UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended SeptemberJune 30, 20222023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                to                

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
 
As of OctoberJuly 28, 2022, 1,8012023, 1.8 billion shares of voting common stock were outstanding, 0.1 million shares of voting commonpreferred stock were outstanding, and no shares of nonvoting common stock were authorized or outstanding. Unless the context otherwise requires, references to common stock in this Report mean the Registrant’s voting common stock.


FORM 10-Q

GLOBALSTAR, INC.
TABLE OF CONTENTS
 
 Page
PART I - FINANCIAL INFORMATION
   
Item 1.
1
   
Item 2.
2324
   
Item 3.
3534
   
Item 4.
3534
   
PART II - OTHER INFORMATION
   
Item 1.
36
Item 1A. 
36
   
Item 2.
3736
Item 3.
3736
Item 4.
3736
Item 5.
3736
Item 6.
37
   
38
 



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 EndedNine Months Ended Three Months EndedSix Months Ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021		June 30,
2023		June 30,
2022		June 30,
2023		June 30,
2022
Revenue:Revenue:  Revenue:  
Service revenueService revenue$33,301 $27,848 $95,693 $76,551 Service revenue$48,648 $33,048 $101,602 $62,392 
Subscriber equipment salesSubscriber equipment sales4,325 4,766 11,505 13,271 Subscriber equipment sales6,424 3,752 12,114 7,180 
Total revenueTotal revenue37,626 32,614 107,198 89,822 Total revenue55,072 36,800 113,716 69,572 
Operating expenses:Operating expenses:  Operating expenses:  
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)11,294 9,648 32,783 27,848 Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)12,246 10,695 24,066 21,489 
Cost of subscriber equipment salesCost of subscriber equipment sales3,490 4,099 9,153 9,856 Cost of subscriber equipment sales5,662 3,113 9,971 5,679 
Cost of subscriber equipment sales - reduction in the value of inventory8,537 71 8,553 853 
Marketing, general and administrativeMarketing, general and administrative10,707 9,196 29,741 28,974 Marketing, general and administrative12,654 9,693 26,045 19,034 
Reduction in value of long-lived assets166,001 242 166,526 242 
Reduction in the value of long-lived assetsReduction in the value of long-lived assets— 525 — 525 
Depreciation, amortization and accretionDepreciation, amortization and accretion24,238 24,072 72,151 72,031 Depreciation, amortization and accretion21,890 24,130 43,823 47,913 
Total operating expensesTotal operating expenses224,267 47,328 318,907 139,804 Total operating expenses52,452 48,156 103,905 94,640 
Loss from operations(186,641)(14,714)(211,709)(49,982)
Income (loss) from operationsIncome (loss) from operations2,620 (11,356)9,811 (25,068)
Other (expense) income:Other (expense) income:  Other (expense) income:  
(Loss) gain on extinguishment of debt— (829)— 1,835 
Loss on extinguishment of debtLoss on extinguishment of debt— — (10,403)— 
Interest income and expense, net of amounts capitalizedInterest income and expense, net of amounts capitalized(7,583)(11,406)(24,300)(33,758)Interest income and expense, net of amounts capitalized(5,070)(7,187)(7,102)(16,717)
Derivative gain (loss)Derivative gain (loss)662 229 (1,066)(2,210)Derivative gain (loss)299 (1,242)299 (1,728)
Foreign currency loss(9,406)(4,752)(13,297)(4,642)
Pension settlement loss(1,501)— (1,501)— 
Foreign currency gain (loss)Foreign currency gain (loss)2,038 (7,123)3,945 (3,891)
OtherOther(45)473 344 407 Other148 272 49 389 
Total other (expense) income(17,873)(16,285)(39,820)(38,368)
Loss before income taxes(204,514)(30,999)(251,529)(88,350)
Income tax (benefit) expense(153)(114)51 317 
Net loss$(204,361)$(30,885)$(251,580)$(88,667)
Total other expenseTotal other expense(2,585)(15,280)(13,212)(21,947)
Income (loss) before income taxesIncome (loss) before income taxes35 (26,636)(3,401)(47,015)
Income tax expenseIncome tax expense26 121 70 204 
Net income (loss)Net income (loss)$9 $(26,757)$(3,471)$(47,219)
Other comprehensive loss:Other comprehensive loss:Other comprehensive loss:
Foreign currency translation adjustmentsForeign currency translation adjustments6,613 3,185 11,249 3,269 Foreign currency translation adjustments(1,307)5,315 (2,736)4,636 
Defined benefit pension plan liability adjustment2,073 $— $2,073 $— 
Comprehensive lossComprehensive loss$(195,675)$(27,700)$(238,258)$(85,398)Comprehensive loss$(1,298)$(21,442)$(6,207)$(42,583)
Net loss attributable to common shareholders (Note 10)Net loss attributable to common shareholders (Note 10)(2,635)(26,757)(8,730)(47,219)
Net loss per common share:Net loss per common share:  Net loss per common share:  
BasicBasic$(0.11)$(0.02)$(0.14)$(0.05)Basic$0.00 $(0.01)$0.00 $(0.03)
DilutedDiluted(0.11)(0.02)(0.14)(0.05)Diluted0.00 (0.01)0.00 (0.03)
Weighted-average shares outstanding:Weighted-average shares outstanding:  Weighted-average shares outstanding:  
BasicBasic1,800,504 1,793,144 1,799,364 1,755,362 Basic1,813,393 1,799,886 1,812,617 1,798,784 
DilutedDiluted1,800,504 1,793,144 1,799,364 1,755,362 Diluted1,813,393 1,799,886 1,812,617 1,798,784 
See accompanying notes to unaudited interim condensed consolidated financial statements.
1

GLOBALSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)
(Unaudited) 
September 30, 2022December 31, 2021 June 30, 2023December 31, 2022
ASSETSASSETSASSETS
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$14,749 $14,304 Cash and cash equivalents$65,334 $32,082 
Accounts receivable, net of allowance for credit losses of $2,923 and $2,962, respectively29,594 21,182 
Accounts receivable, net of allowance for credit losses of $2,022 and $2,892, respectivelyAccounts receivable, net of allowance for credit losses of $2,022 and $2,892, respectively30,188 26,329 
InventoryInventory8,563 13,829 Inventory10,661 9,264 
Prepaid expenses and other current assetsPrepaid expenses and other current assets13,085 19,558 Prepaid expenses and other current assets14,819 13,569 
Total current assetsTotal current assets65,991 68,873 Total current assets121,002 81,244 
Property and equipment, netProperty and equipment, net532,680 672,156 Property and equipment, net605,502 560,371 
Operating lease right of use assets, netOperating lease right of use assets, net28,396 32,041 Operating lease right of use assets, net32,557 30,859 
Prepaid satellite construction costs and related customer receivable83,178 — 
Intangible and other assets, net of accumulated amortization of $10,633 and $11,189, respectively36,293 41,036 
Prepaid satellite construction costs and customer receivablePrepaid satellite construction costs and customer receivable24,188 27,570 
Intangible and other assets, net of accumulated amortization of $11,660 and $10,908, respectivelyIntangible and other assets, net of accumulated amortization of $11,660 and $10,908, respectively49,190 38,425 
Total assetsTotal assets$746,538 $814,106 Total assets$832,439 $738,469 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY  LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:Current liabilities:  Current liabilities:  
Current portion of long-term debtCurrent portion of long-term debt$29,800 $— 
Accounts payableAccounts payable$1,867 $6,247 Accounts payable3,022 3,843 
Vendor financingVendor financing63,765 — Vendor financing— 59,575 
Accrued expensesAccrued expenses28,048 28,947 Accrued expenses29,718 22,554 
Accrued satellite construction costsAccrued satellite construction costs54,228 36,139 
Payables to affiliatesPayables to affiliates142 444 Payables to affiliates284 326 
Deferred revenue53,121 25,927 
Deferred revenue, netDeferred revenue, net56,724 74,639 
Total current liabilitiesTotal current liabilities146,943 61,565 Total current liabilities173,776 197,076 
Long-term debtLong-term debt262,175 237,932 Long-term debt306,786 132,115 
Operating lease liabilitiesOperating lease liabilities25,796 29,237 Operating lease liabilities27,720 27,635 
Deferred revenue, netDeferred revenue, net171,651 112,054 Deferred revenue, net4,920 62,877 
Other non-current liabilitiesOther non-current liabilities4,393 7,887 Other non-current liabilities3,871 3,995 
Total non-current liabilitiesTotal non-current liabilities464,015 387,110 Total non-current liabilities343,297 226,622 
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)
Stockholders’ equity:Stockholders’ equity:  Stockholders’ equity:  
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at September 30, 2022 and December 31, 2021, respectively— — 
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at September 30, 2022 and December 31, 2021, respectively— — 
Voting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,800,523,430 and 1,796,528,871 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively180 180 
Nonvoting Common Stock of $0.0001 par value; no shares authorized and none issued and outstanding at September 30, 2022 and December 31, 2021, respectively— — 
Preferred Stock of $0.0001 par value; 99,700,000 shares authorized and none issued and outstanding at June 30, 2023 and December 31, 2022, respectivelyPreferred Stock of $0.0001 par value; 99,700,000 shares authorized and none issued and outstanding at June 30, 2023 and December 31, 2022, respectively— — 
Series A Preferred Convertible Stock of $0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at June 30, 2023 and December 31, 2022, respectivelySeries A Preferred Convertible Stock of $0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at June 30, 2023 and December 31, 2022, respectively— — 
Voting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,813,971,721 and 1,811,074,696 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectivelyVoting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,813,971,721 and 1,811,074,696 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively181 181 
Additional paid-in capitalAdditional paid-in capital2,155,117 2,146,710 Additional paid-in capital2,352,414 2,345,612 
Accumulated other comprehensive incomeAccumulated other comprehensive income15,212 1,890 Accumulated other comprehensive income6,506 9,242 
Retained deficitRetained deficit(2,034,929)(1,783,349)Retained deficit(2,043,735)(2,040,264)
Total stockholders’ equityTotal stockholders’ equity135,580 365,431 Total stockholders’ equity315,366 314,771 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$746,538 $814,106 Total liabilities and stockholders’ equity$832,439 $738,469 
 See accompanying notes to unaudited interim condensed consolidated financial statements.
2

GLOBALSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited) 
Common
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		TotalPreferred StockCommon StockAdditional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		Total
Balances – January 1, 20221,796,529 $180 $2,146,710 $1,890 $(1,783,349)$365,431 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation703 — 2,230 — — 2,230 
SharesAmountSharesAmountAdditional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		Total
Balances – January 1, 2023Balances – January 1, 2023149 $— 1,811,075 $181 
Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensationNet issuance of restricted stock awards and employee stock options and recognition of stock-based compensation— — 2,037 — 3,795 — — 3,795 
Contribution of servicesContribution of services— — 47 47 Contribution of services— — — — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 117 — — 117 
Common stock issued in connection with conversion of 2013 8.00% Notes2,253 — 2,548 — — 2,548 
Issuance and recognition of stock-based compensation of employee stock purchase planIssuance and recognition of stock-based compensation of employee stock purchase plan— — — — 102 — — 102 
Series A Preferred Stock DividendsSeries A Preferred Stock Dividends— — — — (3,952)— — (3,952)
Other comprehensive lossOther comprehensive loss— — — (679)— (679)Other comprehensive loss— — — — — (1,429)— (1,429)
Net lossNet loss— — — — (20,462)(20,462)Net loss— — — — — — (3,480)(3,480)
Balances – March 31, 20221,799,485 $180 $2,151,652 $1,211 $(1,803,811)$349,232 
Balances – March 31, 2023Balances – March 31, 2023149 $— 1,813,112 $181 $2,345,604 $7,813 $(2,043,744)$309,854 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensationNet issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation546 — 879 — — 879 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 363 — 1,874 — — 1,874 
Contribution of servicesContribution of services— — 47 — — 47 Contribution of services— — — — 47 — — 47 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensationNet issuance of stock through employee stock purchase plan and recognition of stock-based compensation446 — 617 — — 617 Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation— — 497 — 636 — — 636 
Other comprehensive income— — — 5,315 — 5,315 
Net loss— — — — (26,757)(26,757)
Balances – June 30, 20221,800,477 $180 $2,153,195 $6,526 $(1,830,568)$329,333 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation46 — 1,815 — — 1,815 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 60 — — 60 
Other comprehensive income— — — 8,686 — 8,686 
Net loss— — — — (204,361)(204,361)
Balances – September 30, 20221,800,523 $180 $2,155,117 $15,212 $(2,034,929)$135,580 
Series A Preferred Stock DividendsSeries A Preferred Stock Dividends— — — — (2,644)— — (2,644)
Fair value of Thermo guarantee associated with the 2023 Funding AgreementFair value of Thermo guarantee associated with the 2023 Funding Agreement— — — — 6,897 — — 6,897 
Other comprehensive lossOther comprehensive loss— — — — — (1,307)— (1,307)
Net incomeNet income— — — — — — 9 9 
Balances – June 30, 2023Balances – June 30, 2023149 $— 1,813,972 $181 $2,352,414 $6,506 $(2,043,735)$315,366 



3

Common
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		TotalPreferred StockCommon StockAdditional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		Total
Balances – January 1, 20211,674,669 $167 $2,096,566 $(2,944)$(1,670,724)$423,065 
SharesAmountSharesAmountAdditional
Paid-In
Capital		Accumulated Other Comprehensive Income (Loss)Retained
Deficit		Total
Balances – January 1, 2022Balances – January 1, 2022— $— 1,796,529 $180 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensationNet issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation1,998 — 1,932 — — 1,932 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 703 — 2,230 — — 2,230 
Contribution of servicesContribution of services— — 47 — — 47 Contribution of services— — — — 47 47 
Recognition of stock-based compensation of employee stock purchase planRecognition of stock-based compensation of employee stock purchase plan— — 79 — — 79 Recognition of stock-based compensation of employee stock purchase plan— — — — 117 — — 117 
Issuance of stock for warrant exercises115,036 12 43,666 — — 43,678 
Other comprehensive income— — — 3,242 — 3,242 
Common stock issued in connection with conversion of 2013 8.00% NotesCommon stock issued in connection with conversion of 2013 8.00% Notes— — 2,253 — 2,548 — — 2,548 
Other comprehensive lossOther comprehensive loss— — — — — (679)— (679)
Net lossNet loss— — — — (36,333)(36,333)Net loss— — — — — — (20,462)(20,462)
Balances – March 31, 20211,791,703 $179 $2,142,290 $298 $(1,707,057)$435,710 
Balances – March 31, 2022Balances – March 31, 2022— $— 1,799,485 $180 $2,151,652 $1,211 $(1,803,811)$349,232 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensationNet issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation173 — 576 — — 576 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation— — 546 — 879 — — 879 
Contribution of servicesContribution of services— — 47 — — 47 Contribution of services— — — — 47 — — 47 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensationNet issuance of stock through employee stock purchase plan and recognition of stock-based compensation1,187 — 406 — — 406 Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation— — 446 — 617 — — 617 
Other comprehensive loss— — — (3,158)— (3,158)
Net loss— — — — (21,449)(21,449)
Balances – June 30, 20211,793,063 $179 $2,143,319 $(2,860)$(1,728,506)$412,132 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation244 — 544 — — 544 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 102 — — 102 
Other comprehensive incomeOther comprehensive income— — — 3,185 — 3,185 Other comprehensive income— — — — — 5,315 — 5,315 
Net lossNet loss— — — — (30,885)(30,885)Net loss— — — — — — (26,757)(26,757)
Balances – September 30, 20211,793,307 $179 $2,144,012 $325 $(1,759,391)$385,125 
Balances – June 30, 2022Balances – June 30, 2022— $— 1,800,477 $180 $2,153,195 $6,526 $(1,830,568)$329,333 
See accompanying notes to unaudited interim condensed consolidated financial statements.
4

