UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2015~~2016



¨☐	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)

300 Holiday Square Blvd.

Covington, Louisiana 70433

(Address of principal executive offices and zip code)

Registrant's Telephone Number, Including Area Code: (985) 335-1500

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x☒		Accelerated filer ¨☐

Non-accelerated filer ¨☐		Smaller reporting company ¨☐
(Do not check if a smaller reporting company)

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 October ~~29, 2015, 903,671,058~~28, 2016, 947,666,353 shares of voting common stock and 134,008,656 shares of nonvoting common stock were 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



		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	4240

Item 4.	Controls and Procedures.	4241

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	4341

Item 1A.	Risk Factors.	4341

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	4341

Item 3.	Defaults Upon Senior Securities.	4341

Item 4.	Mine Safety Disclosures.	4342

Item 5.	Other Information.	4342

Item 6.	Exhibits.	4342

Signatures		4543

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 Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014			September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Revenue:
Service revenues	$	19,644		$	18,511		$	55,367		$	52,647		$	21,952		$	19,644		$	61,671		$	55,367
Subscriber equipment sales	4,034			4,930			12,356			15,324			3,592			4,034			10,795			12,356
Total revenue	23,678			23,441			67,723			67,971			25,544			23,678			72,466			67,723
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	7,761			7,868			23,222			21,926			8,373			7,761			23,901			23,222
Cost of subscriber equipment sales	2,914			3,836			9,028			11,240			2,411			2,914			7,475			9,028
Cost of subscriber equipment sales - reduction in the value of inventory	—			—			—			7,317
Marketing, general and administrative	9,675			8,783			28,430			24,799			10,077			9,675			30,137			28,430
Depreciation, amortization, and accretion	19,417			21,047			57,734			66,393			19,446			19,417			57,825			57,734
Total operating expenses	39,767			41,534			118,414			131,675			40,307			39,767			119,338			118,414
Loss from operations	(16,089		)	(18,093		)	(50,691		)	(63,704		)	(14,763		)	(16,089		)	(46,872		)	(50,691		)
Other income (expense):
Loss on extinguishment of debt	—			(12,936		)	(2,254		)	(39,615		)	—			—			—			(2,254		)
Loss on equity issuance	(2,920		)	—			(5,832		)	(748		)
Gain (loss) on equity issuance													4,272			(2,920		)	2,349			(5,832		)
Interest income and expense, net of amounts capitalized	(9,019		)	(9,067		)	(26,780		)	(33,853		)	(8,866		)	(9,019		)	(27,020		)	(26,780		)
Derivative gain (loss)	54,194			166,989			183,416			(418,663		)
Derivative gain													10,982			54,194			50,137			183,416
Other	(1,953		)	2,586			1,728			2,955			(505		)	(1,953		)	(581		)	1,728
Total other income (expense)	40,302			147,572			150,278			(489,924		)	5,883			40,302			24,885			150,278
Income (loss) before income taxes	24,213			129,479			99,587			(553,628		)	(8,880		)	24,213			(21,987		)	99,587
Income tax expense	115			89			449			1,255
Income tax expense (benefit)													(6,303		)	115			(6,562		)	449
Net income (loss)	$	24,098		$	129,390		$	99,138		$	(554,883	)	$	(2,577	)	$	24,098		$	(15,425	)	$	99,138

Other comprehensive income (loss):
Foreign currency translation adjustments	(615		)	(493		)	(1,458		)	(871		)	84			(615		)	(1,492		)	(1,458		)
Total comprehensive income (loss)	$	23,483		$	128,897		$	97,680		$	(555,754	)	$	(2,493	)	$	23,483		$	(16,917	)	$	97,680

Net income (loss) per common share:
Basic	$	0.02		$	0.13		$	0.10		$	(0.61	)	$	0.00		$	0.02		$	(0.01	)	$	0.10
Diluted	0.02			0.11			0.09			(0.61		)	0.00			0.02			(0.01		)	0.09
Weighted-average shares outstanding:
Basic	1,031,398			987,668			1,014,165			914,474			1,080,313			1,031,398			1,056,993			1,014,165
Diluted	1,234,551			1,189,190			1,221,287			914,474			1,080,313			1,234,551			1,056,993			1,221,287

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

(Unaudited)


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	27,973		$	7,121		$	12,910		$	7,476
Accounts receivable, net of allowance of $5,681 and $4,788, respectively	14,051			15,015
Accounts receivable, net of allowance of $4,099 and $5,270, respectively							16,585			14,536
Inventory	12,080			14,734			9,731			12,023
Prepaid expenses and other current assets	5,719			7,944			5,571			4,456
Total current assets	59,823			44,814			44,797			38,491
Property and equipment, net	1,083,516			1,113,560			1,048,322			1,077,560
Restricted cash	37,918			37,918			37,959			37,918
Deferred financing costs, net	61,164			63,862
Prepaid second-generation ground costs	13,909			—			2,579			8,929
Intangible and other assets, net of accumulated amortization of $6,631 and $6,315, respectively	10,979			8,266
Intangible and other assets, net of accumulated amortization of $6,943 and $6,315, respectively							15,106			12,117
Total assets	$	1,267,309		$	1,268,420		$	1,148,763		$	1,175,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	19,642		$	6,450		$	38,112		$	32,835
Accounts payable	9,653			6,922			6,570			8,118
Accrued contract termination charge	19,712			21,308			19,654			19,121
Accrued expenses	29,118			22,342			28,066			22,439
Payables to affiliates	536			481			243			616
Deferred revenue	24,987			21,740			27,354			23,902
Total current liabilities	103,648			79,243			119,999			107,031
Long-term debt, less current portion	618,837			623,640			547,311			548,286
Employee benefit obligations	5,537			5,499			4,911			4,810
Derivative liabilities	238,087			441,550			189,500			239,642
Deferred revenue	6,334			6,572			6,068			6,413
Debt restructuring fees	20,795			20,795			20,795			20,795
Other non-current liabilities	10,996			12,205			5,477			10,907
Total non-current liabilities	900,586			1,110,261			774,062			830,853
Commitments and contingent liabilities (Notes 7 and 8)
Stockholders’ equity:
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at September 30, 2015 and December 31, 2014, respectively	—			—
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at September 30, 2015 and December 31, 2014, respectively	—			—
Voting Common Stock of $0.0001 par value; 1,200,000,000 shares authorized; 903,655,140 and 864,378,563 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	90			86
Nonvoting Common Stock of $0.0001 par value; 400,000,000 shares authorized; 134,008,656 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	13			13
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at September 30, 2016 and December 31, 2015, respectively							—			—
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at September 30, 2016 and December 31, 2015, respectively							—			—
Voting Common Stock of $0.0001 par value; 1,200,000,000 shares authorized; 946,322,913 and 904,448,226 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively							95			90
Nonvoting Common Stock of $0.0001 par value; 400,000,000 shares authorized; 134,008,656 shares issued and outstanding at September 30, 2016 and December 31, 2015							13			13
Additional paid-in capital	1,590,094			1,503,619			1,625,926			1,591,443
Accumulated other comprehensive loss	(4,356		)	(2,898		)	(6,325		)	(4,833		)
Retained deficit	(1,322,766		)	(1,421,904		)	(1,365,007		)	(1,349,582		)
Total stockholders’ equity	263,075			78,916			254,702			237,131
Total liabilities and stockholders’ equity	$	1,267,309		$	1,268,420		$	1,148,763		$	1,175,015

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2016			September 30, 2015
Cash flows provided by (used in) operating activities:
Net income (loss)	$	99,138		$	(554,883	)	$	(15,425	)	$	99,138
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	57,734			66,393			57,825			57,734
Change in fair value of derivative assets and liabilities	(183,416		)	418,663			(50,137		)	(183,416		)
Stock-based compensation expense	2,073			2,312			2,963			2,073
Amortization of deferred financing costs	7,110			7,591			6,932			7,110
Provision for bad debts	3,035			1,688			860			3,035
Reduction in value of inventory	—			7,317
Noncash interest and accretion expense	8,381			13,511			8,320			8,381
Loss on extinguishment of debt	2,254			39,615			—			2,254
Loss on equity issuance	5,832			748
Change in fair value related to equity issuance							(2,349		)	5,832
Noncash expense related to legal settlement							1,094			—
Reversal of uncertain tax position							(6,317		)	—
Unrealized foreign currency (gain) loss							357			(2,150		)
Other, net	424			1,426			114			424
Unrealized foreign currency gain	(2,150		)	(3,017		)
Changes in operating assets and liabilities:
Accounts receivable	(2,532		)	(2,699		)	(3,066		)	(2,532		)
Inventory	2,045			4,403			2,972			2,045
Prepaid expenses and other current assets	749			(961		)	(1,276		)	749
Other assets	(648		)	(2,028		)	(476		)	(648		)
Accounts payable and accrued expenses	4,534			1,317			2,714			4,534
Payables to affiliates	55			242			(374		)	55
Other non-current liabilities	(904		)	193			82			(904		)
Deferred revenue	3,600			5,044			2,891			3,600
Net cash provided by operating activities	7,314			6,875			7,704			7,314
Cash flows used in investing activities:
Second-generation network costs (including interest)	(15,484		)	(3,862		)	(8,472		)	(15,484		)
Property and equipment additions	(6,062		)	(2,203		)	(7,646		)	(4,222		)
Purchase of intangible assets							(1,327		)	(1,840		)
Change in restricted cash							(41		)	—
Net cash used in investing activities	(21,546		)	(6,065		)	(17,486		)	(21,546		)
Cash flows provided by (used in) financing activities:
Principal payment of the Facility Agreement	(3,225		)	—
Principal payments of the Facility Agreement							(16,418		)	(3,225		)
Proceeds from issuance of stock to Terrapin	39,000			—			28,500			39,000
Payment of deferred financing costs	—			(164		)
Proceeds from issuance of common stock and exercise of options and warrants	426			9,303			3,001			426
Net cash provided by financing activities	36,201			9,139			15,083			36,201
Effect of exchange rate changes on cash	(1,117		)	(136		)	133			(1,117		)
Net increase in cash and cash equivalents	20,852			9,813			5,434			20,852
Cash and cash equivalents, beginning of period	7,121			17,408			7,476			7,121
Cash and cash equivalents, end of period	$	27,973		$	27,221		$	12,910		$	27,973
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	9,746		$	10,335		$	11,409		$	9,746
Income taxes	4,720			95			152			5

	Nine Months Ended
	September 30, 2015			September 30, 2014			Nine Months Ended
							September 30, 2016			September 30, 2015
Supplemental disclosure of non-cash financing and investing activities:

Increase in non-cash capitalized accrued interest for second-generation network costs	1,574			1,237
Capitalization of the accretion of debt discount and amortization of prepaid financing costs	2,416			1,973
Increase in capitalized accrued interest for second-generation ground costs							2,340			1,574
Increase in accrued second-generation network costs							—			2,392
Capitalized accretion of debt discount and amortization of prepaid financing costs							3,225			2,416
Payments made in convertible notes and common stock	735			12,910			—			735
Principal amount of debt converted into common stock	6,491			76,040			—			6,491
Reduction of debt discount and issuance costs due to note conversions	2,085			28,073			—			2,085
Increase in accrued second-generation network costs	2,392			1,887
Increase of principal amount of Thermo Loan Agreement							—			6,000
Fair value of common stock issued upon conversion of debt	26,669			269,826			—			26,669
Reduction in derivative liability due to conversion of debt	20,008			182,051			—			20,008
Fair value of common stock issued to vendor for payment of invoices	16,684			—			—			16,684
Increase of principal amount of Thermo Loan Agreement	6,000			—

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Globalstar, Inc. (“Globalstar” or ~~“the Company”~~the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications services through its global satellite network. Thermo Capital Partners LLC, through its affiliates ~~(“Thermo”~~(collectively, “Thermo”), is ~~Globalstar’s~~the principal owner and largest ~~stockholder. Globalstar’s Executive~~stockholder of Globalstar. The Company’s Chairman and Chief Executive Officer controls ~~Thermo and its affiliates.~~Thermo. Two other members of ~~Globalstar’s~~the Company's Board of Directors are also directors, officers or minority equity owners of various Thermo entities.

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles ~~(“GAAP”)~~ in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange ~~Commission;~~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 ~~Inc.’s~~ Annual Report on Form 10-K for the year ended December 31, ~~2014,~~2015, as filed with the ~~Securities and Exchange Commission~~SEC on February 26, 2016 (the ~~"SEC") on March 2, 2015 (the "2014~~"2015 Annual Report"), and Management's Discussion and Analysis of Financial Condition and Results of Operations herein.

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. Significant estimates include the value of derivative instruments, the allowance for doubtful accounts, the net realizable value of inventory, the useful life and value of property and equipment, ~~income taxes and~~ the value of stock-based ~~compensation. Actual results could differ from these estimates. Certain~~compensation and income taxes. The Company has made certain reclassifications ~~have been made~~ 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 ~~majority owned or otherwise controlled~~ subsidiaries. All significant 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, ~~and comprehensive loss,~~ condensed consolidated balance sheets, and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and nine months ended September 30, ~~2015~~2016 are not necessarily indicative of the results that may be expected for the full year or any future period.

The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure. Based on this evaluation, the Company determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.

Recently Issued Accounting Pronouncements

In ~~January 2015,~~May 2014, the Financial Accounting Standards Board ~~("FASB"~~(the "FASB") issued Accounting Standards Update ("ASU") ~~No. 2015-01,~~ ~~Income Statement - Extraordinary and Unusual Items~~. This ASU eliminates the separate presentation of extraordinary items, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. ASU 2015-01 was issued to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP and more closely align U.S. GAAP with International Financial Reporting Standards ("IFRS"). This standard is effective for periods beginning after December 15, 2015. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, a reporting entity may elect prospective or retrospective application. If adopted prospectively, both the nature and amount of any subsequent adjustments to previously reported extraordinary items must be disclosed. The Company does not expect this ASU to have a material effect on its consolidated financial statements and related disclosures.

~~In February 2015, the FASB issued ASU No. 2015-02,~~ ~~Consolidation - Amendments to the Consolidation Analysis~~. ASU 2015-02 was issued in response to concerns that current GAAP might require a reporting entity to consolidate another legal entity in situations in which the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of

the legal entity’s economic benefits or obligations. The amendments included in ASU 2015-02 are intended to improve targeted areas in the consolidation guidance, which includes legal entities such as limited partnerships and limited liability companies and the evaluation of fees paid to a decision maker. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effect of the standard on its ongoing reporting.

~~In April 2015, the FASB issued ASU No. 2015-03,~~ ~~Interest - Imputation of Interest - Simplifying the Presentation of Debt Issue Costs~~. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a reduction in the carrying amount of the related debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this ASU. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Upon adoption, if applicable, this ASU will be applied on a retrospective basis, wherein the consolidated balance sheet of each period presented will be adjusted to reflect the effects of applying the new guidance. The Company would be required to comply with the applicable disclosures for a change in an accounting principle, including the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (that is, the previously reported debt issuance cost asset and the adjusted debt liability). The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.

~~In August 2015, the FASB decided to delay the effective date of ASU~~ No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 has been modified four times since its initial release. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with ~~customers. This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU~~customers and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ~~With the one-year deferral,~~ ASU 2014-09, ~~is now~~as amended, becomes effective for ~~fiscal years, and interim~~annual reporting periods ~~within those years,~~ beginning after December 15, 2017. ~~Additionally, early~~Early adoption is ~~now~~ permitted. However, entities reporting under U.S. GAAP are not permitted to adopt the standard earlier than the original effective date of December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the impact ~~this standard~~that these standards will have on its financial statements and related ~~disclosures.~~disclosures and believes that the most significant changes to the Company's revenue recognition accounting policies will be related to the allocation and timing of revenue recognized between service revenue and subscriber equipment sales. This ASU also requires the deferment of certain contract acquisition costs and the recognition of these costs over a customer's contract period or over a customer's expected life. The Company has not yet selected a transition method nor has it determined the effect of ~~the standard~~these standards on its ongoing reporting.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU No. 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and retail inventory method (RIM) are excluded from this new guidance. This ASU replaces the concept of market with the single measurement of net realizable value and is intended to create efficiencies for preparers and more closely ~~aligns~~align U.S. GAAP with IFRS. This ASU is effective for public business entities in fiscal years, and interim periods within those years, beginning after December 15, ~~2016, including interim periods within those years.~~2016. Prospective application is required and early adoption is permitted as of the beginning of an interim or annual reporting period. This ASU will not have a material effect on the Company's consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU. No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU No. 2015-17 simplifies the presentation of deferred taxes on the balance sheet by requiring classification of all deferred tax items as noncurrent including valuation allowances by jurisdiction. The ASU is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures, but does not expect the effect to be material.

In March 2016, the FASB issued ASU No. 2016-02, Leases. The main difference between the provisions of ASU No. 2016-02 and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU No. 2016-02 retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of the standard on its ongoing reporting.

In March 2016, the FASB issued ASU No. 2016-04, Liabilities-Extinguishment of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products. ASU No. 2016-04 contains specific guidance for the derecognition of prepaid stored-value product liabilities within the scope of this ASU. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company does not expect this ASU to have a material effect on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU. No. 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments. ASU No. 2016-06 clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for public business entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of this standard on its ongoing reporting.

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s incurred loss approach with an expected loss model for instruments measured at amortized cost. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The Company has not yet determined the effect of this standard on its ongoing reporting.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 is intended to reduce diversity in how certain cash receipts and cash payments are presented in the statement of cash flows. The new guidance clarifies the classification of cash activity related to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments, and beneficial interests in securitization transactions. The guidance also describes a predominance principle pursuant to which cash flows with aspects of more than one class that cannot be separated should be classified based on the activity that is likely to be the predominant source or use of cash flow. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures, but does not expect it to have a material effect on the Company's consolidated financial statements and related disclosures.

2. PROPERTY AND EQUIPMENT

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


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
Globalstar System:
Space component
First and second-generation satellites in service	$	1,211,768		$	1,211,904		$	1,211,090		$	1,211,768
Prepaid long-lead items	17,040			17,040			17,040			17,040
Second-generation satellite, on-ground spare	32,481			32,481			32,481			32,481
Ground component	45,782			47,595			48,382			46,870
Construction in progress:
Space component	63			30			81			81
Ground component	166,314			141,789			197,712			177,780
Next-generation software upgrades							9,552			3,440
Other	4,989			2,458			2,517			2,153
Total Globalstar System	1,478,437			1,453,297			1,518,855			1,491,613
Internally developed and purchased software	14,607			15,392			14,702			14,492
Equipment	12,645			12,647			11,959			10,802
Land and buildings	3,127			3,590			3,333			3,151
Leasehold improvements	1,670			1,620			1,732			1,671
Total property and equipment	1,510,486			1,486,546			1,550,581			1,521,729
Accumulated depreciation	(426,970		)	(372,986		)	(502,259		)	(444,169		)
Total property and equipment, net	$	1,083,516		$	1,113,560		$	1,048,322		$	1,077,560

Amounts in the above table consist primarily of costs incurred related to the construction of the Company’s second-generation constellation and ground upgrades. The ground component of construction in progress represents costs (including capitalized interest) associated with the Company's contracts with Hughes Network Systems, LLC ("Hughes") and Ericsson Inc. (“Ericsson”) to complete next-generation upgrades to the Company's ground infrastructure. The Company expects to begin depreciating this asset in the near future. See Note 7: Commitments for further discussion of these contracts.

Amounts included in the Company’s second-generation satellite, on-ground spare balance as of September 30, ~~2015,~~2016 consist primarily of costs related to a spare second-generation satellite that has not been placed in orbit, but is capable of being included in a future ~~launch of satellites.~~launch. As of September 30, ~~2015,~~2016, this satellite and the prepaid long-lead items ("LLI") have not been placed into service; therefore, the Company has not started to record depreciation expense for these items.

Pursuant to the Amended and Restated Contract for the construction of ~~the~~ Globalstar ~~Satellite~~Satellites for the Second Generation Constellation between ~~Globalstar~~the Company and Thales Alenia Space France ("Thales"), dated and executed in June 2009 ~~("2009~~(the "2009 Contract"), ~~Globalstar~~the Company paid €12 million in purchase price plus an additional €3.1 million in procurement costs for the LLI to be procured by Thales on ~~Globalstar's~~the Company's behalf. The LLI were to be used in the construction of the Phase 3 satellites for ~~Globalstar.~~the Company. As reflected on the Company's condensed consolidated balance sheets and in the above table, ~~Globalstar~~the Company believes that it owns the LLI and that ~~the~~ title to them transferred upon ~~procurement. Recently, Globalstar~~payment. The Company has asked Thales to turn over the LLI. Despite historical statements to the contrary, Thales currently disputes ~~Globalstar's~~the Company's ownership of the LLI and has ~~recently~~ asserted that ~~Globalstar~~the Company released its title to the LLI pursuant to that certain Release Agreement, dated as of June 24, 2012, which is described more fully ~~below.~~in Note 8: Contingencies. Thales further asserts that the LLI belong to Thales and that Thales has no obligation to turn over possession of ~~this~~the LLI to ~~Globalstar. Globalstar~~the Company. The Company disputes Thales' assertions and is currently considering its rights and remedies to recover the LLI. At this time, ~~Globalstar~~the Company cannot predict the outcome related to this dispute, including, without limitation, the likelihood of any settlement or the probability of success with respect to any litigation ~~which Globalstar~~that the Company may determine to commence with respect to the LLI.

Capitalized Interest and Depreciation Expense

The following ~~tables summarize~~table summarizes capitalized interest (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Interest cost eligible to be capitalized $ 10,935
$ 10,508
$ 31,640
$ 34,123
Interest cost recorded in interest expense, net (8,292 ) (8,557 ) (24,400 ) (28,365 )
Net interest capitalized $ 2,643
$ 1,951
$ 7,240
$ 5,758



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Interest costs eligible to be capitalized	$	12,092		$	10,935		$	35,884		$	31,640
Interest costs recorded in interest income (expense), net	(8,504		)	(8,292		)	(25,649		)	(24,400		)
Net interest capitalized	$	3,588		$	2,643		$	10,235		$	7,240

The following table summarizes depreciation expense (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Depreciation expense $ 19,299
$ 20,653
$ 57,330
$ 65,040



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Depreciation expense	$	19,341	$	19,299	$	57,508	$	57,330

3. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

As required by U.S. GAAP, the Company adopted the provisions of ASU No. 2015-03, Interest - Imputation of Interest - Simplifying the Presentation of Debt Issue Costs during the quarter ended March 31, 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the condensed consolidated balance sheets as a reduction in the carrying amount of the related debt liability, consistent with debt discounts. The Company has applied the provisions of this ASU on a retrospective basis, and therefore, the Company has reduced long-term debt on its condensed consolidated balance sheet as of December 31, 2015 by $57.9 million of deferred financing costs previously reported as assets.

