the funding under the 2021 Funding Agreement at fair value, net of a debt discount. The Company is accreting the debt discount to interest expense through the maturity date using an effective interest rate method.

The table below outlines the components of the 2021 Funding Agreement (amounts in thousands):

Principal $94,200 
Less: Amount Repaid(6,250)
Debt Discount - Customer Relationship(11,626)
Fair Value at Issuance$76,324 
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2023 13% Notes

In March 2023, the Company completed the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the “2023 13% Notes”). The 2023 13% Notes were sold pursuant to a Purchase Agreement (the “Purchase Agreement”) dated March 28, 2023 among the Company, as issuer, the subsidiary guarantors party thereto (each, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”), an affiliate of Värde Partners and the other purchasers party thereto (collectively, the “Purchasers”). The 2023 13% Notes were issued pursuant to an indenture, dated as of March 31, 2023 (the “Indenture”), among the Company, the Subsidiary Guarantors, as guarantors, and Wilmington Trust, National Association, as trustee.

The 2023 13% Notes are senior, unsecured obligations of the Company and have a stated maturity of September 15, 2029. The 2023 13% Notes were sold at an issue price of 95% of the principal amount of the 2023 13% Notes. The Company used a portion of the net proceeds to pay financing costs of $7.8 million, which were recorded on the Company's condensed consolidated balance sheet as a reduction in the carrying amount of the debt. The 2023 13% Notes bear interest initially at a rate of 13.00% per annum payable semi-annually in arrears. The Company is required to pay interest (i) at a rate per annum of 4.00% which must be paid in cash and (ii) at a rate per annum of 9.00% which may be paid either (a) in-kind (“PIK”) by increasing the principal amount of the 2023 13% Notes outstanding or (b) in cash, in such proportion as the Company may choose, with a step up in the PIK component of the interest if any 2023 13% Notes remain outstanding after March 15, 2028. The Company has agreed with its Partner under the Service Agreements to pay cash interest on the 2023 13% Notes at a rate of 6.5% per annum and PIK interest at a rate of 6.5% per annum.

The 2023 13% Notes may be redeemed at the option of the Company at any time, subject to the conditions of the Indenture. Among other things, prior to March 15, 2025 (the “First Call Date”), the Company will be permitted to redeem the 2023 13% Notes in whole or in part at the redemption price equal to 100% of the principal amount of the 2023 13% Notes redeemed plus a premium based on the net present value of the remaining interest payments through the First Call Date. Beginning on the First Call Date, the 2023 13% Notes may be redeemed at a redemption price equal to 103% of the principal amount, declining to 100% of the principal amount after March 15, 2027, in each case, together with accrued and unpaid interest.

Additionally, in the event of a Change of Control (as such term is defined in the Indenture) or certain other events, holders of the 2023 13% Notes have the right to require the Company to repurchase all or a portion of their 2023 13% Notes at a price (as calculated by the Company) in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and certain tax payments. The Indenture includes customary terms and covenants, including restrictions on the Company’s and the Subsidiary Guarantors’ ability to incur indebtedness, make guarantees, sell equity interests, and customary events of default after which the holders may accelerate the maturity of the 2023 13% Notes and become due and payable immediately.

2019 Facility Agreement

In November 2019, the Company entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement"). The 2019 Facility Agreement was scheduled to mature in November 2025. The loans under the 2019 Facility Agreement bore interest at a rate of 14.0% per annum to be paid in kind (or in cash at the option of the Company).