GLOBALSTAR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended Six Months Ended
September 30,
2022		September 30,
2021		 June 30,
2023		June 30,
2022
Cash flows provided by operating activities:Cash flows provided by operating activities:  Cash flows provided by operating activities:  
Net lossNet loss$(251,580)$(88,667)Net loss$(3,471)$(47,219)
Adjustments to reconcile net loss to net cash provided by operating activities:Adjustments to reconcile net loss to net cash provided by operating activities:  Adjustments to reconcile net loss to net cash provided by operating activities:  
Depreciation, amortization and accretionDepreciation, amortization and accretion72,151 72,031 Depreciation, amortization and accretion43,823 47,913 
Change in fair value of derivatives1,066 2,210 
Stock-based compensation expenseStock-based compensation expense4,433 3,044 Stock-based compensation expense6,292 2,380 
Amortization of deferred financing costs419 2,341 
Noncash consideration, net, associated with wholesale capacity contractNoncash consideration, net, associated with wholesale capacity contract(1,203)— 
Reduction in value of long-lived assets and inventoryReduction in value of long-lived assets and inventory175,079 1,095 Reduction in value of long-lived assets and inventory— 541 
Provision for credit losses754 1,029 
Noncash interest and accretion expenseNoncash interest and accretion expense23,788 26,537 Noncash interest and accretion expense9,760 16,522 
Unrealized foreign currency loss13,399 4,639 
Loss on pension settlement1,501 — 
Gain on extinguishment of debt— (1,835)
Noncash reversal of tariff accrual— (912)
Unrealized foreign currency (gain) lossUnrealized foreign currency (gain) loss(4,008)4,139 
Write off of debt discount and deferred financing costs upon extinguishment of debtWrite off of debt discount and deferred financing costs upon extinguishment of debt10,194 — 
Other, netOther, net(3,002)(625)Other, net(487)(424)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:  Changes in operating assets and liabilities:  
Accounts receivableAccounts receivable(952)(7,013)Accounts receivable(2,100)3,737 
InventoryInventory(1,295)276 Inventory12 (1,840)
Prepaid expenses and other current assetsPrepaid expenses and other current assets1,788 (1,595)Prepaid expenses and other current assets(1,151)(227)
Other assetsOther assets352 (1,883)Other assets42 605 
Accounts payable and accrued expensesAccounts payable and accrued expenses(10,272)15,197 Accounts payable and accrued expenses(3,445)(8,106)
Payables to affiliatesPayables to affiliates(303)(309)Payables to affiliates(42)(33)
Other non-current liabilitiesOther non-current liabilities(2,602)(259)Other non-current liabilities21 (370)
Deferred revenueDeferred revenue6,981 81,865 Deferred revenue(11,244)3,153 
Net cash provided by operating activitiesNet cash provided by operating activities31,705 107,166 Net cash provided by operating activities42,993 20,771 
Cash flows used in investing activities:Cash flows used in investing activities:  Cash flows used in investing activities:  
Network upgrades (including capitalized interest)(18,604)(24,766)
Property and equipment additions(5,839)(4,209)
Sale of property and equipment— 350 
Payments under the satellite procurement agreementPayments under the satellite procurement agreement(108,664)— 
Other network upgrades to support the Service AgreementsOther network upgrades to support the Service Agreements(6,898)(18,511)
Payments of capitalized interestPayments of capitalized interest(5,263)— 
Network upgrades to support product developmentNetwork upgrades to support product development(3,422)(3,198)
Purchase of intangible assetsPurchase of intangible assets(863)(1,408)Purchase of intangible assets(389)(683)
Net cash used in investing activitiesNet cash used in investing activities(25,306)(30,033)Net cash used in investing activities(124,636)(22,392)
Cash flows used in financing activities:  
Principal payments of the 2019 Facility Agreement(6,341)— 
Principal payments of the 2009 Facility Agreement— (126,664)
Proceeds from exercise of warrants— 43,678 
Payments for debt and equity issuance costs— (133)
Cash flows provided by financing activities:Cash flows provided by financing activities:  
Principal and Interest payments of the 2019 Facility AgreementPrincipal and Interest payments of the 2019 Facility Agreement(148,281)— 
Proceeds from 2023 13% NotesProceeds from 2023 13% Notes190,000 — 
Proceeds from 2023 Funding AgreementProceeds from 2023 Funding Agreement87,730 — 
Dividends paid on Series A Preferred StockDividends paid on Series A Preferred Stock(6,595)— 
Payments for debt issuance costsPayments for debt issuance costs(8,530)— 
Proceeds from issuance of common stock and exercise of optionsProceeds from issuance of common stock and exercise of options455 394 Proceeds from issuance of common stock and exercise of options498 449 
Net cash used in financing activities(5,886)(82,725)
Net cash provided by financing activitiesNet cash provided by financing activities114,822 449 
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(68)(57)Effect of exchange rate changes on cash, cash equivalents and restricted cash73 9 
Net increase (decrease) in cash, cash equivalents and restricted cashNet increase (decrease) in cash, cash equivalents and restricted cash445 (5,649)Net increase (decrease) in cash, cash equivalents and restricted cash33,252 (1,163)
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period14,304 68,023 Cash, cash equivalents and restricted cash, beginning of period32,082 14,304 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$14,749 $62,374 Cash, cash equivalents and restricted cash, end of period$65,334 $13,141 

As of:As of:
September 30,
2022		December 31,
2021		June 30,
2023		December 31,
2022
Reconciliation of cash and cash equivalentsReconciliation of cash and cash equivalentsReconciliation of cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$14,749 $14,304 Cash and cash equivalents$65,334 $32,082 
Total cash and cash equivalents cash shown in the statement of cash flowsTotal cash and cash equivalents cash shown in the statement of cash flows$14,749 $14,304 Total cash and cash equivalents cash shown in the statement of cash flows$65,334 $32,082 
Nine Months Ended Six Months Ended
September 30,
2022		September 30,
2021		 June 30,
2023		June 30,
2022
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:  Supplemental disclosure of cash flow information:  
Cash paid for interestCash paid for interest$— $4,017 Cash paid for interest$7,554 $— 
Supplemental disclosure of non-cash financing and investing activities:Supplemental disclosure of non-cash financing and investing activities:  Supplemental disclosure of non-cash financing and investing activities:  
Increase in capitalized accrued interest for network upgradesIncrease in capitalized accrued interest for network upgrades$8,615 $1,703 Increase in capitalized accrued interest for network upgrades$1,609 $5,059 
Capitalized accretion of debt discount and amortization of prepaid financing costsCapitalized accretion of debt discount and amortization of prepaid financing costs1,305 379 Capitalized accretion of debt discount and amortization of prepaid financing costs1,772 754 
Satellite construction assets acquired through vendor financing arrangementSatellite construction assets acquired through vendor financing arrangement69,896 — Satellite construction assets acquired through vendor financing arrangement— 73,575 
Forgiveness of principal and interest of Paycheck Protection Program loan— 5,030 
Re-characterization of 2021 Funding Agreement to debtRe-characterization of 2021 Funding Agreement to debt87,950 — 

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

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

Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications and wholesale capacity services through its global satellite network. The Company’s only reportable segment is its MSS business. Thermo Companies, through commonly controlled affiliates, (collectively, “Thermo”) is the principal owner and largest stockholder of Globalstar. The Company’s Executive Chairman of the Board controls Thermo. Two other members of 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 in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); however, management believes the disclosures made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on February 25, 2022March 1, 2023 (the “2021“2022 Annual Report”). 

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

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recent DevelopmentsRecently Issued Accounting Pronouncements

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

On September 7, 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). The Company will be the satellite operator for these Services pursuant to the agreement (the “Service Agreement”) first disclosed in the Company’s Form 10-K for the year ended December 31, 2019, and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Services constitute the potential service which was previously described and disclosed as the Terms Agreement.

Since execution of the Service Agreements in 2020, the parties have completed several milestones including (i) a feasibility phase, (ii) material upgrades to Globalstar’s ground network, (iii) construction of 10 new gateways around the world, (iv) the successful launch of the ground spare satellite, and (v) rigorous in-field system testing.

The Service Agreements generally require Globalstar to allocate network capacity (as described below) to support the Services and provide for the inclusion of Globalstar’s Band 53/n53 in Partner’s cellular-enabled devices that use the Services, for use by third parties, subject to certain terms and conditions.

It is currently expected that Partner will make the Services available to customers during the fourth quarter of 2022 (the “Service Launch”).

Discontinuation of Second-Generation Duplex Products and Services

The Company has been evaluating the continuation of second-generation Duplex services in light of other potential uses for the Company’s capacity, such as those within the Service Agreements. In early 2021, the Company terminated its second-generation Duplex services, which supported approximately 1,800 subscribers, to allow extended testing of the Services to Partner; however, such termination was considered temporary unless or until Partner announced its intent to proceed with
6

launch of the Services. Due to this shift in strategy triggered by Partner's September announcement, the Company evaluated the recoverability of its second-generation Duplex assets, including gateway property, prepaid licenses and royalties, and inventory during the third quarter of 2022. As a result of this shift in strategy, the Company recorded reductions in the value of equipment and long-lived assets totaling $174.3 million during the third quarter of 2022 (refer to Note 7: Fair Value Measurements for further discussion). The Company will continue to support first-generation Duplex services, including voice communications and data transmissions.

Refer to Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 8: Commitments and Contingencies for further discussion of the financial statement impact of the Service Agreements.

2. REVENUE

Disaggregation of Revenue

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

Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Service revenue:Service revenue:Service revenue:
Subscriber servicesSubscriber servicesSubscriber services
DuplexDuplex$9,021 $9,632 $22,103 $23,530 Duplex$6,359 $6,936 $12,110 $13,082 
SPOTSPOT11,753 11,873 34,544 33,996 SPOT11,039 11,536 22,353 22,791 
Commercial IoTCommercial IoT4,673 4,458 14,381 13,443 Commercial IoT5,356 5,038 10,534 9,708 
Wholesale capacity services (1)
Wholesale capacity services (1)
6,972 1,301 22,640 3,999 
Wholesale capacity services (1)
25,478 8,825 55,889 15,668 
Engineering and other servicesEngineering and other services882 584 2,025 1,583 Engineering and other services416 713 716 1,143 
Total service revenueTotal service revenue33,301 27,848 95,693 76,551 Total service revenue48,648 33,048 101,602 62,392 
Subscriber equipment sales:Subscriber equipment sales:Subscriber equipment sales:
DuplexDuplex$15 $265 $288 $889 Duplex$17 $143 $36 $273 
SPOTSPOT1,558 2,619 4,707 6,764 SPOT2,513 1,674 4,439 3,149 
Commercial IoTCommercial IoT2,713 1,841 6,427 5,452 Commercial IoT3,901 1,908 7,713 3,714 
OtherOther39 41 83 166 Other(7)27 (74)44 
Total subscriber equipment salesTotal subscriber equipment sales4,325 4,766 11,505 13,271 Total subscriber equipment sales6,424 3,752 12,114 7,180 
Total revenueTotal revenue$37,626 $32,614 $107,198 $89,822 Total revenue$55,072 $36,800 $113,716 $69,572 

(1) PriorIn September 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). The Company is the satellite operator for these Services pursuant to the third quarter of 2022, revenue from Wholesaleagreement (the “Service Agreement”) and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Service Agreements generally require Globalstar to allocate network capacity services wasto support the Services, which launched in November 2022. Revenue associated with the Service Agreements is included in Engineering and other services"Wholesale capacity services" in the table above. Wholesale capacity services include satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways under the Service Agreements with Partner.

As consideration for the services to be provided by Globalstar after the Service Launch, Partner will make payments to Globalstar under the Service Agreements, Partner makes payments to Globalstar, including a recurring service fee, payments relating to certain service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and other related criteria. Additionally, following the launch of the next-generation satellites being constructed pursuant to the satellite procurement agreement,In February 2023, Partner has agreed to make additional service payments equal to (i) 95% ofpay the approved capital expenditures under the satellite procurement agreement and related launch costs (to be paid on a straight-line basis over the useful life of the satellites); (ii) certain costs of the Company’s borrowingsCompany $6.5 million as consideration related to performance obligations completed in prior periods. The Company recognized this revenue during the new satellites; and (iii) other approved costs.first quarter of 2023.

7

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

7

Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Service revenue:Service revenue:Service revenue:
United StatesUnited States$24,250 $19,677 $71,413 $54,348 United States$40,643 $24,875 $85,704 $47,163 
CanadaCanada5,288 5,236 13,105 13,442 Canada3,640 4,128 7,469 7,817 
EuropeEurope1,737 2,039 4,891 5,607 Europe1,706 1,671 3,219 3,154 
Central and South AmericaCentral and South America1,898 996 5,882 2,592 Central and South America2,477 2,248 4,844 3,984 
OthersOthers128 (100)402 562 Others182 126 366 274 
Total service revenueTotal service revenue$33,301 $27,848 $95,693 $76,551 Total service revenue$48,648 $33,048 $101,602 $62,392 
Subscriber equipment sales:Subscriber equipment sales:Subscriber equipment sales:
United StatesUnited States$2,034 $3,130 $5,817 $7,740 United States$2,562 $2,227 $4,545 $3,783 
CanadaCanada1,634 563 3,311 2,430 Canada2,129 879 4,435 1,677 
EuropeEurope231 505 1,176 1,511 Europe907 309 1,727 945 
Central and South AmericaCentral and South America420 546 1,177 1,538 Central and South America825 328 1,402 757 
OthersOthers6 22 24 52 Others1 9 5 18 
Total subscriber equipment salesTotal subscriber equipment sales$4,325 $4,766 $11,505 $13,271 Total subscriber equipment sales$6,424 $3,752 $12,114 $7,180 
Total revenueTotal revenue$37,626 $32,614 $107,198 $89,822 Total revenue$55,072 $36,800 $113,716 $69,572 

Accounts Receivable

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

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

As of:As of:
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
Accounts receivable, net of allowance for credit lossesAccounts receivable, net of allowance for credit lossesAccounts receivable, net of allowance for credit losses
Subscriber accounts receivableSubscriber accounts receivable$13,954 $12,825 Subscriber accounts receivable$20,816 $14,850 
Wholesale capacity accounts receivableWholesale capacity accounts receivable12,727 1,861 Wholesale capacity accounts receivable7,481 7,234 
Agency agreement accounts receivableAgency agreement accounts receivable2,913 6,496 Agency agreement accounts receivable1,891 4,245 
Total accounts receivable, net of allowance for credit lossesTotal accounts receivable, net of allowance for credit losses$29,594 $21,182 Total accounts receivable, net of allowance for credit losses$30,188 $26,329 
Long-term wholesale capacity accounts receivableLong-term wholesale capacity accounts receivable69,646 — Long-term wholesale capacity accounts receivable16,100 16,100 
Total accounts receivable (short-term and long-term), net of allowance for credit lossesTotal accounts receivable (short-term and long-term), net of allowance for credit losses$99,240 $21,182 Total accounts receivable (short-term and long-term), net of allowance for credit losses$46,288 $42,429 

In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constellation. Under the Service Agreements, subject to certain terms and conditions, Partner is requiredhas agreed to reimbursemake service payments equal to 95% of the capitalapproved capital expenditures under the satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA") and certain other costs incurred for this contract. In accordancethe new satellites; these payments are expected to be paid on a straight-line basis commencing with the launch of these satellites through their estimated useful life ("Phase 2 Service Period"). Based on construction in progress incurred by the Company, amounts expected timingto be billed to Partner associated with this phase of payment from Partner, $11.6the Service Agreements were $162.5 million is as of June 30, 2023.
8


In prior filings, the Company recorded in Wholesale capacity accountsa long-term unbilled receivable and $69.6 million is recorded asrelated long-term deferred revenue reflecting its Partner’s obligation to fund 95% of the construction costs associated with the satellites that are being constructed to provide service during the Phase 2 Service Period. During the second quarter 2023, the Company revised this presentation and applied this change to its December 31, 2022 balance sheet. This change in Long-term wholesale capacity accounts receivable inaccounting presentation has no impact on Partner’s obligation to provide funding for the table above.satellite construction costs nor the expected revenue the Company will recognize during the Phase 2 Service Period.

Contract Liabilities

Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. Contract liabilities reflect balances from its customers, including MSS subscribers and the Partner under the Service
8

Agreements. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands).