Long-term debt consists of the following (in thousands):


	September 30, 2015				December 31, 2014				September 30, 2016						December 31, 2015
	Principal Amount		Carrying Value		Principal Amount		Carrying Value		Principal Amount		Unamortized Discount and Deferred Financing Costs		Carrying Value		Principal Amount		Unamortized Discount and Deferred Financing Costs		Carrying Value
Facility Agreement	$	579,071	$	579,071	$	582,296	$	582,296	$	559,429	$	48,677	$	510,752	$	575,846	$	57,829	$	518,017
Thermo Loan Agreement	80,721		47,473		68,154		32,971		91,139		30,387		60,752		83,222		32,558		50,664
8.00% Convertible Senior Notes Issued in 2013	16,561		11,935		22,799		14,823		16,936		3,017		13,919		16,747		4,307		12,440
Total Debt	676,353		638,479		673,249		630,090		667,504		82,081		585,423		675,815		94,694		581,121
Less: Current Portion	19,642		19,642		6,450		6,450		38,112		—		38,112		32,835		—		32,835
Long-Term Debt	$	656,711	$	618,837	$	666,799	$	623,640	$	629,392	$	82,081	$	547,311	$	642,980	$	94,694	$	548,286

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, as further described below. The current portion of long-term debt represents the scheduled principal repayments under the Facility Agreement due within one year of the balance sheet date.

Facility Agreement

~~The Company’s senior secured credit~~On July 31, 2013, the Company entered into a Global Deed of Amendment and Restatement with Thermo, the Company's domestic subsidiaries, a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Credit Agricole Corporate and Investment Bank and Credit Industrial et Commercial, as arrangers, and BNP Paribas, as the security agent and COFACE Agent, providing for the amendment and restatement of its former facility agreement asand certain related credit documents effective August 22, 2013 (the amended and restated facility agreement is herein referred to as the "Facility Agreement"). On August 7, 2015, the Company, Thermo, the lenders and their agent entered into a Second Global Amendment and Restatement Agreement (the ~~“Facility Agreement”~~"2015 GARA"),.

The Facility Agreement is scheduled to mature in December 2022. As of September 30, ~~2015,~~2016, the Facility Agreement was fully drawn. Semi-annual principal repayments began in December 2014. The facility bears interest at a floating rate of LIBOR plus 2.75% through June 2017, increasing by an additional 0.5% each year thereafter to a maximum rate of LIBOR plus 5.75%. Ninety-five percent of the Company’s obligations under the Facility Agreement are guaranteed by COFACE, the French export credit agency. The Company’s obligations under the Facility Agreement are guaranteed on a senior secured basis by all of its domestic subsidiaries and are secured by a first priority lien on substantially all of the assets of the Company and its domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100% of the equity of the Company’s domestic subsidiaries and 65% of the equity of certain foreign subsidiaries.

The Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants. Pursuant to the terms of the Facility Agreement, the Company has the ability to cure noncompliance with financial covenants with Equity Cure Contributions (as described below) through a date as late as June 2019. If the Company violates any of these covenants and is unable to make a sufficient Equity Cure Contribution or obtain a waiver, it would be in default under the agreement and payment of the indebtedness could be accelerated. The acceleration of the Company's indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-acceleration provisions. The covenants ~~under~~in the Facility Agreement limit the Company's ability to, among other things, incur or guarantee additional indebtedness; make certain investments, acquisitions or capital expenditures above certain agreed levels; pay dividends or repurchase or redeem capital stock or subordinated indebtedness; grant liens on its assets; incur restrictions on the ability of its subsidiaries to pay dividends or to make other payments to the Company; enter into transactions with its affiliates; merge or consolidate with other entities or transfer all or substantially all of its assets; and transfer or sell assets. As of September 30, ~~2015,~~2016, the Company was in compliance with respect to the covenants of the Facility Agreement.

The compliance calculations of the financial covenants of the Facility Agreement permit inclusion of certain cash funds contributed to the Company from the issuance of the Company's common stock and/or ~~Subordinated Indebtedness.~~subordinated indebtedness. These funds are referred to as "Equity Cure Contributions" and may be ~~funded in order~~used to achieve compliance with financial covenants, subject to the conditions set forth in the Facility Agreement. Each Equity Cure Contribution must be made in a minimum amount of $10 million for each measurement period or in the aggregate for all periods until the date that such funding is no longer allowed by the Facility Agreement. In August 2015, February 2016, and June ~~2015,~~2016, the Company drew ~~$10~~$15 million, $6.5 million, and ~~$14~~$22.0 million, respectively, under its common stock purchase agreement with Terrapin Opportunity, L.P. ~~(“Terrapin”~~("Terrapin")~~, as described below.~~ (the "August 2015 Terrapin Agreement"). The Company ~~deemed~~used these funds ~~to be~~as Equity Cure

Contributions under the Facility Agreement ~~and treated them accordingly in~~with respect to the ~~Company's~~ calculation of compliance with ~~certain~~ financial covenants for the measurement periods ended December 31, ~~2014~~2015 and June 30, ~~2015. In August 2015, the Company drew $15 million under its new Common Stock Purchase Agreement with Terrapin (the "August 2015 Terrapin Agreement").~~2016. The Company ~~can~~anticipates that it will continue to use ~~these funds as an~~ Equity Cure ~~Contribution~~Contributions to maintain compliance with certain financial covenants under the Facility Agreement ~~in the calculation of financial covenants~~ for the measurement ~~period ended~~periods ending December 31, 2016 and June 30, 2017, including, but not limited to, the remaining amounts available under the August 2015 ~~if needed.~~Terrapin Agreement.

The Facility Agreement requires the Company to maintain a total of $37.9 million in a debt service reserve account, which is pledged to secure all of the Company's obligations under the Facility Agreement. The use of these funds is restricted to making principal and interest payments under the Facility Agreement. As of September 30, ~~2015,~~2016, the balance in the debt service reserve account, which was established with the proceeds of the loan agreement with Thermo discussed below, was ~~$37.9~~$38.0 million and classified as restricted cash on the Company's condensed consolidated balance sheets.

~~On August 7, 2015, the Company, Thermo, the lenders and their agent entered into a Second Global Amendment and Restatement Agreement (the “2015 GARA”). Pursuant to the 2015 GARA:~~

The Facility Agreement was amended and restated as described below and in the form attached to the 2015 GARA. The amendments to the Facility Agreement clarify the definition of Net Debt (which previously was ambiguous and subject to varying interpretations), adjust the calculation of the Net Debt to Adjusted Consolidated EBITDA covenant, change the way in which certain Equity Cure Contributions are calculated, and extend by up to June 2019 the date through which Equity Cure Contributions can be made.

The lenders agreed that the $14 million equity financing the Company received from Terrapin on June 22, 2015 would be credited towards an Equity Cure Contribution for the measurement period ended June 30, 2015 and that any equity financing the Company raised between the closing date and June 30, 2016 may be used to the extent required as an Equity Cure Contribution for any period ending on or before June 30, 2016.

~~The lenders waived any existing defaults or events of default under the Facility Agreement.~~

~~Thermo agreed to make, or caused to be made, available to the Company cash equity financing, subject to certain conditions, of $30.0 million, all as further described below.~~

~~Thermo repeated in favor of the lenders and agent each of the representations and warranties previously made by Thermo in the Amended and Restated Thermo Subordinated Deed executed in July 2013.~~

~~The Company paid a waiver fee to the agent and lenders in the aggregate amount of $85,000.~~

Thermo Loan Agreement

In connection with the amendment and restatement of the Facility Agreement, the Company amended and restated its loan agreement with Thermo (as amended and restated, the “Loan Agreement”). All obligations of the Company to Thermo under the Loan Agreement are subordinated to all of the Company’s obligations under the Facility Agreement.

The Loan Agreement accrues interest at 12% per annum, which is capitalized and added to the outstanding principal in lieu of cash payments. The Company will make payments to Thermo only when permitted by the Facility Agreement. ~~The~~Principal and interest under the Loan Agreement ~~becomes~~become due and payable six months after the obligations under the Facility Agreement have been paid in full, or earlier if the Company has a change in control or if any acceleration of the maturity of the loans under the Facility Agreement occurs. As of September 30, ~~2015, $37.2~~2016, $47.6 million of interest had accrued since 2009 with respect to the Loan Agreement; the ~~Thermo loan~~Loan Agreement is included in long-term debt on the Company’s condensed consolidated balance sheets.

The Company evaluated the various embedded derivatives within the Loan Agreement (See Note 5: Fair Value Measurements for additional information about the embedded derivative in the Loan Agreement). The Company determined that the conversion option and the contingent put feature upon a fundamental change required bifurcation from the Loan Agreement. The conversion option and the contingent put feature were not deemed clearly and closely related to the Loan Agreement and were separately accounted for as a standalone derivative. The Company recorded this compound embedded derivative liability as a non-current liability on its condensed consolidated balance sheets with a corresponding debt discount, which is netted against the face value of the Loan Agreement.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the maturity of the Loan Agreement using an effective interest rate method. The fair value of the compound embedded derivative liability is marked-to-market at the end of each reporting period, with any changes in value reported in the condensed consolidated statements of operations. The Company determines the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices.

In connection with, and as a condition to the effectiveness of, the 2015 GARA, Thermo and certain of its affiliates executed and delivered to the agent under the Facility Agreement an undertaking (the “Second Thermo Group Undertaking Letter”) in which they agreed that, during the period commencing on the effective date of the 2015 GARA and ending on the later of March 31, 2018 and, if the Company's 8%2013 8.00% Notes ~~Issued in 2013~~ shall have been redeemed in full, September 30, 2019 (the “Commitment Period”), under ~~the~~certain circumstances, ~~described below,~~ they will make, or cause to be made, available to the Company cash equity financing in the aggregate amount of up to $30.0 million.

~~Thermo and its affiliates are required to provide these funds during the Commitment Period if:~~

~~The Company requests the funds, or~~

An Event of Default occurs and is continuing under the Facility Agreement, and, at the direction of the agent under the Facility Agreement, the Company delivers a notice to Terrapin under the Purchase Agreement drawing the amount set forth in the agent’s notice, and Terrapin fails to purchase shares of the Company's voting common stock to provide the Company with cash proceeds in such amount.

The balance of this commitment ~~will be~~is reduced by any cash equity financing received by the Company during the Commitment Period from Thermo or an external equity funding source, including Terrapin, if the Company uses the funds as an Equity Cure Contribution.

Simultaneously with the execution of the 2015 GARA and the Second Thermo Group Undertaking Letter, the Company entered into an Equity Commitment Agreement (the “Equity Agreement”) and ~~a 2015 Thermo~~the Loan ~~Agreement (the “New Thermo Loan Agreement”).~~Agreement.

Pursuant to the Equity Agreement, Thermo agreed to make, or cause to be made, available to the Company up to $30.0 million in additional cash equity investments as contemplated by the 2015 GARA and the Second Thermo Group Undertaking Letter. The price per share that Thermo will pay to purchase any shares of the Company's common stock pursuant to this equity commitment will be established using the same method as used to establish the price per share under the August 2015 Terrapin Agreement. If the issuance of shares of voting common stock to Thermo pursuant to the Equity Agreement would constitute a “Change of Control,” “Default” or “Event of Default” under any applicable agreement, the Company will issue instead an equal number of shares of non-voting common stock. ~~In August~~

Since the inception of the 2015 GARA, the Company ~~drew $15.0 million~~has received cash equity financing in excess of Thermo's equity commitment. This cash equity financing primarily includes draws under the August 2015 Terrapin Agreement in August 2015, February 2016, and ~~issued 9.3~~June 2016 for $15.0 million, ~~shares of voting common stock to Terrapin at an average price of $1.61 per share. Thermo's~~$6.5 million, and $22.0 million, respectively. As a result, Thermo has no remaining cash equity commitment under the Equity Agreement ~~is $15.0 million~~ as of September 30, ~~2015.~~

In connection with the 2015 GARA, the Second Thermo Group Undertaking Letter and the Equity Agreement, the Company agreed to increase the principal amount under the Thermo Loan Agreement by $6.0 million. This fee was capitalized as a deferred financing cost and is being amortized over the term of the Facility Agreement.2016.

All of the transactions between the Company and Thermo and its affiliates were reviewed and approved on the Company's behalf by a Special Committee of its independent directors, who were represented by independent counsel.

8.00% Convertible Senior Notes Issued in 2013

The 8.00% Convertible Senior Notes Issued in 2013 (the ~~"8.00% Notes Issued in 2013"~~"2013 8.00% Notes") initially were convertible into shares of common stock at a conversion price of $0.80 per share of common stock, or 1,250 shares of the Company’s common stock per $1,000 principal amount of the 2013 8.00% Notes, ~~Issued in 2013,~~ subject to adjustment. The conversion price of the 2013 8.00% Notes ~~Issued in 2013 will be~~is adjusted in the event of certain stock splits or extraordinary share distributions, or as a reset of the base conversion and exercise price pursuant to the terms of the Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee, dated May 20, 2013 (the ~~"New Indenture"~~"Indenture"). Due to common stock issuances by the Company since May 20, 2013 at prices below the then effective conversion rate, the base conversion price (rounded to the nearest cent) ~~was~~has been reduced to $0.73 per share of common stock as ~~is the current conversion price as~~ of September 30, ~~2015.~~2016.

The 2013 8.00% Notes ~~Issued in 2013~~ are senior unsecured debt obligations of the Company with no sinking fund. The 2013 8.00% Notes ~~Issued in 2013~~ will mature on April 1, 2028, subject to various call and put features, and bear interest at a rate of 8.00% per annum. Interest on the 2013 8.00% Notes ~~Issued in 2013~~ is payable semi-annually in arrears on April 1 and October 1 of each year. Interest is paid in cash at a rate of 5.75% per annum and in additional notes at a rate of 2.25% per annum. The ~~New~~ Indenture for the ~~new~~2013 8.00% Notes ~~Issued in 2013~~ provides for customary events of default. As of September 30, ~~2015,~~2016, the Company was in compliance with respect to the terms of the 2013 8.00% Notes ~~Issued in 2013~~ and the ~~New~~ Indenture.

Subject to certain conditions set forth in the ~~New~~ Indenture, the Company may redeem the 2013 8.00% Notes, ~~Issued in 2013,~~ with the prior approval of the ~~Majority Lenders~~majority lenders under the Facility Agreement, in whole or in part, at any time on or after April 1, 2018, at a price equal to the principal amount of the 2013 8.00% Notes ~~Issued in 2013~~ to be redeemed plus all accrued and unpaid interest thereon.

A holder of the 2013 8.00% Notes ~~Issued in 2013~~ has the right, at the ~~Holder’s~~holder’s option, to require the Company to purchase some or all of the 2013 8.00% Notes ~~Issued in 2013~~ held by it on each of April 1, 2018 and April 1, 2023 at a price equal to the principal amount of the 2013 8.00% Notes ~~Issued in 2013~~ to be purchased plus accrued and unpaid interest.

Subject to the procedures for conversion and other terms and conditions of the ~~New~~ Indenture, a holder may convert its 2013 8.00% Notes ~~Issued in 2013~~ at its option at any time prior to the close of business on the business day immediately preceding April 1, 2028, into shares of common stock (or, at the option of the Company, cash in lieu of all or a portion thereof, provided that, under the Facility Agreement, the Company may pay cash only with the consent of the Majority Lenders).

As of September 30, ~~2015,~~2016, holders had converted a total of $39.4 million principal amount of the 2013 8.00% Notes, ~~Issued in 2013,~~ resulting in the issuance of approximately ~~71.1~~72.1 million shares of voting common stock. ~~The conversion activity~~There were no conversions during the three and nine-month periods ended September 30, ~~2014 and~~2016. There were no conversions during the three-month period ended September 30, 2015. During the nine-month period ended September 30, 2015, ~~is included~~holders converted a total of $6.5 million principal amount of the 2013 8.00% Notes, resulting in the ~~table below (in thousands).~~

Period Principal Amount Converted Shares of Voting Common Stock Issued Loss on Extinguishment of Debt

First Quarter of 2014 $ 7,046
14,624
$ 10,497
Second Quarter of 2014 $ 10,535
18,611
$ 20,387
Third Quarter of 2014 $ 6,807
11,411
$ 12,936

First Quarter of 2015 $ 237
418
$ 65
Second Quarter of 2015 $ 6,254
10,379
$ 2,189
Third Quarter of 2015 $ —
—
$ —

issuance of approximately 10.9 million shares of voting common stock, and recognition of a loss on extinguishment of debt of $2.3 million.

Holders who convert 2013 8.00% Notes ~~Issued in 2013~~ receive conversion shares over a 40-consecutive trading day settlement period. Accordingly, the portion of converted debt is extinguished on an incremental basis over the 40-day settlement period, reducing the Company's outstanding debt balance. As of September 30, ~~2015,~~2016, no conversions had been initiated but not yet fully settled.

The Company evaluated the various embedded derivatives within the ~~New~~ Indenture for the 2013 8.00% ~~Notes Issued in 2013.~~Notes. The Company determined that the conversion option and the contingent put feature within the ~~New~~ Indenture required bifurcation from the 2013 8.00% ~~Notes Issued in 2013.~~Notes. The Company did not deem the conversion option and the contingent put feature to be clearly and closely related to the 2013 8.00% Notes ~~Issued in 2013~~ and separately accounted for them as a standalone derivative. The Company recorded this compound embedded derivative liability as a non-current liability on its condensed consolidated balance sheets with a corresponding debt discount which is netted against the face value of the 2013 8.00% ~~Notes Issued in 2013.~~Notes.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the first put date of the 2013 8.00% Notes ~~Issued in 2013~~ (April 1, 2018) using an effective interest rate method. The Company is marking to market the fair value of the compound embedded derivative liability at the end of each reporting period, with any changes in value reported in the condensed consolidated statements of operations. The Company determines the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices.

Warrants Outstanding

Warrants are outstanding to purchase shares of common stock as shown in the table below:


	Outstanding Warrants		Strike Price				Outstanding Warrants		Strike Price
	September 30, 2015	December 31, 2014	September 30, 2015		December 31, 2014		September 30, 2016	December 31, 2015	September 30, 2016		December 31, 2015
Contingent Equity Agreement ⁽¹⁾	30,191,866	30,191,866	$	0.01	$	0.01	24,571,428	30,191,866	$	0.01	$	0.01
5.0% Warrants ⁽²⁾	8,000,000	8,000,000	0.32		0.32		—	8,000,000	—		0.32
	38,191,866	38,191,866					24,571,428	38,191,866

(1)

Pursuant to the terms of the Contingent Equity Agreement with Thermo (See Note ~~3: Long-Term Debt and Other Financing Arrangements~~9: Related Party Transactions in the Consolidated Financial Statements in the ~~2014~~2015 Annual Report for a ~~complete~~ description of the Contingent Equity Agreement), the Company issued to Thermo warrants to purchase shares of common stock pursuant to the annual availability fee and subsequent reset provisions in the Contingent Equity Agreement. These warrants ~~have a five-year exercise period from issuance. These warrants~~ were issued between June 2009 and June 2012 and ~~the~~have a five-year exercise ~~periods expire through June 2017.~~period from issuance. As of September 30, ~~2015,~~2016, Thermo had exercised warrants to purchase approximately ~~11.3~~16.9 million of these shares prior to the expiration of the associated warrants. In June 2016, Thermo exercised warrants to purchase 5.6 million shares of voting common stock for a total purchase price of $0.1 million. The exercise period for the remaining outstanding warrants expires in June 2017.

(2)

In June 2011, the Company issued warrants (the “5.0% Warrants”) to purchase 15.2 million shares of its voting common stock in connection with the issuance of its 5.0% Convertible Senior Unsecured Notes. ~~During 2013, a portion~~In June 2016, Thermo exercised all of the ~~5.0% Warrants was exercised~~remaining warrants outstanding to purchase ~~7.2~~8.0 million shares of voting common ~~stock. The remaining 5.0% Warrants are exercisable until June 2016, which is five years after their issuance.~~stock for a total purchase price of $2.5 million. See Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the ~~2014~~2015 Annual Report for a complete description of the 5.0% Warrants.

Terrapin Opportunity, L.P. Common Stock Purchase Agreement

On December 28, 2012 the Company entered into a ~~Common Stock Purchase Agreement~~common stock purchase agreement with Terrapin pursuant to which the Company, subject to certain conditions, could require Terrapin to purchase up to $30.0 million of shares of voting common stock over the 24-month term following the effectiveness of a resale registration statement, which became effective on August 2, 2013. From time to time over the 24-month term following the effectiveness of the registration statement, and in the Company’s sole discretion, the Company had the right to present Terrapin with up to 36 draw down notices requiring Terrapin to purchase a specified dollar amount of shares of voting common stock, based on the price per share per day over ten consecutive trading days (a "Draw Down Period"). The per share purchase price for these shares was equal to the daily volume weighted average price of common stock on each date during the Draw Down Period on which shares were purchased, less a discount ranging from 3.5% to 8% based on a minimum price that the Company specified. In addition, in the Company’s sole discretion, but subject to certain limitations, the Company could require Terrapin to purchase a percentage of the daily trading volume of its common stock for each trading day during the Draw Down Period. The Company agreed not to sell to Terrapin a number of shares of voting common stock which, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in the beneficial ownership by Terrapin or any of its affiliates of more than 9.9% of the then issued and outstanding shares of voting common stock.

When the Company made a draw under ~~the~~this Terrapin ~~equity line~~common stock purchase agreement, it issued Terrapin shares of common stock at a price per share calculated as specified in the agreement. ~~In February~~During the nine months ended September 30, 2015, the Company drew ~~$10.0~~$24.0 million under the agreement and issued ~~4.5~~11.1 million shares of voting common stock to Terrapin at an average price of ~~$2.22 per share. In June 2015, the Company drew the remaining $14.0 million under the agreement and issued 6.6 million shares of voting common stock to Terrapin at an average price of $2.13~~$2.18 per share. Through the term of this agreement, Terrapin purchased a total of 17.2 million shares of voting common stock at a total purchase price of $30.0 million. No funds remain available under this agreement.

In conjunction with the amendment of the Facility Agreement in August 2015 (as discussed above), the Company entered into a new ~~Common Stock Purchase Agreement~~common stock purchase agreement with Terrapin pursuant to which the Company may require Terrapin to purchase up to $75.0 million of shares of the Company’s voting common stock over the 24-month term following the date of the agreement. From time to time over the 24-month term, in the Company’s discretion, the Company may present Terrapin with up to 24 draw notices requiring Terrapin to purchase a specified dollar amount of shares of voting common stock, based on the price per share per day over ~~a Draw~~ten consecutive trading days (a "Draw Down ~~Period.~~Period"). The per share purchase price for these shares of voting common stock will equal the daily volume weighted average price of the common stock on each date during the Draw Down Period on which shares are purchased by Terrapin, but not less than a minimum price specified by the Company (a “Threshold Price”), less a discount ranging from

2.75% to 4.00% based on the Threshold Price. In addition, in the Company’s discretion, but subject to certain limitations, the Company may grant to Terrapin the option to purchase additional shares during ~~the~~a Draw Down Period. The Company has agreed not to sell to Terrapin a number of shares of voting common stock ~~which,~~that, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in their beneficial ownership of more than 9.9% of the then issued and outstanding shares of voting common stock. As discussed above in this Note 3: Long-Term Debt and Other Financing Arrangements and in Note 9: Related Party Transactions, Thermo committed, under certain conditions, to purchase equity securities of the Company on the same pricing terms as the August 2015 Terrapin Agreement.

