PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Globalstar's unaudited interim condensed consolidated financial statements for Q3 2023 include operations, balance sheets, cash flows, and detailed notes on key accounting events [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Globalstar achieved a significant turnaround in Q3 2023, moving from a **$186.6 million** operating loss to a **$2.0 million** operating income, driven by a **53%** revenue increase and reduced net loss Q3 & Nine Months 2023 vs 2022 Statement of Operations Highlights (In thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$57,683** | **$37,626** | **$171,399** | **$107,198** | | Service Revenue | $53,643 | $33,301 | $155,245 | $95,693 | | Income (loss) from operations | $2,017 | $(186,641) | $11,828 | $(211,709) | | Net loss | $(6,169) | $(204,361) | $(9,640) | $(251,580) | | Net loss per common share (Basic & Diluted) | $0.00 | $(0.11) | $(0.01) | $(0.14) | - The significant improvement in operating income for both the three and nine-month periods in 2023 is largely attributable to the absence of the **$166 million** reduction in the value of long-lived assets recorded in Q3 2022[11](index=11&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$910.6 million** and total liabilities grew to **$527.2 million** by September 30, 2023, driven by property, equipment, and increased long-term debt Balance Sheet Highlights (In thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $64,136 | $32,082 | | Total current assets | $143,638 | $81,244 | | Property and equipment, net | $612,911 | $560,371 | | **Total assets** | **$910,612** | **$738,469** | | Current portion of long-term debt | $32,200 | $0 | | Long-term debt | $307,130 | $132,115 | | **Total liabilities** | **$527,246** | **$423,698** | | **Total stockholders' equity** | **$383,366** | **$314,771** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities more than doubled to **$68.6 million**, while investing activities used **$142.4 million** and financing activities provided **$105.9 million**, reflecting debt issuances and satellite procurement Cash Flow Summary (In thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $68,556 | $31,705 | | Net cash used in investing activities | $(142,385) | $(25,306) | | Net cash provided by (used in) financing activities | $105,902 | $(5,886) | | **Net increase in cash** | **$32,054** | **$445** | [Notes to Financial Statements](index=9&type=section&id=Notes%20to%20Financial%20Statements) Notes detail the August 2023 XCOM License Agreement, resulting in **$30.6 million** goodwill, a surge in wholesale capacity revenue, and major debt restructuring including **$200 million** in Senior Notes - In August 2023, the Company entered into an Intellectual Property License Agreement with XCOM Labs, Inc., acquiring an exclusive license and other assets for **60.6 million shares** of common stock, valued at approximately **$68.7 million**; the transaction was accounted for as a business combination, resulting in the recognition of **$26.0 million** in developed intellectual property and **$30.6 million** in goodwill[30](index=30&type=chunk)[31](index=31&type=chunk)[35](index=35&type=chunk) Disaggregation of Revenue (In thousands) | Revenue Source | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Service Revenue** | **$53,643** | **$33,301** | **$155,245** | **$95,693** | | *Subscriber services* | *$25,675* | *$25,447* | *$70,672* | *$71,028* | | *Wholesale capacity services* | *$27,517* | *$6,972* | *$83,406* | *$22,640* | | **Total Subscriber Equipment Sales** | **$4,040** | **$4,325** | **$16,154** | **$11,505** | | **Total Revenue** | **$57,683** | **$37,626** | **$171,399** | **$107,198** | - The company completed significant debt restructuring in 2023, including: issuing **$200 million** of **13% Senior Notes** due 2029, entering a new 2023 Funding Agreement for up to **$252 million**, and fully repaying its 2019 Facility Agreement, which resulted in a **$10.4 million** loss on extinguishment of debt[63](index=63&type=chunk)[74](index=74&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Thermo, the company's principal owner, provides significant support, including guaranteeing the 2023 Funding Agreement, holding **$136.7 million** of the Series A Preferred Stock, and leasing the company its headquarters[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) MD&A discusses significant revenue growth from wholesale capacity services, the strategic XCOM Labs acquisition, and major debt restructuring impacting liquidity and capital resources [Overview and Recent Developments](index=27&type=section&id=Overview%20and%20Recent%20Developments) Globalstar focuses on MSS, Commercial IoT, and terrestrial spectrum monetization, with the August 2023 XCOM Labs license agreement being a key development for wireless spectrum technologies - In August 2023, the company entered into a significant Intellectual Property License Agreement with XCOM Labs to acquire exclusive rights to its technologies for wireless spectrum innovations, including its coordinated multi-point radio system (XCOMP)[131](index=131&type=chunk) - The company is actively pursuing international terrestrial authorizations for its 2.4 GHz spectrum, having already received them in countries like Brazil, Canada, South Africa, and Spain[144](index=144&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q3 2023 total revenue increased **53%** due to a **$20.5 million** surge in wholesale capacity services, while operating expenses decreased significantly due to the absence of a **$166.0 million** asset impairment charge - Wholesale capacity service revenue was the primary growth driver, increasing by **$20.5 million** in Q3 2023 and **$60.8 million** in the first nine months of 2023 compared to the same periods in 2022, due to consideration earned under Service Agreements which commenced in November 2022[158](index=158&type=chunk) - Duplex service revenue continued to decline (down **12%** in Q3) as the company no longer manufactures Duplex devices and focuses on IoT and wholesale services; SPOT service revenue also saw a slight decrease (**3%** in Q3) due to fewer average subscribers[155](index=155&type=chunk)[156](index=156&type=chunk) - Commercial IoT service revenue grew **36%** in Q3 2023, driven by a **26%** increase in gross