The Service Agreements required the Company to refinance all loans outstanding under the 2019 Facility Agreement. A portion was refinanced in November 2022 and the remaining portion was refinanced in March 2023. Using a portion of the proceeds from the sale of the 2023 13% Notes, the Company repaid all of its outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

The Company recorded a loss on extinguishment of debt of $10.4 million in the first quarter of 2023 representing the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs, debt discounts and derivatives) and the reacquisition price of the debt. Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2019 Facility Agreement.
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Vendor Financing

In February 2022, the Company entered into a satellite procurement agreement with MDA (see Note 8: Commitments and Contingencies for further discussion). This agreement (as amended in October 2022 and January 2023) provided for deferrals of milestone payments through March 15, 2023. Interest accrued on the amount outstanding at an annual rate of 7%, which increased to 10.5% on balances between December 2022 and March 2023. The Company has made payments totaling $76.1 million to MDA under this vendor financing arrangement, of which $62.1 million (including $2.5 million of interest) was paid during the first quarter of 2023 to fully repay the outstanding vendor financing balance.

Reflected in the table below is a rollforward of the Company's obligations under its vendor financing arrangement with MDA (amounts in thousands):
As of:
June 30, 2023December 31, 2022
Confirmed obligations outstanding, January 1, 2023 and 2022, respectively$59,575 $ 
Invoices confirmed during the periods 73,575 
Confirmed invoices paid during the periods(59,575)(14,000)
Confirmed obligations outstanding, June 30, 2023 and December 31, 2022, respectively
$ $59,575 

Series A Preferred Stock

In November 2022, the Company issued 149,425 shares of its 7.0% Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share (the “Series A Preferred Stock”) in exchange for $149.4 million outstanding principal amount of its 2019 Facility Agreement held by affiliates of Thermo and certain other lenders. The Company recorded the Series A Preferred Stock at fair value of the shares totaling $105.3 million on its consolidated balance sheet.

Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by the Company's Board of Directors or a committee thereof, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. The table below reflects the dividends approved by the Company's Board of Directors (amounts in thousands):

Payment PeriodPayment DatePayment Amount
November 15, 2022 - December 31, 2022January 2023$1,337 
January 1, 2023 - March 31, 2023April 20232,615 
April 1, 2023 - June 30, 2023June 20232,644 

The shares of Series A Preferred Stock do not possess voting rights, other than certain matters specifically affecting the rights and obligations of the Series A Preferred. Series A Preferred Stock may be redeemed by the Company, in whole or in part, at any time. The holders of the Series A Preferred Stock do not have any rights to convert or require the Company to redeem such stock.

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6. DERIVATIVES 

The Company has identified various embedded derivatives resulting from certain features in the Company’s borrowing arrangements, requiring recognition on its consolidated balance sheets. None of these derivative instruments are designated as a hedge. The following table discloses the fair values of the derivative instruments on the Company’s consolidated balance sheet (in thousands):

As of:
 June 30, 2023December 31, 2022
Derivative liabilities:  
Embedded derivative within 2023 Funding Agreement $(42)$ 
Compound embedded derivative within the 2019 Facility Agreement (122)

Derivative liabilities are recorded in "Other non-current liabilities" on the Company's consolidated balance sheet.

 The following table discloses the changes in value recorded as derivative gain (loss) in the Company’s condensed consolidated statement of operations (in thousands): 

Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Embedded derivative within 2023 Funding Agreement$299 $ $299 $ 
Compound embedded derivative within the 2013 8.00% Notes
   216 
Compound embedded derivative within the 2019 Facility Agreement (1,242) (1,944)
Total derivative gain (loss)$299 $(1,242)$299 $(1,728)

The fair value of each embedded derivative is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in the Company's condensed consolidated statements of operations and its condensed consolidated statements of cash flows as a non-cash operating activity. See Note 7: Fair Value Measurements for further discussion.

The instruments and related features embedded in the debt instruments that are required to be accounted for as derivatives are described below.

Compound Embedded Derivative within 2013 8.00% Notes

The 2013 8.00% Notes contained a conversion option and contingent put feature that were required to be bifurcated and recorded as a compound embedded derivative. The Company determined the fair value of the compound embedded derivative liability using a Monte Carlo simulation model. During the first quarter of 2022, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative was extinguished and is no longer outstanding.