In August 2015, the Company drew $15.0 million under the August 2015 Terrapin Agreement and issued 9.3 million shares of voting common stock to Terrapin at an average price of $1.61 per share. AtIn February 2016, the Company drew $6.5 million under the August 2015 Terrapin Agreement and issued 6.4 million shares of voting common stock to Terrapin at an average price of $1.02 per share. In June 2016, the Company drew $22.0 million under the August 2015 Terrapin Agreement and issued 19.5 million shares of voting common stock to Terrapin at an average price of $1.13 per share. As of September 30, ~~2015, $60.0~~2016, $31.5 million remained available under the August 2015 Terrapin Agreement. ~~The Company will make draws from time to time under the August 2015 Terrapin Agreement to be used as Equity Cure Contributions under the Facility Agreement or for general corporate purposes.~~

4. DERIVATIVES

In connection with certain existing and past borrowing arrangements, the Company was required to record derivative instruments on its condensed consolidated balance sheets. None of these derivative instruments ~~are~~is designated as ~~hedges.~~a hedge. The following tables disclose the fair values of the derivative instruments on the Company’s condensed consolidated balance sheets (in thousands):


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
Derivative assets:
Interest rate cap	$	8		$	46		$	1		$	6
Total derivative assets	$	8		$	46		$	1		$	6
Derivative liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	(28,664	)	$	(79,040	)
Compound embedded derivative with 2013 8.00% Notes							$	(18,779	)	$	(26,203	)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	(209,423		)	(362,510		)	(170,721		)	(213,439		)
Total derivative liabilities	$	(238,087	)	$	(441,550	)	$	(189,500	)	$	(239,642	)

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 Ended						Three Months Ended					Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2016		September 30, 2015			September 30, 2016			September 30, 2015
Interest rate cap	$	(11	)	$	(7	)	$	—	$	(11	)	$	(5	)	$	(38	)
Compound embedded derivative with 8.00% Notes Issued in 2013	11,475			43,050
Compound embedded derivative with 2013 8.00% Notes							1,641		11,475			7,424			30,367
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	42,730			123,946			9,341		42,730			42,718			153,087
Total derivative gain (loss)	$	54,194		$	166,989
Total derivative gain							$	10,982	$	54,194		$	50,137		$	183,416

Nine Months Ended
September 30, 2015 September 30, 2014
Interest rate cap $ (38 ) $ (113 )
Warrants issued with 8.00% Notes Issued in 2009 —
(67,523 )
Compound embedded derivative with 8.00% Notes Issued in 2009 —
(16,406 )
Compound embedded derivative with 8.00% Notes Issued in 2013 30,367
(98,376 )
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement 153,087
(236,245 )
Total derivative gain (loss) $ 183,416
$ (418,663 )

Intangible and Other Assets

Interest Rate Cap

In June 2009, in connection with entering into the Facility Agreement, under which interest accrues at a variable rate, the Company entered into five ten-year interest rate cap agreements. The interest rate cap agreements reflect a variable notional amount ~~ranging from $586.3 million to $14.8 million~~ at interest rates that provide coverage to the Company for exposure resulting from escalating interest rates over the term of the Facility Agreement. The interest rate cap provides limits on the six-month Libor rate (“Base Rate”) used to calculate the coupon interest on outstanding amounts on the Facility Agreement and is capped at 5.50% should the Base Rate not exceed 6.5%. Should the Base Rate exceed 6.5%, the Company’s Base Rate will be 1% less than the then six-month Libor rate. The Company paid an approximately $12.4 million upfront fee for the interest rate cap agreements. The interest rate cap did not qualify for hedge accounting treatment, and changes in the fair value of the agreements are included in the condensed consolidated statements of operations.

Derivative Liabilities

The Company has identified various embedded derivatives resulting from certain features in the Company’s debt instruments. These embedded derivatives required bifurcation from the debt host ~~instrument.~~agreement. All embedded derivatives that required bifurcation are recorded as a derivative liability on the Company’s condensed consolidated balance sheets with a corresponding debt discount netted against the principal amount of the related debt instrument. The Company accretes the debt discount associated with each derivative liability to interest expense over the term of the related debt instrument using an effective interest rate method. The fair value of each embedded derivative liability is marked-to-market at the end of each reporting period with any changes in value reported in its condensed consolidated statements of operations. Each liability and the features embedded in the debt instrument, which required the Company to account for the instrument as a derivative, are described below.

Compound Embedded Derivative with the 2013 8.00% Notes ~~Issued in 2013~~

As a result of the conversion option and the contingent put feature within the 2013 8.00% Notes, ~~Issued in 2013,~~ the Company recorded a compound embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the face value of the 2013 8.00% ~~Notes Issued in 2013.~~Notes. The Company determined the fair value of the compound embedded derivative liability using a blend of a Monte Carlo simulation model and market prices.

Compound Embedded Derivative with the Amended and Restated Thermo Loan Agreement

As a result of the conversion option and the contingent put feature within the Thermo Loan Agreement, ~~with Thermo as amended and restated in July 2013,~~ the Company recorded a compound embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the face value of the Amended and Restated Loan Agreement. The Company determined the fair value of the compound embedded derivative liability using a blend of a Monte Carlo simulation model and market prices.

~~Compound Embedded Derivative with 8.00% Notes Issued in 2009~~

As a result of the conversion rights and features and the contingent put feature embedded within the 8.00% Notes Issued in 2009, the Company recorded a compound embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the principal amount of the 8.00% Notes Issued in 2009. The Company determined the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices. On April 15, 2014, the remaining principal amount of 8.00% Notes Issued in 2009 was converted into common stock; accordingly, the derivative liability embedded in the 8.00% Notes Issued in 2009 is no longer outstanding.~~See~~ ~~8.00% Convertible Senior Unsecured Notes Issued in 2009~~ ~~in Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 Annual Report for a complete description of the 8.00% Notes Issued in 2009.~~

~~Warrants Issued with 8.00% Notes Issued in 2009~~

Due to the cash settlement provisions and reset features in the 8.00% Warrants issued with the 8.00% Notes Issued in 2009, the Company recorded the 8.00% Warrants as an embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the principal amount of the 8.00% Notes Issued in 2009. The Company determined the fair value of the warrant derivative using a Monte Carlo simulation model. The exercise period for the 8.00% Warrants expired in June 2014; accordingly, the derivative liability for the 8.00% Warrants is no longer outstanding.

5. 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 table provides a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	September 30, 2015										September 30, 2016
	(Level 1)		(Level 2)		(Level 3)			Total Balance			(Level 1)		(Level 2)			(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	8	$	—		$	8		$	—	$	1		$	—		$	1
Total assets measured at fair value	$	—	$	8	$	—		$	8		$	—	$	1		$	—		$	1

Liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	—	$	—	$	(28,664	)	$	(28,664	)
Liability for potential stock issuance to Hughes											$	—	$	(3,146	)	$	—		$	(3,146	)
Compound embedded derivative with 2013 8.00% Notes											—		—			(18,779		)	(18,779		)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—		(209,423		)	(209,423		)	—		—			(170,721		)	(170,721		)
Total liabilities measured at fair value	$	—	$	—	$	(238,087	)	$	(238,087	)	$	—	$	(3,146	)	$	(189,500	)	$	(192,646	)


	December 31, 2014										December 31, 2015
	(Level 1)		(Level 2)		(Level 3)			Total Balance			(Level 1)		(Level 2)			(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	46	$	—		$	46		$	—	$	6		$	—		$	6
Total assets measured at fair value	$	—	$	46	$	—		$	46		$	—	$	6		$	—		$	6

Liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	—	$	—	$	(79,040	)	$	(79,040	)
Liability for potential stock issuance to Hughes											$	—	$	(5,495	)	$	—		$	(5,495	)
Compound embedded derivative with 2013 8.00% Notes											—		—			(26,203		)	(26,203		)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—		(362,510		)	(362,510		)	—		—			(213,439		)	(213,439		)
Total liabilities measured at fair value	$	—	$	—	$	(441,550	)	$	(441,550	)	$	—	$	(5,495	)	$	(239,642	)	$	(245,137	)

Assets

Interest Rate Cap

The fair value of the interest rate cap is determined using observable pricing inputs including benchmark yields, reported trades, and broker/dealer quotes at the reporting date. See Note 4: Derivatives for further discussion.

Liabilities

13Liability for potential stock issuance to Hughes

The Company has one liability classified as Level 2. As described in Note 7: Commitments, the Company agreed to provide downside protection after the issuance of shares of common stock to Hughes in lieu of cash for contract payments in June 2015. This feature requires the Company to issue to Hughes additional shares of common stock equal to the difference, if any, between $15.5 million and the total amount of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on December 30, 2016. The value of this option is calculated using a Black-Scholes pricing model. This liability is marked-to-market at each balance sheet date and through the settlement date.

Derivative Liabilities

The Company has two derivative liabilities classified as Level 3. The Company marks-to-market these liabilities at each reporting date with the changes in fair value recognized in the Company’s condensed consolidated statements of operations. See Note 4: Derivatives for further discussion.

The significant quantitative Level 3 inputs utilized in the valuation models are shown in the tables below:


	September 30, 2015							September 30, 2016
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock		Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with 8.00% Notes Issued in 2013	75% - 85%	0.8	%	$	0.73	$	1.57
Compound embedded derivative with the 2013 8.00% Notes								100% - 125%	0.7	%	$	0.73	$	1.21
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	50% - 85%	1.9	%	$	0.73	$	1.57	40% - 125%	1.4	%	$	0.73	$	1.21


	December 31, 2014							December 31, 2015
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock		Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with 8.00% Notes Issued in 2013	70% - 100%	1.2	%	$	0.73	$	2.75
Compound embedded derivative with 2013 8.00% Notes								75% - 90%	1.1	%	$	0.73	$	1.44
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	50% - 100%	2.1	%	$	0.73	$	2.75	50% - 90%	2.1	%	$	0.73	$	1.44

~~Fluctuations~~Fluctuation in the Company’s stock price ~~are~~is the primary driver for the changes in the derivative valuations during each reporting period. As the stock price ~~increases above~~decreases towards the current conversion price for each of the related derivative instruments, the value to the holder of the instrument generally ~~increases,~~decreases, thereby ~~increasing~~decreasing the liability on the Company’s condensed consolidated balance sheets.

~~Stock~~ These valuations are sensitive to the weighting applied to each of the simulated values. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the expected volatility of the Company's stock price. Decreases in expected volatility would generally result in a lower fair value measurement.

Probability of a change of control is another significant unobservable input used in the fair value measurement of the Company’s derivative instruments. Subject to certain restrictions in each indenture, the Company’s debt instruments contain certain provisions whereby holders may require the Company to purchase all or any portion of the convertible debt instrument upon a change of control. A change of control will occur upon certain changes in the ownership of the Company or certain events relating to the trading of the Company’s common stock. The simulated fair value of the derivative liabilities above is sensitive to changes in the assumed probabilities of a change of control. Decreases in the assumed probability of a change of control would generally result in a lower fair value measurement.

In addition to the inputs described above, the valuation model used to calculate the fair value measurement of the compound embedded derivatives within the Company’s 2013 8.00% Notes ~~Issued in 2013~~ and Thermo Loan Agreement included the following inputs and features: discount rate, payment in kind interest payments, make whole premiums, a 40-day stock issuance settlement period upon conversion, automatic conversions, estimated maturity date, and the principal balance of each loan at the balance sheet date. There are also certain put and call features within the 2013 8.00% Notes ~~Issued in 2013~~ that impact the valuation model.

The trading activity in the market provides the Company with additional valuation support. The Company uses a weight factor to calculate the fair value of the embedded derivatives to align the fair value produced from the Monte Carlo simulation model with the market value of the 2013 8.00% ~~Notes Issued in 2013.~~Notes. Due to the similarities of the debt instruments, the Company applies a similar weight to the embedded derivative in the Thermo Loan Agreement. These valuations are sensitive to the weighting applied to each of the simulated values.

The following table presents a rollforward for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) ~~for the three and nine months ended September 30, 2015~~ (in thousands):

Balance at June 30, 2015 $ (292,293 )
Derivative adjustment related to conversions and exercises —
Unrealized gain, included in derivative gain (loss) 54,206
Balance at September 30, 2015 $ (238,087 )

Balance at December 31, 2014 $ (441,550 )
Derivative adjustment related to conversions and exercises 20,008
Unrealized gain, included in derivative gain (loss) 183,455
Balance at September 30, 2015 $ (238,087 )



	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Balance at beginning of period	$	(200,482	)	$	(292,293	)	$	(239,642	)	$	(441,550	)
Derivative adjustment related to conversions	—			—			—			20,008
Unrealized gain, included in derivative gain	10,982			54,206			50,142			183,455
Balance at end of period	$	(189,500	)	$	(238,087	)	$	(189,500	)	$	(238,087	)

15Fair Value of Debt Instruments

The Company believes it is not practicable to determine the fair value of the Facility Agreement. Unlike typical long-term debt, interest rates and other terms for the Facility Agreement are not readily available and generally involve a variety of factors, including due diligence by the debt holders. As such, it is not practicable to determine the fair value of the Facility Agreement without incurring significant additional costs. The following table sets forth the carrying values and estimated fair values of the Company's other debt instruments, which are classified as Level 3 financial instruments (in thousands):



	September 30, 2016				December 31, 2015
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Thermo Loan Agreement	$	60,752	$	38,552	$	50,664	$	17,244
2013 8.00% Notes	13,919		13,247		12,440		9,831

6. ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES

Accrued expenses consist of the following (in thousands):

September 30,
2015 December 31,
2014
Accrued interest $ 5,283
$ 827
Accrued compensation and benefits 2,397
2,597
Accrued property and other taxes 5,312
6,727
Accrued customer liabilities and deposits 3,005
3,358
Accrued professional and other service provider fees 2,237
1,925
Accrued commissions and rebates 1,162
686
Accrued telecommunications expenses 1,594
1,135
Accrued satellite and ground costs 928
1,531
Accrued inventory in transit 906
1,189
Accrued liability for potential stock issuance to Hughes 4,664
—
Other accrued expenses 1,630
2,367
Total accrued expenses $ 29,118
$ 22,342

Other accrued expenses include primarily outsourced logistics services, storage, warranty reserve, maintenance, rent, payments to independent gateway operators ("IGOs") and liability for contingent consideration.



	September 30, 2016		December 31, 2015
Accrued interest	$	5,776	$	317
Accrued compensation and benefits	3,562		2,098
Accrued property and other taxes	4,213		4,125
Accrued customer liabilities and deposits	3,477		3,216
Accrued professional and other service provider fees	2,860		1,830
Accrued commissions	715		1,216
Accrued telecommunications expenses	618		1,487
Accrued inventory	62		502
Accrued liability for potential stock issuance to Hughes	3,146		5,495
Accrued liability for legal settlement	1,411		328
Other accrued expenses	2,226		1,825
Total accrued expenses	$	28,066	$	22,439

Accrued liability for potential stock issuance to Hughes includes the estimated value at September 30, ~~2015~~2016 of the downside protection that the Company provided to Hughes in connection with its April 2015 agreement (as amended). As described in Note 7: Commitments, the Company agreed to provide downside protection for a period of 130 trading days after the issuance of shares of common stock to Hughes in lieu of cash for contract payments in June 2015. This feature requires the Company to issue to Hughes additional shares of common stock equal to the difference, if any, between $15.5 million and the total amount of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on the last day of the 130-day period. The value of this option was calculated using a Black-Scholes pricing model. This liability is marked to market at each balance sheet date and through the settlement date, and is considered a level 2 financial instrument, as defined inSee Note 5: Fair Value ~~Measurements.~~Measurements and Note 7: Commitments for further discussion.

Other accrued expenses include primarily capital lease obligations, warranty reserve, occupancy costs, advertising costs, payments to independent gateway operators ("IGOs") and estimated payroll shortfall under the Cooperative Endeavor Agreement with the Louisiana Department of Economic Development.

Other non-current liabilities consist of the following (in thousands):


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
Long-term accrued interest	$	189	$	131	$	194	$	96
Asset retirement obligation	1,274		1,184		1,408		1,302
Deferred rent and capital lease obligations	414		404
Liabilities related to the Cooperative Endeavor Agreement with the State of Louisiana	1,146		1,391
Deferred rent and other deferred expense					517		593
Liability related to the Cooperative Endeavor Agreement with the State of Louisiana					573		716
Uncertain income tax positions	5,626		6,061		—		5,795
Foreign tax contingencies	2,321		3,034		2,624		2,311
Other non-current liabilities	26		—
Capital lease obligations					161		94
Total other non-current liabilities	$	10,996	$	12,205	$	5,477	$	10,907

As a result of the expiration of the statute of limitations associated with the tax position of one of the Company's foreign subsidiaries, the Company removed the total unrecognized tax position of $6.3 million, inclusive of cumulative interest and penalties, from its non-current liabilities and recorded a $6.3 million tax benefit in its condensed consolidated financial statements during the quarter ended September 30, 2016.

7. COMMITMENTS

Contractual Obligations - Second-Generation Satellites, Next-Generation Gateways and Other Ground Facilities

As of September 30, ~~2015,~~2016, the Company had purchase commitments with Thales, Hughes ~~Network Systems, LLC (“Hughes”)~~ and Ericsson ~~Inc. (“Ericsson”)~~ related to the procurement, deployment and maintenance of the second-generation ~~ground~~ network.

Second-Generation Satellites

As of September 30, 2016, the Company had a contract with Thales for the construction of the Company’s second-generation low-earth orbit satellites and related services. The Company has successfully launched all of these second-generation satellites, excluding one on-ground spare. The Company and Thales have discussed the ownership of certain deliverables under this contract, but have been unable to reach an agreement.

Effective October 24, 2014, the Company entered into a contract with Thales for in-orbit support services for the second-generation satellites delivered under the 2009 contract described in Note 2: Property and Equipment. These services will be performed over a three-year period for a total cost of approximately €1.9 million. A credit of €0.6 million was applied to the total cost, reducing the first annual payment to €0. This credit results from a settlement of amounts previously paid in conjunction with the 2009 contract.

Next-Generation Gateways and Other Ground Facilities

Hughes Network Systems

In May 2008, the Company entered into a contract with Hughes under which Hughes will design, supply and implement the Radio Access Network (RAN) ground network equipment and software upgrades for installation at a number of the Company’s satellite gateway ground stations and satellite interface chips to be used in various second-generation Globalstar devices.

In March 2015, the Company entered into an agreement with Hughes for the design, development, build, testing and delivery of four custom test equipment units for a total of $1.9 ~~million to be~~million. This test equipment was delivered byduring the ~~end~~fourth quarter of 2015. In April 2015, the Company extended the scope of work for delivery of two additional RANs for a total of $4.0 ~~million with an estimated delivery date of~~million. These RANs were delivered in February 2016. As of September 30, 2016, the Company had purchase commitments due under this contract of $0.8 million, which will be payable upon final acceptance.

In April 2015, Hughes exercised an option to be paid in shares of the Company's common stock (at a price 7% below market) in lieu of cash for certain of its remaining contract payments, including those related to the 2015 work mentioned above, totaling approximately $15.5 million. In June 2015, the Company issued 7.4 million shares of freely tradable common stock at the 7% discount pursuant to this option. The portion of these contract payments related to future milestone work is included in Prepaid second-generation ground costs on the condensed consolidated balance sheets as of September 30, ~~2015.~~2016. As the contract milestones are achieved, the Company reclassifies the related costs ~~will be reclassified~~ from Prepaid second-generation ground costs to construction in progress within Property and equipment. ~~The Company recorded a loss equal to the value of the 7% discount of $1.2 million in its condensed consolidated statement of operations for the three months ended June 30, 2015.~~ In the April 2015 agreement ~~as amended in July and August 2015,~~(as amended), the Company agreed to provide downside protection ~~for a period of 130 trading days after the issuance of the shares of common stock.~~through December 30, 2016. This feature requires that the Company issue additional shares of common stock equal to the difference, if any, between $15.5 million and the total amount of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on ~~the last day of the 130-day period.~~December 30, 2016. Pursuant to this agreement, the Company recorded a liability of ~~$4.7~~$3.1 million as of September 30, ~~2015~~2016 and ~~$1.7~~$5.5 million as of ~~June 30,~~December 31, 2015, respectively. ~~This estimate~~The Company calculated these estimates of the value of this option ~~was calculated~~ using a Black-Scholes pricing ~~model.~~model and an estimate of the number of shares of common stock held by Hughes as of the balance sheet dates. This liability is ~~marked to market~~marked-to-market at each balance sheet date and through the settlement ~~date, which is expected to be in December 2015.~~date. The Company ~~recorded~~records gains and losses resulting from changes in the value of this ~~estimated loss, and subsequent changes~~liability in its condensed consolidated statement of ~~operations for the nine months ended September 30, 2015.~~operations.

In July 2015, the Company and Hughes formally amended the contract to include the revised scope of work set forth in the March 2015 and April 2015 letter agreements. The additional $1.9 million for delivery of four custom test equipment units and the $4.0 million for delivery of two additional RANs agreed to in March and April 2015, respectively, are now reflected in the contract through this amendment.

Ericsson

In October 2008, the Company entered into a contract with Ericsson to develop, implement and maintain a ground interface, or core network system, which will be installed at a number of the Company’s satellite gateway ground stations. In July 2014, the parties signed an amended and restated contract to specify the remaining contract value and a new milestone schedule to reflect a revised program ~~time line.~~timeline. Prior to the amended and restated contract being finalized, Ericsson and the Company agreed to defer certain milestone payments previously due under the 2008 contract to 2014 and beyond. The deferred payments were incurring interest at a rate of 6.5% per annum. In April 2015, the Company signed an amendment to the 2014 contract to incorporate certain changes in scope and timing identified as necessary by the parties. In conjunction with signing this amendment, the parties executed a new letter agreement under which Ericsson waived the remaining $1.0 million in deferred milestone payments and $0.4 million in interest accrued on the milestone payments under the 2008 contract. In the first quarter of 2015, the Company reversed these amounts from accounts payable, accrued expenses and construction in progress on the Company's condensed consolidated balance sheet. In August 2015, the Company and Ericsson executed a second amendment to the 2014 contract which incorporated revised payment and pricing schedules. This amendment also reflected an accelerated timeline for the project providing that the work iswas estimated to be completed in the second quarter, instead of the third quarter, of 2016. During the second quarter of 2016, the Company took possession of the final Ericsson hardware for the Company's global deployment. As of September 30, ~~2015,~~2016, the ~~remaining amount~~Company had purchase commitments due under this contract of $2.9 million, which is related to the final acceptance of all contract ~~is $13.1 million.~~deliverables.

~~The Company has signed various~~Other Second-Generation Commitments

Various maintenance, licensing and royalty agreements are necessary for the ~~manufacture and distribution~~use of proprietary, third-party technology embedded in its second-generation ~~products,~~ground infrastructure and products. The fees due under these maintenance and license agreements are projected to be approximately $3.6 million per year and will be recognized in the Company's condensed consolidated statement of operations over the maintenance and license terms, which are expected to begin at various times during 2017. The fees due under the royalty agreements will fluctuate based on product sales and will be ~~introduced~~recognized in ~~2016. The Company will pay or has paid license fees for new product technology with royalty fees payable~~the Company's condensed consolidated statement of operations on a per unit basis as ~~these units~~second-generation products are manufactured, sold or activated. As of September 30, 2016, a portion of these fees have been paid and are recorded as a prepaid asset in the Company's condensed consolidated balance sheets.