As of:As of:
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
Short-term contract liabilitiesShort-term contract liabilitiesShort-term contract liabilities
Subscriber contract liabilitiesSubscriber contract liabilities$23,212 $24,940 Subscriber contract liabilities$24,074 $21,987 
Wholesale capacity contract liabilitiesWholesale capacity contract liabilities29,909 987 Wholesale capacity contract liabilities32,650 52,652 
Total short-term contract liabilitiesTotal short-term contract liabilities$53,121 $25,927 Total short-term contract liabilities$56,724 $74,639 
Long-term contract liabilitiesLong-term contract liabilitiesLong-term contract liabilities
Subscriber contract liabilitiesSubscriber contract liabilities$1,669 $1,783 Subscriber contract liabilities$1,770 $1,704 
Wholesale capacity contract liabilities, net of contract assetWholesale capacity contract liabilities, net of contract asset169,982 110,271 Wholesale capacity contract liabilities, net of contract asset3,150 61,173 
Total long-term contract liabilitiesTotal long-term contract liabilities$171,651 $112,054 Total long-term contract liabilities$4,920 $62,877 
Total contract liabilitiesTotal contract liabilities$224,772 $137,981 Total contract liabilities$61,644 $137,516 

For subscriber contract liabilities, the amount of revenue recognized during the ninesix months ended SeptemberJune 30, 20222023 and 20212022 from performance obligations included in the contract liability balance at the beginning of these periods was $22.8$14.0 million and $23.8$18.3 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the ninesix months ended SeptemberJune 30, 20222023 and 20212022 from performance obligations included in the contract liability balance at the beginning of these periods was $33.5 million and less than $0.1 million, and zero, respectively.

The duration of the Company’s contracts with subscribers is generally one year or less. As of SeptemberJune 30, 2022,2023, the Company expects to recognize $23.2$24.1 million or approximately 93%, of its remaining performance obligations to its subscribers during the next twelve months. The term of the Company's wholesale capacity contract with its Partner under the Service Agreements is indefinite;have no expiration date; therefore, the related contract liabilities may be recognized into revenue over various periods driven by the expected related service or recoupment periods. As of SeptemberJune 30, 2022,2023, the Company expects to recognize $29.9$32.7 million or approximately 15%, of its remaining performance obligations to its Partner during the next twelve months.

9

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

As of:
September 30, 2022December 31, 2021
Wholesale capacity contract liabilities, net:
Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1)
$99,405 $96,362 
Advanced payments for services expected to be performed with the recently launched ground spare satellite during Phases 1 and 225,652 16,981 
Advanced payments (both received and contractually owed) for services expected to be performed with the next-generation satellite constellation during Phase 278,151 — 
Contract asset(3,317)(2,085)
Wholesale capacity contract liabilities, net$199,891 $111,258 
As of:
June 30, 2023December 31, 2022
Wholesale capacity contract liabilities, net:
Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1) (3)
$6,426 $99,671 
Additional consideration associated with the 2021 Funding Agreement (4)
10,519 — 
Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 during Phases 1 and 224,552 25,438 
Advanced payments contractually owed for services expected to be performed with the next-generation satellite constellation prior to the Phase 2 Service Period16,602 22,540 
Additional consideration associated with the 2023 Funding Agreement (5)
4,509 — 
Advanced payments for the Phase 1 service fee and service-related operating expenses and capital expenditures19,871 18,872 
Contract asset (2)
(46,679)(52,696)
Wholesale capacity contract liabilities, net$35,800 $113,825 

(1)In accordance with applicable accounting guidance, the Company records imputed interest associated with the significant financing component, totaling $4.9$4.8 million and $1.9$5.3 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively, which is included in deferred revenue.revenue and represents the remaining amount to be recognized over the Company's performance obligations.
(2)In November 2022, the Company issued warrants to Partner (the "Warrants"). The initial fair value of the Warrants at the time of issuance was $48.3 million and recorded in equity with an offset to a contract asset on the Company's consolidated balance sheets. The fair value of the Warrants is recorded as a reduction to revenue over the period in which the Company performs its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided.
(3)During 2021, the Company received payments from Partner totaling $94.2 million (the "2021 Funding Agreement"). In February 2023, the Service Agreements were amended. This amendment, which was effective in April 2023, changed certain terms in the 2021 Funding Agreement, including granting Partner a first lien security interest in substantially all of the assets of the Company and its domestic subsidiaries. This amendment resulted in $88.0 million previously recorded as deferred revenue to be re-characterized as debt during the second quarter of 2023. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements.
(4)In connection with the Company recording the fair value of the financial obligations in the amended 2021 Funding Agreement, it recorded a debt discount of $11.6 million, representing the difference between the present value of the future principal payments discounted using the prevailing market rate at the date of issuance of the debt and the effective rate. The offset was recorded to deferred revenue and is being recognized into revenue over the Phase 1 Service Period.
(5)In connection with the Company recording the fair value of the financial obligations in the 2023 Funding Agreement (as defined in Note 5: Long-Term Debt and Other Financing Arrangements), it recorded a debt discount of $4.5 million, representing the difference between the present value of the future principal payments discounted using the prevailing market rate at the date of issuance of the debt and the effective rate. The offset was recorded to deferred revenue and will be recognized into revenue over the Phase 2 Service Period.

10

3. LEASES

9

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

As of:As of:
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
Operating leases:Operating leases:Operating leases:
Right-of-use asset, netRight-of-use asset, net$28,396 $32,041 Right-of-use asset, net$32,557 $30,859 
Short-term lease liability (recorded in accrued expenses)Short-term lease liability (recorded in accrued expenses)2,464 2,501 Short-term lease liability (recorded in accrued expenses)2,727 2,747 
Long-term lease liabilityLong-term lease liability25,796 29,237 Long-term lease liability27,720 27,635 
Total operating lease liabilitiesTotal operating lease liabilities$28,260 $31,738 Total operating lease liabilities$30,447 $30,382 
Finance leases:Finance leases:Finance leases:
Right-of-use asset, net (recorded in intangible and other current assets, net)Right-of-use asset, net (recorded in intangible and other current assets, net)$109 $8 Right-of-use asset, net (recorded in intangible and other current assets, net)$824 $104 
Short-term lease liability (recorded in accrued expenses)Short-term lease liability (recorded in accrued expenses)17 6 Short-term lease liability (recorded in accrued expenses)746 16 
Long-term lease liability (recorded in non-current liabilities)Long-term lease liability (recorded in non-current liabilities)75 3 Long-term lease liability (recorded in non-current liabilities)63 71 
Total finance lease liabilitiesTotal finance lease liabilities$92 $9 Total finance lease liabilities$809 $87 

Lease Cost

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

Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Operating lease cost:Operating lease cost:Operating lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets$584 $661 $1,908 $1,815 Amortization of right-of-use assets$693 $604 $1,375 $1,324 
Interest on lease liabilitiesInterest on lease liabilities571 545 1,848 1,256 Interest on lease liabilities633 632 1,247 1,277 
Capitalized lease costCapitalized lease cost(215)— (702)— Capitalized lease cost— (244)— (487)
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets4 1 7 9 Amortization of right-of-use assets5 1 10 3 
Short-term lease costShort-term lease cost205 38 413 117 Short-term lease cost266 144 511 208 
Total lease costTotal lease cost$1,149 $1,245 $3,474 $3,197 Total lease cost$1,597 $1,137 $3,143 $2,325 

In accordance with the Service Agreements, prior to the launch of Phase 1 services in November 2022, the Company began capitalizingcapitalized certain costs to fulfill this contract, during the fourth quarter of 2021, including lease expense, as shown in the table above. These capitalized lease costs will beare amortized over the expected term of the related performance obligation.

Interest on finance lease liabilities was less than $0.1 million for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021;2022; accordingly, these amounts are not shown in the table above.

11

Weighted-Average Remaining Lease Term and Discount Rate

The following table discloses the weighted-average remaining lease term and discount rate for finance and operating leases.
10

As of:As of:
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
Weighted-average lease termWeighted-average lease termWeighted-average lease term
Finance leasesFinance leases4.8 years1.6 yearsFinance leases0.6 years4.6 years
Operating LeasesOperating Leases9.9 years10.6 yearsOperating Leases10.2 years10.1 years
Weighted-average discount rateWeighted-average discount rateWeighted-average discount rate
Finance leasesFinance leases10.2 %7.0 %Finance leases8.7 %10.2 %
Operating leasesOperating leases8.4 %8.4 %Operating leases8.6 %8.5 %

Supplemental Cash Flow Information

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

Nine Months EndedSix Months Ended
September 30, 2022September 30, 2021June 30, 2023June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leasesOperating cash flows for operating leases$3,675 $3,420 Operating cash flows for operating leases$2,988 $2,536 

Operating and financing cash flows from finance leases were each less than $0.1 million for each of the ninesix months ended SeptemberJune 30, 20222023 and 2021;2022; accordingly, these cash flows are not shown in the table above.

Maturity Analysis

The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of SeptemberJune 30, 20222023 (amounts in thousands):

Operating LeasesFinance Leases
2022 (remaining)$1,180 $8 
20234,775 25 
20244,649 23 
20254,677 23 
20264,724 23 
Thereafter21,584 15 
Total lease payments$41,589 $117 
Imputed interest(13,329)(25)
Discounted lease liability$28,260 $92 

As of September 30, 2022, the Company executed additional operating leases for new gateway locations. These leases have not yet commenced as of September 30, 2022, since the lessors are continuing to ready the sites for use. Accordingly, these leases are not included on the consolidated balance sheet as of September 30, 2022 or in the maturity table above. The Company is in the process of evaluating these lease obligations and expects the impact of these leases to be an increase of right of use assets and lease liabilities of approximately $4.7 million.
Operating LeasesFinance Leases
2023 (remaining)$2,662 $748 
20245,187 23 
20255,215 23 
20265,262 23 
20275,141 15 
Thereafter22,082 — 
Total lease payments$45,549 $832 
Imputed interest(15,102)(23)
Discounted lease liability$30,447 $809 

1112

4. PROPERTY AND EQUIPMENT

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

September 30,
2022		December 31,
2021
Globalstar System:  
Space component  
First and second-generation satellites in service$1,262,254 $1,195,509 
Second-generation satellite, on-ground spare— 32,442 
Ground component79,848 282,268 
Construction in progress:  
Space component63,504 16,394 
Ground component16,303 33,998 
Other8,658 4,123 
Total Globalstar System1,430,567 1,564,734 
Internally developed and purchased software22,127 20,823 
Equipment8,002 8,590 
Land and buildings1,662 1,149 
Leasehold improvements2,075 2,088 
Total property and equipment1,464,433 1,597,384 
Accumulated depreciation(931,753)(925,228)
Total property and equipment, net$532,680 $672,156 

Amounts included in "second-generation satellite, on-ground spare" in the table above consist of costs related to one of the Company's second-generation satellites that was stored as an on-ground spare satellite until its launch in June 2022. The costs to prepare this satellite for launch were included in "construction in progress - space component" in the table above prior to its launch. During 2022, $66.7 million in costs associated with the construction and launch of this spare satellite (including capitalized interest) were placed into service. Since this satellite is expected to remain as an in-orbit spare and will only be raised to its operational orbit at a future date if needed, it was placed into service following its successful launch.
As of:
June 30,
2023		December 31,
2022
Globalstar System:  
Space component$1,246,343 $1,246,343 
Ground component99,585 102,567 
Construction in progress:  
Space component190,611 110,068 
Ground component11,211 5,316 
Other8,444 9,167 
Total Globalstar System1,556,194 1,473,461 
Internally developed and purchased software23,225 22,509 
Equipment9,312 8,042 
Land and buildings1,816 1,681 
Leasehold improvements2,085 2,083 
Total property and equipment1,592,632 1,507,776 
Accumulated depreciation(987,130)(947,405)
Total property and equipment, net$605,502 $560,371 

In February 2022, the Company entered into an agreement with MDA for the purchase of new satellites that will replenish the Company's existing satellite constellation. This agreement has an initial contract price of $327 million, of which $166.0 million had been incurred as of June 30, 2023 and $98.5 million as of December 31, 2022. The "space component" of construction in progress in the table above includes costs incurred under the MDA contract as well as associated personnel costs and capitalized interest. Accrued satellite construction costs on the Company's condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 included $54.2 million and $36.1 million, respectively, of work completed, but not yet invoiced, under the satellite procurement agreement. As of SeptemberJune 30, 2023 and December 31, 2022, the Company also recorded $13.5$8.1 million and $11.5 million, respectively, as prepaid satellite construction costs and $56.4 million in construction in progress on its consolidated balance sheet. Asfor the Company incurs this construction in progress, it earns the right to receive certain payments from Partner associated with this phasefirst milestone payment made upon signing of the Service Agreements as well as certain associated advanced payments under the Service Agreements.

The ground component ofcontract; these costs are recorded in Prepaid satellite construction in progress includes costs incurred for assets to upgrade the Company's ground infrastructure, including costs associated with the procurement of new gateway antennas. During 2022, the Company placed $16.8 million of costs into service associated with these antennas (including capitalized interest), which are included in ground component in the table above. These capital expenditures relate primarily to gateway upgrade work in connection with the Service Agreements.

As discussed in Note 1: Basis of Presentation and Note 7: Fair Value Measurements, the Company evaluated the recoverability of its second-generation Duplex assets on September 7, 2022. This evaluation resulted in the removal of the second-generation Duplex assets from the Company's long-lived asset grouping. The reduction in value of long-lived assets recorded during the third quarter of 2022 totaled $161.2 million. The table below reflects the reduction in value of long-lived assets by each component of Property and equipment, net, and Intangible and other assets, net, previously recordedcustomer receivable on the Company's condensed consolidated balance sheets (amounts in thousands, reflected net of accumulated depreciation and amortization, as applicable, prior to their write downs).

sheets.
1213

Three months ended September 30, 2022
Property and equipment, net
Ground component$154,144 
Construction in progress: ground component5,545 
Equipment202 
Total property and equipment, net$159,891 
Intangible and other assets, net$1,271 
Total reduction in value of long-lived assets$161,162 

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

September 30, 2022December 31, 2021As of:
Principal
Amount		Unamortized Discount and Deferred Financing CostsCarrying
Value		Principal
Amount		Unamortized Discount and Deferred Financing CostsCarrying
Value		 June 30, 2023December 31, 2022
Principal
Amount		Unamortized Discount and Deferred Financing CostsCarrying
Value		Principal
Amount		Unamortized Discount and Deferred Financing CostsCarrying
Value
2023 Funding Agreement2023 Funding Agreement$87,729 $11,891 $75,838 $— $— $— 
2021 Funding Agreement2021 Funding Agreement87,950 10,015 77,935 — — — 
2023 13% Notes2023 13% Notes200,000 17,187 182,813 — — — 
2019 Facility Agreement2019 Facility Agreement$285,296 $23,121 $262,175 $263,812 $27,287 $236,525 2019 Facility Agreement— — — 143,213 11,098 132,115 
Vendor financingVendor financing63,765 — 63,765 — — — Vendor financing— — — 59,575 — 59,575 
8.00% Convertible Senior Notes Issued in 2013— — — 1,407 — 1,407 
Total debt and vendor financingTotal debt and vendor financing$349,061 $23,121 $325,940 $265,219 $27,287 $237,932 Total debt and vendor financing$375,679 $39,093 $336,586 $202,788 $11,098 $191,690 
Less: current portionLess: current portion63,765 — 63,765 — — — Less: current portion29,800 — 29,800 59,575 — 59,575 
Long-term debt and vendor financingLong-term debt and vendor financing$285,296 $23,121 $262,175 $265,219 $27,287 $237,932 Long-term debt and vendor financing$345,879 $39,093 $306,786 $143,213 $11,098 $132,115 

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

2023 Funding Agreement

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

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

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

The Company recorded the fair value of the 2023 Funding Agreement using a discounted cash flow model. The Company recorded debt discounts for the difference between the fair value of the debt and the proceeds received. This difference is attributed to the fair value of the Thermo guarantee (recorded as additional paid in capital) and the fair value of the economic
14

benefit received due to the existing customer relationship (recorded as deferred revenue); both of these debt discounts are netted against the face value of the 2023 Funding Agreement. The Company is accreting the debt discounts to interest expense through the maturity date using an effective interest rate method.