subscriber activations over the preceding twelve months and higher ARPU[157](index=157&type=chunk) - Total operating expenses decreased mainly because of a one-time **$166.0 million** reduction in the value of long-lived Duplex assets and an **$8.5 million** inventory write-down recorded in Q3 2022, which were not repeated in 2023[161](index=161&type=chunk)[165](index=165&type=chunk)[169](index=169&type=chunk) - A loss on extinguishment of debt of **$10.4 million** was recorded in Q1 2023 following the full repayment of the 2019 Facility Agreement[172](index=172&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with cash at **$64.1 million**, capital structure altered by **$200 million** Senior Notes and **$87.7 million** from a new funding agreement, used for debt repayment and satellite construction Change in Debt and Vendor Financing (In millions) | Date | Principal Amount | | :--- | :--- | | December 31, 2022 | $202.8 | | September 30, 2023 | $375.4 | - Key financing activities in 2023 included issuing **$200 million** of 2023 **13% Notes**, establishing a 2023 Funding Agreement for up to **$252 million** (with an initial draw of **$87.7 million**), and reclassifying the 2021 Funding Agreement to debt[181](index=181&type=chunk)[184](index=184&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - Cash used in investing activities increased to **$142.4 million** from **$25.3 million** year-over-year, primarily due to **$110.5 million** in payments to MDA for the new satellite constellation[181](index=181&type=chunk) - The company is now paying quarterly cash dividends on its Series A Preferred Stock, totaling **$7.9 million** in the first nine months of 2023[123](index=123&type=chunk)[195](index=195&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Globalstar faces foreign currency exchange risk from international sales in Canadian dollars, Brazilian reais, and euros, but does not use hedging instruments - The company's primary market risk is foreign currency exchange risk from sales denominated in Canadian dollars, Brazilian reais, and euros[199](index=199&type=chunk) - Globalstar does not currently use derivative hedging instruments to manage its foreign currency exposure[199](index=199&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting identified - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[203](index=203&type=chunk) - No changes occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[205](index=205&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings.) No material legal proceedings were reported during the period - There are no legal proceedings to report[207](index=207&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors.) A new risk factor highlights potential failure to achieve strategic objectives from the XCOM Labs transaction and the new CEO's integration - A new risk factor was added concerning the potential failure to achieve strategic objectives from the XCOM transaction and the integration of the new CEO, which could harm growth and profitability[208](index=208&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information.) Board member Timothy E. Taylor entered a new Rule 10b5-1 trading plan on September 28, 2023, for the sale of **3.16 million** common shares - On September 28, 2023, board member Timothy E. Taylor entered into a Rule 10b5-1 trading plan for the sale of **3.16 million shares** of common stock, terminating in September 2025[210](index=210&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits.) Exhibits include CEO/CFO certifications, XBRL data, and incorporated key corporate documents like the CEO's employment agreement and the XCOM License Agreement - Exhibits filed include CEO/CFO certifications and XBRL data; key agreements like the CEO's employment contract and the XCOM License Agreement are incorporated by reference[212](index=212&type=chunk)

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents Globalstar's unaudited interim condensed consolidated financial statements and management's analysis of financial condition and results of operations [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents Globalstar, Inc.'s unaudited interim condensed consolidated financial statements, including statements of operations, balance sheets, stockholders' equity, and cash flows for the periods ended June 30, 2023, along with accompanying notes. Key financial highlights include significant revenue growth, a shift from operating loss to income, and a substantial increase in cash and long-term debt due to new financing agreements and satellite procurement [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) This statement details Globalstar's financial performance, including revenue, operating income, and net income (loss) for the specified periods Three Months Ended June 30, 2023 vs 2022 (in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Total Revenue | $55,072 | $36,800 | +$18,272 | | Service Revenue | $48,648 | $33,048 | +$15,600 | | Subscriber Equipment Sales | $6,424 | $3,752 | +$2,672 | | Income (loss) from operations | $2,620 | $(11,356) | +$13,976 | | Net income (loss) | $9 | $(26,757) | +$26,766 | | Basic Net loss per common share | $0.00 | $(0.01) | +$0.01 | Six Months Ended June 30, 2023 vs 2022 (in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Total Revenue | $113,716 | $69,572 | +$44,144 | | Service Revenue | $101,602 | $62,392 | +$39,210 | | Subscriber Equipment Sales | $12,114 | $7,180 | +$4,934 | | Income (loss) from operations | $9,811 | $(25,068) | +$34,879 | | Net income (loss) | $(3,471) | $(47,219) | +$43,748 | | Basic Net loss per common share | $0.00 | $(0.03) | +$0.03 | [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This statement provides a snapshot of Globalstar's assets, liabilities, and equity as of the specified dates As of June 30, 2023 vs December 31, 2022 (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $65,334 | $32,082 | +$33,252 | | Total current assets | $121,002 | $81,244 | +$39,758 | | Property and equipment, net | $605,502 | $560,371 | +$45,131 | | Total assets | $832,439 | $738,469 | +$93,970 | | Current portion of long-term debt | $29,800 | $— | +$29,800 | | Vendor financing | $— | $59,575 | -$59,575 | | Total current liabilities | $173,776 | $197,076 | -$23,300 | | Long-term debt | $306,786 | $132,115 | +$174,671 | | Total