8. CONTINGENCIES

Arbitration

On June 3, 2011, Globalstar filed a demand for arbitration against Thales before the American Arbitration Association to enforce certain rights to order additional satellites under the 2009 Contract. ~~Globalstar~~The Company did not include within its demand any claims that it had against Thales for work previously performed under the contract to design, manufacture and timely deliver the first 25 second-generation satellites. On May 10, 2012, the arbitration tribunal issued its award in which it determined that ~~Globalstar~~the Company had terminated the 2009 Contract "for convenience" and had materially breached the contract by failing to pay to Thales the €51.3 million in termination charges inrequired under the ~~amount of €51.3 million by October 9, 2011, and~~contract. The tribunal additionally determined that absent further agreement between the parties, Thales had no further obligation to manufacture or deliver satellites under Phase 3 of the 2009 Contract. ~~The award required Globalstar~~Based on these determinations, the tribunal directed the Company to pay Thales approximately €53 million in termination charges, ~~and~~plus interest by June 9, 2012. On May 23, 2012, Thales commenced an action in the United States District Court for the Southern District of New York by filing a petition to confirm the arbitration award (the “New York Proceeding”). Thales and the Company entered into a tolling agreement as of June 13, 2013, under which Thales dismissed the New York Proceeding without prejudice. The tolling agreement has expired. Thales may refile the petition at a later date and pursue the confirmation of the arbitration award, which ~~Globalstar will~~the Company would oppose. ~~The tolling agreement has expired.~~ Should Thales be successful in confirming the arbitration award, this would have a material adverse effect on the Company's financial condition, results of operations and liquidity.

On June 24, 2012, the Company and Thales agreed to settle their prior commercial disputes, including those disputes that were the subject of the arbitration award. In order to effectuate this settlement, the Company and Thales entered into a Release Agreement, a Settlement Agreement and a Submission Agreement. Under the terms of the Release Agreement, Thales agreed unconditionally and irrevocably to release and forever discharge the Company from any and all claims and obligations (with the exception of those items payable under the Settlement Agreement or in connection with a new contract for the purchase of any additional second-generation satellites), including, without limitation, a full release from paying €35.6 million of the termination charges awarded in the arbitration together with all interest on the award amount effective upon the earlier of December 31, 2012, and the effective date of the financing for the purchase of any additional second-generation satellites. Under the terms of the Release Agreement, ~~Globalstar~~the Company agreed unconditionally and irrevocably to release and forever discharge Thales from any and all claims (with limited exceptions), including, without limitation, claims related to Thales’ work under the 2009 satellite construction contract, including

any obligation to pay liquidated damages, effective upon the earlier of December 31, 2012, and the effective date of the financing for the purchase of any additional second-generation satellites. In connection with the Release Agreement and the Settlement Agreement, the Company recorded a contract termination charge of approximately €17.5 million which is recorded in the Company’s condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015. The releases became effective on December 31, 2012.

Under the terms of the Settlement Agreement, the ~~parties agreed, among other things, to stay the New York Proceeding, and Globalstar~~Company agreed to pay €17.5 million to Thales, representing one-third of the termination charges awarded to Thales in the arbitration, subject to certain conditions, on the later of the effective date of the new contract for the purchase of any additional second-generation satellites and the effective date of the financing for the purchase of these satellites. As of September 30, ~~2015,~~2016, this condition had not been satisfied. Because the effective date of the new contract for the purchase of additional second-generation satellites did not occur on or prior to February 28, 2013, any party may terminate the Settlement Agreement. If any party terminates the Settlement Agreement, all parties’ rights and obligations under the Settlement Agreement ~~(with limited exceptions related to tolling)~~ shall terminate. The Release Agreement is a separate and independent agreement from the Settlement Agreement and therefore it would survive any termination of the Settlement Agreement. As of September 30, 2015, no party had terminated the Settlement Agreement. Each of the Settlement Agreement and the Release Agreement provides that it supersedes all prior understandings, commitments and representations between the parties with respect to the subject matter ~~thereof.~~thereof; therefore it would survive any termination of the Settlement Agreement. As of September 30, 2016, no party had terminated the Settlement Agreement.

Litigation

Due to the nature of the Company's business, the Company is involved, from time to time, in various litigation matters or subject to disputes or routine claims regarding its business activities. Legal costs related to these matters are expensed as incurred. During the second quarter of 2016, the Company increased an accrual related to the settlement of litigation incurred on behalf of the Company's Brazilian subsidiary. The Company paid the total settlement of 4.5 million reais, or $1.4 million, by issuing approximately 1.3 million shares of Globalstar common stock on October 24, 2016.

In management's opinion, there is no pending litigation, dispute or claim, other than those described in this report, which ~~may~~could be expected to have a material adverse effect on the Company's financial condition, results of operations or liquidity.

9. RELATED PARTY TRANSACTIONS

Payables to Thermo and other affiliates related to normal purchase transactions were ~~$0.5~~$0.2 million and $0.6 million at ~~both~~each of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015, respectively.

Transactions with Thermo

~~The following table summarizes expenses~~Expenses incurred by Thermo ~~incurred~~ on behalf of the Company, ~~(in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
General and administrative expenses $ 264
$ 174
$ 324
$ 236
Non-cash expenses 137
137
411
411
Total $ 401
$ 311
$ 735
$ 647

~~General~~including non-cash expenses and ~~administrative~~those expenses ~~are related to expenses incurred by Thermo on the Company’s behalf which are~~ charged to the ~~Company.~~Company, were $0.2 million and $0.4 million during the three months ended September 30, 2016 and 2015, respectively and were $0.5 million and $0.7 million during the nine months ended September 30, 2016 and 2015, respectively. Non-cash expenses, ~~are related~~which the Company accounts for as a contribution to capital, relate to services provided by two executive officers of Thermo (who are also directors of the ~~Company) who~~Company and receive no cash compensation from the ~~Company; these expenses are treated as a contribution to capital.~~Company). The Thermo ~~expenses~~expense charges are based on actual amounts (with no mark-up) incurred or upon allocated employee time.

Since June 2009, Thermo and its affiliates have also deposited $60.0 million into a contingent equity account to fulfill a condition precedent for borrowing under the Facility Agreement, purchased $20.0 million of the Company’s 5.0% Notes, purchased $11.4 million of the Company's 8.00% Notes Issued in 2009, provided a $2.3 million short-term loan to the Company (which was subsequently converted into nonvoting common stock), loaned $37.5 million to the Company to fund the debt service reserve account, and funded $65 million in exchange for the Company's common stock in accordance with the Consent Agreement, the Common Stock Purchase Agreement, and the Common Stock Purchase and Option Agreement entered into in May 2013. See the sections ~~The Consent Agreement~~, ~~The Common Stock Purchase Agreement, and~~ ~~The Common Stock Purchase and Option Agreement~~ in Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 Annual Report for a complete description of these agreements between the Company and Thermo.

During 2014, Thermo exercised warrants that were scheduled to expire in June 2014. The warrants that were exercised during 2014 included warrants for 4.2 million shares of the Company's common stock issued as partial consideration for the Amended and Restated Thermo Loan Agreement, resulting in the issuance of 4.2 million shares of Globalstar common stock; warrants for 11.3 million shares issued in connection with the annual availability fee for the Contingent Equity Agreement in 2009, resulting in the issuance of 11.3 million shares of Globalstar common stock; and 8.00% Warrants issued in 2009 to purchase 16.3 million shares of Globalstar common stock, resulting in the issuance of 14.7 million shares of Globalstar common stock. As of September 30, 2016, the principal amount outstanding under the Loan Agreement with Thermo was $91.1 million, and the fair value of the compound embedded derivative liability associated with the Loan Agreement was $170.7 million. During the three months ended September 30, 2016 and 2015, interest accrued on the Loan Agreement was approximately $2.7 million and $2.4 million, respectively. During the nine months ended September 30, 2016 and 2015, interest accrued on the Loan Agreement was approximately $7.9 million and $6.6 million, respectively. In addition, as of September 30, 2016, warrants to purchase approximately ~~30.2~~24.6 million shares issued under the Contingent Equity Agreement ~~and 8.0 million 5.0% Warrants~~ remain outstanding, all of which are held by Thermo and are scheduled to expire ~~between~~in June 2017. In June 2016, Thermo exercised warrants to purchase 5.6 million and 8.0 million shares of voting common stock related to the Contingent Equity Agreement and the Company's 5.0% Warrants, respectively. As a result of these warrant exercises, the Company received aggregate proceeds of $2.6 million in June ~~2017.~~2016.

In August 2015, the Company entered into an Equity Agreement with Thermo. Thermo agreed to purchase up to $30.0 million in equity securities of the Company if the Company so requests or if an event of default is continuing under the Facility Agreement and funds are not available under the August 2015 Terrapin Agreement. ~~Thermo’s consideration for this commitment was added to the principal amount owed to Thermo under the Thermo Loan Agreement. If the~~The Company ~~requires Thermo to purchase~~has received cash equity ~~securities under this commitment, the price per share~~financing in excess of ~~common stock will be calculated in the same manner as in the August 2015 Terrapin Agreement. In August 2015, the Company drew $15.0 million~~Thermo's equity commitment. This cash equity financing primarily includes draws under the August 2015 Terrapin Agreement ~~which reduced Thermo's~~in August 2015, February 2016, and June 2016 for $15.0 million, $6.5 million, and $22.0 million, respectively. As a result, Thermo had no remaining cash equity commitment under the Equity Agreement ~~to $15.0 million~~ as of September 30, ~~2015.~~2016.

The Facility Agreement requires Thermo to maintain minimum and maximum ownership levels in the Company's common stock. Thermo may convert shares of nonvoting common stock into shares of voting common stock as needed to comply with these ownership limitations. ~~During 2014, Thermo converted 175 million shares of nonvoting common stock into shares of voting common stock to comply with these covenants.~~

See Note 3: Long-Term Debt and Other Financing Arrangements and Note 4: Derivatives for further discussion of the Company's debt and financing transactions with Thermo.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) includes all changes in equity during a period from non-owner sources.

The components of accumulated other comprehensive income (loss) were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014			2016			2015			2016			2015
Accumulated other comprehensive income (loss), beginning of period	$	(3,741	)	$	493		$	(2,898	)	$	871
Other comprehensive loss:
Accumulated other comprehensive loss, beginning of period													$	(6,409	)	$	(3,741	)	$	(4,833	)	$	(2,898	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(615		)	(493		)	(1,458		)	(871		)	84			(615		)	(1,492		)	(1,458		)
Accumulated other comprehensive loss, end of period	$	(4,356	)	$	—		$	(4,356	)	$	—		$	(6,325	)	$	(4,356	)	$	(6,325	)	$	(4,356	)

No amounts were reclassified out of accumulated other comprehensive ~~income (loss)~~loss for the periods shown above.

~~11. STOCK COMPENSATION~~

The Company’s 2006 Equity Incentive Plan (“Equity Plan”) provides long-term incentives to the Company’s key employees, officers, directors, consultants and advisers (“Eligible Participants”) to align stockholder and employee interests. Under the Equity Plan, the Company may grant incentive stock options, restricted stock awards, restricted stock units, and other stock based awards or any combination thereof to Eligible Participants. The Compensation Committee of the Company’s board of directors (or its designee for non-executive officers and directors) establishes the terms and conditions of any awards granted under the plans.

The Company recorded compensation expense related to its 2006 Equity Incentive Plan of $0.5 million and $1.1 million during the three-month periods ended September 30, 2015 and 2014, and $1.8 million and $2.1 million for the nine-month periods ended September 30, 2015 and 2014, respectively. These expenses are reflected in marketing, general and administrative expenses.

~~Grants to eligible participants of incentive stock options, restricted stock awards, and restricted stock units were as follows (in thousands of shares):~~

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Grants of restricted stock awards and restricted stock units 78
201
170
607
Grants of options to purchase common stock 207
134
499
595
Total 285
335
669
1,202

~~Employee Stock Purchase Plan~~

The Company recorded expense of $0.1 million for the fair value of the stock granted under its Employee Stock Purchase Plan for each of the three-month periods ended September 30, 2015 and 2014. Expense for stock granted during the nine-month periods ended September 30, 2015 and 2014 was $0.3 million and $0.2 million, respectively. These expenses are reflected in marketing, general and administrative expenses. Through September 30, 2015, the Company had issued 2,798,898 shares of common stock pursuant to this plan.

~~12.~~11. GEOGRAPHIC INFORMATION

The Company attributes subscriber equipment ~~revenue~~sales to various countries based on the location where equipment is sold. Service revenue is generally attributed to the various countries based on ~~where~~ the ~~service is processed. Long-lived assets consist primarily of property~~Globalstar entity that holds the customer contract. Property and equipment ~~and are~~is attributed to the various countries based on the physical location of the asset at the end of a given ~~fiscal year-end,~~period, except for the Company's satellites ~~which~~that are included in the ~~long-lived assets~~property and equipment of the United States. The Company’s information by geographic area is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Revenues:
Service:
Service revenue:
United States	$	13,506	$	12,267	$	37,689	$	35,000	$	14,703	$	13,506	$	42,379	$	37,689
Canada	3,863		4,077		11,067		10,946		4,512		3,863		11,822		11,067
Europe	1,634		1,655		4,377		4,407		1,785		1,634		5,048		4,377
Central and South America	486		440		1,788		1,886		824		486		2,012		1,788
Others	155		72		446		408		128		155		410		446
Total service revenue	$	19,644	$	18,511	$	55,367	$	52,647	$	21,952	$	19,644	$	61,671	$	55,367
Subscriber equipment:
Subscriber equipment sales:
United States	2,304		2,510		5,883		8,340		2,150		2,304		5,680		5,883
Canada	962		1,418		3,401		4,187		689		962		2,502		3,401
Europe	313		540		1,299		1,628		242		313		1,198		1,299
Central and South America	409		437		1,465		930		505		409		1,172		1,465
Others	46		25		308		239		6		46		243		308
Total subscriber equipment revenue	$	4,034	$	4,930	$	12,356	$	15,324
Total subscriber equipment sales									$	3,592	$	4,034	$	10,795	$	12,356
Total revenue	$	23,678	$	23,441	$	67,723	$	67,971	$	25,544	$	23,678	$	72,466	$	67,723


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
Property and equipment, net:
United States	$	1,079,306	$	1,108,675	$	1,043,827	$	1,073,327
Canada	467		357		675		510
Europe	499		413		435		484
Central and South America	2,717		3,309		3,147		2,782
Others	527		806		238		457
Total long-lived assets	$	1,083,516	$	1,113,560
Total property and equipment, net					$	1,048,322	$	1,077,560

~~13.~~12. EARNINGS (LOSS) PER SHARE

~~The Company is required to present basic and diluted~~Basic earnings ~~per share. Basic earnings~~(loss) per share are computed based on the weighted average number of shares of common stock outstanding during the period. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive.

The following ~~tables reconcile~~table sets forth the calculation of basic ~~weighted average shares of common stock to~~and diluted ~~weighted average shares of common stock outstanding~~earnings (loss) per share for the ~~three and nine months ended September 30, 2015 and September 30, 2014~~periods indicated (in thousands):

Three Months Ended September 30, 2015 Three Months Ended September 30, 2014
Weighted average common shares outstanding:
Basic shares outstanding 1,031,398
987,668
Incremental shares from assumed exercises of:
Stock options, restricted stock, restricted stock units and ESPP 7,111
7,340
8.00% Notes Issued in 2013 27,475
39,625
Thermo Loan Agreement 130,375
109,469
Warrants 38,192
45,088
Diluted shares outstanding 1,234,551
1,189,190


	Nine Months Ended September 30, 2015	Nine Months Ended September 30, 2014	Three Months Ended September 30,					Nine Months Ended September 30,
			2016			2015		2016			2015
Net income (loss)			$	(2,577	)	$	24,098	$	(15,425	)	$	99,138
Effect of dilutive securities:
2013 8.00% Notes			550			547		1,625			1,860
Thermo Loan Agreement			2,453			2,291		7,211			6,542
Income (loss) to common stockholders plus assumed conversions			$	426		$	26,936	$	(6,589	)	$	107,540
Weighted average common shares outstanding:
Basic shares outstanding	1,014,165	914,474	1,080,313			1,031,398		1,056,993			1,014,165
Incremental shares from assumed exercises of:
Incremental shares from assumed exercises, conversions and other issuances:
Stock options, restricted stock, restricted stock units and ESPP	8,550	N/A	—			7,111		—			8,550
8.00% Notes Issued in 2013	27,778	N/A
2013 8.00% Notes			—			27,475		—			27,778
Thermo Loan Agreement	132,602	N/A	—			130,375		—			132,602
Warrants	38,192	N/A
Warrants and other			—			38,192		—			38,192
Diluted shares outstanding	1,221,287	914,474	1,080,313			1,234,551		1,056,993			1,221,287
Income (loss) per share:
Basic			—			0.02		(0.01		)	0.10
Diluted			—			0.02		(0.01		)	0.09

For the three and nine months ended September 30, ~~2015~~2016, 195.8 million and ~~the three months ended September 30, 2014, net income was adjusted for interest expense (net~~199.7 million shares of ~~capitalized amounts) related to the 8.00% Notes Issued in 2013 and the Thermo Loan Agreement for the computation of diluted earnings per share as these notes~~potential common stock were ~~assumed to be converted at the start of each respective period. There were no anti-dilutive stock options, restricted stock or restricted stock units~~ excluded from diluted shares outstanding during the three or nine months ended September 30, 2015 or the three months ended September 30, 2014. The calculation of outstanding diluted shares excludes future share issuances under the August 2015 Terrapin Agreement.

~~For the nine months ended September 30, 2014, diluted net loss per share of common stock was the same as basic net loss per share of common stock~~ because the effects of assuming issuance of these potentially dilutive securities would be anti-dilutive.

~~14.~~13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In connection with the Company’s issuance of the 2013 8.00% Notes, ~~issued in 2013,~~ certain of the Company’s 100% owned domestic subsidiaries (the “Guarantor Subsidiaries”), fully, unconditionally, jointly, and severally guaranteed the payment obligations under the 2013 8.00% ~~Notes Issued in 2013.~~Notes. The following financial information sets forth, on a consolidating basis, the balance sheets, statements of operations and statements of cash flows for Globalstar, Inc. ~~(“Parent~~(the “Parent Company”), for the Guarantor Subsidiaries and for the Parent Company’s other subsidiaries (the “Non-Guarantor Subsidiaries”).

The condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include disclosures included in annual financial statements. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses.

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2016

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	23,996		$	7,529		$	11,501		$	(21,074	)	$	21,952
Subscriber equipment sales	84			2,833			1,559			(884		)	3,592
Total revenue	24,080			10,362			13,060			(21,958		)	25,544
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	5,178			2,538			8,442			(7,785		)	8,373
Cost of subscriber equipment sales	(18		)	2,108			1,203			(882		)	2,411
Marketing, general and administrative	5,229			1,504			15,497			(12,153		)	10,077
Depreciation, amortization, and accretion	19,083			194			291			(122		)	19,446
Total operating expenses	29,472			6,344			25,433			(20,942		)	40,307
Income (loss) from operations	(5,392		)	4,018			(12,373		)	(1,016		)	(14,763		)
Other income (expense):
Gain on equity issuance	4,272			—			—			—			4,272
Interest income and expense, net of amounts capitalized	(8,894		)	(9		)	36			1			(8,866		)
Derivative gain	10,982			—			—			—			10,982
Equity in subsidiary earnings (loss)	(2,743		)	(12,794		)	—			15,537			—
Other	(802		)	(80		)	284			93			(505		)
Total other income (expense)	2,815			(12,883		)	320			15,631			5,883
Income (loss) before income taxes	(2,577		)	(8,865		)	(12,053		)	14,615			(8,880		)
Income tax benefit	—			—			(6,303		)	—			(6,303		)
Net income (loss)	$	(2,577	)	$	(8,865	)	$	(5,750	)	$	14,615		$	(2,577	)
Comprehensive income (loss)	$	(2,577	)	$	(8,865	)	$	(5,659	)	$	14,608		$	(2,493	)

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2015

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	14,830		$	8,426		$	8,251		$	(11,863	)	$	19,644
Subscriber equipment sales	219			2,853			889			73			4,034
Total revenue	15,049			11,279			9,140			(11,790		)	23,678
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	4,723			1,694			3,809			(2,465		)	7,761
Cost of subscriber equipment sales	(52		)	2,365			(1,641		)	2,242			2,914
Marketing, general and administrative	5,282			1,486			14,411			(11,504		)	9,675
Depreciation, amortization, and accretion	18,955			291			282			(111		)	19,417
Total operating expenses	28,908			5,836			16,861			(11,838		)	39,767
Income (loss) from operations	(13,859		)	5,443			(7,721		)	48			(16,089		)
Other income (expense):
Loss on equity issuance	(2,920		)	—			—			—			(2,920		)
Interest income and expense, net of amounts capitalized	(8,872		)	(8		)	(140		)	1			(9,019		)
Derivative gain	54,194			—			—			—			54,194
Equity in subsidiary earnings (loss)	(3,559		)	(18,162		)	—			21,721			—
Other	(886		)	(60		)	3,800			(4,807		)	(1,953		)
Total other income (expense)	37,957			(18,230		)	3,660			16,915			40,302
Income (loss) before income taxes	24,098			(12,787		)	(4,061		)	16,963			24,213
Income tax expense	—			1			114			—			115
Net income (loss)	$	24,098		$	(12,788	)	$	(4,175	)	$	16,963		$	24,098
Comprehensive income (loss)	$	24,098		$	20,357		$	(12,258	)	$	(8,714	)	$	23,483

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Nine Months Ended September 30, 2016

(Unaudited)


	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)															(In thousands)
Revenue:
Service revenues	$	19,523		$	620		$	3,560		$	(4,059	)	$	19,644		$	51,878		$	25,887		$	31,615		$	(47,709	)	$	61,671
Subscriber equipment sales	219			2,853			889			73			4,034			508			7,299			5,232			(2,244		)	10,795
Total revenue	19,742			3,473			4,449			(3,986		)	23,678			52,386			33,186			36,847			(49,953		)	72,466
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	3,174			2,465			1,996			126			7,761			15,126			4,608			14,039			(9,872		)	23,901
Cost of subscriber equipment sales	(52		)	2,365			(489		)	1,090			2,914			169			5,648			3,896			(2,238		)	7,475
Marketing, general and administrative	2,538			4,229			2,908			—			9,675			15,833			3,358			48,561			(37,615		)	30,137
Depreciation, amortization, and accretion	18,955			291			5,243			(5,072		)	19,417			56,706			620			860			(361		)	57,825
Total operating expenses	24,615			9,350			9,658			(3,856		)	39,767			87,834			14,234			67,356			(50,086		)	119,338
Loss from operations	(4,873		)	(5,877		)	(5,209		)	(130		)	(16,089		)
Income (loss) from operations																(35,448		)	18,952			(30,509		)	133			(46,872		)
Other income (expense):
Loss on equity issuance	(2,920		)	—			—			—			(2,920		)
Gain on equity issuance																2,349			—			—			—			2,349
Interest income and expense, net of amounts capitalized	(8,872		)	(8		)	(140		)	1			(9,019		)	(26,875		)	(21		)	(116		)	(8		)	(27,020		)
Derivative gain (loss)	54,194			—			—			—			54,194
Equity in subsidiary earnings	(12,545		)	(4,075		)	—			16,620			—
Derivative gain																50,137			—			—			—			50,137
Equity in subsidiary earnings (loss)																(4,170		)	(10,715		)	—			14,885			—
Other	(886		)	(354		)	4,094			(4,807		)	(1,953		)	(1,418		)	(192		)	888			141			(581		)
Total other income (expense)	28,971			(4,437		)	3,954			11,814			40,302			20,023			(10,928		)	772			15,018			24,885
Income (loss) before income taxes	24,098			(10,314		)	(1,255		)	11,684			24,213			(15,425		)	8,024			(29,737		)	15,151			(21,987		)
Income tax expense	—			1			114			—			115
Income tax benefit																—			—			(6,562		)	—			(6,562		)
Net income (loss)	$	24,098		$	(10,315	)	$	(1,369	)	$	11,684		$	24,098		$	(15,425	)	$	8,024		$	(23,175	)	$	15,151		$	(15,425	)
Comprehensive income (loss)	$	24,098		$	(10,315	)	$	(2,004	)	$	11,704		$	23,483		$	(15,425	)	$	8,024		$	(24,662	)	$	15,146		$	(16,917	)

Globalstar, Inc.