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

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

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

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

2021 Funding Agreement

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

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

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

Principal$94,200 
Less: Amount Repaid(6,250)
Debt Discount - Customer Relationship(11,626)
Fair Value at Issuance$76,324 
15


2023 13% Notes

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

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

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

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

2019 Facility Agreement

In November 2019, the Company entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement"). The 2019 Facility Agreement iswas scheduled to mature in November 2025. The loans under the 2019 Facility Agreement bearbore interest at a blended rate of 13.5%14.0% per annum to be paid in kind (or in cash at the option of the Company). In August 2022, the Company received a waiver letter from its lenders increasing permitted capital expenditures for 2022. As of September 30, 2022, the Company was in compliance with the covenants of the 2019 Facility Agreement.

The 2019 Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the 2019 Facility Agreement) on a semi-annual basis. The Company generated excess cash flow for the six-month measurement period ended June 30, 2022 and was required to pay $6.3 million to its lenders in August 2022. This payment reduced future principal payment obligations.

The Service Agreements requirerequired the Company to refinance all loans outstanding under the 2019 Facility Agreement; theAgreement. A portion held by Thermo is to bewas refinanced upon commencement of Services (expected to bein November 2022)2022 and the remaining portion is to bewas refinanced within 90 daysin March 2023. Using a portion of the commencementproceeds from the sale of Services.the 2023 13% Notes, the Company repaid all of its outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

The Company recorded a loss on extinguishment of debt of $10.4 million in the first quarter of 2023 representing the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs, debt discounts and derivatives) and the reacquisition price of the debt. Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2019 Facility Agreement.
1316


Vendor Financing

In February 2022, the Company entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation (“MDA”)MDA (see Note 8: Commitments and Contingencies for further discussion). As of September 30,This agreement (as amended in October 2022 the Company had recorded $63.8 million in short-term vendor financing on its consolidated balance sheet associated with this agreement. This agreementand January 2023) provided for deferrals of milestone payments through August 2022 at a 0% interest rate.

On October 28, 2022, the Company executed an amendment to extend this payment deferral date and allow for other related changes in terms, including two $7.0 million payments (one of which was made on October 31, 2022 and the second is required to be made in November 2022) and interest that will accrueMarch 15, 2023. Interest accrued on the amount outstanding at an annual rate of 7%., which increased to 10.5% on balances between December 2022 and March 2023. The total interest accruedCompany has made payments totaling $76.1 million to MDA under this vendor financing arrangement, of which $62.1 million (including $2.5 million of interest) was $0.2 million aspaid during the first quarter of September 30, 2022. All remaining amounts2023 to fully repay the outstanding are required to be paid in December 2022. Concurrently, the Company continues to pursue debtvendor financing for the funding of the construction and launch costs for these satellites (discussed below).balance.

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

As discussed in Note 4: Property and Equipment and Note 8: Commitments and Contingencies, the Company entered into a contract with MDA to construct new satellites. Under the Service Agreements, the Company is required to raise additional debt capital for the construction and launch of the new satellites and targets to complete such financing during the fourth quarter of 2022.Series A Preferred Stock

8.00% Convertible Senior Notes Issued in 2013
In May 2013,November 2022, the Company issued $54.6149,425 shares of its 7.0% Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share (the “Series A Preferred Stock”) in exchange for $149.4 million aggregateoutstanding principal amount of its 2013 8.00% Notes. Interest was paid in2019 Facility Agreement held by affiliates of Thermo and certain other lenders. The Company recorded the Series A Preferred Stock at fair value of the shares totaling $105.3 million on its consolidated balance sheet.

Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by the Company's Board of Directors or a committee thereof, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of 5.75%each year. The table below reflects the dividends approved by the Company's Board of Directors (amounts in thousands):

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

The shares of Series A Preferred Stock do not possess voting rights, other than certain matters specifically affecting the rights and in additional notes at a rateobligations of 2.25%. In February 2022,the Series A Preferred. Series A Preferred Stock may be redeemed by the Company, notified thein whole or in part, at any time. The holders of the 8.00% Notes of its intentionSeries A Preferred Stock do not have any rights to convert or require the Company to redeem all of the outstanding amount of principal and interest in March 2022. Prior to the Company's intended redemption of the 8.00% Notes, the holders converted the remaining principal amount outstanding of $1.4 million into 2.3 million shares of Globalstar common stock in February and March 2022. The 2013 8.00% Notes were converted into shares of common stock at a conversion price of $0.69 per share of commonsuch stock.

As a result of the conversions during 2022, the Company recorded gains and losses on extinguishment of debt resulting from the difference between the fair value of shares of Globalstar common stock issued to the holders and the principal amount of the notes that converted as well as the write-offs of the embedded derivative associated with the 2013 8.00% Notes. The net impact to the Company's condensed consolidated statement of operations in 2022 was a gain of less than $0.1 million.

Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00% Notes.

2009 Facility Agreement

In 2009, the Company entered into a facility agreement with a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Crédit Agricole Corporate and Investment Bank and Crédit Industriel et Commercial, as arrangers, and BNP Paribas, as the security agent (the "2009 Facility Agreement"). The 2009 Facility Agreement was fully repaid in November 2021. As a result of prepayments made under the 2009 Facility Agreement during the second and third quarters of 2021, the Company wrote off $2.3 million and $0.8 million, respectively, in deferred financing costs, which represented the portion of debt prepaid by the Company in the second and third quarters of 2021, and were recorded as a loss on extinguishment of debt on its condensed consolidated statements of operations.

Paycheck Protection Program Loan

In April 2020, the Company sought relief under the CARES Act and received a $5.0 million loan under the Paycheck Protection Program ("PPP"), (the "PPP Loan"). In June 2021, the Small Business Administration ("SBA") approved the Company's request for forgiveness of all amounts outstanding under the PPP Loan, including accrued interest. The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the PPP Loan as debt under ASC 470. As the entire principal balance, including accrued interest, was forgiven in June 2021, the Company recorded a gain on extinguishment of debt totaling $5.0 million on its condensed consolidated statements of operations for the period ended June 30, 2021.

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6. DERIVATIVES 

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

 September 30, 2022December 31, 2021
Derivative (liabilities) assets:  
Compound embedded derivative with the 2019 Facility Agreement$(798)$484 
Compound embedded derivative with the 2013 8.00% Notes$— (1,364)
As of:
June 30, 2023December 31, 2022
Derivative liabilities:
Embedded derivative within 2023 Funding Agreement$(42)$— 
Compound embedded derivative within the 2019 Facility Agreement— (122)

As of September 30, 2022 and December 31, 2021, the derivative (liability) assetDerivative liabilities are recorded for the Compound embedded derivative with the 2019 Facility Agreement was reflected in Other"Other non-current liabilities and Intangible and other assets, net, respectively,liabilities" on the Company's consolidated balance sheets. During the first quarter of 2022, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding.sheet.

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

 Three Months EndedNine Months Ended
 September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Compound embedded derivative with the 2013 8.00% Notes$— $284 $216 $(2,537)
Compound embedded derivative with the 2019 Facility Agreement662 (55)(1,282)327 
Total derivative gain (loss)$662 $229 $(1,066)$(2,210)
Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Embedded derivative within 2023 Funding Agreement$299 $— $299 $— 
Compound embedded derivative within the 2013 8.00% Notes— — — 216 
Compound embedded derivative within the 2019 Facility Agreement— (1,242)— (1,944)
Total derivative gain (loss)$299 $(1,242)$299 $(1,728)

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

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

Compound Embedded Derivative within 2013 8.00% Notes

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

Compound embedded derivative within the 2019 Facility Agreement

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

18

2023 Funding Agreement

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


7. FAIR VALUE MEASUREMENTS

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

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

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

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
15

Recurring Fair Value Measurements

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

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

The Company marks-to-market its derivatives at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s condensed consolidated statements of operations. DuringIn March 2023, the first quarter of 2022,Company refinanced the remaining principal amount ofbalance outstanding under the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly,2019 Facility Agreement and wrote off the associated embedded derivative isbalance; therefore, no longer outstanding See Note 5: Long-Term Debt and Other Financing Arrangements and Note 6: Derivatives for further discussion.balance remained as of March 31, 2023.

Recurring Fair Value Measurements

The following tables provide a summary ofCompound Embedded Derivative within the assets and liabilities measured at fair value on a recurring basis (in thousands): 

 September 30, 2022
(Level 1)(Level 2)(Level 3)Total
 Balance
Liabilities:    
Compound embedded derivative with the 2019 Facility Agreement$— $— $(798)$(798)
Total liabilities measured at fair value$— $— $(798)$(798)
 December 31, 2021
(Level 1)(Level 2)(Level 3)Total
 Balance
Assets:    
Compound embedded derivative with the 2019 Facility Agreement$— $— $484 $484 
Total assets measured at fair value$— $— $484 $484 
Liabilities:    
Compound embedded derivative with the 2013 8.00% Notes$— $— $(1,364)$(1,364)
Total liabilities measured at fair value$— $— $(1,364)$(1,364)

2013 8.00% Notes

The significant quantitative Level 3 inputs utilized in the valuation model are shown in the table below:

 December 31, 2021
 Stock Price
Volatility		Risk-Free
Interest
Rate		Note
Conversion
Price		Discount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes120% - 139%0.5 %$0.6918 %$1.16

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Fluctuation in the Company’s stock price and stock price volatility were significant drivers of the change in the compound embedded derivative with the 2013 8.00% Notes. Increases in these inputs resulted in a higher fair value measurement.

2019 Facility Agreement

 The compound embedded derivative withwithin the 2019 Facility Agreement iswas valued using a probability weighted discounted cash flow model. The most significant observable input used in the fair value measurement iswas the discount yield, which was 22% and 13% at September 30, 2022 and December 31, 2021, respectively. When the discount yield utilized in the valuation is higher than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in a liability for the Company. Conversely, when the discount yield is lower than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in an asset for the Company.yield. The unobservable inputs used in the fair value measurement includeincluded the probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement. See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion.

Embedded Derivative within the 2023 Funding Agreement

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The embedded derivative associated with the 2023 Funding Agreement is valued using a discounted cash flow model. The most significant observable input used in the fair value measurement is the discount yield, which was 8.21% at June 30, 2023 and 8.52% at issuance. As the expecteddiscount yield used in the valuation decreases, the fair value of the embedded derivative decreases. The significant unobservable input used in the fair value measurement includes estimated timing and amountamounts of prepaymentscash flows associated with the prepayment features within the debt agreement. As projected cash flows decrease, the fair value of the embedded derivative also decrease. During the third quarter of 2022, the Company's expected probability of refinancing the 2019 Facility Agreement increased and therefore the fair value of the embedded derivative reduced. decreases.

See Note 5: Long-Term Debt and Other Financing Arrangements6: Derivatives for further discussion.

Rollforward of Recurring Level 3 Assets and Liabilities

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

Balance at beginning of period, January 1, 2022 and 2021, respectively$(880)$163 
Derivative adjustment related to conversions1,148 — 
Unrealized loss, included in derivative loss(1,066)(1,043)
Balance at end of period, September 30, 2022 and December 31, 2021, respectively$(798)$(880)
As previously discussed, the Company entered into the 2023 Funding Agreement with its Partner in February 2023. Significant quantitative Level 3 inputs were utilized in the valuation model as of the first draw date on April 18, 2023. The Company's first draw under the 2023 Funding Agreement occurred in April 2023 with a total fair value of $76.0 million calculated as the projected future cash flows discounted using the prevailing market rate of interest for a similar transaction. The discount yield used for this calculation was 8.52%.

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

2021 Funding Agreement

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

Fair Value of Debt Instruments and VendorOther Financing Arrangements
The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreementits debt agreements on a recurring basis without incurring significant additional costs. Unlike typical long-term debt, certain terms for this instrumentthese instruments are not readily available and generally involve a variety of factors, including due diligence by the debt holders. The Company's vendor financing arrangement iswas recorded at net carrying value, which approximatesapproximated fair value. As previously disclosed, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock during 2022; accordingly, there is no value in the table below as of September 30, 2022. The following table sets forth the carrying value and estimated fair value of the Company's Level 3 financial instrument (in thousands):
 September 30, 2022December 31, 2021
Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
2013 8.00% Notes$— $— $1,407 $1,265 
See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt instruments.

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Nonrecurring Fair Value Measurements

The Company follows the authoritative guidance regarding non-financial assets and liabilities that are remeasured at fair value on a nonrecurring basis.

Derivative Liabilities

On February 17, 2022 and March 9, 2022, the remaining principal balance of the 2013 8.00% Notes was converted into shares of Globalstar common stock, eliminating the principal balance outstanding. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements. As a result of the conversion, the Company wrote off the proportionate fair value of the compound embedded derivative liability with the 2013 8.00% Notes based on the value of the derivative on each conversion date. As of each conversion date, the fair value of the compound embedded derivative liability with the 2013 8.00% Notes was $0.8 million. The significant quantitative Level 3 inputs utilized in the valuation models as of the conversion date are shown in the table below:
 February 17, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes0.06 %$0.6918 %$1.00
 March 9, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes0.18 %$0.6919 %$1.21

Prepaid and Other Current Assets, Intangible and Other Assets and Long-Lived Assets

Prepaid and other current assets, intangible and other assets and long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. During 2022, the Company wrote down the value of certain assets as reflected in the table below (in thousands).

Reduction in the Value of Assets
Three Months EndedNine Months Ended
September 30, 2022
Prepaid and other current assets
Prepaid licenses and royalties (1)
$183 $183 
Intangible and other assets, net
Prepaid licenses and royalties (1)
4,514 4,514 
Internally developed technology and software (2)
1,271 1,271 
Spectrum intangible assets (3)
142 667 
Property and equipment, net (2)
159,891 159,891 
Grand Total$166,001 $166,526 

(1).While developing its second-generation Duplex products and services, the Company signed various licensing and royalty agreements necessary for the manufacture and distribution of such products and services. These prepayments were classified as either current or non-current based on the estimated portion of expense to be recognized over the next twelve months. As of September 7, 2022, approximately $0.2 million and $4.5 million, respectively, was recorded in Prepaid and other current assets and Intangible and other assets, net, on the Company's consolidated balance sheets. On September 7, 2022, these prepaid assets were no longer considered recoverable. The Company recorded a reduction in value of long-lived assets on its condensed consolidated statements of operations for the amount shown in the table above during the third quarter of 2022.

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(2).During 2018 and 2019, the Company placed into service second-generation ground Duplex assets (including associated developed technology and software upgrades) which represented the gateways capable of providing commercial traffic to support Sat-Fi2®. Additionally, the Company recorded certain costs in construction in progress for spare software associated with the second-generation Duplex assets. On September 7, 2022, the Company re-assessed its asset grouping for long-lived assets and determined that the second-generation Duplex assets are no longer part of the Company's overall satellite and ground network. These second-generation Duplex assets will no longer provide future cash flows to the Company. As of September 7, 2022, approximately $1.3 million was recorded in Intangible and other assets, net, and $159.9 million was recorded in Property and equipment, net. The Company recorded a reduction in value of long-lived assets on its condensed consolidated statements of operations for the amount shown in the table above during the third quarter of 2022.

(3).During the second and third quarters of 2022, the Company wrote off approximately $0.5 million and $0.1 million, respectively, of work in progress associated with its spectrum intangible assets, previously recorded in Intangible and other assets, net, on its consolidated balance sheets. The work in progress was related to efforts to obtain spectrum licensing authority in certain countries around the world; during the second and third quarters of 2022, the Company determined that it would not continue pursing such authorities in these countries and recorded a reduction in the value of long-lived assets in its condensed consolidated statements of operations during the nine months ended September 30, 2022.

Inventory

In addition to the items discussed above relative to the Company's second-generation Duplex assets, the Company wrote down the value of equipment held in inventory during the third quarter of 2022. Included in the Company's inventory balance were second-generation Duplex assets, including finished goods, chips and component parts to be used in manufacturing such devices as well as second-generation Duplex gateway spare parts, totaling $6.9 million. Additionally, the Company recorded amounts prepaid to its product manufacturer related to second-generation Duplex products, previously included in Prepaid and other current assets on its consolidated balance sheets totaling $1.6 million. The Company concluded that there was no remaining net realizable value of its second-generation Duplex inventory including prepayments to its product manufacturer. Accordingly, during the third quarter of 2022, the Company recorded a reduction in the value of inventory and prepaid and other current assets totaling $8.5 million on its condensed consolidated statements of operations, representing the carrying value of these assets on September 7, 2022.