liabilities and stockholders' equity | $832,439 | $738,469 | +$93,970 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This statement outlines changes in Globalstar's stockholders' equity, including capital and retained deficit, for the specified period Changes in Stockholders' Equity (January 1, 2023 to June 30, 2023, in thousands) | Metric | Balance Jan 1, 2023 | Balance Jun 30, 2023 | Change | | :-------------------------------- | :------------------ | :------------------- | :----- | | Total Stockholders' Equity | $314,771 | $315,366 | +$595 | | Additional Paid-In Capital | $2,345,612 | $2,352,414 | +$6,802 | | Retained Deficit | $(2,040,264) | $(2,043,735) | -$3,471 | | Accumulated Other Comprehensive Income | $9,242 | $6,506 | -$2,736 | - The company recognized **$6,897 thousand** in additional paid-in capital related to the fair value of the Thermo guarantee associated with the 2023 Funding Agreement during the second quarter of 2023[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement details Globalstar's cash flows from operating, investing, and financing activities for the specified periods Six Months Ended June 30, 2023 vs 2022 (in thousands) | Cash Flow Activity | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $42,993 | $20,771 | +$22,222 | | Net cash used in investing activities | $(124,636) | $(22,392) | -$102,244 | | Net cash provided by financing activities | $114,822 | $449 | +$114,373 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $33,252 | $(1,163) | +$34,415 | - Significant increase in cash used in investing activities primarily due to **$108.7 million** in payments under the satellite procurement agreement in 2023, compared to no such payments in 2022[23](index=23&type=chunk) - Net cash provided by financing activities surged due to proceeds from the **2023 13% Notes ($190 million)** and the **2023 Funding Agreement ($87.7 million)**, partially offset by debt repayments and dividends[23](index=23&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures supporting Globalstar's interim condensed consolidated financial statements [1. BASIS OF PRESENTATION](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This note describes Globalstar's business operations and the accounting principles applied in preparing the financial statements - Globalstar, Inc. operates as a Mobile Satellite Services (MSS) business, providing voice, data, and wholesale capacity services through its global satellite network[27](index=27&type=chunk) - The Company adopted ASU 2022-04 (Liabilities — Supplier Finance Programs) effective January 1, 2023, revising disclosures for supplier finance program obligations[31](index=31&type=chunk) [2. REVENUE](index=10&type=section&id=2.%20REVENUE) This note disaggregates Globalstar's revenue by service and equipment type, highlighting key drivers of change Service Revenue Disaggregation (in thousands) | Service Type | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :------------------------ | :------ | :------ | :------- | :------- | | Duplex | $6,359 | $6,936 | $12,110 | $13,082 | | SPOT | $11,039 | $11,536 | $22,353 | $22,791 | | Commercial IoT | $5,356 | $5,038 | $10,534 | $9,708 | | Wholesale capacity services | $25,478 | $8,825 | $55,889 | $15,668 | | Engineering and other services | $416 | $713 | $716 | $1,143 | | **Total service revenue** | **$48,648** | **$33,048** | **$101,602** | **$62,392** | Subscriber Equipment Sales Disaggregation (in thousands) | Equipment Type | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :------------------------ | :------ | :------ | :------- | :------- | | Duplex | $17 | $143 | $36 | $273 | | SPOT | $2,513 | $1,674 | $4,439 | $3,149 | | Commercial IoT | $3,901 | $1,908 | $7,713 | $3,714 | | Other | $(7) | $27 | $(74) | $44 | | **Total subscriber equipment sales** | **$6,424** | **$3,752** | **$12,114** | **$7,180** | - Wholesale capacity services revenue significantly increased by **$16.7 million (QoQ)** and **$40.2 million (YoY)** due to service fees under the Service Agreement with Apple, which commenced in November 2022, and revenue recognized for satellite construction[32](index=32&type=chunk)[33](index=33&type=chunk)[146](index=146&type=chunk) - In February 2023, Partner (Apple) agreed to pay Globalstar **$6.5 million** for performance obligations completed in prior periods, recognized as revenue in Q1 2023[33](index=33&type=chunk)[147](index=147&type=chunk) Accounts Receivable, net of allowance for credit losses (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Subscriber accounts receivable | $20,816 | $14,850 | | Wholesale capacity accounts receivable | $7,481 | $7,234 | | Agency agreement accounts receivable | $1,891 | $4,245 | | **Total accounts receivable (short-term)** | **$30,188** | **$26,329** | | Long-term wholesale capacity accounts receivable | $16,100 | $16,100 | | **Total accounts receivable (short-term and long-term)** | **$46,288** | **$42,429** | - The Company re-characterized **$88.0 million** previously recorded as deferred revenue from the 2021 Funding Agreement to debt during Q2 2023, following an amendment to the Service Agreements[43](index=43&type=chunk)[44](index=44&type=chunk) [3. LEASES](index=14&type=section&id=3.%20LEASES) This note provides details on Globalstar's operating and finance lease liabilities, terms, and discount rates Lease Liabilities (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Total operating lease liabilities | $30,447 | $30,382 | | Total finance lease liabilities | $809 | $87 | Weighted-Average Lease Term and Discount Rate | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Finance leases (term) | 0.6 years | 4.6 years | | Operating Leases (term) | 10.2 years | 10.1 years | | Finance leases (discount rate) | 8.7 % | 10.2 % | | Operating leases (discount rate) | 8.6 % | 8.5 % | - Total lease cost increased to **$3.143 million** for the six months ended June 30, 2023, from **$2.325 million** in the prior year, driven by higher operating lease costs[46](index=46&type=chunk) [4. PROPERTY AND EQUIPMENT](index=16&type=section&id=4.