Condensed Consolidating Statement of Operations

~~Three Months Ended September 30, 2014~~

~~(Unaudited)~~

Parent
Company

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
(In thousands)
Revenue:

Service revenues $ 19,258
$ 1,494
$ 6,389
$ (8,630 ) $ 18,511
Subscriber equipment sales 71
3,471
5,118
(3,730 ) 4,930
Total revenue 19,329
4,965
11,507
(12,360 ) 23,441
Operating expenses:

Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 2,903
2,653
2,563
(251 ) 7,868
Cost of subscriber equipment sales 31
2,962
4,823
(3,980 ) 3,836
Marketing, general and administrative 1,906
3,850
4,408
(1,381 ) 8,783
Depreciation, amortization, and accretion 19,180
1,879
6,974
(6,986 ) 21,047
Total operating expenses 24,020
11,344
18,768
(12,598 ) 41,534
Income (loss) from operations (4,691 ) (6,379 ) (7,261 ) 238
(18,093 )
Other income (expense):

Loss on extinguishment of debt (12,936 ) —
—
—
(12,936 )
Loss on equity issuance —
—
—
—
—
Interest income and expense, net of amounts capitalized (9,001 ) (10 ) (57 ) 1
(9,067 )
Derivative loss 166,989
—
—
—
166,989
Equity in subsidiary earnings (12,653 ) (884 ) —
13,537
—
Other 1,782
409
364
31
2,586
Total other income (expense) 134,181
(485 ) 307
13,569
147,572
Income (loss) before income taxes 129,490
(6,864 ) (6,954 ) 13,807
129,479
Income tax (provision) expense 100
7
(18 ) —
89
Net income (loss) $ 129,390
$ (6,871 ) $ (6,936 ) $ 13,807
$ 129,390
Comprehensive income (loss) $ 129,390
$ (6,871 ) $ (7,429 ) $ 13,807
$ 128,897

~~Globalstar, Inc.~~

~~Condensed Consolidating Statement of Operations~~

Nine Months Ended September 30, 2015

(Unaudited)

Parent
Company

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
(In thousands)
Revenue:

Service revenues $ 57,373
$ 2,042
$ 14,950
$ (18,998 ) $ 55,367
Subscriber equipment sales 573
8,917
6,380
(3,514 ) 12,356
Total revenue 57,946
10,959
21,330
(22,512 ) 67,723
Operating expenses:

Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 9,580
8,740
8,053
(3,151 ) 23,222
Cost of subscriber equipment sales 8
7,808
5,243
(4,031 ) 9,028
Marketing, general and administrative 6,563
12,645
9,222

28,430
Depreciation, amortization, and accretion 56,282
882
16,041
(15,471 ) 57,734
Total operating expenses 72,433
30,075
38,559
(22,653 ) 118,414
Income (loss) from operations (14,487 ) (19,116 ) (17,229 ) 141
(50,691 )
Other income (expense):

Loss on extinguishment of debt (2,254 ) —
—
—
(2,254 )
Loss on equity issuance (5,832 ) —
—
—
(5,832 )
Interest income and expense, net of amounts capitalized (26,315 ) (23 ) (449 ) 7
(26,780 )
Derivative gain 183,416
—
—
—
183,416
Equity in subsidiary earnings (35,691 ) (10,150 ) —
45,841
—
Other 246
40
6,196
(4,754 ) 1,728
Total other income (expense) 113,570
(10,133 ) 5,747
41,094
150,278
Income (loss) before income taxes 99,083
(29,249 ) (11,482 ) 41,235
99,587
Income tax (provision) expense (55 ) 16
488
—
449
Net income (loss) $ 99,138
$ (29,265 ) $ (11,970 ) $ 41,235
$ 99,138
Comprehensive income (loss) $ 99,138
$ (29,265 ) $ (13,449 ) $ 41,256
$ 97,680

~~Globalstar, Inc.~~

~~Condensed Consolidating Statement of Operations~~

~~Nine Months Ended September 30, 2014~~

~~(Unaudited)~~

Parent
Company

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
(In thousands)
Revenue:

Service revenues $ 56,627
$ 4,859
$ 17,279
$ (26,118 ) $ 52,647
Subscriber equipment sales 387
10,966
9,271
(5,300 ) 15,324
Total revenue 57,014
15,825
26,550
(31,418 ) 67,971
Operating expenses:

Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 7,958
7,101
7,289
(422 ) 21,926
Cost of subscriber equipment sales 243
8,578
9,415
(6,996 ) 11,240
Cost of subscriber equipment sales - reduction in the value of inventory 7,258
19
40
—
7,317
Marketing, general and administrative 5,501
11,994
10,910
(3,606 ) 24,799
Depreciation, amortization, and accretion 57,636
9,589
20,113
(20,945 ) 66,393
Total operating expenses 78,596
37,281
47,767
(31,969 ) 131,675
Income (loss) from operations (21,582 ) (21,456 ) (21,217 ) 551
(63,704 )
Other income (expense):

Loss on extinguishment of debt (39,615 ) —
—
—
(39,615 )
Loss on equity issuance (748 ) —
—
—
(748 )
Interest income and expense, net of amounts capitalized (33,598 ) (30 ) (226 ) 1
(33,853 )
Derivative loss (418,663 ) —
—
—
(418,663 )
Equity in subsidiary earnings (42,471 ) (5,100 ) —
47,571
—
Other 1,998
400
643
(86 ) 2,955
Total other income (expense) (533,097 ) (4,730 ) 417
47,486
(489,924 )
Income (loss) before income taxes (554,679 ) (26,186 ) (20,800 ) 48,037
(553,628 )
Income tax expense 204
34
1,017
—
1,255
Net income (loss) $ (554,883 ) $ (26,220 ) $ (21,817 ) $ 48,037
$ (554,883 )
Comprehensive income (loss) $ (554,883 ) $ (26,220 ) $ (22,688 ) $ 48,037
$ (555,754 )



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	47,005		$	22,969		$	28,271		$	(42,878	)	$	55,367
Subscriber equipment sales	573			8,917			6,380			(3,514		)	12,356
Total revenue	47,578			31,886			34,651			(46,392		)	67,723
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	14,227			4,871			10,098			(5,974		)	23,222
Cost of subscriber equipment sales	8			7,808			4,091			(2,879		)	9,028
Marketing, general and administrative	14,731			4,477			46,716			(37,494		)	28,430
Depreciation, amortization, and accretion	56,282			882			934			(364		)	57,734
Total operating expenses	85,248			18,038			61,839			(46,711		)	118,414
Income (loss) from operations	(37,670		)	13,848			(27,188		)	319			(50,691		)
Other income (expense):
Loss on extinguishment of debt	(2,254		)	—			—			—			(2,254		)
Loss on equity issuance	(5,832		)	—			—			—			(5,832		)
Interest income and expense, net of amounts capitalized	(26,315		)	(23		)	(449		)	7			(26,780		)
Derivative gain	183,416			—			—			—			183,416
Equity in subsidiary earnings (loss)	(12,508		)	(12,736		)	—			25,244			—
Other	246			334			5,902			(4,754		)	1,728
Total other income (expense)	136,753			(12,425		)	5,453			20,497			150,278
Income (loss) before income taxes	99,083			1,423			(21,735		)	20,816			99,587
Income tax expense (benefit)	(55		)	16			488			—			449
Net income (loss)	$	99,138		$	1,407		$	(22,223	)	$	20,816		$	99,138
Comprehensive income (loss)	$	99,138		$	1,407		$	(23,702	)	$	20,837		$	97,680

Globalstar, Inc.

Condensed Consolidating Balance Sheet

As of September 30, ~~2015~~2016

(Unaudited)


	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)														(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	23,325		$	1,606		$	3,042		$	—		$	27,973	$	6,281		$	2,337		$	4,292		$	—		$	12,910
Accounts receivable	3,863			5,132			4,545			511			14,051		6,133			6,776			3,676			—			16,585
Intercompany receivables	835,221			450,702			40,021			(1,325,944		)	—		881,227			661,824			25,362			(1,568,413		)	—
Inventory	2,030			6,821			3,229			—			12,080		2,268			5,299			2,164			—			9,731
Prepaid expenses and other current assets	2,089			371			3,259			—			5,719		2,950			345			2,276			—			5,571
Total current assets	866,528			464,632			54,096			(1,325,433		)	59,823		898,859			676,581			37,770			(1,568,413		)	44,797
Property and equipment, net	1,075,634			3,672			4,678			(468		)	1,083,516		1,040,091			3,735			4,492			4			1,048,322
Restricted cash	37,918			—			—			—			37,918		37,959			—			—			—			37,959
Intercompany notes receivable	12,036			—			14,995			(27,031		)	—		10,086			—			6,436			(16,522		)	—
Investment in subsidiaries	(290,165		)	7,870			41,660			240,635			—		(277,528		)	59,947			35,042			182,539			—
Deferred financing costs	61,164			—			—			—			61,164
Prepaid second-generation ground costs	13,909			—			—			—			13,909		2,579			—			—			—			2,579
Intangible and other assets, net	9,837			339			815			(12		)	10,979		14,270			164			682			(10		)	15,106
Total assets	$	1,786,861		$	476,513		$	116,244		$	(1,112,309	)	$	1,267,309	$	1,726,316		$	740,427		$	84,422		$	(1,402,402	)	$	1,148,763
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	19,642		$	—		$	—		$	—		$	19,642	$	38,112		$	—		$	—		$	—		$	38,112
Accounts payable	5,809			2,524			1,320			—			9,653		2,030			3,473			1,067			—			6,570
Accrued contract termination charge	19,712			—			—			—			19,712		19,654			—			—			—			19,654
Accrued expenses	15,116			7,025			6,977			—			29,118		14,919			5,710			7,437			—			28,066
Intercompany payables	564,481			614,931			148,586			(1,327,998		)	—		619,104			740,464			208,735			(1,568,303		)	—
Payables to affiliates	536			—			—			—			536		243			—			—			—			243
Deferred revenue	2,133			18,713			4,141			—			24,987		1,390			20,123			5,841			—			27,354
Total current liabilities	627,429			643,193			161,024			(1,327,998		)	103,648		695,452			769,770			223,080			(1,568,303		)	119,999
Long-term debt, less current portion	618,837			—			—			—			618,837		547,311			—			—			—			547,311
Employee benefit obligations	5,537			—			—			—			5,537		4,911			—			—			—			4,911
Intercompany notes payable	5,355			—			14,175			(19,530		)	—		6,435			—			10,086			(16,521		)	—
Derivative liabilities	238,087			—			—			—			238,087		189,500			—			—			—			189,500
Deferred revenue	5,907			427			—			—			6,334		5,751			317			—			—			6,068
Debt restructuring fees	20,795			—			—			—			20,795		20,795			—			—			—			20,795
Other non-current liabilities	1,839			303			8,854			—			10,996		1,459			320			3,698			—			5,477
Total non-current liabilities	896,357			730			23,029			(19,530		)	900,586		776,162			637			13,784			(16,521		)	774,062
Stockholders’ (deficit) equity	263,075			(167,410		)	(67,809		)	235,219			263,075
Stockholders’ equity (deficit)															254,702			(29,980		)	(152,442		)	182,422			254,702
Total liabilities and stockholders’ equity	$	1,786,861		$	476,513		$	116,244		$	(1,112,309	)	$	1,267,309	$	1,726,316		$	740,427		$	84,422		$	(1,402,402	)	$	1,148,763

Globalstar, Inc.

Condensed Consolidating Balance Sheet

As of December 31, ~~2014~~2015

(Unaudited)


	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)														(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	3,166		$	672		$	3,283		$	—		$	7,121	$	3,530		$	719		$	3,227		$	—		$	7,476
Accounts receivable	4,470			5,265			4,955			325			15,015		4,860			5,215			4,461			—			14,536
Intercompany receivables	755,482			441,525			23,967			(1,220,974		)	—		839,215			609,500			54,507			(1,503,222		)	—
Inventory	2,018			8,424			4,292			—			14,734		2,148			6,321			3,554			—			12,023
Prepaid expenses and other current assets	3,465			303			4,176			—			7,944		2,399			291			1,766			—			4,456
Total current assets	768,601			456,189			40,673			(1,220,649		)	44,814		852,152			622,046			67,515			(1,503,222		)	38,491
Property and equipment, net	1,105,670			3,002			5,776			(888		)	1,113,560		1,069,605			3,722			4,587			(354		)	1,077,560
Restricted cash	37,918			—			—			—			37,918		37,918			—			—			—			37,918
Intercompany notes receivable	13,006			—			8,285			(21,291		)	—		12,037			—			5,355			(17,392		)	—
Investment in subsidiaries	(265,249		)	4,734			30,552			229,963			—		(274,453		)	58,686			32,945			182,822			—
Deferred financing costs	63,862			—			—			—			63,862
Prepaid second-generation ground costs															8,929			—			—			—			8,929
Intangible and other assets, net	6,707			541			1,031			(13		)	8,266		11,384			280			464			(11		)	12,117
Total assets	$	1,730,515		$	464,466		$	86,317		$	(1,012,878	)	$	1,268,420	$	1,717,572		$	684,734		$	110,866		$	(1,338,157	)	$	1,175,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	6,450		$	—		$	—		$	—		$	6,450	$	32,835		$	—		$	—		$	—		$	32,835
Accounts payable	3,310			1,755			1,857			—			6,922		4,292			2,439			1,387			—			8,118
Accrued contract termination charge	21,308			—			—			—			21,308		19,121			—			—			—			19,121
Accrued expenses	6,638			7,213			8,491			—			22,342		9,816			6,949			5,674			—			22,439
Intercompany payables	508,503			563,183			153,067			(1,224,753		)	—		585,091			706,913			211,188			(1,503,192		)	—
Payables to affiliates	481			—			—			—			481		616			—			—			—			616
Derivative liabilities	—			—			—			—			—
Deferred revenue	3,185			15,378			3,177			—			21,740		1,980			17,722			4,200			—			23,902
Total current liabilities	549,875			587,529			166,592			(1,224,753		)	79,243		653,751			734,023			222,449			(1,503,192		)	107,031
Long-term debt, less current portion	623,640			—			—			—			623,640		548,286			—			—			—			548,286
Employee benefit obligations	5,499			—			—			—			5,499		4,810			—			—			—			4,810
Intercompany notes payable	2,000			—			15,148			(17,148		)	—		5,563			—			11,818			(17,381		)	—
Derivative liabilities	441,550			—			—			—			441,550		239,642			—			—			—			239,642
Deferred revenue	6,229			343			—			—			6,572		6,027			386			—			—			6,413
Debt restructuring fees	20,795			—			—			—			20,795		20,795			—			—			—			20,795
Other non-current liabilities	2,011			294			9,900			—			12,205		1,567			305			9,035			—			10,907
Total non-current liabilities	1,101,724			637			25,048			(17,148		)	1,110,261		826,690			691			20,853			(17,381		)	830,853
Stockholders’ (deficit) equity	78,916			(123,700		)	(105,323		)	229,023			78,916
Stockholders’ equity (deficit)															237,131			(49,980		)	(132,436		)	182,416			237,131
Total liabilities and stockholders’ equity	$	1,730,515		$	464,466		$	86,317		$	(1,012,878	)	$	1,268,420	$	1,717,572		$	684,734		$	110,866		$	(1,338,157	)	$	1,175,015

Globalstar, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2016

(Unaudited)



	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations		Consolidated
	(In thousands)
Cash flows provided by (used in) operating activities	$	4,785		$	1,618	$	1,301		$	—	$	7,704
Cash flows used in investing activities:
Second-generation network costs (including interest)	(8,272		)	—		(200		)	—		(8,472		)
Property and equipment additions	(7,477		)	—		(169		)	—		(7,646		)
Purchase of intangible assets	(1,327		)	—		—			—		(1,327		)
Change in restricted cash	(41		)								(41		)
Net cash used in investing activities	(17,117		)	—		(369		)	—		(17,486		)
Cash flows provided by (used in) financing activities:
Principal payments of the Facility Agreement	(16,418		)	—		—			—		(16,418		)
Proceeds from issuance of stock to Terrapin	28,500			—		—			—		28,500
Proceeds from issuance of common stock and exercise of options and warrants	3,001			—		—			—		3,001
Net cash provided by financing activities	15,083			—		—			—		15,083
Effect of exchange rate changes on cash	—			—		133			—		133
Net increase (decrease) in cash and cash equivalents	2,751			1,618		1,065			—		5,434
Cash and cash equivalents, beginning of period	3,530			719		3,227			—		7,476
Cash and cash equivalents, end of period	$	6,281		$	2,337	$	4,292		$	—	$	12,910

Globalstar, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2015

(Unaudited)


	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
	(In thousands)														(In thousands)
Cash flows provided by (used in) operating activities:	$	2,869		$	2,901		$	1,544		$	—	$	7,314
Cash flows provided by (used in) operating activities															$	2,869		$	2,901		$	1,544		$	—	$	7,314
Cash flows used in investing activities:
Second-generation network costs (including interest)	(15,484		)	—			—			—		(15,484		)	(15,484		)	—			—			—		(15,484		)
Property and equipment additions	(3,427		)	(1,967		)	(668		)	—		(6,062		)	(1,587		)	(1,967		)	(668		)	—		(4,222		)
Purchase of intangible assets															(1,840		)									(1,840		)
Net cash used in investing activities	(18,911		)	(1,967		)	(668		)	—		(21,546		)	(18,911		)	(1,967		)	(668		)	—		(21,546		)
Cash flows provided by (used in) financing activities:
Principal payments of the Facility Agreement															(3,225		)									(3,225		)
Proceeds from issuance of stock to Terrapin	39,000			—			—			—		39,000			39,000			—			—			—		39,000
Proceeds from issuance of common stock and exercise of options and warrants	426			—			—			—		426			426			—			—			—		426
Principal payment of the Facility Agreement	(3,225		)	—			—			—		(3,225		)
Net cash provided by financing activities	36,201			—			—			—		36,201			36,201			—			—			—		36,201
Effect of exchange rate changes on cash	—			—			(1,117		)	—		(1,117		)	—			—			(1,117		)	—		(1,117		)
Net increase (decrease) in cash and cash equivalents	20,159			934			(241		)	—		20,852			20,159			934			(241		)	—		20,852
Cash and cash equivalents, beginning of period	3,166			672			3,283			—		7,121			3,166			672			3,283			—		7,121
Cash and cash equivalents, end of period	$	23,325		$	1,606		$	3,042		$	—	$	27,973		$	23,325		$	1,606		$	3,042		$	—	$	27,973

~~Globalstar, Inc.~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Nine Months Ended September 30, 2014~~

~~(Unaudited)~~

Parent
Company

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
(In thousands)
Cash flows provided by operating activities $ 6,066
$ 728
$ 81
$ —
$ 6,875
Cash flows used in investing activities:

Second-generation network costs (including interest) (3,862 ) —
—
—
(3,862 )
Property and equipment additions (1,357 ) (492 ) (354 ) —
(2,203 )
Net cash used in investing activities (5,219 ) (492 ) (354 ) —
(6,065 )
Cash flows provided by (used in) financing activities:

Proceeds from issuance of common stock and exercise of options and warrants 9,303
—
—
—
9,303
Payment of deferred financing costs (164 ) —
—
—
(164 )
Net cash provided by financing activities 9,139
—
—
—
9,139
Effect of exchange rate changes on cash —
—
(136 ) —
(136 )
Net increase (decrease) in cash and cash equivalents 9,986
236
(409 ) —
9,813
Cash and cash equivalents, beginning of period 12,935
676
3,797
—
17,408
Cash and cash equivalents, end of period $ 22,921
$ 912
$ 3,388
$ —
$ 27,221

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements.

Certain statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q (the "Report"), other than purely historical information, including, but not limited to, estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements, such as the statements regarding our ability to develop and expand our business (including our ability to monetize our spectrum rights), our anticipated capital spending, our ability to manage costs, our ability to exploit and respond to technological innovation, the effects of laws and regulations (including tax laws and regulations) and legal and regulatory changes (including regulation related to the use of our spectrum), the opportunities for strategic business combinations and the effects of consolidation in our industry on us and our competitors, our anticipated future revenues, our anticipated financial resources, our expectations about the future operational performance of our satellites (including their projected operational lives), the expected strength of and growth prospects for our existing customers and the markets that we serve, commercial acceptance of new products, problems relating to the ground-based facilities operated by us or by independent gateway operators, worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis and other statements contained in this Report regarding matters that are not historical facts, involve predictions. Risks and uncertainties that could cause or contribute to such differences include, without limitation, those in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014,~~2015, as filed with the Securities and Exchange Commission (the "SEC") on ~~March 2, 2015~~February 26, 2016 (the ~~"2014~~"2015 Annual Report"). and in Item 1A.Risk Factors of Part II in this Report. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this Report to reflect actual results or future events or circumstances.

New risk factors emerge from time to time, and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

This "Management's Discussion and Analysis of Financial Condition" should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition" and information included in our ~~2014~~2015 Annual Report.

Overview

Mobile Satellite Services Business

Globalstar, Inc. (“we,” “us” or ~~“the Company”~~the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications services ~~through its global satellite network.~~globally via satellite. By providing wireless communications services in areas not served or underserved by terrestrial wireless and wireline networks and in circumstances where terrestrial networks are not operational due to natural or man-made disasters, we seek to meet our customers' increasing desire for connectivity. We offer voice and data communication services over our network of in-orbit satellites and our active ground stations (or “gateways”), which we refer to collectively as the Globalstar System.

We currently provide the following communications services via satellite. These services are available only with equipment designed to work on our network:

two-way voice communication and data transmissions (“Duplex”) using mobile or fixed devices; and

one-way data transmissions ("Simplex") using a mobile or fixed device that transmits its location and other information to a central monitoring station, which includes certain SPOT and Simplex products.

We have integrated our second-generation satellites with our first-generation satellites to form our second-generation constellation of Low Earth Orbit (“LEO”) satellites. The restoration of our constellation’s Duplex capabilities was complete in August 2013 forming the world's most modern satellite network.

This restoration of Duplex capabilities resulted in a substantial increase in service levels, making our products and services more desirable to existing and potential customers. We ~~are gaining new customers and winning back former customers, which contributes to increases in Duplex service revenue. We~~ offer a range of price-competitive products to the industrial, governmental

and consumer markets. Due to the unique design of the Globalstar System (and based on customer input), we believe that we offer the best voice quality among our peer group.