8. COMMITMENTS AND CONTINGENCIES

Service Agreements

The Service Agreements set forth the primary terms for the Company to provide services to Partner and incur costs related primarily to new gateways and upgrades at existing gateways as well as satellite construction and launch costs.services. The Service Agreements have no expiration datean indefinite term but provide that eacheither party may terminate subject to certain notice requirements and, in some cases, other conditions. In the event Partner terminates the agreements or the deliverables for the second phase of the contract, Partner will reimburse the Company for the cost of materials purchased or manufactured through the date of such termination notice, subject to certain conditions. The Service Agreements also provide for various commitments with which the Company must comply, including to:

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

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

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

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

•Maintain minimum liquidity of $30 million;

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

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

•Provide the Resource Protections as defined in the Service Agreements.

The Service Agreements requirealso required the Company to raise additional debt capital for the construction and launch of the new satellites, which the Company targets to be complete during the fourth quarter of 2022.

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The Service Agreements require the Company (i) upon commencement of the Services, to refinance all loans outstanding under the 2019 Facility Agreement that are held by affiliates of the Thermo and (ii) within 90 days of the commencement of the Services, to refinance all loans outstanding under the 2019 Facility Agreement that are held by persons other than Thermo.Agreement. The required refinancings have been completed.

The Service Agreements also provide that Partner may elect to receive warrants (the "Warrants") to purchase up to 2.64% of the Company’s outstanding common stock (see further discussion in Note 11: Loss Per Share). In addition, Partner has the right, but not the obligation, to participate in certain issuances of the Company’s equity securities, in order to maintain its percentage interest in the Company (determined on a fully diluted basis, assuming exercise of all the Warrants).

Refer to Note 1: Basis of Presentation, Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 5: Long-Term Debt and Other Financing Arrangements for further discussion.

Satellite Procurement Agreement

In February 2022, the Company entered into a satellite procurement agreement with MDA pursuant to which Globalstar will acquire 17 satellites that will replenish Globalstar's existing constellation of satellites and ensure long-term continuity of its mobile satellite services. Globalstar is acquiring the satellites to provide continuous satellite services to Partner under the Service Agreements, as well as services to Globalstar’s current and future customers. Globalstar maintains the option to acquire additional satellites under the contract. Globalstar plans to contract separately for launch services and launch insurance for the new satellites. The totalinitial contract price for the initial 17 satellites is $327.0 million;$327 million; Globalstar has the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The satellites are expected to be manufactured during the next three years.launched in 2025. In addition, MDA will procure a satellite operations control center for $4.9 million. Under the Service Agreements, subject to certain terms and conditions, Partner is requiredhas agreed to reimbursemake service payments equal to 95% of the approved capital expenditures under the satellite procurement agreement (to be paid on a straight-line basis over the useful life of the satellites) and certain other costs incurred for this contract.the new satellites, as adjusted based on certain provisions, beginning with the Phase 2 Service Period.

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

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9. RELATED PARTY TRANSACTIONS

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

Payables to Thermo and other affiliates related to normal purchase transactions were $0.1$0.3 million and $0.4$0.3 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.

Transactions with Thermo 

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

The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments started at $1.4 million per year in 2019 and increase at a rate of 2.5% per year, for ayear. 2023 lease payments will be $1.6 million. The lease term ofis ten years.years and will expire in January 2029. During each of the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Company incurred lease expense of $1.2$0.8 million under this lease agreement.

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InTo fulfill its obligations under the Service Agreements, in November 2019,2022, the Company entered into an Exchange Agreement with Thermo and certain other exchanging lenders providing for the 2019 Facility Agreement. Thermo's participation inexchange of all the outstanding principal amount of, and accrued and unpaid interest on, the exchanging lenders’ loans under the 2019 Facility Agreement was $95.1for shares of the Company's Series A Preferred Stock. The terms of the Exchange Agreement were reviewed and approved by the Company's Board of Directors and Audit Committee. Thermo's ownership portion in the Series A Preferred Stock is $136.7 million. This principal balance earns paid-in-kind interestHolders of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of 13% per annum. Interest accrued since inception with respect to Thermo's portioneach year. During 2023, the Company paid Thermo dividends of $1.2 million for the period November 15, 2022 through December 31, 2022 and $2.4 million for each of the debt outstanding on the 2019 Facility Agreement was approximately $39.4 million,first and second quarters of which $9.7 million was accrued during the nine months ended September 30, 2022. As discussed in Note 8: Commitments and Contingencies, the Service Agreements require the Company to refinance all loans outstanding under the 2019 Facility Agreement; the portion associated with Thermo is required to be refinanced upon commencement of Services, which is expected to be during the fourth quarter of 2022.2023.

InAlso in connection with the Service Agreements, in September 2022, Partner and Thermo entered into a lock-up and right of first offer agreement that generally (i) requires Thermo to offer any shares of Globalstar common stock to Partner before transferring them to any other Person other than affiliates of Thermo and (ii) prohibits Thermo from transferring shares of Globalstar common stock if such transfer would cause Thermo to hold less than 51.00% of the outstanding common stock of the Company for a period of 5five years from the Service Launch (as definedlaunch of Services in Note 1: Basis of Presentation). This agreement does not prohibitNovember 2022.

Amounts payable by the Company from entering intoin connection with the 2023 Funding Agreement are expected to be guaranteed by Thermo under a changeguarantee agreement among Thermo, the Company and the Partner. Thermo has agreed to provide support of control transaction at any time. Additionally, upon commencementcertain of the Services,Company’s obligations under the Service Agreements require2023 Funding Agreement. Currently this support agreement is directly between Thermo and Partner, and the parties have agreed to replace it with an agreement between Thermo, the Company and the Partner. Entry into this guarantee agreement received shareholder approval in June 2023, and it is expected to refinance all loans outstanding underbe effective during the 2019 Facility Agreement that are held by Thermo.third quarter of 2023. As consideration for Thermo's guarantee, the Company will issue to Thermo warrants to purchase 10.0 million shares of the Company’s common stock at an exercise price of equal to $2.00 (as calculated pursuant to the agreement). 5.0 million of these warrants vest immediately upon effectiveness of Thermo's guarantee, which is expected to occur during the third quarter of 2023, and the remaining 5.0 million warrants vest if and when Thermo advances aggregate funds of $25.0 million or more to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. These warrants expire five years after the date of issuance.

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

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10. PENSIONS AND OTHER EMPLOYEE BENEFITS

Defined Benefit Plan
In January 2022, the Company received consent from its senior lenders to terminate the Retirement Plan of Globalstar, Inc. (the "Pension Plan"). The Pension Plan was frozen, effective October 23, 2003, for participation and benefit accrual purposes. The Pension Plan was settled in August 2022, which resulted in the Company no longer have any remaining pension plan obligations as of September 30, 2022. The total settlement of $7.7 million was paid out through assets held in the Pension Plan and cash, totaling $5.0 million and $2.7 million, respectively,

Upon settlement, the Company recorded a pension settlement loss totaling $1.5 million, reflected in Other income (expense) on the Company's condensed consolidated statements of operations during the nine months ended September 30, 2022.

11.NET LOSS PER SHARE 

Loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. In periods of net income, the numerator used to calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net income. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. When outstanding, the effect of potentially dilutive common shares for the Company's convertible notes is calculated using the if-converted method. Generally, for all other potentially dilutive common shares, the effect is calculated using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per common share during each of the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 (amounts in thousands, except per share data):
Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Net loss$(204,361)$(30,885)$(251,580)$(88,667)
Weighted average shares outstanding1,800,504 1,793,144 1,799,364 1,755,362 
Net loss per common share - basic and diluted$(0.11)$(0.02)$(0.14)$(0.05)
Three Months EndedSix Months Ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Numerator:
Net income (loss)$9 $(26,757)$(3,471)$(47,219)
Effect of Series A Preferred Stock dividends(2,644)— (5,259)— 
Adjusted net loss attributable to common shareholders$(2,635)$(26,757)(8,730)(47,219)
Denominator:
Weighted average shares outstanding - basic and diluted1,813,393 1,799,886 1,812,617 1,798,784 
Net loss per common share - basic and diluted$0.00 $(0.01)$0.00 $(0.03)

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For the three months ended SeptemberJune 30, 2023 and 2022, and 2021, 9.418.2 million and 11.07.8 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive. For the ninesix months Septemberended June 30, 2023 and 2022, and 2021, 8.819.0 million and 10.27.6 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive. Included in these shares as of June 30, 2023 is a portion of the 49.1 million Warrants issued to Partner under the Service Agreements in 2022, which was determined after considering the exercise price of each tranche relative to the average market price during the period. Excluded from the amounts above are warrants expected to be issued to Thermo for its guarantee of the 2023 Funding Agreement totaling 10.0 million; the guarantee is expected to become effective during the third quarter of 2023.

The Service Agreements also provide that Partner may electAs discussed in Note 5: Long-Term Debt and Other Financing Arrangements, the Company's Board of Directors approved the payment of dividends totaling $2.6 million and $5.3 million for the three and six months ended June 30, 2023, respectively, on its Series A Preferred Stock. This amount adjusts the numerator used to receive warrants (the "Warrants") to purchase up to 2.64% of the Company’s outstanding common stock, to be calculated on a fully diluted basis on the date Partner begins providing the Services (estimated to be November 2022), at a blended exercise price of $1.01, which is based on the price of Globalstar common stock on the dates of certain past milestones provided under the Service Agreements. As of September 30, 2022, the estimated Warrants to purchase shares of Globalstar common stock is 49.1 million with estimated proceeds to the Company totaling $49.8 million. Partner is under no obligation to receive the Warrants or to exercise them.calculate loss per share.

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

Certain statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q (this "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), our expectations for future increases in our revenue and profitability, our performance and financial results under the Service Agreements, 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, business interruptions due to natural disasters, unexpected events or public health crises, including viral pandemics such as the COVID-19 coronavirus, 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, 2021,2022, as filed with the Securities and Exchange Commission (the "SEC") on February 25, 2022March 1, 2023 (the "2021"2022 Annual 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 20212022 Annual Report. 

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Overview 

Mobile Satellite Services Business

Globalstar, Inc. ("we", "us" or the "Company") provides Mobile Satellite Services (“MSS”) including voice and data communications services in addition toas well as wholesale capacity services through its global satellite network. We offer these services over our network of in-orbit satellites and our active ground stations (“gateways”), which we refer to collectively as the Globalstar System. In addition to supporting Internet of Things ("IoT") data transmissions in a variety of applications, we provide reliable connectivity 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. By providing wireless communications services across the globe, we meet our customers' increasing desire for connectivity.

Recent Developments

In February 2022, we entered into a satellite procurement agreement (the "Procurement Agreement") with Macdonald, Dettwiler and Associates Corporation (the "Vendor") pursuant to which we will acquire 17 satellites that will replenish our existing constellation and ensure long-term continuity of our mobile satellite services. We are acquiring the satellites to provide continuous satellite services to Partner (defined below) under the Service Agreements (defined below), as well as services to our current and future customers. We have committed to purchase these new satellites for a total contract price of $327.0 million and have the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The technical specifications and design of these new satellites are similar to our current second-generation satellites. Rocket Lab USA, Inc. is the Vendor’s satellite bus subcontractor under the Procurement Agreement. The agreement requires the Vendor to deliver the initial 17 new satellites by 2025, all of which are expected to be launched by the end of 2025. Under the Service Agreements, Partner is required to pay us a service fee equal to 95% of the capital expenditures and certain other costs incurred for the new satellites.

In June 2022, we successfully launched our on-ground spare second-generation satellite. This satellite is expected to remain as an in-orbit spare and will only be raised to its operational orbit at a future date if needed.

In September 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). We will be the satellite operator for the Services pursuant to the agreement (the “Service Agreement”) and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). Since execution of the Service Agreements in 2020, the parties have completed several milestones, including (i) a feasibility phase, (ii) material upgrades to our ground network, (iii) construction of 10 new gateways around the world, (iv) the successful launch of the ground spare satellite, and (v) rigorous in-field system testing. The Service Agreements generally require us to allocate network capacity to support the Services and provide for the inclusion of our Band 53/n53 in Partner’s cellular-enabled devices that use the Services, for use by third parties, subject to certain terms and conditions. It is currently expected that Partner will make the Services available to customers during the fourth quarter of 2022 (the “Service Launch”). In consideration for the services provided by us, Partner will make payments to us under the Service Agreements, including a recurring service fee, payments relating to certain Service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria.

Communications Products and Services

We currently provide the following communications services: 

•two-way voice communication and data transmissions via our GSP-1600 and GSP-1700 phone ("Duplex");
•one-way or two-way communication and data transmissions using mobile devices, including our SPOT family of products, such as SPOT X®, SPOT Gen4™ and SPOT Trace®, that transmit messages and the location of the device ("SPOT");
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•one-way data transmissions using a mobile or fixed device that transmits its location and other information to a central monitoring station, including our commercial IoT products, such as our battery- and solar-powered SmartOne, STX-3, ST100, ST150 and ST100Integrity 150 ("Commercial IoT");
•satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways under our agreement with Partner ("Wholesale Capacity Services"); and
•engineering and other communication services using our MSS and terrestrial spectrum licenses ("Engineering and Other").
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We compete aggressively on price. We offer a range of price-competitive products to the industrial, governmental and consumer markets. We expect to retain our position as a cost-effective, high quality leader in the MSS industry.  

As technological advancements are made, we continue to explore opportunities to develop new products and provide new services over our network to meet the needs of our existing and prospective customers. We are currently pursuinghave pursued and continue to pursue initiatives that we expect will expand our satellite communications business and more effectively utilize the capacity of our network assets. These initiatives include evaluating our product and service offeringsare focused in light of the shiftpart on further investment in demand across the MSS industry from full Duplex voice and data services to IoT-enabled devices. Integrated with this assessment is the development of IoT-enabled devices, including a two-way reference design module that is expected to significantly expand our Commercial IoT offerings, which is among our other current initiatives. We have evaluated the continuation of second-generation Duplex services in light of other potential uses for our capacity, such as those within the Service Agreements. In early 2021, we terminated our second-generation Duplex services to support extended testing of the Services to Partner; however, such termination was considered temporary unless and until Partner announced its intent to proceed with launch of the Services. Due to this shift in strategy triggered by Partner's announcement in September 2022, we abandoned our second-generation Duplex assets, including gateway property, prepaid licenses and royalties, and inventory. We will continue to support first-generation Duplex services, including voice communications and data transmissions.offerings.

Our Commercial IoT use cases continue to expand. In June 2022, we introduced the Realm Enablement Suite, an innovative portfolio of satellite asset tracking hardware and software solutions featuring a powerful application enablement platform for processing smart data at the edge. With Realm, partners can accelerate new solutions to market with smart applications that generate an advanced level of telematics data. The Realm Enablement Suite includes Integrity 150, the first solar-powered, deployment-ready satellite asset tracking device with an application enablement platform; ST150M, a satellite modem module that drastically simplifies product development; and the Realm application enablement platform, which will offer tools and an extensive library for quickly accessing and developing smart applications at the edge for vertical-specific solutions. We also continue to expand deployments that support environmentally friendly initiatives. Recent deployments include remote monitoring of fluid levels and tanks, which replaces the need for motor vehicles to access these assets, as well as asset monitoring solutions for solar lighting and other renewable energy sources.

Globalstar System

Our constellation of Low Earth Orbit ("LEO") satellites includes second-generation satellites and certain first-generation satellites. We designed our satellite network to maximize the probability that at least one satellite is visible from any point on the Earth's surface between the latitudes 70° north and 70° south. 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.

Our goal is to provide service levels and call or message success rates equal to or better than our MSS competitors so our products and services are attractive to potential customers. We believe that our system outperforms geostationary (“GEO”) satellites used by some of our competitors. GEO satellite signals must travel approximately 42,000 additional miles on average, which introduces considerable delay and signal degradation to GEO calls.