%20PROPERTY%20AND%20EQUIPMENT) This note details the composition of Globalstar's property and equipment, including space and ground components, and construction in progress Property and Equipment (in thousands) | Component | June 30, 2023 | December 31, 2022 | | :------------------------ | :------------ | :---------------- | | Space component | $1,246,343 | $1,246,343 | | Ground component | $99,585 | $102,567 | | Construction in progress (Space component) | $190,611 | $110,068 | | **Total property and equipment, net** | **$605,502** | **$560,371** | - Construction in progress for the space component increased significantly, reflecting costs incurred under the **$327 million** satellite procurement agreement with MDA, with **$166.0 million** incurred as of June 30, 2023[53](index=53&type=chunk) [5. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS](index=17&type=section&id=5.%20LONG-TERM%20DEBT%20AND%20OTHER%20FINANCING%20ARRANGEMENTS) This note outlines Globalstar's debt structure, including new funding agreements, notes, and repayments Debt and Vendor Financing (in thousands) | Debt Type | Principal Amount (Jun 30, 2023) | Carrying Value (Jun 30, 2023) | Principal Amount (Dec 31, 2022) | Carrying Value (Dec 31, 2022) | | :------------------------ | :------------------------------ | :---------------------------- | :------------------------------ | :---------------------------- | | 2023 Funding Agreement | $87,729 | $75,838 | $— | $— | | 2021 Funding Agreement | $87,950 | $77,935 | $— | $— | | 2023 13% Notes | $200,000 | $182,813 | $— | $— | | 2019 Facility Agreement | $— | $— | $143,213 | $132,115 | | Vendor financing | $— | $— | $59,575 | $59,575 | | **Total debt and vendor financing** | **$375,679** | **$336,586** | **$202,788** | **$191,690** | | Less: current portion | $29,800 | $29,800 | $59,575 | $59,575 | | **Long-term debt and vendor financing** | **$345,879** | **$306,786** | **$143,213** | **$132,115** | - The 2023 Funding Agreement provides up to **$252 million** from Partner to fund **50%** of satellite costs, with the first payment of **$87.7 million** received in April 2023. This agreement includes covenants and a guarantee from Thermo[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - The 2021 Funding Agreement, totaling **$94.2 million**, was re-characterized from deferred revenue to debt in Q2 2023, granting Partner a first-priority lien on Company assets[64](index=64&type=chunk)[177](index=177&type=chunk) - Globalstar issued **$200.0 million** in **13% Senior Notes due 2029** in March 2023, with interest payable **4% cash** and **9% PIK**. Proceeds were used to repay the 2019 Facility Agreement[67](index=67&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk) - The 2019 Facility Agreement was fully repaid in March 2023, resulting in a **$10.4 million loss on extinguishment of debt**[72](index=72&type=chunk)[73](index=73&type=chunk) - Vendor financing with MDA, totaling **$59.6 million** at December 31, 2022, was fully repaid in Q1 2023[75](index=75&type=chunk)[76](index=76&type=chunk) - The Company issued **149,425 shares of 7.0% Series A Preferred Stock** in November 2022, with a fair value of **$105.3 million**, in exchange for outstanding 2019 Facility Agreement loans[77](index=77&type=chunk) [6. DERIVATIVES](index=21&type=section&id=6.%20DERIVATIVES) This note details Globalstar's derivative instruments, including embedded derivatives, and their fair value and gain/loss impact Derivative Liabilities (in thousands) | Derivative Type | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Embedded derivative within 2023 Funding Agreement | $(42) | $— | | Compound embedded derivative within 2019 Facility Agreement | $— | $(122) | Derivative Gain (Loss) (in thousands) | Derivative Type | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Embedded derivative within 2023 Funding Agreement | $299 | $— | $299 | $— | | Compound embedded derivative within 2019 Facility Agreement | $— | $(1,242) | $— | $(1,944) | | **Total derivative gain (loss)** | **$299** | **$(1,242)** | **$299** | **$(1,728)** | - The embedded derivative associated with the 2019 Facility Agreement was written off in March 2023 due to its refinancing, while a new embedded derivative from the 2023 Funding Agreement was recognized[84](index=84&type=chunk)[85](index=85&type=chunk) [7. FAIR VALUE MEASUREMENTS](index=22&type=section&id=7.%20FAIR%20VALUE%20MEASUREMENTS) This note describes the valuation methodologies and inputs used for Globalstar's liabilities measured at fair value Liabilities Measured at Fair Value (Level 3, in thousands) | Liability | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Embedded derivative within 2023 Funding Agreement | $(42) | $— | | Compound embedded derivative within 2019 Facility Agreement | $— | $(122) | - The embedded derivative within the 2023 Funding Agreement is valued using a discounted cash flow model, with a discount yield of **8.21%** at June 30, 2023[91](index=91&type=chunk) - The 2023 Funding Agreement's first draw had a fair value of **$76.0 million**, and the Thermo guarantee embedded feature was valued at **$6.9 million**[93](index=93&type=chunk)[94](index=94&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=24&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines Globalstar's significant contractual obligations, including network capacity allocation and satellite procurement - The Service Agreements require Globalstar to allocate **85%** of network capacity to Partner, provide all necessary resources, prioritize services, maintain quality standards, and maintain minimum liquidity of **$30 million**[102](index=102&type=chunk) - Globalstar entered into a satellite procurement agreement with MDA for **17 new satellites** at an initial contract price of **$327 million**, expected to launch by 2025, with Partner funding **95%** of approved capital expenditures[101](index=101&type=chunk) [9. RELATED PARTY TRANSACTIONS](index=25&type=section&id=9.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses Globalstar's transactions and relationships with related parties, including Thermo Companies - Thermo Companies, controlled by Globalstar's Executive Chairman, is the principal owner and largest stockholder[103](index=103&type=chunk) - Thermo guarantees certain obligations under the 2023 Funding Agreement, for which Globalstar will issue **10.0 million warrants** to Thermo[108](index=108&type=chunk) - Globalstar paid Thermo dividends of **$1.2 million** (Nov 15-Dec 31, 2022) and **$2.4 million** for each of Q1 and Q2 2023 on Series A Preferred Stock[106](index=106&type=chunk) [10. NET LOSS PER SHARE](index=26&type=section&id=10.