We designed our second-generation satellites to last twice as long in space, have 40% greater capacity and be built at a significantly lower cost compared to our first-generation satellites. We achieved this longer life by increasing the solar array and battery capacity, using a larger fuel tank, adding redundancy for key satellite equipment, and improving radiation specifications and additional lot level testing for all susceptible electronic components, in order to account for the accumulated dosage of radiation encountered during a 15-year mission at the operational altitude of the satellites. The second-generation satellites use passive S-band antennas on the body of the spacecraft providing additional shielding for the active amplifiers which are located inside the spacecraft, unlike the first-generation amplifiers that were located on the outside as part of the active antenna array. Each satellite has a high degree of on-board subsystem redundancy, an on-board fault detection system and isolation and recovery for safe and quick risk mitigation.

We define a successful level of service for our customers as ~~measured by~~ their ability to make uninterrupted calls of average duration for a system-wide average number of minutes per month. Our goal is to provide service levels and call success rates equal to or better than our MSS competitors so our products and services are attractive to potential customers. We define voice quality as the ability to easily hear, recognize and understand callers with imperceptible delay in the transmission. Due to the unique design of the Globalstar System, by this measure our system outperforms geostationary (“GEO”) satellites used by some of our competitors. Due to the difference in signal travel distance, GEO satellite signals must travel approximately 42,000 additional nautical miles, which introduces considerable delay and signal degradation to GEO calls. For our competitors using cross-linked satellite architectures, which require multiple inter-satellite connections to complete a call, signal degradation and delay can result in compromised call quality as compared to that experienced over the Globalstar System.

We also compete aggressively on price. Our MSS handsets are priced lower than those of our main MSS competitors, providing access to MSS services to a broader range of subscribers. We expect to retain our position as the low cost, high quality leader in the MSS industry.

Our satellite communications business, by providing critical mobile communications to our subscribers, serves principally the following markets: recreation and personal; government; public safety and disaster relief; oil and gas; maritime and fishing; natural resources, mining and forestry; construction; utilities; and transportation.

At September 30, 2015, we served approximately 687,000 subscribers. We increased our net subscribers 11% from September 30, 2014 to September 30, 2015. We count "subscribers" based on the number of devices that are subject to agreements which entitle them to use our voice or data communications services rather than the number of persons or entities who own or lease those devices.

We designed our second-generation constellation to support our current lineup of Duplex, SPOT and Simplex products. With the improvement in both coverage and service quality resulting from the deployment of our second-generation constellation and with the release of new product and service offerings, we anticipate further expansion of our subscriber base and increases in our average revenue per user, or “ARPU.”

Our products and services are sold through a variety of independent agents, dealers and resellers, and ~~independent gateway operators (“IGOs”).~~IGOs. We have distribution relationships with a number of "Big Box" and online retailers and other similar distribution channels which expands the diversification of our distribution channels.

At September 30, 2016, we served approximately 694,000 subscribers. We count "subscribers" based on the number of devices that are subject to agreements that entitle them to use our voice or data communications services rather than the number of persons or entities who own or lease those devices. With the release of new product and service offerings and expansion in new and legacy markets, we anticipate further growth in our subscriber base.

Regulatory Reform for Terrestrial Spectrum Authority

In November 2013, the Federal Communications Commission (the "FCC") proposed rules that, if adopted, would enable us to offer low power terrestrial broadband services over a portion of our licensed MSS spectrum. We have termed these services Terrestrial Low Power Service ("TLPS"). We believe TLPS represents a differentiated, premium, and immediate solution to existing Wi-Fi congestion. Through the two TLPS deployments held during 2015, we demonstrated a material increase in user throughput and network levels. These deployments also provided additional data confirming the successful coexistence of TLPS with other existing services. With these real world deployments of our TLPS operations, we have shown the FCC the dramatic consumer benefits that are achievable. The proposed rules would substantially revise the gating criteria for terrestrial use of our spectrum and would allow us to provide TLPS over our licensed spectrum together with the non-exclusive use of adjacent unlicensed spectrum. On May 13, 2016, the FCC circulated an order containing the proposed rules. If the FCC adopts the proposed order, we plan to establish one or more partnerships to deploy commercial service promptly as well as to seek similar terrestrial authority in certain international jurisdictions.

Performance Indicators

Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality of and potential variability of our earnings and cash flows. These key performance indicators include:

total revenue, which is an indicator of our overall business growth;

subscriber growth and churn rate, which are both indicators of the satisfaction of our customers;

average monthly revenue per user, or ARPU, which is an indicator of our pricing and ability to obtain effectively long-term, high-value customers. We calculate ARPU separately for each type of our Duplex, Simplex, SPOT and IGO revenue;

operating income and adjusted EBITDA, both of which are indicators of our financial performance; and

capital expenditures, which are an indicator of future revenue growth potential and cash requirements.

Comparison of the Results of Operations for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015

Revenue

Total revenue increased by ~~$0.3~~$1.9 million, or approximately 1%8%, to $25.6 million for the three months ended September 30, 2016 from $23.7 million for the three months ended September 30, ~~2015 from $23.4 million for the three months ended September 30, 2014.~~2015. This increase was driven by a ~~$1.1~~$2.3 million increase in service revenue resulting from ~~an 11%~~a 2% increase in our average subscriber ~~base.~~base and increases in ARPU for most types of revenue. This increase in service revenue was offset partially by a ~~$0.9~~decrease in revenue from subscriber equipment sales due primarily to a lower volume of core Simplex units sold during the three months ended September 30, 2016.

Total revenue increased by $4.8 million, or approximately 7%, to $72.5 million for the nine months ended September 30, 2016 from $67.7 million for the nine months ended September 30, 2015. This increase was driven by a $6.3 million increase in service revenue resulting from a 4% increase in our average subscriber base and increases in ARPU for all types of revenue. This increase in service revenue was offset partially by a $1.6 million decrease in revenue from subscriber equipment sales. This decrease was due primarily to a ~~reduction in the selling price~~lower volume of ~~our Duplex phones in early 2015 in advance of the transition to our second-generation products.~~

Total revenue decreased by $0.3 million, or less than 1%, to $67.7 million for the nine months ended September 30, 2015 from $68.0 million for the nine months ended September 30, 2014. This decrease was due primarily to a $3.0 million decline in revenue generated from subscriber equipment sales, which resulted from higher demand in the first nine months of 2014 from our commercial

~~Simplex customers and lower~~ Duplex and ~~SPOT equipment sales prices due to rebate promotions. The decrease in equipment revenue was~~Simplex units sold, offset partially by a ~~$2.7 million increase in service revenue, which is attributable to growth in our subscriber base.~~

Additionally, revenue recognized during the three and nine months ended September 30, 2015 declined by $1.4 million and $3.7 million, respectively, compared to the prior year periods due to significant appreciationhigher volume of ~~the U.S. dollar. See further discussion below.~~SPOT equipment sales.

The following table sets forth amounts and percentages of our revenue by type of service (dollars in thousands).


	Three Months Ended September 30, 2015				Three Months Ended September 30, 2014				Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014				Three Months Ended September 30, 2016				Three Months Ended September 30, 2015				Nine Months Ended September 30, 2016				Nine Months Ended September 30, 2015
	Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue
Service Revenue:
Service revenue:
Duplex	$	7,409	31	%	$	7,687	33	%	$	20,572	30	%	$	20,504	30	%	$	9,303	36	%	$	7,409	31	%	$	23,730	33	%	$	20,572	30	%
SPOT	8,794		37		7,491		32		24,655		36		21,566		32		9,662		38		8,794		37		28,252		39		24,655		36
Simplex	2,363		10		1,986		8		6,898		10		6,078		9		2,294		9		2,363		10		7,303		10		6,898		10
IGO	189		1		214		1		576		1		789		1		238		1		189		1		654		1		576		1
Other	889		4		1,133		5		2,666		5		3,710		6		455		2		889		4		1,732		2		2,666		5
Total	$	19,644	83	%	$	18,511	79	%	$	55,367	82	%	$	52,647	78	%	$	21,952	86	%	$	19,644	83	%	$	61,671	85	%	$	55,367	82	%

The following table sets forth amounts and percentages of our revenue generated from equipment sales (dollars in thousands).


	Three Months Ended September 30, 2015					Three Months Ended September 30, 2014					Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014				Three Months Ended September 30, 2016				Three Months Ended September 30, 2015					Nine Months Ended September 30, 2016				Nine Months Ended September 30, 2015
	Revenue			% of Total Revenue		Revenue			% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue			% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue
Equipment Revenues:
Subscriber equipment sales:																			Subscriber equipment sales:
Duplex	$	1,122		5	%	$	1,800		8	%	$	3,947	6	%	$	4,856	7	%	$	1,125	4	%	$	1,122		5	%	$	3,144	4	%	$	3,947	6	%
SPOT	1,414			6		1,603			7		3,941		6		4,685		7		1,436		6		1,414			6		4,051		6		3,941		6
Simplex	1,265			5		1,557			7		3,661		5		4,838		7		832		3		1,265			5		2,837		4		3,661		5
IGO	272			1		130			—		745		1		739		1		175		1		272			1		706		1		745		1
Other	(39		)	—		(160		)	(1	)	62		—		206		—		24		—		(39		)	—		57		—		62		—
Total	$	4,034		17	%	$	4,930		21	%	$	12,356	18	%	$	15,324	22	%	$	3,592	14	%	$	4,034		17	%	$	10,795	15	%	$	12,356	18	%

The following table sets forth our average number of subscribers ~~ARPU~~ and ~~ending number of subscribers~~ARPU by type of revenue.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Average number of subscribers for the period (three and nine months ended):
Duplex (1)	75,303		63,774		71,477		74,904
SPOT	258,812		232,658		251,169		228,816
Simplex	302,460		269,110		297,271		252,709
IGO	38,725		38,944		38,697		38,995
ARPU (monthly):
Duplex (1)	$	32.80	$	40.18	$	31.98	$	30.42
SPOT	11.33		10.73		10.91		10.47
Simplex	2.60		2.46		2.58		2.67
IGO	1.63		1.83		1.65		2.25
Number of subscribers (end of period):
Average number of subscribers for the period:
Duplex	75,592		65,645		75,592		65,645		77,485		75,303		77,378		71,477
SPOT	262,020		235,737		262,020		235,737		276,384		258,812		271,209		251,169
Simplex	307,374		274,065		307,374		274,065		298,186		302,460		301,216		297,271
IGO	38,736		38,639		38,736		38,639		39,318		38,725		39,226		38,697
Other	2,892		5,806		2,892		5,806		2,185		4,364		2,270		4,304
Total	686,614		619,892		686,614		619,892		693,558		679,664		691,299		662,918

ARPU (monthly):
Duplex									$	40.02	$	32.80	$	34.08	$	31.98
SPOT									11.65		11.33		11.57		10.91
Simplex									2.56		2.60		2.69		2.58
IGO									2.02		1.63		1.85		1.65

~~(1)~~

In 2014 we initiated a process to deactivate certain subscribers in our Duplex subscriber base who were either suspended or non-paying. We deactivated approximately 26,000 subscribers during the first quarter of 2014. For the nine months ended September 30, 2014, excluding these 26,000 subscribers deactivated in prior periods, average subscribers would have been 61,574 and ARPU would have been $37.00.

The numbers reported in the above table are subject to immaterial rounding inherent in calculating averages.

Other service revenue includes revenue generated primarily from engineering services and third party sources, which are not subscriber driven. Accordingly, we do not present ~~average subscribers or~~ ARPU for other service revenue in the ~~above charts.~~ table above. Effective April 1, 2016, we began classifying activation fees with the service revenue to which they relate.

Service Revenue

~~Compared to the same periods in 2014,~~ Duplex service revenue ~~decreased approximately 4% for the three months ended September 30, 2015~~increased 26% and ~~increased less than 1% for the nine months ended September 30, 2015. The Duplex subscriber base increased~~ 15% from September 30, 2014 to September 30, 2015. The increase in service revenue generated from subscriber growth was offset by a decrease in ARPU resulting from changes in the rate plans selected by our subscribers and the negative impact from appreciation of the U.S. dollar during 2015. Due to our global footprint, a significant portion of our sales are generated internationally. For the three and nine months ended September 30, 2015 compared to the same periods in 2014, the movement of foreign exchange rates decreased Duplex service revenue by $0.8 million and $1.8 million, respectively.

~~SPOT service revenue increased 17% and 14%~~ for the three and nine months ended September 30, ~~2015,~~2016, respectively, due to increases in both the average subscriber base and ARPU compared to the same periods in ~~2014. SPOT~~2015. The average Duplex subscriber base increased 3% and 8% and ARPU increased 22% and 7% for the three and nine months ended September 30, 2016, respectively, compared to the same periods in 2015. Higher ARPU was due primarily to increased revenue from annual, usage-based plans. Over the past several quarters, the popularity of our annual, usage-based plans has increased substantially. These plans result in higher service revenue recognized in seasonally stronger months due to increased usage and expiration of unused minutes on the anniversary date of the customer's contract.

SPOT service revenue increased 10% and 15% for the three and nine months ended September 30, 2016, respectively, compared to the same periods in 2015, due to increases in both the average subscriber base and ARPU. The average number of SPOT subscribers increased 7% and 8% and ARPU increased 3% and 6% for the three and nine months ended September 30, 2016, respectively, compared to the same periods in 2015.The ARPU increase was driven primarily by rate plans increases and the significant number of SPOT Gen3^TM sales over the past 12 months. We sell SPOT Gen3^TM with a higher annual rate plan compared to other SPOT ~~products. End of period SPOT subscribers increased 11% from September 30, 2014~~products due to ~~September 30, 2015. Expansion in international markets and a corresponding increase in activations is the principal reason for growth in our SPOT subscriber base.~~its enhanced tracking features.

Simplex service revenue decreased 3% for the three months ended September 30, 2016, compared to the same period in 2015, due to slight declines in both the average subscriber base and ARPU, reflecting the impact of the oil and gas industry downturn on some of our largest customers. Average Simplex subscribers decreased 1% and ARPU decreased 2% for the three months ended September 30, 2016, compared to the same period in 2015. Comparing the nine months ended September 30, 2016 to the same period in 2015, Simplex service revenue increased ~~19%~~6% due to a 1% increase in average subscribers and ~~13%~~a 4% increase in ARPU. Our reclassification of activation fees from other revenue to Simplex service revenue in 2016, which contributed $0.5 million to the Simplex service revenue variance during the nine months ended September 30, 2016, was the principal reason for this increase.

Other revenue decreased approximately $0.4 million, or 49%, and $0.9 million, or 35%, for the three and nine months ended September 30, ~~2015,~~2016, respectively, compared to the same periods in ~~2014. End~~2015. The decrease in other revenue is due primarily to a reclassification of ~~period~~activation fees from other revenue to Simplex ~~subscribers increased 12% from September 30, 2014 to September 30, 2015. However,~~and Duplex service revenue ~~growth from our Simplex customers is not necessarily commensurate with subscriber growth due~~beginning in 2016, which contributed $0.3 million and $0.5 million to the ~~various competitive pricing plans we offer as well as variations in customer usage.~~

~~Other revenue decreased approximately 22% and 28%~~total decrease for the three and nine months ended September 30, ~~2015, respectively,~~2016 compared to the same periods in 2014. The decrease in other revenue is due primarily to lower revenue generated from government contracts as well as a decrease in third party revenue. While we were manufacturing and deploying our second-generation constellation, we began purchasing service from other satellite providers that we re-sell to certain loyal customers. We record this revenue in other service revenue as third party revenue. In markets where our coverage is fully restored, we have transitioned these subscribers to our network.2015.

Subscriber Equipment ~~Revenue~~Sales

Revenue from Duplex equipment sales was flat for the three months ended September 30, 2016 and decreased 20% for the nine months ended September 30, 2016 compared to the same periods in 2015. This decrease was driven primarily by ~~approximately 38%~~a sales promotion introduced in March 2015, which reduced the selling price of our Duplex handsets, thereby lowering the revenue generated from these equipment sales, and ~~19%, respectively,~~drove higher demand following the initial launch resulting in a higher volume of phones sold in 2015.

Revenue from SPOT equipment sales increased 2% and 3% for the three and nine months ended September 30, 2015 compared to the same periods in 2014. Although there was a 15% increase in the Duplex subscriber base from September 30, 2014 to September 30, 2015, Duplex equipment sales revenue declined due to a reduction in the selling price of our phones beginning in 2015 in advance of second-generation products, which we expect to introduce in 2016. Reduced Duplex equipment pricing has contributed to the 42% and 54% increase in the number of phones sold during the three and nine months ended September 30, 2015,2016, respectively, compared to the same periods in ~~2014.~~

~~Revenue from SPOT equipment sales decreased by approximately 12% and 16%, respectively, for the three and nine months ended September 30,~~ 2015 ~~compared~~due to the same periods in 2014. The success of our SPOT products continues to grow as evidenced in part by improving consumer velocity, which is measured by the number of subscriber activations. The primary reason for the SPOT equipment sales revenue decrease was the success of our recent rebate programs, which decreased the revenue generated from equipment sales. These rebates given to customers reduced equipment revenue, but contributed to thean increase in ~~SPOT service revenue by increasing our subscriber count and ARPU.~~the volume of units sold during the respective periods.

Revenue from Simplex equipment sales decreased by approximately ~~19%~~34% and ~~24%, respectively,~~23% for the three and nine months ended September 30, ~~2015~~2016, respectively, compared to the same periods in ~~2014. This decrease is~~2015. The downturn in the oil and gas industry has negatively impacted our Simplex business due to ~~product mix as we sold a larger number~~the concentration of ~~high margin units~~Simplex customers who operate in ~~2014 and a larger number of low margin units in 2015.~~this industry.

Operating Expenses

Total operating expenses ~~decreased $1.7~~increased $0.5 million, or approximately 4%1%, to ~~$39.8~~$40.3 million for the three months ended September 30, ~~2015~~2016 from ~~$41.5~~$39.8 million for the same period in ~~2014, due primarily to lower depreciation expense. Total operating expenses decreased $13.3~~2015, and increased $0.9 million, or approximately ~~10%~~1%, to ~~$118.4~~$119.3 million for the nine months ended September 30, ~~2015~~2016, from ~~$131.7~~$118.4 million for the same period in ~~2014. This decrease was~~2015. Increases in both periods were due ~~primarily~~ to ~~the reduction in the value~~higher marketing, general and administrative costs and cost of ~~inventory recognized during the nine months ended September 30, 2014, which did not recur during 2015, and~~services, offset by lower ~~depreciation expense.~~cost of subscriber equipment sales.

Cost of Services

Cost of services ~~decreased $0.1~~increased $0.6 million, or approximately 1%8%, ~~to $7.8 million~~ for the three months ended September 30, ~~2015~~2016 from ~~$7.9 million for~~ the same period in ~~2014.~~

~~Cost of services~~2015 and increased ~~$1.3~~$0.7 million, or 6%approximately 3%, ~~to $23.2 million~~ for the nine months ended September 30, ~~2015~~2016 from ~~$21.9 million for~~ the same period in ~~2014. The Thales in-orbit support contract signed in~~2015. For both periods, the ~~fourth quarter of 2014 represents 40% of this increase. Research~~increases were due primarily to higher research and development costs related to new products ~~represent 33% of the increase. Additionally, higher~~and personnel ~~costs contributed 17% of the increase due to higher fringe expenses and an expanded employee base.~~costs.

Cost of Subscriber Equipment Sales

Cost of subscriber equipment sales decreased ~~$0.9~~$0.5 million ~~or approximately 24%, to $2.9~~and $1.5 million for the three ~~months ended September 30, 2015 from $3.8 million for the same period in 2014~~ and ~~decreased $2.2 million, or approximately 20%, to $9.0 million for the~~ nine months ended September 30, ~~2015~~2016, respectively, from ~~$11.2 million for~~ the same ~~period~~periods in ~~2014. The decrease~~2015. These decreases are in ~~cost of~~line with the decreases in revenue from subscriber equipment sales isover the same periods. However, the consolidated equipment margin increased due to changes in the ~~carrying value,~~volume and mix ~~and volume~~ of products sold during the respective ~~periods. During the fourth quarter of 2014, we recorded a reduction in the carrying value of Duplex inventory based on evaluating~~periods and ~~estimating timing of new~~price variations across our worldwide markets and product ~~launches. This impairment corresponded to reduced Duplex equipment selling prices during 2015 compared to 2014.~~

~~Cost of Subscriber Equipment Sales - Reduction in the Value of Inventory~~

We recognized no reduction in the value of inventory during 2015 compared to $7.3 million for the nine months ended September 30, 2014. We have had various commercial contracts with Qualcomm since 2004 for the purchase of phone equipment and accessories. These contracts were canceled in March 2013, and we entered into an agreement with Qualcomm in July 2014 whereby we paid $0.1 million to Qualcomm for all remaining finished goods and raw materials held at Qualcomm, which included our previously recorded $9.2 million advances to Qualcomm for inventory. As part of our future business plans we intend to use Hughes-based technology in future product development; therefore, many of the raw materials held by Qualcomm are not likely to be used in the future production of additional inventory. As a result of certain terms included in the July 2014 agreement, during the second quarter of 2014 we recorded a reduction in the value of inventory of $7.3 million.portfolio.

Marketing, General and Administrative

Marketing, general and administrative expenses increased ~~$0.9~~approximately $0.4 million ~~or approximately 10%, to $9.7 million~~ for ~~the~~ three months ended September 30, ~~2015 from $8.8 million for the same period in 2014~~2016 and increased ~~$3.6 million, or approximately 15%, to $28.4~~$1.7 million for the nine months ended September 30, ~~2015 from $24.8 million~~2016 compared to the same periods in 2015.

The increase for the ~~same period~~three months ended September 30, 2016 is due primarily to increases in ~~2014. Higher~~stock compensation cost of $0.5 million, subscriber acquisition costs ~~resulting from enhanced advertising efforts, increased dealer commissions, broader global expansion,~~of $0.4 million, and ~~aggressive rebate promotions comprised 61% and 42%, respectively,~~personnel costs of $0.3 million. These increases were offset by a reduction in bad debt expense of $0.7 million due to a reserve recorded on a specific customer's receivable balance during the three months ended September 30, 2015, which did not recur in 2016.

The increase for the nine months ended September 30, 2016 is due primarily to a $1.1 million increase in the accrual for the settlement of litigation related to one of our international operations. We paid the total settlement of 4.5 million reais, or $1.4 million, by issuing approximately 1.3 million shares of our common stock on October 24, 2016. Also contributing to the increase in marketing, general and administrative expenses ~~for the three~~were higher stock compensation costs, personnel costs, subscriber acquisition costs and ~~nine months ended September 30, 2015. Higher~~professional and consulting fees, which increased $0.9 million, $0.9 million, $0.7 million, and $0.4 million, respectively. These increases were offset partially by a reduction in bad debt expense of $2.2 million during the nine-month period, which ~~constituted 56% and 37%, respectively, of~~was driven primarily by an accounts receivable balance that we reserved during the ~~increase in marketing, general and administrative expenses for the three and~~ nine months ended September 30, 2015 ~~was due to specific reserves we recorded for certain commercial customer balances. We also incurred higher personnel costs for both the three~~ and nine months ended September 30, 2015 resulting from higher salaries and fringe expenses and an expanded employee base. These third quarter 2014 to 2015 increases to marketing, general and administrative expenses were offset partially by a $0.6 million decrease in stock compensation expense primarily related to the vesting of a key employee performance grantrecovered during the ~~third~~first quarter of ~~2014, which did not recur during 2015.~~2016.