Our ground network includes our ground equipment, which uses patented CDMA technology to permit communication to multiple satellites. Our system architecture provides full frequency re-use. This maximizes satellite diversity (which maximizes quality) and network capacity as we can reuse the assigned spectrum in every satellite beam in every satellite. In addition, we have developed a proprietary technology for our SPOT and Commercial IoT services.

In February 2022, we entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA") pursuant to which we expect to acquire 17 satellites that will replenish our existing constellation and ensure long-term continuity of our mobile satellite services. We are acquiring the satellites to provide continuous satellite services to Partner under the Service Agreements, as well as services to our current and future customers. We have committed to purchase these new satellites for a total contract price of $327.0 million and have the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The technical specifications and design of these new satellites are similar to our current second-generation satellites. Rocket Lab USA, Inc. is the Vendor’s satellite bus subcontractor. The satellite procurement agreement requires the Vendor to deliver 17 new satellites by 2025, all of which are expected to be launched by the end of 2025. In addition, MDA will procure a satellite operations control center for $4.9 million. Under the Service Agreements, subject to certain terms and conditions, Partner has agreed to make service payments equal to 95% of the approved capital expenditures under the satellite procurement agreement (to be paid on a straight-line basis over the useful life of the satellites) and certain other costs incurred for the new satellites, as adjusted based on certain provisions, beginning with the Phase 2 Service Period.
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Customers
For our subscriber driven revenue, the specialized needs of our global customers span many industries. As of SeptemberJune 30, 2022,2023, we had approximately 762,000766,000 subscribers worldwide, principally within 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; animal tracking and transportation. In response to Russia's invasion of Ukraine, during the first quarter of 2022, we disconnected satellite services to gateways in Russia that were operated by an independent gateway operator. Accordingly, approximately 25,000 subscribers that previously received satellite services through these gateways were removed fromOur subscriber count does not include our subscriber count.Partner's subscribers. Our system is able to offer our customers cost-effective communications solutions completely independent of cellular coverage. Although traditional users of wireless telephony and broadband data services have access to these services in developed locations, our customers often operate, travel and/or live in remote regions or regions with under-developed telecommunications infrastructure where these services are not readily available or are not provided on a reliable basis. Our top revenue-generating markets in the United States and Canada are government (including federal, state and local agencies), public safety and disaster relief, oil and gas, recreation and personal telecommunications. In recent years, the number of Commercial IoT devices on our network has increased significantly.
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In addition to our subscribers, we also provide services to our Partner under the Service Agreements. Our FCC license allows us to provide service over our network to up to 250 million users in the United States.

For wholesale capacity revenue, we provide primarily satellite network accessthe six months ended June 30, 2023 and related services to2022, our Partner. We intend to seek to offer wholesale opportunities to commercial customers overPartner under the Service Agreements was responsible for 49% and 22%, respectively, of our remaining satellite capacityrevenue; no other customer was responsible for IoT and other initiatives.more than 10%.
Spectrum and Regulatory Structure
We benefit from a worldwide allocation of radio frequency spectrum in the international radio frequency tables administered by the International Telecommunications Union ("ITU"). Access to this globally harmonized spectrum enables us to design satellites, networks and terrestrial infrastructure enhancements more cost effectively because the products and services can be deployed and sold worldwide. In addition, this broad spectrum assignment enhances our ability to capitalize on existing and emerging wireless and broadband applications.

Terrestrial Authority for Globalstar's Licensed 2.4GHz2.4 GHz Spectrum
 
In August 2017, the FCC modified our MSS licenses, granting us authorityWe are authorized to provide terrestrial broadband services over the 11.5 MHz portion of our licensed MSS spectrum. Specifically, the FCC modified our space station authorization and our blanket mobile earth station license to permit a terrestrial network using 11.5 MHz of our licensed mobile-satellite service spectrum.

In December 2018, weWe have successfully completed the Third Generation Partnership Project (“3GPP”) standardization process for the 11.5 MHz of our licensed MSS spectrum terrestrially authorized by the FCC. The 3GPP designated the band as Band 53. Additionally, in March 2020, we announced that the 3GPP approved53 with the 5G variant of our Band 53 which is known as n53. This new band class provides a pathway for our terrestrial spectrum to be integrated into handset and infrastructure ecosystems. Additional follow-on 3GPP specifications and approvals are expected in the future. During

We have executed agreements with partners that we believe allow our potential device ecosystem to expand significantly to include the most popular smartphones, laptops, tablets, automated equipment and other IoT modules. Most recently, in September 2022, we announced the Service Agreements, which provide for the enablement of Band 53/n53 use in cellular-enabled devices designated by Partner in connection with the Services, subject to certain terms and conditions; we believe this inclusion significantly enhances the device ecosystem for Band 53/n53. Prior to that, in 2019, we executed a spectrum manager lease agreement with Nokia in order to permit Nokia to utilize Band 53 within its equipment domestically and have such equipment type-certified for sale and deployment.

In February 2021, Qualcomm Technologies announced its new Snapdragon X65 modem-RF System, which includes support for Band n53. By having global 5G band support for n53 in Qualcomm Technologies’ 5G solutions, our potential device ecosystem expands significantly to include the most popular smartphones, laptops, tablets, automated equipment and other IoT modules. The Service Agreements provide for the inclusion of Globalstar’s Band 53/n53 in Partner’s cellular-enabled devices that use the Services, for use by third parties, subject to certain terms and conditions; this inclusion materially enhances the device ecosystem for Band 53/n53.

We believe our MSS spectrum position provides potential for harmonized terrestrial authority across many international regulatory domains and have been seeking approvals in various international jurisdictions. To date, we have received additional terrestrial authorizations in various countries, including Brazil, Canada, and South Africa and Spain, among others. We expect this global effort to continue for the foreseeable future while we seek additional terrestrial approvals to internationally harmonize our S-band spectrum across the entire 16.5 MHz authority for terrestrial mobile broadband services.

We expect our terrestrial authority will allow future partners to develop high-density dedicated networks using the TD-LTE and 5G protocols for private networks as well as the densification of cellular networks. We believe that our offering has competitive advantages over other conventional commercial spectrum allocations. Such other allocations must meet minimum population coverage requirements, which effectively prohibit the exclusive use of most carrier spectrum for dedicated small cell deployments. In addition, low frequency carrier spectrum is not physically well suited to high-density small cell topologies, and mmWave spectrum is subject to range and attenuation limitations. We believe that our licensed 2.4 GHz band holds physical, regulatory and ecosystem qualities that distinguishes it from other current and anticipated allocations, and that it is well positioned to balance favorable range, capacity and attenuation characteristics.

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Performance Indicators 

Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality 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 subscriber-driven revenue, including Duplex, SPOTCommercial IoT, and Commercial IoT;SPOT;
•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 ninesix months ended SeptemberJune 30, 20222023 and 2021  2022

Revenue

Our revenue is categorized as service revenue and equipment revenue. We provide services to customers using technology from our satellite and ground network. Equipment revenue is generated from the sale of devices that work over our network. For the three months ended SeptemberJune 30, 2022,2023, total revenue increased 15%50% to $37.6$55.1 million from $32.6$36.8 million for the same period in 2021.2022. For the ninesix months ended SeptemberJune 30, 2022,2023, total revenue increased 19%63% to $107.2$113.7 million from $89.8$69.6 million for the same period in 2021.2022. See below for a further discussion of the fluctuations in revenue.

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The following table sets forth amounts and percentages of our revenue by type of service (dollars in thousands).
 
Three Months Ended 
September 30, 2022		Three Months Ended 
September 30, 2021		Nine Months Ended 
September 30, 2022		Nine Months Ended 
September 30, 2021		 Three Months Ended 
June 30, 2023		Three Months Ended 
June 30, 2022		Six Months Ended 
June 30, 2023		Six Months Ended 
June 30, 2022
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:    Service Revenue:    
Subscriber servicesSubscriber servicesSubscriber services
DuplexDuplex$9,021 24 %$9,632 30 %$22,103 21 %$23,530 26 %Duplex$6,359 11 %$6,936 19 %$12,110 10 %$13,082 19 %
SPOTSPOT11,753 31 11,873 35 34,544 32 33,996 38 SPOT11,039 20 11,536 31 22,353 20 22,791 33 
Commercial IoTCommercial IoT4,673 13 4,458 14 14,381 13 13,443 15 Commercial IoT5,356 10 5,038 14 10,534 9 9,708 14 
Wholesale capacity services (1)Wholesale capacity services (1)6,972 19 1,301 4 22,640 21 3,999 4 Wholesale capacity services (1)25,478 46 8,825 24 55,889 49 15,668 22 
Engineering and other servicesEngineering and other services882 2 584 2 2,025 2 1,583 2 Engineering and other services416 1 713 2 716 1 1,143 2 
Total Service RevenueTotal Service Revenue$33,301 89 %$27,848 85 %$95,693 89 %$76,551 85 %Total Service Revenue$48,648 88 %$33,048 90 %$101,602 89 %$62,392 90 %
 
Note 1: Prior to the third quarter of 2022, revenue from wholesale capacity services was included in engineering and other services in the table above.

The following table sets forth amounts and percentages of our revenue generated from equipment sales (dollars in thousands).
Three Months Ended 
September 30, 2022		Three Months Ended 
September 30, 2021		Nine Months Ended 
September 30, 2022		Nine Months Ended 
September 30, 2021		 Three Months Ended 
June 30, 2023		Three Months Ended 
June 30, 2022		Six Months Ended 
June 30, 2023		Six Months Ended 
June 30, 2022
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 Revenue:Equipment Revenue:    Equipment Revenue:    
DuplexDuplex$15 — %$265 1 %$288 — %$889 1 %Duplex$17 — %$143 — %$36 — %$273 — %
SPOTSPOT1,558 4 2,619 8 4,707 5 6,764 8 SPOT2,513 5 1,674 5 4,439 4 3,149 5 
Commercial IoTCommercial IoT2,713 7 1,841 6 6,427 6 5,452 6 Commercial IoT3,901 7 1,908 5 7,713 7 3,714 5 
OtherOther39 — 41 — 83 — 166 — Other(7)— 27 — (74)— 44 — 
Total Equipment RevenueTotal Equipment Revenue$4,325 11 %$4,766 15 %$11,505 11 %$13,271 15 %Total Equipment Revenue$6,424 12 %$3,752 10 %$12,114 11 %$7,180 10 %

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The following table sets forth our average number of subscribers and ARPU by type of revenue.
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
2022202120222021 2023202220232022
Average number of subscribers for the period:Average number of subscribers for the period:  Average number of subscribers for the period:  
DuplexDuplex41,204 45,004 42,046 46,531 Duplex34,974 42,723 36,047 43,295 
SPOTSPOT276,203 271,843 275,250 268,506 SPOT261,734 277,815 264,162 276,633 
Commercial IoTCommercial IoT444,397 410,630 434,338 410,374 Commercial IoT466,609 433,578 467,059 431,652 
OtherOther428 26,848 13,337 26,732 Other385 437 395 13,340 
TotalTotal762,232 754,325 764,971 752,143 Total763,702 754,553 767,663 764,920 
ARPU (monthly):ARPU (monthly): ARPU (monthly): 
DuplexDuplex$72.98 $71.34 $58.41 $56.19 Duplex$60.61 $54.12 $55.99 $50.36 
SPOTSPOT14.18 14.56 13.94 14.07 SPOT14.06 13.84 14.10 13.73 
Commercial IoTCommercial IoT3.51 3.62 3.68 3.64 Commercial IoT3.83 3.87 3.76 3.75 

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

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. 

Wholesale capacity service revenue includes revenue generated from satellite network access and related services under the Service Agreements and engineering and other service revenue includes revenue generated primarily from certain governmental and engineering service contracts; neither of these service revenue items is subscriber driven. Accordingly, we do not present ARPU for wholesale capacity service revenue and engineering and other service revenue in the table above.

As previously discussed,In response to Russia's invasion of Ukraine, during the first quarter of 2022, we disconnected satellite services to gateways in Russia that were operated by an independent gateway operator. Accordingly, approximately 25,000 subscribers that previously recorded in Other in the table abovereceived satellite services through these gateways were removed from our subscriber count.count; these subscribers were included in "Other" in the table above.

Service Revenue

Duplex service revenue decreased 6%$0.6 million, or 8%, and $1.0 million, or 7%, respectively, for each of the three and ninesix month periods ended SeptemberJune 30, 20222023, compared to the same periods in 2022. For both periods, the decrease in revenue was due primarily to a decrease in average subscribers, of 8% and 10%, respectively, offset partially by higher ARPU in both periods.ARPU. The decrease in average subscribers is due to churn exceeding gross activations over the last twelve months. In line with the shift in demand across the MSS industry from fullmonths as we no longer manufacture and sell Duplex voicedevices, and data services to IoT-enabled devices, we expect the decline in our Duplex subscriber base to continue as weinstead focus our investments on IoT-enabled devices and wholesale capacity services.

SPOT service revenue decreased 1%4% and increased 2%, respectively, for the three and ninesix months ended SeptemberJune 30, 2023, compared to the same periods in 2022. For both the three and six month period, a 3%periods, the decrease in ARPUSPOT service revenue was offset partiallydue primarily to fewer average subscribers. Average subscribers were impacted by a 2% increase in average subscribers, driving a net decrease in revenue for the period. For the nine month period, higher average subscribers contributedlower equipment sales, and therefore gross subscriber activations, during 2022 due to a 3% increase in revenue and was offset partially by a 1% decrease in ARPU. During 2022, our subscriber base increased despite fewer than forecasted activations resulting from supply chain disruptions overissues that lowered the past few quarters (see discussion below). The slight decreasenumber of devices available in ARPU for both periods is due to the mix of subscriber rate plans, including the continued popularity of our flex plans, which have contributed to the increase in average subscribers however generally carry lower rates than our traditional prepaid unlimited plans.sales channel.

Commercial IoT service revenue increased 5%6% and 7%9%, respectively, for the three and ninesix months ended SeptemberJune 30, 20222023, compared to the same periods in 2022. The increases for both periods were due primarily to an increase in average subscribers. For the three month period, average subscribers increased 8% and ARPU decreased 3%. For the nine month period, average subscribers increased 6% and ARPU increased 1%. Grossdriven by a 21% increase in gross subscriber activations havewhen compared to the preceding twelve month periods.

Wholesale capacity service revenue increased 24% over the last twelve months$16.7 million and subscriber churn is lower over the same period. Our average subscriber base has grown despite significant production delays in 2022 resulting from component part shortages (discussed further below). As we fulfill sales back orders for Commercial IoT products, we expect to see activations continue to increase. We have recently experienced steady growth in our Latin American subscriber base; average subscribers for this region increased 49% and 40%$40.2 million, respectively, for the three and nine monthsix months ended June 30, 2023 compared to the same periods respectively,in 2022. The increase in revenue recognized during the three and represent 5% and 6% of our average subscriber growthsix months ended June 30, 2023 is due primarily to consideration received for service fees under the Service Agreement which commenced after service launch in total. The fluctuations in ARPUNovember 2022. Revenue for both periods is driven byalso increased due to the mixamount of subscribers on various rate plans.revenue recognized for our performance associated with the construction of additional satellites for Partner. Additionally, in connection with the
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Wholesale capacity service revenue increased $5.7 million and $18.6 million, respectively, for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Fluctuations in wholesale capacity service revenue are due primarily to the timing and amount of revenue recognized associated with the Service Agreements. The increase in revenue recognized during 2022 is due primarily to consideration received for performance obligations associated with our work to expand and upgrade our gateways around the globe and under the Procurement Agreement. In consideration for the services provided by us, Partner make payments to us under the Service Agreements, including a recurring service fee, payments relating to certain service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria. Once the second phaseamendment of the Service Agreements commences,in February 2023, Partner has agreed to also make service payments equal to (i) 95% of the approved capital expenditures under the Procurement Agreement (to be paid on a straight-line basis over the useful life of the satellites); (ii) certain costs of the Company’s borrowingspay us $6.5 million as consideration related to performance obligations completed in prior periods. The Company recognized this revenue during the new satellites; and (iii) other approved costs.