%20NET%20LOSS%20PER%20SHARE) This note presents the calculation of Globalstar's basic and diluted net loss per common share, considering preferred stock dividends Net Loss Per Common Share (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :-------------------------------- | :------ | :------ | :------- | :------- | | 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) | | Weighted average shares outstanding - basic and diluted | 1,813,393 | 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)** | - Potential common stock of **18.2 million (Q2 2023)** and **19.0 million (YTD 2023)** shares were excluded from diluted EPS calculation due to their anti-dilutive effect, including a portion of **49.1 million warrants** issued to Partner[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on Globalstar's financial condition and operational results, highlighting significant revenue growth driven by wholesale capacity services, strategic investments in IoT and satellite replenishment, and changes in debt structure. The company experienced improved operating income and reduced net loss, while managing liquidity through new financing agreements and cash flow generation [Overview](index=27&type=section&id=Overview) This section provides an overview of Globalstar's business model, strategic investments, subscriber base, and terrestrial broadband capabilities - Globalstar provides Mobile Satellite Services (MSS) including voice, data, and wholesale capacity services through its global satellite network, supporting IoT data transmissions and connectivity in remote areas[117](index=117&type=chunk) - The company is investing in IoT-enabled devices, including the Realm Enablement Suite, and is acquiring **17 new satellites** for **$327 million** from MDA, expected to launch by 2025, with Partner funding **95%** of approved capital expenditures[119](index=119&type=chunk)[120](index=120&type=chunk)[124](index=124&type=chunk) - As of June 30, 2023, Globalstar had approximately **766,000 subscribers**, with Commercial IoT devices increasing significantly. The Partner under Service Agreements accounted for **49% of revenue** for the six months ended June 30, 2023[126](index=126&type=chunk)[127](index=127&type=chunk) - Globalstar has terrestrial broadband authority for its licensed **2.4 GHz spectrum (Band 53/n53)**, which has been integrated into 3GPP standards and supported by partners like Apple and Qualcomm, enhancing its device ecosystem[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Performance Indicators](index=30&type=section&id=Performance%20Indicators) This section analyzes key financial performance metrics, including revenue disaggregation, subscriber trends, operating expenses, and non-operating items Total Revenue (in thousands) | Period | 2023 | 2022 | Change | | :------------------------ | :----- | :----- | :----- | | Three Months Ended June 30 | $55,072 | $36,800 | +50% | | Six Months Ended June 30 | $113,716 | $69,572 | +63% | - Wholesale capacity service revenue increased significantly by **$16.7 million (QoQ)** and **$40.2 million (YoY)** due to service fees from the Service Agreement with Apple and revenue from satellite construction[146](index=146&type=chunk) - Commercial IoT service revenue increased **6% (QoQ)** and **9% (YoY)** driven by a **21% increase** in gross subscriber activations, while Duplex and SPOT service revenues decreased due to lower subscriber counts[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Subscriber equipment sales for SPOT and Commercial IoT increased by **50% and 50% (QoQ)**, and **41% and 109% (YoY)** respectively, as production delays from component shortages in 2022 were resolved[149](index=149&type=chunk)[150](index=150&type=chunk) Average Number of Subscribers and Monthly ARPU (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | Change (Subscribers) | Change (ARPU) | | :------------------------ | :------ | :------ | :------------------- | :------------ | | Duplex Subscribers | 34,974 | 42,723 | -18.1% | +12.0% | | Duplex ARPU | $60.61 | $54.12 | | | | SPOT Subscribers | 261,734 | 277,815 | -5.8% | +1.6% | | SPOT ARPU | $14.06 | $13.84 | | | | Commercial IoT Subscribers | 466,609 | 433,578 | +7.6% | -1.0% | | Commercial IoT ARPU | $3.83 | $3.87 | | | - Total operating expenses increased to **$52.5 million (QoQ)** and **$103.9 million (YoY)** due to higher cost of services (new gateway leases, IT maintenance, personnel), increased subscriber equipment sales costs, and higher MG&A (stock-based compensation, legal fees)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - Depreciation, amortization, and accretion expenses decreased by **$2.2 million (QoQ)** and **$4.1 million (YoY)** due to a net reduction in property and equipment following the re-assessment and write-down of second-generation Duplex assets in September 2022[156](index=156&type=chunk) - A **$10.4 million loss on extinguishment of debt** was recorded in Q1 2023 due to the full repayment of the 2019 Facility Agreement[157](index=157&type=chunk) - Net interest expense decreased by **$2.1 million (QoQ)** and **$9.6 million (YoY)** due to lower gross interest costs from the 2019 Facility Agreement repayment, partially offset by new interest from the 2023 13% Notes and Funding Agreements[158](index=158&type=chunk)[159](index=159&type=chunk) - Derivative gains of **$0.3 million** were recorded in Q2 and YTD 2023, compared to losses of **$1.2 million (QoQ)** and **$1.7 million (YoY)** in 2022, primarily due to changes in discount rates and cash flow timing for the 2023 Funding Agreement derivative[160](index=160&type=chunk)[161](index=161&type=chunk) - Foreign currency gains of **$2.0 million (QoQ)** and **$3.9 million (YoY)** were recorded in 2023 due to the weakening of the U.S. dollar[164](index=164&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, changes in debt structure, and cash flow movements from operating, investing, and financing activities - Principal liquidity sources include cash on hand (**$65.3 million** as of June 30, 2023), cash flows from operations, and proceeds from the 2023 Funding Agreement[165](index=165&type=chunk)[166](index=166&type=chunk) - Total debt and vendor financing increased by **$144.9 million** to **$336.6 million** at June 30, 2023, driven by the issuance of **$200.0 