Compound embedded derivative within the 2019 Facility Agreement

The 2019 Facility Agreement contained certain contingently exercisable put features that were required to be bifurcated and recorded as a compound embedded derivative. The Company determined the fair value of this derivative using a probability weighted discounted cash flow model. In November 2022, the Company exchanged a portion of the 2019 Facility Agreement into Series A Preferred Stock. In March 2023, the Company refinanced the remaining principal outstanding under the 2019 Facility Agreement with proceeds from the issuance of its 2023 13% Notes. As a result of this activity, the Company wrote off the embedded derivative associated with the 2019 Facility Agreement, which is included in "Loss on extinguishment of debt" on the condensed consolidated statement of operations; therefore, no balance remained as of March 31, 2023. See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion.

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2023 Funding Agreement

The 2023 Funding Agreement contains certain prepayment features that are required to be bifurcated and recorded as an embedded derivative liability on the Company's condensed consolidated balance sheet with a corresponding debt discount that is netted against the principal amount of the draws under the 2023 Funding Agreement. The Company determined the fair value of the embedded derivative liability using a discounted cash flow model.


7. FAIR VALUE MEASUREMENTS

The Company follows the authoritative guidance for fair value measurements relating to financial and non-financial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Recurring Fair Value Measurements 

The following tables provide a summary of the liabilities measured at fair value on a recurring basis (in thousands): 
 June 30, 2023
(Level 1)(Level 2)(Level 3)Total
 Balance
Embedded derivative within 2023 Funding Agreement$ $ $(42)$(42)
Total liabilities measured at fair value$ $ $(42)$(42)

 December 31, 2022
(Level 1)(Level 2)(Level 3)Total
 Balance
Compound embedded derivative within the 2019 Facility Agreement  (122)(122)
Total liabilities measured at fair value$ $ $(122)$(122)

The Company marks-to-market its derivatives at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s consolidated statements of operations. In March 2023, the Company refinanced the remaining principal balance outstanding under the 2019 Facility Agreement and wrote off the associated embedded derivative balance; therefore, no balance remained as of March 31, 2023.

Compound Embedded Derivative within the 2019 Facility Agreement

 The compound embedded derivative within the 2019 Facility Agreement was valued using a probability weighted discounted cash flow model. The most significant observable input used in the fair value measurement was the discount yield. The unobservable inputs used in the fair value measurement included the probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement. See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion.

Embedded Derivative within the 2023 Funding Agreement

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The embedded derivative associated with the 2023 Funding Agreement is valued using a discounted cash flow model. The most significant observable input used in the fair value measurement is the discount yield, which was 8.21% at June 30, 2023 and 8.52% at issuance. As the discount yield used in the valuation decreases, the fair value of the embedded derivative decreases. The significant unobservable input used in the fair value measurement includes estimated timing and amounts of cash flows associated with the prepayment features within the debt agreement. As projected cash flows decrease, the fair value of the embedded derivative decreases.

See Note 6: Derivatives for further discussion.

Rollforward of Recurring Level 3 Assets and Liabilities

The following table presents a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
Six Months Ended 
June 30, 2023
Twelve Months Ended December 31, 2022
Balance at beginning of period, January 1, 2023 and 2022, respectively$(122)$(880)
Issuance of embedded derivative within the 2023 Funding Agreement(341) 
Derivative adjustment related to conversions 1,563 
Derivative adjustment related to extinguishment of debt122  
Unrealized gain (loss), included in derivative gain (loss)299 (805)
Balance at end of period, June 30, 2023 and December 31, 2022, respectively
$(42)$(122)
Nonrecurring Fair Value Measurements
2023 Funding Agreement

As previously discussed, the Company entered into the 2023 Funding Agreement with its Partner in February 2023. Significant quantitative Level 3 inputs were utilized in the valuation model as of the first draw date on April 18, 2023. The Company's first draw under the 2023 Funding Agreement occurred in April 2023 with a total fair value of $76.0 million calculated as the projected future cash flows discounted using the prevailing market rate of interest for a similar transaction. The discount yield used for this calculation was 8.52%.