Depreciation, Amortization and Accretion

Depreciation, amortization, and accretion expense ~~decreased $1.6 million, or approximately 8%, to $19.4 million~~was flat for the three months ended September 30, ~~2015~~2016 from ~~$21.0 million for~~ the same period in ~~2014~~2015 and ~~decreased $8.7 million, or approximately 13%, to $57.7~~increased $0.1 million for the nine months ended September 30, ~~2015~~2016 from ~~$66.4 million for~~ the same period in ~~2014. These decreases relate primarily~~2015.

As of September 30, 2016, we had $197.7 million in construction in progress related to costs (including capitalized interest) associated with our contracts with Hughes and Ericsson to complete next-generation upgrades to our ground infrastructure. We expect to begin depreciating this asset in the ~~depreciation of our first-generation satellites launched during 2007, which reached the end of their estimated depreciable lives during 2014.~~near future.

Other Income (Expense)

~~Gain (Loss)~~Loss on Extinguishment of Debt

We ~~incurred no~~did not incur losses on extinguishment of debt during 2016 or for the three months ended September 30, ~~2015 and~~2015. We incurred a loss of $2.3 million for the nine months ended September 30, 2015, due to the conversion of a portion of our 8.00% Notes Issued in 2013. We incurred losses on extinguishment of debt of $12.9 million and $39.6 million for the three and nine months ended September 30, 2014, respectively, due to the conversion of our 8.00% Notes Issued in 2013 and 8.00% Notes Issued in 2009.

2015. During the first ~~quarter~~and second quarters of 2015, holders of ~~$0.2~~$6.5 million principal amount of our 2013 8.00% Notes ~~Issued in 2013~~ converted their Notes, resulting in a loss on extinguishment of debt of less than $0.1 million on the issuance of 0.5 million shares of voting common stock. During the second quarter of 2015, holders of $6.3 million principal amount of 8.00% Notes Issued in 2013 converted their Notes tonotes into common stock, resulting in a loss ~~on extinguishment~~ of ~~debt of $2.2~~$2.3 million on the issuance of ~~10.4~~10.9 million shares of voting common stock. These losses resulted from the fair value of the shares issued to the holders upon conversion exceeding the carrying value of the debt and derivative liability written off due to these ~~conversions, offset by the fair value of shares issued to the holders upon conversion.~~

During the first quarter of 2014, we incurred loss on extinguishment of debt of $10.2 million due primarily to the conversion of a portion of our 8.00% Notes Issued in 2009 and 8.00% Notes Issued in 2013. Holders of approximately $8.8 million principal amount of our 8.00% Notes Issued in 2009 converted them into common stock, resulting in a gain on extinguishment of debt of $0.4 million. This gain resulted from the carrying value of the debt and derivative liability written off due to these conversions exceeding the fair value of shares we issued to the holders upon conversion. Additionally, holders of approximately 15%, or $7.0 million, of the principal amount of 8.00% Notes Issued in 2013 converted them into common stock on March 20, 2014 resulting in a loss on extinguishment of debt of $10.5 million. This loss was due primarily to the fair value of shares issued to the holders being in excess of the carrying value of the debt and the derivative liability written off due to these conversions.

During the second quarter of 2014, we recorded loss on extinguishment of debt of $16.5 million due to the conversion of our 8.00% Notes Issued in 2009 and a portion of our 8.00% Notes Issued in 2013. On April 15, 2014 we met the condition for automatic

conversion of our 8.00% Notes Issued in 2009 pursuant to the terms of the related indenture. As a result of this automatic conversion and other conversions prior to April 15, 2014, the remaining principal amount of the 8.00% Notes Issued in 2009 converted into shares of our common stock resulting in a gain on extinguishment of debt of $3.9 million during the second quarter of 2014. This gain resulted from the carrying value of the debt and derivative liability written off due to these conversions exceeding the fair value of shares issued to the holders upon conversion. Additionally, holders of approximately $10.5 million principal amount of our 8.00% Notes Issued in 2013 converted the Notes into 18.6 million shares of common stock during the second quarter of 2014, resulting in a loss on extinguishment of debt of $20.4 million. This loss was due to the fair value of shares issued to the holders being in excess of the carrying value of the debt and the derivative liability written off due to these conversions.

During the third quarter of 2014, holders of approximately $6.8 million principal amount of our 8.00% Notes Issued in 2013 converted these notes into 11.4 million shares of common stock, resulting in a non-cash loss on extinguishment of debt of $12.9 million. The fair value of the shares issued to the holders exceeded the derivative liability and principal amount written off due to the conversions resulting in a loss on extinguishment of debt.

~~Loss~~Gain (Loss) on Equity Issuance

InFor the three and nine months ended September 30, ~~2015, loss~~2016, gain (loss) on equity issuance ~~increased~~fluctuated to a gain of $4.3 million and $2.3 million, respectively, from a loss of $2.9 million ~~from $0.0 million for the three months ended September 30, 2014~~ and to $5.8 million, ~~from $0.7 million for~~respectively, compared to the ~~nine months ended September 30, 2014. As previously discussed~~same periods in ~~Note 7: Commitments to our condensed consolidated financial statements, in~~2015. In June 2015, Hughes exercised its right to receive ~~the~~a pre-payment of certain payment milestones in shares of our common stock at a 7% discount to market value in lieu of cash. InAs previously discussed in Note 7: Commitments Contractual Obligations - Next-Generation Gateways and Other Ground Facilities to our condensed consolidated financial statements, in valuing the shares issued to Hughes at the 7% discount and the related liability for the potential issuance of additional shares, we initially recorded a non-cash loss of approximately ~~$1.2~~$2.9 million in loss on equity issuance in our condensed consolidated statements of operations ~~during~~for the second quarter of 2015. In conjunction with this agreement, we also provided Hughes downside protection ~~for a period of 130-trading days following the issuance of the stock in June.~~through December 30, 2016. This agreement generally would require us to issue additional shares to Hughes if the market value of our common stock at the end of the ~~130-day~~downside protection period is less than the price at issuance. We recorded an additional $3.0 million loss on equity issuance during the three months ended September 30, 2015 based on an estimate of the value of this option as of September 30, 2015 calculated using a Black-Scholes pricing model. We mark this liability to market at each balance sheet date ~~and~~ through the settlement ~~date, which we expect to be in December 2015.~~

During the three months ended June 30, 2014, Hughes also exercised its right to receive the pre-payment of certain milestone payments in shares of our common stock at a 7% discount to market value in lieu of cash. We recorded a loss of $0.7 million related to this discount in our condensed consolidated statements of operations for the second quarter of 2014.date.

Interest Income and Expense

Interest income and expense, net, decreased by $0.1 million to an expense of ~~$9.0~~$8.9 million for the three months ended September 30, ~~2015~~2016 from an expense of ~~$9.1~~$9.0 million for the same period in ~~2014.~~ 2015. This variance is due to higher capitalized interest, offset partially by an increase in interest costs during 2016.

Interest income and expense, net, ~~decreased $7.1~~increased $0.2 million to an expense of ~~$26.8~~$27.0 million for the nine months ended September 30, ~~2015 compared to~~2016 from an expense of ~~$33.9~~$26.8 million for the same period in ~~2014. This decrease resulted primarily from~~2015. Higher capitalized interest ~~expense of approximately $4.0 million related to make-whole interest we paid to holders who converted 8.00% Notes Issued in 2009 and 8.00% Notes Issued in 2013~~ during the nine months ended September 30, 2014, compared to $0.6 million of make-whole interest paid to converting holders during the nine months ended September 30, 2015. A decrease in our outstanding debt balance and2016 partially offset an increase in ~~capitalized~~ interest ~~also contributed to the decrease in~~costs resulting primarily from a higher LIBOR-based interest ~~expense for the nine-month period. See Note 3: Long-Term Debt and Other Financing Arrangements to~~rate on our ~~condensed consolidated financial statements for discussion of the reduction in~~Facility Agreement, a higher principal balance outstanding on our ~~outstanding debt balance, including conversions of the remaining 8.00% Notes Issued in 2009 in April 2014~~Thermo Loan Agreement and a ~~portion~~make-whole interest payment made in the second quarter of ~~the 8.00% Notes Issued~~2015, which did not recur in ~~2013 at various dates throughout 2014 and 2015.~~2016.

Derivative Gain ~~(Loss)~~

Derivative gain ~~(loss) fluctuated~~decreased by ~~$112.8~~$43.2 million to ~~a gain of $54.2~~$11.0 million for the three months ended September 30, ~~2015,~~2016, compared to ~~a gain of $167.0~~$54.2 million for the same period in ~~2014~~2015 and ~~fluctuated~~ by ~~$602.1~~$133.3 million to ~~a gain of $183.4~~$50.1 million for the nine months ended September 30, ~~2015,~~2016, compared to ~~a loss of $418.7~~$183.4 million for the same period in ~~2014.~~2015.

We recognize gains or losses due to the change in the value of certain embedded features within our debt instruments that require standalone derivative accounting. AWhile fluctuation in our stock price is the most significant cause for the change in value of these derivative ~~instruments.~~instruments, other inputs can impact the value including volatility, discount rate, maturity date and changes in the principal amount of notes outstanding. Although our stock price did not fluctuate significantly during the first and third quarters of 2016, it did fluctuate significantly during the second quarter of 2016. Our stock price fluctuated even more significantly during the three and nine month periods ended September 30, 2015, ~~and 2014,~~ resulting in the material non-cash derivative gains ~~and losses~~ in ~~these~~those periods. See Note 5: Fair Value Measurements to our condensed consolidated financial statements for further discussion of the fair value computations of our derivatives.

Other

Other income (loss) ~~decreased $4.6~~fluctuated $1.5 million to expense of ~~$2.0~~$0.5 million for the three months ended September 30, ~~2015~~2016 from ~~income~~expense of ~~$2.6~~$2.0 million for the same period in ~~2014.~~2015. Other income ~~decreased $1.3~~(loss) fluctuated $2.3 million to ~~$1.7~~expense of $0.6 million for the nine months ended September 30, ~~2015~~2016 from ~~$3.0~~income of $1.7 million infor the same period in ~~2014. The fluctuations in other expense are~~2015. This fluctuation is due primarily to foreign currency gains and losses we recognized during the respective ~~periods. The U.S. dollar has strengthened dramatically since mid-2014 relative to certain other currencies, including the Euro and Canadian dollar. Given~~periods given the significant financial statement ~~amounts~~items we have denominated in ~~these~~foreign currencies, including primarily the ~~foreign currency gain decreased by $0.7 million to a gain of $2.2 million during~~Brazilian real, euro and Canadian dollar. Additionally, in March 2016, the ~~nine months ended September 30, 2015 compared to a gain of $2.9 million during~~Venezuelan government introduced the ~~same period in 2014.~~

~~Included in the foreign currency loss recorded during the third quarter of 2015 was a $1.9 million loss related to our Venezuelan subsidiary. Effective July 1, 2015, we began using the SIMADI exchange~~DICOM rate, which is published by the Central Bank of Venezuela and replaced the SIMADI rate. We use the DICOM exchange rate to remeasure our Venezuelan subsidiary's ~~Bolivar based~~bolivar-based transactions and net monetary assets in U.S. dollars. ~~We determined, based upon~~

Income Tax Benefit (Expense)

Income tax benefit (expense) fluctuated $6.4 million to a benefit of $6.3 million for the three months ended September 30, 2016 from expense of $0.1 million for the same period in 2015. Income tax benefit (expense) fluctuated $7.0 million to a benefit of $6.6 million for the nine months ended September 30, 2016 from expense of $0.4 million for the same period in 2015. As disclosed in Note 6: Accrued Expenses and Other Non-Current Liabilities to our ~~specific facts and circumstances, that the SIMADI rate is the most appropriate rate for~~condensed consolidated financial ~~reporting purposes, instead~~statements, as a result of the ~~official exchange rate~~expiration of the statute of limitations associated with the tax position of one of our foreign subsidiaries, we ~~previously used.~~removed $6.3 million in unrecognized tax positions, inclusive of cumulative interest and penalties, from our non-current liabilities resulting in a corresponding tax benefit.

In October 2016, the U.S. Department of the Treasury released final and temporary regulations under Section 385 of the U.S. Internal Revenue Code. The final regulations strengthen the tax rules distinguishing between debt and equity specific to related party transactions. We are currently evaluating the impact this regulation will have on our current accounting and tax policies and procedures.

Liquidity and Capital Resources

Overview

Our principal liquidity requirements include paying our debt service obligations, funding our operating costs and paying amounts related to ~~second-generation upgrades to~~ our ~~ground infrastructure, repaying our debt and funding our operating costs.~~capital projects. Our principal sources of liquidity include cash on hand, cash flows from operations and funds available under ~~the August 2015 Terrapin Agreement. See below for further discussion.~~our common stock purchase agreement with Terrapin. We also expect sources of liquidity to include funds from other debt or equity financings that have not yet been arranged. See Part I, Item 1A. Risk Factors in our 2015 Annual Report ~~on Form 10-K for the year ended December 31, 2014~~ for a description of risks, some of which are beyond our control, affecting our ability to ~~achieve~~fulfill our liquidity requirements.

~~Additionally,~~As of September 30, 2016, we held cash and cash equivalents of $12.9 million. We also had $38.0 million in restricted cash, which is the balance in our debt service reserve account. The Facility Agreement (as defined below) requires us to maintain $37.9 million in a debt service reserve ~~account. The Facility Agreement~~account and restricts the use of ~~the~~these funds ~~in this account~~ to making principal and interest payments under the Facility Agreement. ~~As of September 30, 2015, the balance in the debt service reserve account was $37.9 million, which we classified as restricted cash on our condensed consolidated balance sheets.~~

~~Comparison of Cash Flows for the nine months ended September 30, 2015 and 2014~~

~~The following table shows our cash flows from operating, investing and financing activities (in thousands):~~

Nine Months Ended
September 30,
2015 September 30,
2014
Net cash provided by operating activities $ 7,314
$ 6,875
Net cash used in investing activities (21,546 ) (6,065 )
Net cash provided by financing activities 36,201
9,139
Effect of exchange rate changes on cash (1,117 ) (136 )
Net increase in cash and cash equivalents $ 20,852
$ 9,813

~~Cash Flows Provided by Operating Activities~~

Net cash provided by operating activities during the nine months ended September 30, 2015 was $7.3 million compared to net cash provided by operating activities of $6.9 million during the same period in 2014. During 2015, we experienced favorable changes in operating assets and liabilities, which resulted in more cash provided by operating activities for the first nine months of 2015 compared to the same period in 2014. Changes during 2015 compared to the same period in 2014 resulted from favorable fluctuations in accounts payable and accrued expenses, offset partially by lower cash receipts for future services to be provided by us to our subscribers and lower cash receipts from the sale of inventory.

~~Cash Flows Used in Investing Activities~~

Net cash used in investing activities was $21.5 million for the nine months ended September 30, 2015 compared to $6.1 million for the same period in 2014. The increase in cash used in investing activities was due primarily to an increase in spending related to our second-generation ground upgrades.

~~Cash Flows Provided by Financing Activities~~

Net cash provided by financing activities for the nine months ended September 30, 2015 was due primarily to cash received from the sale of common stock to Terrapin, offset by a principal payment on the Facility Agreement.

~~Cash Position and Indebtedness~~

As of September 30, 2015, we held cash and cash equivalents of $28.0 million. We also had $37.9 million in restricted cash, which we must maintain through the term of the Facility Agreement and we will use to pay principal and interest under the Facility Agreement. Additionally, as discussed above, inIn August 2015, we ~~executed~~entered into a new $75.0 million ~~equity line~~common stock purchase agreement with Terrapin (the "August 2015 Terrapin Agreement"), which is available to be drawn over a 24-month period. As of September 30, ~~2015, $60.0~~2016, $31.5 million ~~remain~~remained available under this agreement. We anticipate that we will draw all or substantially all of the remaining amounts available under the August 2015 Terrapin Agreement to achieve compliance with certain financial covenants in our Facility Agreement for the measurement period ending December 31, 2016 and to pay our debt service obligations.

As of December 31, ~~2014,~~2015, we held cash and cash equivalents of ~~$7.1~~$7.5 million and ~~$24.0~~$60.0 million was available under ~~our previous equity line agreement with Terrapin.~~ the August 2015 Terrapin Agreement.

The carrying amount of ~~the~~our current ~~portion of our~~and long-term debt outstanding was ~~$19.6~~$38.1 million and ~~$6.5~~$547.3 million, respectively, at September 30, ~~2015~~2016, compared to $32.8 million and $548.3 million, respectively, at December 31, ~~2014, respectively.~~2015. The current portion of our long-term debt outstanding at these ~~periods~~dates represents principal payments under our Facility Agreement scheduled to occur within 12 ~~months of the balance sheet dates. The carrying amount of our long-term debt outstanding was $618.8 million and $623.6 million at September 30, 2015 and December 31, 2014, respectively.~~months. The decrease in ~~the~~our total debt balance was due primarily to ~~conversions of a portion of the 8.00% Notes Issued in 2013 and~~ a principal payment ofon our Facility ~~Agreement. These decreases were~~Agreement, offset partially by a higher carrying value of the Thermo Loan Agreement due to interest accruing on that debt ~~as well as an increase in the principal balance in connection with the Thermo Equity Agreement entered into in August 2015,~~and amortization and accretion of the debt discounts and debt financing costs related to our Facility Agreement and convertible notes.

Indebtedness and Available Credit

Facility Agreement

~~Our~~On August 7, 2015, we entered into a Second Global Amendment and Restatement Agreement (the "2015 GARA") providing for the amendment and restatement of our former senior credit facility and certain related credit documents (this amended and restated senior secured credit facility agreement is herein referred to as ~~amended and restated (the “Facility Agreement”~~the "Facility Agreement"). The indebtedness under the Facility Agreement is scheduled to mature in December 2022. As of September 30, ~~2015,~~2016, we had fully drawn all funds available under the Facility ~~Agreement.~~Agreement and the principal amount outstanding was $559.4 million. Semi-annual principal repayments began in December 2014. ~~See Note 3: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements in Part II, Item 8 of our 2014 Annual Report for a complete description of our Facility Agreement.~~

The Facility Agreement contains customary events of default and requires that we satisfy various financial and non-financial covenants. Pursuant to the terms of the Facility Agreement, we ~~have the ability to~~may cure noncompliance with certain financial covenants ~~with~~through Equity Cure Contributions (as described below) through a date as late as June 2019. If we were to violate any of these covenants and ~~are~~were unable to ~~make~~obtain a sufficient Equity Cure Contribution or ~~obtain~~ a waiver, we would be in default under the ~~agreement~~Facility Agreement, and the lenders could accelerate payment of the ~~indebtedness could be accelerated.~~indebtedness. The acceleration of our indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-acceleration provisions. As of September 30, ~~2015,~~2016, we were in compliance with respect to the covenants of the Facility Agreement.

The compliance calculations of the financial covenants of the Facility Agreement permit inclusion of certain cash funds contributed to us from the issuance of our common stock and/or ~~Subordinated Indebtedness.~~subordinated indebtedness. We refer to these funds as "Equity Cure ~~Contributions"~~Contributions," and we ~~may fund~~use them ~~in order~~ to achieve compliance with financial covenants, subject to the conditions set forth in the Facility Agreement. Each Equity Cure Contribution must be ~~made~~ in a minimum amount of $10 million for each measurement period or in the aggregate for all periods until the date that such funding is no longer allowed by the Facility Agreement. In August 2015, February 2016 and June ~~2015,~~2016, we drew ~~$10~~$15 million, $6.5 million and ~~$14~~$22 million, respectively, under ~~our agreement with~~the August 2015 Terrapin ~~as described below. These~~Agreement. We used these funds ~~were deemed~~as Equity Cure Contributions under the Facility Agreement ~~and were treated accordingly~~ in ~~our~~the calculation of our compliance with ~~certain~~ financial covenants for the measurement periods ended December 31, ~~2014~~2015 and June 30, ~~2015. In August 2015, we drew $15 million~~2016. We anticipate continuing to use Equity Cure Contributions to maintain compliance with certain financial covenants under the Facility Agreement for the measurement periods ending December 31, 2016 and June 30, 2017, including, but not limited to, the remaining amounts available under the August 2015 Terrapin Agreement. We can use these funds as an Equity Cure Contribution under the Facility Agreement in the calculation of financial covenants for the measurement period ended December 31, 2015, as needed, or for general corporate purposes.

The Facility Agreement requires that we maintain a total of $37.9 million in a debt service reserve account ~~which~~that is pledged to ~~reserve~~secure all of our obligations under the Facility Agreement. ~~The~~We may use of these funds ~~is restricted~~only to ~~making~~make principal and interest payments under the Facility Agreement. As of September 30, ~~2015,~~2016, the balance in the debt service reserve account, which was established with the proceeds of the loan agreement with Thermo discussed below, was ~~$37.9~~$38.0 million and classified as restricted cash on our condensed consolidated balance sheets.

~~In August 2015, we and the lenders agreed~~The Facility Agreement bears interest at a floating rate of LIBOR plus 2.75% through June 2017, increasing by an additional 0.5% each year thereafter to ~~amend~~a maximum rate of LIBOR plus 5.75%. Ninety-five percent of our obligations under the Facility Agreement ~~to, among other things, clarify~~are guaranteed by COFACE, the ~~definition~~French export credit agency. Our obligations under the Facility Agreement are guaranteed on a senior secured basis by all of ~~Net Debt~~our domestic subsidiaries and ~~the calculation~~are secured by a first priority lien on substantially all of our assets and our domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100% of the ~~Net Debt to Adjusted Consolidated EBITDA covenant, change~~equity of our domestic subsidiaries and 65% of the ~~way in which~~equity of certain ~~Equity~~foreign subsidiaries.

~~Cure Contributions are calculated, and extend by up to two years the date through which we may utilize Equity Cure Contributions.~~ See discussion in Note 3: Long-Term Debt and Other Financing Arrangements into our condensed consolidated financial statements for further discussion of the ~~2015 GARA.~~Facility Agreement.

Thermo Loan Agreement

~~In connection with the amendment and restatement of the Facility Agreement, we~~We also have an amended and restated ~~our~~ loan agreement with Thermo ~~(as amended and restated, the~~(the “Loan Agreement”). Our obligations to Thermo under the Loan Agreement are subordinated to all of our obligations under the Facility Agreement.

Amounts outstanding under the Loan Agreement accrue interest at 12% per annum, which we capitalize and add to the outstanding principal in lieu of cash payments. We will make payments to Thermo only when permitted by the Facility Agreement. ~~The~~Principal and interest under the Loan Agreement ~~becomes~~become due and payable six months after the obligations under the Facility Agreement have been paid in full, or earlier if a change in control ~~occurs~~ or if any acceleration of the maturity of the loans under the Facility Agreement occurs. As of September 30, ~~2015, $37.2~~2016, the principal amount outstanding was $91.1 million, including $47.6 million of interest ~~was outstanding under~~that had accrued since 2009 with respect to the Thermo Loan ~~Agreement; we include this amount in long-term debt on our condensed consolidated balance sheets.~~Agreement.