million** in 2023 13% Notes and the recognition of the 2021 and 2023 Funding Agreements as debt, offset by repayments of the 2019 Facility Agreement and vendor financing[167](index=167&type=chunk) Cash Flows for the six months ended June 30, 2023 vs 2022 (in thousands) | Activity | 2023 | 2022 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $42,993 | $20,771 | +$22,222 | | Net cash used in investing activities | $(124,636) | $(22,392) | -$102,244 | | Net cash provided by financing activities | $114,822 | $449 | +$114,373 | | Net increase (decrease) in cash | $33,252 | $(1,163) | +$34,415 | - Operating cash flow increased due to higher wholesale capacity service fees. Investing cash flow increased significantly due to **$108.7 million** in payments for satellite procurement. Financing cash flow surged from new debt issuances, partially offset by debt repayments and **$6.6 million** in Series A Preferred Stock dividends[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) [Off-Balance Sheet Transactions](index=37&type=section&id=Off-Balance%20Sheet%20Transactions) This section confirms the absence of material off-balance sheet transactions impacting the company's financial position - The Company has no material off-balance sheet transactions[186](index=186&type=chunk) [Recently Issued Accounting Pronouncements](index=37&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section addresses the company's review of new accounting standards and their anticipated impact on financial statements - The Company reviews new accounting standards but has not identified any that will have a material impact on its condensed consolidated financial statements[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Globalstar is exposed to foreign currency exchange risk due to international sales denominated in various currencies, primarily Canadian dollars, Brazilian reais, and euros. The company mitigates this risk by seeking U.S. dollar payments and spot market foreign currency purchases, but does not currently use hedging instruments. Operations in highly inflationary economies like Argentina are not considered significant - Globalstar's international sales are primarily denominated in Canadian dollars, Brazilian reais, and euros, exposing the company to currency exchange risk[188](index=188&type=chunk) - The Company manages foreign currency risk by requiring U.S. dollar payments when possible and purchasing foreign currencies on the spot market, but does not currently use hedging instruments[188](index=188&type=chunk) - Operations in Argentina, a highly inflationary economy, are not significant to consolidated operations[189](index=189&type=chunk) [Item 4. Controls and Procedures.](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2023, concluding they were effective. No material changes to internal control over financial reporting occurred during the quarter - As of June 30, 2023, management concluded that the Company's disclosure controls and procedures were effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[191](index=191&type=chunk)[192](index=192&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the quarter ended June 30, 2023[194](index=194&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings.](index=39&type=section&id=Item%201.%20Legal%20Proceedings.) There are no legal proceedings to report - The Company reported no legal proceedings[196](index=196&type=chunk) [Item 1A. Risk Factors.](index=39&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes to the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K - No material changes to the risk factors disclosed in Part I. Item 1A. 'Risk Factors' of the 2022 Annual Report[197](index=197&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This item is not applicable for the reporting period - This item is not applicable[198](index=198&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) There are no defaults upon senior securities to report - The Company reported no defaults upon senior securities[198](index=198&type=chunk) [Item 4. Mine Safety Disclosures.](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable for the reporting period - This item is not applicable[198](index=198&type=chunk) [Item 5. Other Information.](index=39&type=section&id=Item%205.%20Other%20Information.) Rebecca S. Clary, VP and CFO, entered into a Rule 10b5-1 trading plan on June 28, 2023, for the sale of 300,000 shares of common stock, terminating on September 3, 2024. No other directors or executive officers adopted or terminated such plans during the quarter - Rebecca S. Clary, VP and CFO, adopted a Rule 10b5-1 trading plan on June 28, 2023, to sell **300,000 shares** of common stock, effective until September 3, 2024[198](index=198&type=chunk) - No other directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the fiscal quarter ended June 30, 2023[198](index=198&type=chunk) [Item 6. Exhibits.](index=40&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and XBRL taxonomy documents Key Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 3.1* | Third Amended and Restated Certificate of Incorporation | | 3.2* | Fourth Amended and Restated Bylaws | | 31.1 | Section 302 Certification of the Principal Executive Officer | | 31.2 | Section 302 Certification of the Principal Financial Officer | | 32.1 | Section 906 Certification of the Principal Executive Officer | | 32.2 | Section 906 Certification of the Principal Financial Officer | | 101.INS | XBRL Instance Document | [Signatures](index=41&type=section&id=Signatures) The report was duly signed on August 3, 2023, by David B. Kagan, Chief Executive Officer, and Rebecca S. Clary, Chief Financial Officer - The report was signed by David B. Kagan, Chief Executive Officer, and Rebecca S. Clary, Chief Financial Officer, on August 3, 2023[205](index=205&type=chunk)

Globalstar, Inc. (NYSE:GSAT) Q2 2023 Earnings Conference Call August 3, 2023 9:00 AM ET Company Participants James Monroe - Executive Chairman Timothy Taylor - VP, Finance, Business Operations & Strategy and Director Rebecca Clary - VP & CFO David Kagan - CEO Kyle Pickens - VP, Strategy and Communications Conference Call Participants Simon Flannery - Morgan Stanley George Sutton - Craig-Hallum Michael Crawford - B. Riley Securities Operator Good morning, and welcome to the Globalstar Second Quarter 2023 Ear ...