Amounts payable to Partner under the 2023 Funding Agreement, are expected to be guaranteed by Thermo under a guarantee agreement among Thermo, the Company and the Partner. The Company recorded a total fair value of $6.9 million for this embedded feature, which was calculated as the difference in projected cash flows with and without the guarantee agreement discounted using calculated rates of 6.22% and 8.52%, respectively.

2021 Funding Agreement

In connection with the re-characterization of the 2021 Funding Agreement from deferred revenue to debt, the Company recorded the fair value of the debt calculated as the projected cash flows discounted using the prevailing market rate of interest for a similar transaction. The discount yield used for this calculation was 8.52%. The total fair value of the 2021 Funding Agreement was $76.3 million and was recorded on the Company's condensed consolidated balances sheet during the second quarter of 2023 when the amendment was effective.

Fair Value of Debt and Other Financing Arrangements
The Company believes it is not practicable to determine the fair value of its debt agreements on a recurring basis without incurring significant additional costs. Unlike typical long-term debt, certain terms for these instruments are not readily available and generally involve a variety of factors, including due diligence by the debt holders. The Company's vendor financing arrangement was recorded at net carrying value, which approximated fair value.
See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt instruments.

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8. COMMITMENTS AND CONTINGENCIES

Service Agreements

The Service Agreements set forth the primary terms for the Company to provide services to Partner and incur costs related primarily to new gateways and upgrades at existing gateways as well as satellite construction and launch services. The Service Agreements have an indefinite term but provide that either party may terminate subject to certain notice requirements and, in some cases, other conditions. The Service Agreements also provide for various commitments with which the Company must comply, including to:

Allocate 85% of its current and future network capacity to support the Services;

Provide and maintain all resources, including personnel, software, satellite, gateways, satellite spectrum and regulatory rights necessary to provide the Services (the “Required Resources”);

Prioritize the Services and provide Partner with priority access to the Required Resources, including the Company’s licensed satellite spectrum;

Maintain minimum quality and coverage standards and provide continuity of service;

Maintain minimum liquidity of $30 million;

Use best efforts to obtain a standby letter of credit by December 31, 2023 (or such future date as determined by Partner) in the aggregate outstanding amounts of the 2021 and 2023 Funding Agreements;

Allow Partner to recoup advance payments made to Globalstar from future service fees or, to the extent recoupment is not possible, to repay such amounts in cash; and,

Provide the Resource Protections as defined in the Service Agreements.

The Service Agreements also required the Company refinance all loans outstanding under the 2019 Facility Agreement. The required refinancings have been completed.

Partner has the right, but not the obligation, to participate in certain issuances of the Company’s equity securities, in order to maintain its percentage interest in the Company (determined on a fully diluted basis, assuming exercise of all the Warrants).

Refer to Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 5: Long-Term Debt and Other Financing Arrangements for further discussion.

Satellite Procurement Agreement

In February 2022, the Company entered into a satellite procurement agreement with MDA pursuant to which Globalstar will acquire 17 satellites that will replenish Globalstar's existing constellation of satellites and ensure long-term continuity of its mobile satellite services. Globalstar is acquiring the satellites to provide continuous satellite services to Partner under the Service Agreements, as well as services to Globalstar’s current and future customers. Globalstar plans to contract separately for launch services and launch insurance for the new satellites. The initial contract price for 17 satellites is $327 million; Globalstar has the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The satellites are expected to be launched in 2025. In addition, MDA will procure a satellite operations control center for $4.9 million. Under the Service Agreements, subject to certain terms and conditions, Partner has agreed to make service payments equal to 95% of the approved capital expenditures under the satellite procurement agreement (to be paid on a straight-line basis over the useful life of the satellites) and certain other costs incurred for the new satellites, as adjusted based on certain provisions, beginning with the Phase 2 Service Period.