Engineering and other service revenue increased $0.3 million and $0.4 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Throughout 2022, we have made significant progress on constructing a teleport for a customer at onefirst quarter of our gateway locations in Brazil; the services performed for this customer contributed $0.6 million and $0.9 million, respectively, to the total revenue recognized for Engineering and other service revenue for the three and nine month periods. Offsetting this increase are fluctuations in the volume of other engineering service contracts. Additionally, as previously discussed, we disconnected service to approximately 25,000 subscribers in Russia. During 2021, we billed less than $0.3 million to these subscribers and the revenue associated with these subscribers was recorded in Engineering and other service revenue.2023.

Subscriber Equipment Sales

Revenue from Duplex equipment sales decreased $0.3$0.1 million and $0.6$0.2 million, respectively, for the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 2021.2022. These decreases were driven primarily bydue to a lower sales volume of phones and accessories due to a lack of available inventory since these devices are no longer being manufactured.we discontinued from our product offerings.

Revenue from SPOT equipment sales decreased $1.1increased $0.8 million, or 50%, and $2.1$1.3 million, or 41%, respectively, for the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 2021. These decreases resulted from2022. During 2022, due to component part shortages, we experienced production delays resulting in a lower sales volumeback order position for most of all products over the last twelve months. Twoyear. Starting in the second quarter of our core2023, all SPOT products are on back order duereturned to inventory shortages, which delayed the fulfillment of orders during the nine months of 2022. Weordinary production levels; therefore, we expect equipment sales to continue to see demand exceeding supply resulting from supply chain disruptions caused by component part shortages. We are actively working to address this issue and expect production to resume in the fourth quarter of 2022.increase year-over-year as we move through 2023.

Revenue from Commercial IoT equipment sales increased $0.9$2.0 million and $1.0$4.0 million, respectively, for the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 2021.2022. During the third quarter, we were able2022, due to fulfill a portion of the back orders of certain devices. As a result, the volume of our SmartOne Solar device sales increased over 100% from the third quarter of 2021 and revenue from this product increased over $1.2 million during the same period. While production issues were substantially resolved during the third quarter of 2022, IoT equipment sales continue to be negatively impacted by component part shortages, which has impacted our abilitywe experienced production delays resulting in a back order position for most of the year. These issues have been resolved and all products are being manufactured in the ordinary course of business; therefore, we expect equipment sales to produce inventory at sufficient quantities to fulfill sales orders and we continue to have back orders of two of our most profitable products.increase year-over-year as we move through 2023.

Operating Expenses 

Total operating expenses increased to $224.3$52.5 million from $47.3$48.2 million and increased to $318.9$103.9 million from $139.8$94.6 million respectively, for the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 2021. For both the three and nine month periods, reductions in the value of inventory and long-lived assets contributed to the majority of the increase in expense. Additionally, higher2022, respectively. Higher cost of services, and management, general and administrative ("MG&A") costs, and subscriber equipment sales were offset partially by lower cost of subscriber equipment sales.depreciation, amortization and accretion expense. The main contributors to the variance in operating expenses are explained in further detail below.

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Cost of Services 

Cost of services increased $1.6 million and $4.9$2.6 million for the three and ninesix months ended SeptemberJune 30, 20222023 compared to the same periods in 2021.2022, respectively. For the three and nine monththese periods, personnel costs increased $0.6 million and $1.9 million, respectively; the year to date increase included $0.7 million related to annual cash bonuses and non-recurring separation pay during the first quarter of 2022. Higherhigher lease expense associated with new teleport leases (including associated occupancy costs, such as utilities and other building services), which commenced throughout the second half of 2021,gateway sites contributed to $0.3$0.6 million and $1.4$1.5 million, respectively, ofto the total increase.increases. These leases were executed in connection with the gateway expansion project associated with the Service Agreements; these lease and related costs are being reimbursed to us, and this consideration is being recognized as revenue (as further discussed above in "Wholesale capacity service revenue"Capacity Service Revenue"). Higher professional fees and licensing costs related to our implementation of a new enterprise resource planning ("ERP") system, which went live in January 2022, as well as other costs for information technology security and maintenance contributed $0.8totaling $0.4 million and $1.4$0.6 million, respectively, also contributed to the total increase.increases for both periods. Personnel costs were also up for both periods due to the impact of merit and headcount increases in 2023 offset partially by non-recurring personnel costs from the first quarter of 2022 related to annual cash bonuses and separation pay.

Cost of Subscriber Equipment Sales

Cost of subscriber equipment sales decreased $0.6increased $2.5 million and $0.7$4.3 million for the three and ninesix months ended SeptemberJune 30, 20222023 from the same periods in 2021. These decreases are generally2022, respectively. This increase is consistent with the decreasesincrease in total revenue from subscriber equipment sales,sales. Margin percentages on subscriber equipment narrowed slightly for both the three and were also impacted bysix month periods due to the reversalmix of a prior year accrual for tariffs during the second quarter 2021. Pursuant to regulatory developments, we reversed this accrual for potential tariffs owed on imports from China made prior to a ruling by the U.S Customs and Border Protectionproducts sold in September 2019 that we no longer believe will be due, resulting in an expense reduction of $0.9 million in 2021.each respective period.

Cost of Subscriber Equipment Sales - Reduction in the Value of Inventory
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During the third quarter of 2022, we recorded a reduction in the value of inventory totaling $8.5 million. As disclosed in Note 7: Fair Value Measurements to our Condensed Consolidated Financial Statements, upon Partner's announcement in September 2022, our strategy relative to second-generation Duplex assets shifted. Due to this shift in strategy, we concluded that there was no remaining net realizable value of our second-generation Duplex inventory, resulting in an $8.5 million reduction in value of inventory.

During the second quarter of 2021, we recorded a reduction in the value of inventory totaling $0.8 million. We wrote off certain Sat-Fi2 materials that were not likely to be used in production as well as defective inventory units that were not saleable.

Marketing, General and Administrative

MG&A expenses increased $1.5$3.0 million and $0.8$7.0 million for the three and ninesix months ended SeptemberJune 30, 2022,2023 compared to the same periods in 2021. For the three and nine month periods, increases in2022, respectively. Higher personnel costs totaling $1.1of $1.7 million and $2.7$3.8 million, respectively, contributed to the increase in MG&A expense. Included in personnel costs are higher stock-based compensation driven by performance grants to certain employees associated with their efforts under the Service Agreements, annual cash bonuses and separation pay. For the nine-month period, higher professional and legal fees totaling $0.8 million also increased MG&A expense. These increases for the nine-month period were offset partially by certain non-recurring items, including lower subscriber acquisition costs of $1.0 millionexpense, due primarily to the deactivation of all Sat-Fi2 subscribers during the first half of 2021. Additionally, during 2021, we terminated our dealer programstock-based compensation and, reduced advertising spend for Duplex productsto a lesser extent, merit and services; these items contributed $0.8 millionheadcount increases. Also contributing to the decreaseMG&A increase for both periods were higher legal and professional fees of $0.9 million and $1.6 million, respectively, for various efforts, including increased regulatory work, government relations and negotiations of new commercial arrangements. These increased costs are in MG&A expense. Finally, duringpart due to the upcoming World Radio Conference and our ongoing efforts to remove interference into the Globalstar System being received from China. For the year to date period, the increase was also impacted by a $1.0 million accrual reversal in the first quarter of 2022 we reversed a $1.0 million accrual related to professional services associated with the 2018 shareholder litigation basedlitigation. Based on our assessment and considering the passage of time, we concluded it was appropriate to release the likelihoodaccrual, which resulted in a decrease in MG&A expense in the first quarter of payment.2022. Other smaller items contributed to the remaining increase for the year to date period.

Reduction in Value of Long-Lived Assets
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Depreciation, Amortization and Accretion

DuringDepreciation, amortization and accretion expenses decreased $2.2 million and $4.1 million for the third quarter ofthree and six months ended June 30, 2023, respectively, compared to the same periods in 2022 we recordeddue to a net reduction in the value of long-lived assets totaling $166.0 million. As disclosed in Note 7: Fair Value Measurements to our Condensed Consolidated Financial Statements, upontotal property and equipment. In connection with Partner's announcement concerning the Services in September 2022, our strategy relative to our second-generation Duplex assets shifted. Due to this shift in strategy, we re-assessed our asset grouping for long-lived assets and determined that the second-generation Duplex assets (including the gateways (and related technology) capable of providing commercial traffic to support Sat-Fi2®) arewere no longer part of our overall satellite and ground network. These second-generation Duplex assets will no longer provide future cash flows to us - these assets totaled approximately $161.2 million prior to their write down in September 2022. Also reflectedOur first-generation Duplex assets (i.e. handsets and related ground infrastructure) were not impacted. Offsetting this decrease is depreciation expense from the on-ground spare satellite that was launched and placed into service in the reduction in the value of long-lived assets were certain prepaid licenses and royalties necessary for the manufacture and distribution of second-generation Duplex products and services. These prepaid items are no longer considered recoverable as there are no longer separately identifiable cash flows for such assets - these assets totaled approximately $4.7 million prior to their write down in SeptemberJune 2022.

During the second and third quarters of 2022, we recorded reductions in the value of intangible and other assets totaling $0.5 million and $0.1 million, respectively. We wrote off work in progress associated with spectrum licensing efforts in certain countries around the world. We determined that attainment of such licenses was no longer probable based on discussions with regulators and other circumstances.

Other (Expense) Income

(Loss) GainLoss on Extinguishment of Debt

We recorded gaina loss on extinguishment of debt of $10.4 million during the secondfirst quarter of 2021 totaling $5.0 million. In June 2021,2023 following the Small Business Administration ("SBA") approved our request for forgivenessfull pay-off of amounts outstanding under the Paycheck Protection Program ("PPP") loan. Offsetting this gain during2019 Facility Agreement in March 2023. The extinguishment loss was recognized due to the nine-month period were the write-offs of a portion of remaining deferred financing costs totaling $2.3 million and $0.8 million duringdebt discount associated with the second and third quartersinstrument at the time of 2021, respectively, resulting from unscheduled principal repayments of the 2009 Facility Agreement in those quarters.repayment. Similar activity did not occur in 2022.

Interest Income and Expense

Interest income and expense, net, decreased $3.8$2.1 million and $9.5$9.6 million during the three and ninesix months ended SeptemberJune 30, 2022,2023, compared to the same periods in 2021. The decrease for both2022, respectively. For these periods, was driventhese decreases were due primarily byto lower gross interest costs totaling $1.9 million and $5.1 million, respectively. For the six month period, higher capitalized interest (which decreases interest expense) of $3.7$4.2 million, due to higher construction in progress, also reduced expense.

For the three and $8.5 million, respectively. Lowersix month periods, gross interest costs totaling $1.0were lower due to $10.7 million also contributed to the decrease in expense for the nine month period.

Grossand $15.1 million, respectively, less interest costs were generally flat for the three month periods and down $1.0 million for the nine month period. For the three month period, lower interest of $1.6 million associated with the 2009 Facility Agreement was offset by higher interest of $1.3 million associated withunder the 2019 Facility Agreement imputed(as defined below) due to the partial paydown in November 2022 and the final paydown in March 2023. Offsetting this decrease was a $7.1 million increase in interest associated with the significant financing component related to advance payments from Partner under2023 13% Notes (as defined below), which commenced in the Service Agreementssecond quarter of $0.2 million,2023, as well as interest and the accrualaccretion of interest associated with our vendor financing totaling $0.2 million. For the nine month period, lower interest of $7.2 milliondebt discount associated with the 2009 Facility Agreement was offset by higher2023 and 2021 Funding Agreements (as defined below), which also commenced in the second quarter of 2023, and totaled $2.8 million. Finally, we incurred interest of $3.9$1.2 million on the 2019 Facility Agreement, imputed interest associated with the significant financing component relateddue to advance payments from PartnerMDA under the Service Agreementsvendor financing arrangement during the first quarter of $1.9 million, and $0.2 million2023 that was not in place during the first half of interest accrued associated with our2022. This vendor financing.financing arrangement was fully repaid during the first quarter of 2023.

Derivative Gain (Loss)

We recorded derivative gains of $0.7 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively. We recorded derivative losses of $1.1 million and $2.2 million for the nine months ended September 30, 2022 and 2021, respectively. We recognize derivative gains or losses due to the change in the value of certain embedded features within our debt instruments that require standalone derivative accounting. 

For the three and six months ended June 30, 2023, we recorded derivative gains of $0.3 million, respectively. For the three and six months ended June 30, 2022, we recorded derivative losses of $1.2 million and $1.7 million, respectively.

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The gaingains recorded during 2023 were impacted by a decrease in the three months ended September 30,discount rate and the timing of cash flow utilized in the valuation of the embedded derivative within the 2023 Funding Agreement. The losses recorded during 2022 was drivenwere impacted primarily by the increased likelihood of conversion of our 2019 Facility Agreement and associated derivative. For the nine months ended September 30, 2022, an increase in the discount rate was offset by changes in the probability and timing of prepayments contemplatedused in the valuation of the derivative associated with our 2019 Facility Agreement. Additionally, forFor the ninesix month period, the loss was offset partially by a gain on the valuation adjustment of the embedded derivative associated with our 2013 8.00% Notes following their conversion.

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The gains recorded during the three months ended September 30, 2021 were primarily impacted by a decrease in our stock price, which was a significant input used in the valuation of the embedded derivative associated with our 2013 8.00% Notes. Conversely, the loss recorded during the nine months ended September 30, 2021 was primarily impacted by increases in our stock price and stock price volatility.

See Note 7: Fair Value Measurements to our condensed consolidated financial statements for further discussion of the computation of the fair value of our derivatives. 

Foreign Currency Loss(Loss) Gain

Foreign currency loss fluctuated by $4.6 million and $8.7 million for the three and nine months ended September 30, 2022, compared to the same periods in 2021. Changes in foreign currency gains and losses are driven by the remeasurement of financial statement items, which are denominated in various currencies, at the end of each reporting period. For all periods presented,

We recorded foreign currency gains of $2.0 million and $3.9 million, respectively, during the three and six months ended June 30, 2023. We recorded foreign currency losses of $7.1 million and $3.9 million, respectively, during the three and six months ended June 30, 2022. During 2023, the foreign currency gains were due to the weakening of the U.S. dollar relative to other currencies. During 2022, the foreign currency losses were due to the strengthening of the U.S. dollar relative to other currencies.

Pension Settlement Loss
In August 2022, we settled the remaining pension liability; this settlement resulted in a loss of $1.5 million. See Note 10: Pensions and Other Employee Benefits to our condensed consolidated financial statements for further discussion.

Liquidity and Capital Resources

Overview

Our principal near-term liquidity requirements include funding our operating costs, capital expenditures, and repayment of amounts being financed through our satellite vendor under the Procurement Agreement. Our principal sources of liquidity include cash on hand, cash flows from operations and vendor financing.

Another source of liquidity may include proceeds from the exercise of warrants that may be issuedfunding agreement with our Partner under the Service Agreements. We also expectThese liquidity sources ofare expected to meet our short-term and long-term liquidity to include funds from other debt or equity financings that have not yet been arranged; we are actively pursuing a new debtneeds for funding our operating costs, capital expenditures and financing arrangement to repay and fund amounts dueobligations, including scheduled recoupments under the Procurement Agreement. With this financing, we expect that2021 Funding Agreement (defined below), interest on our current sources of liquidity over the next twelve months will be sufficient for us to cover13% Notes (defined below), and dividends on our obligations. Beyond the next twelve months, our liquidity requirements also include paying our debt service obligations. Additionally, under the Service Agreements, we are also required to maintain minimum liquidity of $10.0 million.perpetual preferred stock.

As of SeptemberJune 30, 20222023 and December 31, 2021,2022, we held cash and cash equivalents of $14.7$65.3 million and $14.3$32.1 million, respectively, on our consolidated balance sheet.

The total carrying amount of our debt and vendor financing outstanding was $325.9$336.6 million at SeptemberJune 30, 2022,2023, compared to $237.9$191.7 million at December 31, 2021.