In connection with the 2015 GARA, Thermo and certain of its affiliates executed and delivered to the agent under the Facility Agreement the Second Thermo Group Undertaking Letter in which they agreed that, during the period commencing on the effective date of the 2015 GARA and ending on the later of March 31, 2018 and, if our 8%2013 8.00% Notes ~~Issued in 2013~~ have been redeemed in full, September 30, 2019, they ~~will~~would make, or cause to be made, available to us cash equity financing in the aggregate amount of $30.0 million. Thermo ~~must~~was obligated to provide these funds ~~during this period~~ if we ~~request~~requested the funds or an event of default ~~occurs and is continuing~~occurred under the Facility Agreement, and Terrapin ~~fails~~failed to purchase shares of our voting common stock to provide us with cash proceeds requested under the August 2015 Terrapin Agreement. The balance of this commitment ~~will be~~was reduced by any cash equity financing ~~which~~that we ~~receive~~received during the Commitment Period from Thermo or an external equity funding source, including Terrapin, ifand which we ~~use the funds~~used as an Equity Cure Contribution. In August 2015, February 2016 and June 2016, we ~~made a first draw~~drew $15 million, $6.5 million and $22.0 million, respectively, under the August 2015 Terrapin ~~agreement in the amount of $15.0 million, which reduced Thermo's~~Agreement. As a result, Thermo had no remaining cash equity commitment ~~to $15.0 million~~ as of September 30, ~~2015.~~

~~In connection with the 2015 GARA, the Second Thermo Group Undertaking Letter and the Equity Agreement, we agreed to increase the principal amount~~2016 under ~~the Thermo Loan Agreement by $6.0 million.~~this letter. All of the transactions between us and Thermo and its affiliates were reviewed and approved on our behalf by a Special Committee of our independent directors, who were represented by independent counsel.

See discussion in Note 3: Long-Term Debt and Other Financing Arrangements into our condensed consolidated financial statements for further discussion of the Second Thermo Group Undertaking Letter, the Equity Agreement, and the ~~New~~ Thermo Loan Agreement.

8.00% Convertible Senior Notes Issued in 2013

Our 2013 8.00% ~~Convertible Senior~~ Notes ~~Issued in 2013 (the "8.00% Notes Issued in 2013")~~ initially were convertible into shares of our common stock at a conversion price of $0.80 per share of common stock, or 1,250 shares of our common stock per $1,000 principal amount of 2013 8.00% Notes, ~~Issued in 2013,~~ subject to adjustment. Due to common stock issuances by us since May 20, 2013 at prices below the then effective conversion rate, the base conversion rate was $0.73 per share of common stock as of September 30, ~~2015.~~2016.

As of September 30, 2016, the principal amount outstanding of the 2013 8.00% Notes was $16.9 million. Interest on the 2013 8.00% Notes ~~Issued in 2013~~ is payable semi-annually in arrears on April 1 and October 1 of each year. We pay interest in cash at a rate of 5.75% per annum and by issuing additional 2013 8.00% Notes ~~Issued in 2013~~ at a rate of 2.25% per annum. See Note 3: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements in Part II, Item 8 of our 2014 Annual Report for a complete description of our 8.00% Notes Issued in 2013.

A holder of 2013 8.00% Notes ~~Issued in 2013~~ has the right, at the holder’s option, to require us to purchase some or all of the 2013 8.00% Notes ~~Issued in 2013~~ on each of April 1, 2018 and April 1, 2023 at a price equal to the principal amount of the 2013 8.00% Notes ~~Issued in 2013~~ to be purchased plus accrued and unpaid interest.

The indenture governing the 2013 8.00% Notes ~~Issued in 2013~~ provides for customary events of default. If there is an event of default, the Trustee may, at the direction of the holders of 25% or more in aggregate principal amount of the 2013 8.00% Notes, ~~Issued in 2013,~~ accelerate the maturity of the 2013 8.00% ~~Notes Issued in 2013.~~Notes. As of September 30, ~~2015,~~2016, we were ~~not~~ in ~~default under~~compliance with respect to the ~~indenture governing~~terms of the 2013 8.00% Notes ~~Issued in 2013.~~and the Indenture.

39See Note 3: Long-Term Debt and Other Financing Arrangements to our Consolidated Financial Statements in Part II, Item 8 of our 2015 Annual Report for a complete description of our 2013 8.00% Notes.

Terrapin Opportunity, L.P. Common Stock Purchase Agreement

On December 28, 2012 we entered into a Common Stock Purchase Agreement with Terrapin pursuant to which we were entitled, subject to certain conditions, to require Terrapin to purchase up to $30.0 million of shares of our voting common stock over the 24-month term following the effectiveness of a resale registration statement, which became effective on August 2, 2013. From time to time over the 24-month term following the effectiveness of the registration statement, and in our sole discretion, we could present Terrapin with up to 36 draw down notices requiring Terrapin to purchase a specified dollar amount of shares of our voting common stock. We agreed not to sell Terrapin a number of shares of voting common stock which, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in the beneficial ownership by Terrapin or any of its affiliates of more than 9.9% of our then issued and outstanding shares of voting common stock.

When we made a draw under the Terrapin equity line agreement, we issued shares of common stock to Terrapin at a price per share calculated as specified in the agreement. In February 2015, we drew $10.0 million under the agreement with Terrapin and issued 4.5 million shares of voting common stock to Terrapin at an average price of $2.22 per share. In June 2015, we drew the remaining $14.0 million under our agreement with Terrapin and issued 6.6 million shares of voting common stock to Terrapin at an average price of $2.13 per share. Through the term of this agreement, Terrapin purchased a total of 17.2 million shares of voting common stock at a total purchase price of $30.0 million. No funds remain available under this agreement.

In conjunction with the amendment to the Facility Agreement in August 2015 (as discussed above), we entered into ~~a Common Stock Purchase Agreement with Terrapin (the "August~~the August 2015 Terrapin ~~Agreement")~~Agreement pursuant to which we may require Terrapin to purchase up to $75.0 million of shares of voting common stock over the 24-month term following the date of the agreement. Over the 24-month term, in our discretion, we may present Terrapin with up to 24 draw notices requiring Terrapin to purchase a specified dollar amount of shares of our voting common stock, based on the price per share per day over ten consecutive trading days (a "Draw Down Period"). The per share purchase price for these shares will equal the daily volume weighted average price of common stock on each date during the Draw Down Period on which shares are purchased by Terrapin (but not less than a minimum price specified by us (a “Threshold Price”)), less a discount ranging from 2.75% to 4.00% based on the amount of the Threshold Price. In addition, in our discretion, but subject to certain limitations, we may grant to Terrapin the option to purchase additional shares during ~~the~~a Draw Down Period. We have agreed not to sell to Terrapin a number of shares of voting common stock ~~which,~~that, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in their beneficial ownership of more than 9.9% of the number of our shares of voting common stock issued and outstanding at the date of the sale. As previously discussed, Thermo committed to purchase up to $30.0 million of our equity securities if we require it to do so or if there is an event of default under the Facility Agreement and funds are not available under the new Terrapin agreement.

In August 2015, we drew $15.0 million under the August 2015 Terrapin Agreement and issued 9.3 million shares of voting common stock to Terrapin at an average price of $1.61 per share. In February 2016, we drew $6.5 million under the August 2015 Terrapin Agreement and issued 6.4 million shares of voting common stock to Terrapin at an average price of $1.02 per share. In June 2016, we drew $22.0 million under the August 2015 Terrapin Agreement and issued 19.5 million shares of voting common stock to Terrapin at an average price of $1.13 per share. As of September 30, ~~2015, $60.0~~2016, $31.5 million remained available under the August 2015 Terrapin Agreement. ~~We expect to make draws from time to time under the August 2015 Terrapin Agreement, to be used as Equity Cure Contributions under the Facility Agreement or for general corporate purposes.~~

~~Capital Expenditures~~ Contractual Obligations

~~We have entered into various~~For the nine months ended September 30, 2016, our capital expenditures, excluding interest, totaled approximately $12.9 million, of which $4.7 million were under our contractual agreements ~~primarily~~ with ~~Hughes~~Ericsson and ~~Ericsson,~~Hughes related to the procurement and deployment of our second-generation gateways and other ground ~~facilities.~~facilities and related products. As of September 30, 2016, the remaining contractual obligations under our agreements with Ericsson and Hughes were $2.9 million and $0.8 million, respectively.

~~Our~~Various maintenance, licensing and royalty agreements ~~with Hughes~~ are ~~related to design, supply~~necessary for the use of proprietary, third-party technology embedded in our second-generation ground infrastructure and ~~implementation of RAN ground network equipment~~products. We project the fees due under these maintenance and ~~software upgrades for installation at a number of our satellite gateway ground stations and satellite interface chips~~license agreements to be ~~used in various second-generation devices.~~

~~In March 2015, we entered into an agreement with Hughes for the design, development, build, testing~~approximately $3.6 million per year and delivery of four custom test equipment units for a total of $1.9 million to be delivered by the end of 2015. In April 2015, we extended the scope of work for delivery of two additional RANs for a total of $4.0 million with an estimated delivery date of February 2016.

In April 2015, Hughes exercised its option to accept shares of our common stock (at a price 7% below market) in lieu of cash for certain of our remaining contract milestones, including milestones related to the 2015 work mentioned above, totaling approximately $15.5 million. In June 2015, we issued 7.4 million shares of freely tradable common stock at a 7% discount pursuant to this option. We recorded a loss equal to the value of the 7% discount of $1.2 millionwill recognize them in our condensed consolidated statement of operations ~~for~~over the ~~three months ended June 30, 2015. In~~maintenance and license terms, which we expect to begin at various times during 2017. The fees due under the April 2015 agreement, as amended in July and in August 2015, we agreed to provide downside protection for a period of 130 trading days after the issuance of common stock. This feature requires that we issue additional shares of common stock equal to the difference, if any, between the $15.5 million and the total amount

of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on the last day of the 130 day period. Pursuant to this agreement, we recorded a $4.7 million liability as of September 30, 2015, up from $1.7 million as of June 30, 2015,royalty agreements will fluctuate based on ~~an estimate of the value of this option calculated using a Black-Scholes pricing model. We mark this liability to market at each balance sheet date~~product sales, and ~~through the settlement date, which is expected to be in December 2015. We recorded this estimated loss, and subsequent changes,~~we will recognize them in our condensed consolidated statement of operations on a per unit basis as second-generation products are manufactured, sold or activated. As of September 30, 2016, we have paid a portion of these fees have recorded them as a prepaid asset in our condensed consolidated balance sheets.

Cash Flows for the nine months ended September 30, ~~2015.~~

~~In July~~2016 and 2015 we formally amended the contract with Hughes to include the revised scope of work set forth in the March 2015 and April 2015 letter agreements. The additional $1.9 million for delivery of four custom test equipment units and the $4.0 million for delivery of two additional RANs agreed to in March and April 2015, respectively, are now reflected in the contract through this amendment.

Our agreements with Ericsson are related to development, implementation and maintenance of a ground interface, or core network system, which will be installed at a number of our satellite gateway ground stations. In July 2014, we signed an amended and restated contract to specify the remaining contract value and a new milestone schedule to reflect a revised program time line. Prior to the amended and restated contract being finalized, we made an agreement with Ericsson that deferred certain milestone payments previously due under the 2008 contract to 2014 and beyond. The deferred payments were incurring interest at a rate of 6.5% per annum. In April 2015, we signed an amendment to the 2014 contract to incorporate certain changes in scope and timing identified as necessary by the parties. In conjunction with signing this amendment, we executed a new letter agreement under which Ericsson agreed to waive the remaining $1.0 million in deferred milestone payments and $0.4 million in interest accrued on the milestone payments under the 2008 contract. In the first quarter of 2015, we reversed these amounts from accounts payable, accrued expenses and construction in progress on our condensed consolidated balance sheet. In August 2015, we executed a second amendment to the 2014 contract which incorporates revised payment and pricing schedules. This amendment also reflects an accelerated time line for the project such that the work is estimated to be completed in the second quarter, instead of the third quarter, of 2016. As of September 30, 2015, the remaining amount due under the contract is $13.1 million.

The following table ~~presents~~shows our cash flows from operating, investing and financing activities (in thousands):



	Nine Months Ended
	September 30, 2016			September 30, 2015
Net cash provided by operating activities	$	7,704		$	7,314
Net cash used in investing activities	(17,486		)	(21,546		)
Net cash provided by financing activities	15,083			36,201
Effect of exchange rate changes on cash	133			(1,117		)
Net increase in cash and cash equivalents	$	5,434		$	20,852

Cash Flows Provided by Operating Activities

Cash provided by operations includes primarily cash receipts from subscribers related to the ~~amount~~purchase of ~~actual~~equipment and ~~contractual capital expenditures~~satellite voice and data services. Uses of cash from operating activities include primarily personnel costs, inventory purchases and other general corporate expenditures. Net cash provided by operating activities during the nine months ended September 30, 2016 was $7.7 million compared to $7.3 million during the same period in 2015. The increase was due to a lower net loss after adjusting for non-cash items, offset partially by unfavorable changes in working capital.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $17.5 million for the nine months ended September 30, 2016 compared to $21.5 million for the same period in 2015. We used less cash for our second-generation network costs as we are approaching the final acceptance of our contracts with Hughes and ~~Ericsson~~Ericsson. This decrease was offset partially by an increase in other property and equipment additions related to software and other back office expenditures to prepare for the ~~construction~~rollout of new products.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was $15.1 million for the nine months ended September 30, 2016 compared to $36.2 million for the same period in 2015. This decrease was due to higher principal payments and lower cash proceeds from the sale of equity during the nine months ended September 30, 2016 compared to the prior year period. Principal payments made under our Facility Agreement in June 2016 and 2015 were $16.4 million and $3.2 million, respectively. Additionally, we received proceeds from the sale of our ~~ground components~~common stock to Terrapin of $28.5 million and $39.0 million during the first nine months of 2016 and 2015, respectively. We also received cash of $2.6 million from Thermo related ~~product costs and includes both payments made~~to warrants exercised in ~~cash and stock (in thousands):~~

Payments through Estimated Future Payments
Capital Expenditures September 30,
2015
Remaining
2015
2016 Thereafter Total
Hughes second-generation ground component (and related product costs) $ 111,082
$ —
$ 756
$ —
$ 111,838
Ericsson ground network 18,392
9,224
3,892
—
31,508
Other Capital Expenditures 1,667
—
—
—
1,667
Total $ 131,141
$ 9,224
$ 4,648
$ —
$ 145,013

~~As of September 30, 2015, we recorded approximately $4.4 million of these capital expenditures in accrued expenses.~~

In addition to the contractual agreements mentioned above, we have a contract with Thales for the construction of the second-generation low-earth orbit satellites and related services. We successfully completed the launches of our second-generation satellites. Discussions between us and Thales are ongoing regarding certain deliverables under the contract.June 2016.

Contractual Obligations and Commitments

As previously disclosed, on December 31, 2014, we entered into a contract for the sale of a Globalstar gateway for installation in Eastern Europe, along with related construction and engineering services. During the quarter ended March 31, 2015, we amended the contract to extend to May 29, 2015 the date at which the parties could terminate the contract. We did not reach an agreement; therefore, the contract terminated without any payment obligations by either party.

We have signed various licensing and royalty agreements necessary for the manufacture and distribution of our second-generation products, which we expect to introduce in 2016. We will pay or have paid license fees for new product technology with royalty fees payable on a per unit basis as these units are manufactured, sold, or activated.

There have been no significant changes to our contractual obligations and commitments since December 31, ~~2014, except those discussed above.~~2015.

Off-Balance Sheet Transactions

We have no material off-balance sheet transactions.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting guidance and the expected impact that the guidance could have on our Condensed Consolidated Financial Statements, see Recently Issued Accounting Pronouncements in Note 1: Basis of Presentation into our ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements in Part 1, Item 1 of this Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our services and products are sold, distributed or available in over 120 countries. Our international sales are ~~made~~denominated primarily in Canadian dollars, Brazilian ~~Reais~~reais and ~~Euros.~~euros. In some cases, insufficient supplies of U.S. currency may require us to accept payment in other foreign currencies. We reduce our currency exchange risk from revenues in currencies other than the U.S. dollar by requiring payment in U.S. dollars whenever possible and purchasing foreign currencies on the spot market when rates are favorable. We currently do not purchase hedging instruments to hedge foreign currencies. We are obligated to enter into currency hedges with the ~~original~~ lenders to the Facility Agreement no later than 90 days after any fiscal quarter during which more than 25% of revenues is denominated in a single currency other than U.S. or Canadian dollars. Otherwise, we cannot enter into hedging agreements other than interest rate cap agreements or other hedges described above without the consent of the agent for the Facility Agreement, and with that consent the counterparties may only be the ~~original lenders.~~lenders to the Facility Agreement.

We also have operations in Venezuela. Since 2010, the Venezuelan government's frequent modifications to its currency laws have caused the bolivar to devalue significantly and resulted in Venezuela being considered a highly inflationary economy. At the end of each accounting period through June 30, 2015, we remeasured our Venezuelan subsidiary from the bolivar to the U.S. dollar at the official government rate of 6.3 bolivars per U.S. dollar. ~~Included in the foreign currency gain (loss) recorded during the third quarter of 2015 was a $1.9 million loss related to our Venezuelan subsidiary.~~ Effective July 1, 2015 we began using the SIMADI exchange rate published by the Central Bank of Venezuela to remeasure our Venezuelan subsidiary's ~~Bolivar~~bolivar based transactions and net monetary assets in U.S. dollars. We determined, based upon our specific facts and circumstances, that the SIMADI rate (renamed the DICOM rate in March 2016) is the most appropriate rate for financial reporting purposes, instead of the official exchange rate ~~of 6.3~~we previously used. We continue to monitor the significant uncertainty surrounding current Venezuela exchange mechanisms.

Our interest rate risk arises from our variable rate debt under our Facility Agreement, under which loans bear interest at a floating rate based on the LIBOR. In order to reduce the interest rate risk, we completed an arrangement with the lenders under the Facility Agreement to limit the interest to which we are exposed. The interest rate cap provides limits on the 6-month Libor rate (Base Rate) used to calculate the coupon interest on outstanding amounts on the Facility Agreement to be capped at 5.50% should the Base Rate not exceed 6.5%. Should the Base Rate exceed 6.5%, our Base Rate will be 1% less than the then 6-month LIBOR rate. We have ~~$579.1~~$559.4 million ~~due~~in principal outstanding under the Facility Agreement. A 1.0% change in interest rates would result in a change to interest expense of approximately ~~$5.8~~$5.6 million annually.

See Note 5: Fair Value Measurements into our ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements for discussion of our financial assets and liabilities measured at fair market value and the market factors affecting changes in fair market value of each.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 as of September 30, ~~2015,~~2016, the end of the period covered by this Report. This evaluation was based on the guidelines established in Internal Control - Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on this evaluation, our ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer concluded that as of September 30, ~~2015~~2016 our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose

in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We believe that the condensed consolidated financial statements included in this Report fairly present, in all material respects, our condensed consolidated financial position and results of operations for the ~~quarter and~~ nine months ended September 30, ~~2015.~~2016.

(b) Changes in internal control over financial reporting.

As of September 30, ~~2015,~~2016, our management, with the participation of our ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer, evaluated our internal control over financial reporting. Based on that evaluation, our ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer concluded that no changes in our internal control over financial reporting occurred during the quarter ended September 30, ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our material pending legal and regulatory proceedings and settlements, see Note 8: Contingencies in our Condensed Consolidated Financial Statements in Part I, Item 1 of this Report.

Item 1A. Risk Factors.

You should carefully consider the risks described in this Report and all of the other reports that we file from time to time with the SEC, in evaluating and understanding us and our business. Additional risks not presently known or that we currently deem immaterial may also impact our business operations and the risks identified in this Report may adversely affect our business in ways we do not currently anticipate. Our financial condition or results of operations also could be materially adversely affected by any of these risks. There have been no material changes to our risk factors disclosed in Part I. Item 1A."Risk Factors" of our ~~2014~~2015 Annual ~~Report.~~Report, as amended by Part II, Item 1A. "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description

~~10.1†~~10.1		Amendment ~~No. 2~~ to ~~Contract~~Letter Agreement regarding equity payment by and between Globalstar, Inc. and ~~Ericsson Inc. effective~~Hughes Network Systems, LLC dated as of ~~August 11, 2015~~

~~10.2~~		~~2015 Equity Commitment and Loan Agreement with Thermo Funding II LLC dated August 7, 2015~~September 21, 2016

31.1		Section 302 Certification of the ~~Chief~~Principal Executive Officer

31.2		Section 302 Certification of the ~~Chief~~Principal Financial Officer

32.1		Section 906 Certification of the ~~Chief~~Principal Executive Officer

32.2		Section 906 Certification of the ~~Chief~~Principal Financial Officer

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

†		~~Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission. The omitted portions have been filed with the Commission.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			GLOBALSTAR, INC.

Date:	November ~~5, 2015~~3, 2016	By:	/s/ James Monroe III
			James Monroe III
			Chairman and Chief Executive Officer ~~(On behalf of the registrant)~~(Principal Executive Officer)

			/s/ Rebecca S. Clary
			Rebecca S. Clary
			Chief Financial Officer (Principal Financial Officer)

4543



Period	Principal Amount Converted		Shares of Voting Common Stock Issued	Loss on Extinguishment of Debt

First Quarter of 2014	$	7,046	14,624	$	10,497
Second Quarter of 2014	$	10,535	18,611	$	20,387
Third Quarter of 2014	$	6,807	11,411	$	12,936

First Quarter of 2015	$	237	418	$	65
Second Quarter of 2015	$	6,254	10,379	$	2,189
Third Quarter of 2015	$	—	—	$	—



Balance at June 30, 2015	$	(292,293	)
Derivative adjustment related to conversions and exercises	—
Unrealized gain, included in derivative gain (loss)	54,206
Balance at September 30, 2015	$	(238,087	)


Balance at December 31, 2014	$	(441,550	)
Derivative adjustment related to conversions and exercises	20,008
Unrealized gain, included in derivative gain (loss)	183,455
Balance at September 30, 2015	$	(238,087	)



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
General and administrative expenses	$	264	$	174	$	324	$	236
Non-cash expenses	137		137		411		411
Total	$	401	$	311	$	735	$	647



	Three Months Ended September 30, 2015	Three Months Ended September 30, 2014
Weighted average common shares outstanding:
Basic shares outstanding	1,031,398	987,668
Incremental shares from assumed exercises of:
Stock options, restricted stock, restricted stock units and ESPP	7,111	7,340
8.00% Notes Issued in 2013	27,475	39,625
Thermo Loan Agreement	130,375	109,469
Warrants	38,192	45,088
Diluted shares outstanding	1,234,551	1,189,190



	Payments through		Estimated Future Payments
Capital Expenditures	September 30, 2015		Remaining 2015		2016		Thereafter		Total
Hughes second-generation ground component (and related product costs)	$	111,082	$	—	$	756	$	—	$	111,838
Ericsson ground network	18,392		9,224		3,892		—		31,508
Other Capital Expenditures	1,667		—		—		—		1,667
Total	$	131,141	$	9,224	$	4,648	$	—	$	145,013