Refer to Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the vendor financing arrangement with MDA.

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9. RELATED PARTY TRANSACTIONS

Thermo is the principal owner and largest stockholder of Globalstar. The Company's Executive Chairman of the Board controls Thermo. Two other members of the Company's Board of Directors are also directors, officers or minority equity owners of various Thermo entities.

Payables to Thermo related to normal purchase transactions were $0.3 million and $0.3 million as of June 30, 2023 and December 31, 2022, respectively.

Transactions with Thermo 

Certain general and administrative expenses are incurred by Thermo on behalf of the Company. These expenses include: i) non-cash expenses, such as stock compensation costs as well as costs recorded as a contribution to capital as they relate to services provided by certain executive officers of Thermo, and ii) expenses incurred by Thermo on behalf of the Company that are charged to the Company; these charges are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time. 

The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments started at $1.4 million per year and increase at a rate of 2.5% per year. 2023 lease payments will be $1.6 million. The lease term is ten years and will expire in January 2029. During each of the six months ended June 30, 2023 and 2022, the Company incurred lease expense of $0.8 million under this lease agreement.

To fulfill its obligations under the Service Agreements, in November 2022, the Company entered into an Exchange Agreement with Thermo and certain other exchanging lenders providing for the exchange of all the outstanding principal amount of, and accrued and unpaid interest on, the exchanging lenders’ loans under the 2019 Facility Agreement for shares of the Company's Series A Preferred Stock. The terms of the Exchange Agreement were reviewed and approved by the Company's Board of Directors and Audit Committee. Thermo's ownership portion in the Series A Preferred Stock is $136.7 million. Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. During 2023, the Company paid Thermo dividends of $1.2 million for the period November 15, 2022 through December 31, 2022 and $2.4 million for each of the first and second quarters of 2023.

Also in connection with the Service Agreements, Partner and Thermo entered into a lock-up and right of first offer agreement that generally (i) requires Thermo to offer any shares of Globalstar common stock to Partner before transferring them to any other Person other than affiliates of Thermo and (ii) prohibits Thermo from transferring shares of Globalstar common stock if such transfer would cause Thermo to hold less than 51.00% of the outstanding common stock of the Company for a period of five years from the launch of Services in November 2022.

Amounts payable by the Company in connection with the 2023 Funding Agreement are expected to be guaranteed by Thermo under a guarantee agreement among Thermo, the Company and the Partner. Thermo has agreed to provide support of certain of the Company’s obligations under the 2023 Funding Agreement. Currently this support agreement is directly between Thermo and Partner, and the parties have agreed to replace it with an agreement between Thermo, the Company and the Partner. Entry into this guarantee agreement received shareholder approval in June 2023, and it is expected to be effective during the third quarter of 2023. As consideration for Thermo's guarantee, the Company will issue to Thermo warrants to purchase 10.0 million shares of the Company’s common stock at an exercise price of equal to $2.00 (as calculated pursuant to the agreement). 5.0 million of these warrants vest immediately upon effectiveness of Thermo's guarantee, which is expected to occur during the third quarter of 2023, and the remaining 5.0 million warrants vest if and when Thermo advances aggregate funds of $25.0 million or more to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. These warrants expire five years after the date of issuance.

See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt and financing transactions with Thermo.

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10. NET LOSS PER SHARE 

The following table sets forth the computation of basic and diluted loss per common share during each of the three and six months ended June 30, 2023 and 2022 (amounts in thousands, except per share data):
Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Numerator:
Net income (loss)$9 $(26,757)$(3,471)$(47,219)
Effect of Series A Preferred Stock dividends(2,644) (5,259) 
Adjusted net loss attributable to common shareholders$(2,635)$(26,757)(8,730)(47,219)
Denominator:
Weighted average shares outstanding - basic and diluted1,813,393 1,799,886 1,812,617 1,798,784 
Net loss per common share - basic and diluted$