2022. The $144.9 million increase was driven by the sale of $200.0 million in aggregate principal amount of 2023 13% Notes (as defined below), which were issued net of a 5% OID of $10 million and $7.2 million in financing costs, net of accretion since issuance. Also contributing to this increase was the recognition of the 2021 and 2023 Funding Agreements (as defined below), $87.7 million and $88.0 million, increase in carrying valuerespectively, of ourprincipal amount, net of debt discounts and vendor financingaccretion totaling $10.0 million and $11.9 million, respectively. Offsetting these increases was the payoff of the remaining balances due to draws under the Procurement Agreement of $63.8 million during 2022, a higher carrying value of the 2019 Facility Agreement of $25.6 million due to the accrual of PIK interest(defined below) and the accretionvendor financing arrangement of debt discount, offset by a mandatory prepayment of principal in August 2022 (see further discussion below); offsetting these increases was a reduction in the remaining principal balance of the 2013 8.00% Notes totaling $1.4$132.1 million which were converted into shares of Globalstar common stock during the first quarter of 2022.and $59.6 million, respectively.

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Cash Flows for the ninesix months ended SeptemberJune 30, 20222023 and 20212022

The following table shows our cash flows from operating, investing and financing activities (in thousands): 
Nine Months Ended Six Months Ended
September 30,
2022		September 30,
2021		 June 30,
2023		June 30,
2022
Net cash provided by operating activitiesNet cash provided by operating activities$31,705 $107,166 Net cash provided by operating activities$42,993 $20,771 
Net cash used in investing activitiesNet cash used in investing activities(25,306)(30,033)Net cash used in investing activities(124,636)(22,392)
Net cash used in financing activities(5,886)(82,725)
Net cash provided by financing activitiesNet cash provided by financing activities114,822 449 
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents(68)(57)Effect of exchange rate changes on cash and cash equivalents73 9 
Net increase (decrease) in cash, cash equivalents and restricted cashNet increase (decrease) in cash, cash equivalents and restricted cash$445 $(5,649)Net increase (decrease) in cash, cash equivalents and restricted cash$33,252 $(1,163)
 
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Cash Flows Provided by Operating Activities

Net cash provided by operations includes primarily cash receiptsreceived from the performance of wholesale capacity services as well as cash received from subscribers related to the purchase of equipment and satellite voice and data services as well as cash received from the performance of wholesale capacity services. We use cash in operating activities primarily for network costs, personnel costs, inventory purchases and other general corporate expenditures. Net cash provided by operating activities during the ninesix months ended SeptemberJune 30, 20222023 was $31.7$43.0 million compared to $107.2$20.8 million during the same period in 2021.2022. The primary driver for the decreaseincrease was due to unfavorable working capital changes offset partially by higher net income after adjusting for noncash items. During 2021, working capital changes were favorably impacted by prepayments made by the customeritems due primarily to higher wholesale capacity service fees under the Service Agreements totaling $95.5 million, which were recorded as deferred revenue (seefollowing service launch in November 2022. (See Note 2: Revenue to our condensed consolidated financial statements for further discussion). The timing of vendor payments and customer receivables also impacted thediscussion.) This activity was offset partially by an unfavorable change in working capital.capital due primarily to the recognition of deferred revenue under the Service Agreements.

Cash Flows Used in Investing Activities 

Net cash used in investing activities was $25.3$124.6 million for the ninesix months ended SeptemberJune 30, 20222023 compared to $30.0$22.4 million for the same period in 2021. Net2022. The increase is due primarily to payments to MDA during 2023 totaling $108.7 million during the first six months of 2023 (we did not make cash usedpayments under this agreement during the same period in investing activities during both periods included network upgrades associated with the Service Agreements, such as costs associated with the procurement and deployment of new antennas for our gateways and the preparation and launch of our on-ground spare satellite, which occurred in June 2022. Cash used in investing activities decreased in 2022 due to lower costs associated with gateway upgrades as that portion of the project nears completion.2022).

Cash Flows Used inProvided by Financing Activities 

Net cash used inprovided by financing activities was $5.9$114.8 million during the ninesix month period ended SeptemberJune 30, 2022,2023 compared to $0.4 million for the same period in 2022. This increase was due primarily to an unscheduledproceeds from the 2023 13% Notes and the 2023 Funding Agreement (as discussed in more detail below). The proceeds from the 2023 13% Notes were used to pay the remaining principal repayment ofamount due under the 2019 Facility Agreement in August 2022,of $148.3 million and financing costs of $8.5 million). The payment of cash dividends totaling $6.3 million. Net$6.6 million was also a use of cash used in financing activities was $82.7 millionduring 2023 that did not occur during the nine monthcomparable period ended September 30, 2021, including principal payments of the 2009 Facility Agreement totaling $126.7 million offset by $43.7 million received in proceeds from the exercise of the warrants issued with our 2019 Facility Agreement.2022.

Indebtedness 

For further discussion on all of our debt and other financing arrangements, see Note 5: Long-Term Debt and Other Financing Arrangements to our condensed consolidated financial statements.

2023 Funding Agreement

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

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

Amounts payable by us in connection with the 2023 Funding Agreement are expected to be guaranteed by Thermo under a guarantee agreement among Thermo, Globalstar and Partner. Thermo has agreed to provide support of certain of our obligations under the 2023 Funding Agreement. Currently, this support agreement is directly between Thermo and Partner, and the parties have agreed to replace it with an agreement between Thermo, us and the Partner. Entry into this guarantee agreement received shareholder approval in June 2023, and it is expected to be effective during the third quarter of 2023.

2021 Funding Agreement

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During 2021, we received payments from Partner totaling $94.2 million (the "2021 Funding Agreement"), which were recorded as deferred revenue. This funding is expected to be recouped as services are performed by us over the Phase 1 Service Period. In connection with the February 2023 amendment of the Service Agreements, certain terms of the 2021 Funding Agreement were amended to align with the terms of the 2023 Funding Agreement, including granting Partner a first-priority lien in all of our assets to secure our repayment of amounts funded by Partner. This amendment resulted in re-characterizing the previously recorded deferred revenue balance to debt.

2023 13% Notes

In March 2023, we completed the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the "2023 13% Notes"). The 2023 13% Notes are senior, unsecured obligations of the Company and have a stated maturity of September 15, 2029. The 2023 13% Notes were sold at an issue price of 95% of the principal amount and bear interest at a rate of 13.00% per annum payable semi-annually in arrears. The Company has agreed with its Partner under the Service Agreements to pay cash interest on the 2023 13% Notes at a rate of 6.5% per annum and paid-in-kind ("PIK") interest at a rate of 6.5% per annum.

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

2019 Facility Agreement

In November 2019, we entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement"). The 2019 Facility Agreement iswas scheduled to mature in November 2025. The loans under the 2019 Facility Agreement bearbore interest at a blended rate of 13.5% per annum to be paid-in-kind (or in cash at our option, subject to restrictions in the Facility Agreement). As of September 30, 2022, the principal amount outstanding under the 2019 Facility Agreement was $285.3 million. As of September 30, 2022, we were in compliance with all the covenants of the 2019 Facility Agreement.annum.

The 2019 Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the 2019 Facility Agreement) on a semi-annual basis. We generated excess cash flow for the six-month
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measurement period ended June 30, 2022 and were required to pay $6.3 million to our lenders in August 2022. This payment reduced future principal payment obligations.

As discussed further in Note 8: Commitments and Contingencies to our Condensed Consolidated Financial Statements, the Service Agreements requirerequired us to refinance all loans outstanding under the 2019 Facility Agreement; of which theAgreement. A portion held by Thermo to bewas refinanced upon commencement of Servicesin November 2022 and the remaining portion to bewas refinanced within 90 daysin March 2023. Using a portion of the commencementproceeds from the sale of Services.the 2023 13% Notes, we repaid all of our outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

Vendor Financing

In February 2022, we entered into a Procurement Agreementsatellite procurement agreement with MDA (see Note 8: Commitments and Contingencies to our Condensed Consolidated Financial Statements for further discussion). As of September 30,This agreement (as amended in October 2022 the amount outstanding under this agreement was $63.8 million. This agreementand January 2023) provided for deferrals of milestone payments from February 2022 through August 2022 at a 0% interest rate.

On October 28, 2022, we executed an amendment to extend the payment deferral date and allow for other related changes in terms, including two $7.0 million payments (one of which was made on October 31, 2022 and the second is required to be made in November 2022) and interest that will accrueMarch 15, 2023. Interest accrued on the amount outstanding at an annual rate of 7%. All remaining amounts outstanding are required, which increased to be10.5% on balances between December 2022 and March 2023. We have made payments totaling $76.1 million to MDA under this vendor financing arrangement, of which $62.1 million (including $2.5 million of interest) was paid in December 2022. Concurrently, the Company continues to pursue debt financing for the funding of the construction and launch costs for these satellites (discussed below).

New Satellite Construction Financing

As discussed in Note 4: Property and Equipment and Note 8: Commitments and Contingencies to our Condensed Consolidated Financial Statements, we entered into a contract with MDA to construct new satellites. Under the Service Agreements, we are required to raise additional debt capital for the construction and launch of the new satellites and target to complete such financing during the fourthfirst quarter of 2022.2023 to fully repay the outstanding vendor financing balance.

8.00% Convertible Senior Notes Issued in 2013Series A Preferred Stock

In May 2013,November 2022, we issued $54.6 million aggregate principal amount149,425 shares of its 2013 8.00% Notes. In February 2022, we notified7.0% Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”). The Company recorded the holdersSeries A Preferred Stock at fair value of the 8.00% Notesshares totaling $105.3 million on its consolidated balance sheet.

Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by our intention to redeem allBoard of Directors, cumulative cash dividends based on the liquidation preference of the outstanding amount of principal and interest in March 2022. Prior to our intended redemption of the 8.00% Notes in March 2022, the holders converted the remaining principal amount outstanding into 2.3 million shares of Globalstar common stockSeries A Preferred Stock, at a conversion price of $0.69 (as adjusted)fixed rate equal to 7.00% per share of common stock. The 2013 8.00% Notes were scheduled to mature on April 1, 2028, subject to various call and put features. Interest on the 2013 8.00% Notes wasannum, payable semi-annuallyquarterly in arrears on January 1, April 1, July 1 and October 1 of each year. We paid interestThe table below reflects the dividends approved by our Board of Directors (amounts in cashthousands):

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

The shares of Series A Preferred Stock do not possess voting rights, other than certain matters specifically affecting the rights and obligations of the Series A Preferred. Series A Preferred Stock may be redeemed by us, in whole or in part, at a rateany time. The holders of 5.75% per annum and issued additional 2013 8.00% Notes at a rate of 2.25% per annum.the Series A Preferred Stock do not have any rights to convert or require us to redeem such stock.

Off-Balance Sheet Transactions 

We have no material off-balance sheet transactions.

Recently Issued Accounting Pronouncements

We review recently issued accounting guidance as new standards are issued. Certain accounting standards issued or effective may be applicable to us; however, we have not identified any standards that will have a material impact on our condensed consolidated financial statements.
 
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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 denominated primarily in Canadian dollars, Brazilian reais and 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 lenders to the 2019 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 lenders to the 2019 Facility Agreement.

We expect to refinance our vendor financing in the future and may be exposed to the risk of rising interest rates if this or other future borrowings bear interest at a floating rate.

We also have operations in Argentina, which is considered to have a highly inflationary economy. We continue to monitor the significant uncertainty surrounding current Argentinian exchange mechanisms. Operations in this country are not considered significant to our consolidated operations.

See Note 7: Fair Value Measurements in our 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 Principal Executive Officer and 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 SeptemberJune 30, 2022,2023, 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, each of our Principal Executive Officer and Principal Financial Officer concluded that as of SeptemberJune 30, 20222023 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 Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and 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 ninesix months ended SeptemberJune 30, 2022.2023.

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(b) Changes in internal control over financial reporting.

As of SeptemberJune 30, 2022,2023, our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated our internal control over financial reporting. During the first quarter of 2022, we implemented a new enterprise resource planning ("ERP") system, which replaced our existing financial systems. The implementation and transition to the new ERP system resulted in changes to our reporting processes and our internal control over financial reporting, by automating certain manual procedures and standardizing business processes and reporting across the organization. As a result of this implementation, there were anticipated changes to our internal control over financial reporting, none of which adversely affected the Company's internal control over financial reporting. We will continue to monitor our internal control over financial reporting under the new system, including evaluating the operating effectiveness of related key controls. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that no changes in our internal control over financial reporting occurred during the quarter ended SeptemberJune 30, 20222023 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II: OTHER INFORMATION
 
Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors. 

Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and
financial condition.

Our results of operations are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, recession, availability of capital, energy and commodity prices, trade laws and the effects of governmental initiatives to manage economic conditions. Current or potential customers may delay or decrease spending on our products and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential customers to pay us for our products and services may adversely affect our earnings and cash flows. In addition, deterioration of conditions in worldwide credit markets could limit our ability to obtain financing to fund our operations and capital expenditures.

The current invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization (“NATO”) and Russia. The United States and other NATO member states, as well as non-member states, have announced new sanctions against Russia and certain Russian banks, enterprises and individuals. These and any future additional sanctions and any resulting conflict between Russia, the United States and NATO countries could have an adverse impact on our current operations.

Further, such invasion, ongoing military conflict, resulting sanctions and related countermeasures by NATO states, the United States and other countries are likely to lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions for equipment, which could have an adverse impact on our operations and financial performance.

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. Other than as set forth above, thereThere have been no material changes to our risk factors disclosed in Part I. Item 1A. "Risk Factors" of our 20212022 Annual Report.

There is no assurance that the Service Launch contemplated by the Service Agreements will occur or, if it does occur, that we will receive the revenues we expect under the Service Agreements.

As described more fully in our Current Report on Form 8-K filed with the Commission on September 7, 2022, the Service Agreements impose a number of substantial obligations on us, provide for certain of our fees to be payable upon satisfaction of the conditions therein and are terminable by each party. It is possible that we may fail to meet these obligations, that the conditions to the payment of such fees may not be satisfied or that the Service Agreements may be terminated. If any of these events were to occur, we would not receive the revenues we currently expect to receive under the Service Agreements, which could adversely affect our business and results of operations.

Volatility in the financial markets may impede our ability to access capital markets during favorable economic conditions and may adversely affect our financial condition.

Our Service Agreements and our Procurement Agreement require us to raise additional financing during the fourth quarter of 2022. Turmoil in the capital markets, including the tightening of credit and rise in interest rates, may limit our ability to raise additional financing on terms and at a cost favorable to the Company. Because we are required to raise capital during the fourth quarter of 2022, we have little flexibility to wait for more favorable terms or economic conditions. We are likely to face higher borrowing costs, less available capital, more stringent terms and tighter covenants. Such unfavorable market conditions could have an adverse impact on our ability to fund our operations and capital expenditures in the future, including our obligations under the Service Agreements and the Procurement Agreement. Any adverse change in the terms of our financing, including increased costs, could have a negative impact on our financial condition.

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

Not Applicable

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

As discussed above, on OctoberRule 10b5-1 Trading Plans

On June 28, 2022, the Company2023, Rebecca S. Clary, our Vice President and Chief Financial Officer, entered into a Forbearance Agreement with MDARule 10b5-1 trading plan (the “Plan”) intended to amendsatisfy the satellite procurement agreementaffirmative defense conditions of Rule 10b5-1(c). The Plan provides for the sale of 300,000 shares of the Company’s voting common stock and will terminate on September 3, 2024. During the fiscal quarter ended June 30, 2023, none of our other directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to extendsatisfy the payment deferral dateaffirmative defense conditions of Rule 10b5-1(c) (each, a “10b5-1 Plan”) or any non-Rule 10b5-1 trading arrangement. However, certain other of our executive officers had 10b5-1 Plans in effect during the fiscal quarter ended June 30, 2023, and allow for other related changescertain of our directors and executive officers may adopt 10b5-1 Plans or non-Rule 10b5-1 trading arrangements in terms, including two $7.0 million payments (one of which was made on October 31, 2022 and the second is required to be made in November 2022) and interest that will accrue on the amount outstanding at an annual rate of 7%.future.

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Item 6. Exhibits.
 
Exhibit
Number		Description
3.1*
3.2*
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
*Incorporated by reference.

* Incorporated by reference.

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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:NovemberAugust 3, 20222023By:/s/ David B. Kagan
  David B. Kagan
  Chief Executive Officer (Principal Executive Officer)
/s/ Rebecca S. Clary
 Rebecca S. Clary
 Chief Financial Officer (Principal Financial Officer)



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