Financial Data and Key Metrics Changes - Globalstar reported a record growth in revenue with an 80% increase compared to Q1 2022 [6] - The net loss decreased by 83% year-over-year, resulting in a net loss of $3.5 million, primarily due to a $10 million nonrecurring noncash charge [6] - Adjusted EBITDA increased by 216% year-over-year to $32 million, indicating strong operational performance [6] Business Line Data and Key Metrics Changes - The company is focusing on four pillars: wholesale, legacy, IoT, and terrestrial spectrum, aiming to maximize overall value [12] - The service revenue for the quarter included $30.4 million from wholesale capacity service, with potential volatility in future quarters due to fixed and variable components in service agreements [15][24] Market Data and Key Metrics Changes - Globalstar is actively pursuing opportunities in private LTE and private 5G networks, particularly in critical infrastructure sectors [23] - The company anticipates replicating its current opportunities in various geographies, indicating a broad market strategy [13] Company Strategy and Development Direction - The company is in "deal mode," having signed agreements for new services utilizing Band 53, which are expected to generate significant milestone payments [7] - Globalstar plans to launch innovative products, including a two-way module, to enhance its competitive position in the IoT market [12][43] - The management is focused on driving utilization of space and terrestrial assets, with a clean balance sheet providing a runway for growth [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing the repositioning of the platform to support sustainable growth and cash flow generation [6] - The company is experiencing a transformative period, with significant improvements in operations and financial results [52] - Management highlighted ongoing discussions with Qualcomm regarding private 5G networks, indicating potential future revenue streams [18] Other Important Information - The company is planning a series of roadshows to communicate its story and growth potential to investors [22] - Globalstar has completed payments to MDA, with ongoing projects on track for completion by 2025 [19] Q&A Session Summary Question: How will Band 53 leases be recorded in financials? - Revenue from the initial Band 53 deal will be recorded under engineering services, with plans to create a separate line item as it becomes material [9] Question: Will wholesale capacity service revenue decline in future quarters? - There may be volatility in service revenue due to fixed and variable components, but the current run rate is considered a good baseline [15][24] Question: What is the status of the unique service and its revenue impact? - The unique service is still in early stages, with engineering work expected to yield significant payments over the next 12 to 18 months [26] Question: What is the timeline for the two-way module? - The two-way module is expected to be released by the end of the year, with beta testing already in progress [43] Question: How does the regulatory environment in Spain influence other approvals? - The forward-thinking nature of the Spanish regulatory body may positively influence the timing of other regulatory approvals in Europe [44]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) The financial statements reveal Globalstar's significant revenue growth and operational turnaround in Q1 2023, alongside balance sheet shifts and cash flow impacts from strategic investments and debt refinancing [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Globalstar's Q1 2023 operations show a significant revenue surge to $58.6 million, transforming an operating loss into income despite a one-time debt extinguishment loss Q1 2023 vs Q1 2022 Statement of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Total Revenue** | **$58,644** | **$32,772** | | Service Revenue | $52,954 | $29,344 | | Subscriber Equipment Sales | $5,690 | $3,428 | | **Income (Loss) from Operations** | **$7,191** | **($13,712)** | | Loss on Extinguishment of Debt | ($10,403) | - | | **Net Loss** | **($3,480)** | **($20,462)** | | Net Loss per Common Share (Basic & Diluted) | $0.00 | ($0.01) | - Total revenue increased by **79%** year-over-year, driven by a substantial **80%** growth in service revenue[13](index=13&type=chunk) - The company achieved a significant operational turnaround, posting an income from operations of **$7.2 million** compared to a loss of **$13.7 million** in the same period last year[13](index=13&type=chunk) - A one-time loss on debt extinguishment of **$10.4 million** significantly impacted the bottom line, leading to a net loss despite positive operating income[13](index=13&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Globalstar's balance sheet as of March 31, 2023, shows total assets increasing to $844.6 million, driven by property and prepaid satellite costs, while liabilities grew due to new long-term debt Balance Sheet Summary (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | **$72,715** | **$81,244** | | Cash and cash equivalents | $20,487 | $32,082 | | **Total Assets** | **$844,555** | **$833,395** | | **Total Current Liabilities** | **$162,694** | **$197,076** | | Vendor financing | $0 | $59,575 | | **Long-Term Debt** | **$182,243** | **$132,115** | | **Total Liabilities** | **$534,701** | **$518,624** | | **Total Stockholders' Equity** | **$309,854** | **$314,771** | - Cash and cash equivalents decreased by **$11.6 million** during the quarter to **$20.5 million**[16](index=16&type=chunk) - The company eliminated its **$59.6 million** in vendor financing, but long-term debt increased by **$50.1 million** due to the issuance of new **13%** Senior Notes[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Globalstar's Q1 2023 cash flows show strong operating cash generation, offset by significant investing outflows for satellite procurement and financing activities from debt refinancing Cash Flow Summary (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$22,805** | **$7,569** | | **Net cash used in investing activities** | **($71,575)** | **($10,451)** | | Payments under satellite procurement agreement | ($59,575) | - | | **Net cash provided by financing activities** | **$37,148** | **$8** | | Proceeds from 13% Notes Agreement | $190,000 | - | | Principal and Interest payments of 2019 Facility | ($148,281) | - | | **Net decrease in cash** | **($11,595)** | **($2,785)** | - Investing activities saw a significant cash outflow of **$71.6 million**, dominated by a **$59.6 million** payment related to the satellite procurement agreement[21](index=21&type=chunk) - Financing activities were marked by a major refinancing, with **$190 million** in proceeds from new notes used to repay approximately **$148.3 million** of the 2019 Facility Agreement[21](index=21&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) The notes detail a surge in wholesale capacity revenue, major debt refinancing, a new $252 million prepayment agreement for satellite construction, and commitments under service agreements - Revenue from Wholesale capacity services, associated with the Apple Inc. Service Agreements, increased dramatically to **$30.4 million** in Q1 2023 from **$6.8 million** in Q1 2022[29](index=29&type=chunk) - The company entered into a satellite procurement agreement with MDA for **17** new satellites at an initial contract price of **$327 million**, with launches expected in 2025[52](index=52&type=chunk)[87](index=87&type=chunk) - On March 31, 2023, the company issued **$200 million** of **13%** Senior Notes due 2029 and used the proceeds to repay all outstanding obligations under its 2019 Facility Agreement[55](index=55&type=chunk)[60](index=60&type=chunk) - A Prepayment Agreement was established with its key partner, providing **$252 million** to fund the new satellite construction and launch costs, replacing the need for third-party financing[64](index=64&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Globalstar's Q1 2023 revenue growth driven by the Apple partnership, improved operating income, and strengthened liquidity through a new prepayment agreement and debt refinancing [Overview](index=22&type=section&id=Overview) Globalstar's overview highlights its MSS offerings, strategic procurement of 17 new satellites for $327 million, and advancements in terrestrial spectrum use, with a key partner driving 52% of Q1 2023 revenue - The company's key partner under the Service Agreements (identified as Apple in Note 2) accounted for **52%** of total revenue in Q1 2023, up from **21%** in Q1 2022[113](index=113&type=chunk) - Globalstar is acquiring **17** new satellites from MDA for **$327 million** to replenish its constellation, with launches expected by the end of 2025. Its partner has agreed to make service payments equal to **95%** of these approved capital expenditures[110](index=110&type=chunk) - The company is pursuing terrestrial use of its licensed spectrum, designated as **5G Band n53**, which is supported by partners like Nokia and Qualcomm and is enabled in certain cellular devices[116](index=116&type=chunk)[117](index=117&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Globalstar's Q1 2023 results show a 79% revenue increase to $58.6 million, primarily from wholesale capacity services, leading to a positive operating income despite higher expenses and a debt extinguishment loss Revenue by Type (in thousands) | Revenue Type | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Total Service Revenue** | **$52,954** | **$29,344** | | Subscriber services | $22,243 | $22,071 | | Wholesale capacity services | $30,411 | $6,843 | | **Total Equipment Revenue** | **$5,690** | **$3,428** | | **Total Revenue** | **$58,644** | **$32,772** | Subscriber & ARPU Data | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Total Average Subscribers** | **765,160** | **757,293** | | Duplex Subscribers | 36,616 | 43,565 | | SPOT Subscribers | 266,067 | 276,863 | | Commercial IoT Subscribers | 462,077 | 423,519 | | **ARPU (monthly)** | | | | Duplex | $52.35 | $47.03 | | SPOT | $14.17 | $13.55 | | Commercial IoT | $3.74 | $3.68 | - Wholesale capacity service revenue increased by **$23.6 million**, primarily due to service fees under the Service Agreement which commenced in November 2022 and a one-time **$6.5 million** payment recognized in Q1 2023[132](index=132&type=chunk)[133](index=133&type=chunk) - MG&A expenses increased by **$4.1 million**, partly due to a **$1.0 million** accrual reversal in Q1 2022 that lowered the prior year's expense base, as well as higher personnel and legal fees in Q1 2023[139](index=139&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Globalstar's liquidity is supported by operating cash flow and a new $252 million prepayment agreement for satellite construction, following a major debt refinancing that impacted cash balances - The company's cash position decreased from **$32.1 million** at year-end 2022 to **$20.5 million** at the end of Q1 2023[149](index=149&type=chunk) - A Prepayment Agreement with its partner will provide **$252 million** to fund satellite procurement, launch, and insurance costs, replacing the previous requirement to raise third-party financing. The first payment of **$87.7 million** was received in April 2023[163](index=163&type=chunk) Q1 2023 Cash Flow Summary (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,805 | $7,569 | | Net cash used in investing activities | ($71,575) | ($10,451) | | Net cash provided by financing activities | $37,148 | $8 | | **Net decrease in cash** | **($11,595)** | **($2,785)** | - The company completed a major refinancing, issuing **$200 million** of **13%** Senior Notes and using the proceeds to fully repay its 2019 Facility Agreement and its vendor financing arrangement[157](index=157&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Globalstar faces foreign currency exchange risk from international sales in various currencies, mitigating it by prioritizing U.S. dollar payments and spot market purchases without hedging instruments - The company's primary market risk is foreign currency exchange risk from sales denominated in Canadian dollars, Brazilian reais, and euros[171](index=171&type=chunk) - Globalstar mitigates currency risk by requiring U.S. dollar payments where feasible and does not currently use derivative hedging instruments[171](index=171&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that Globalstar's disclosure controls and procedures were effective as of March 31, 2023, despite changes from a new ERP system - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[175](index=175&type=chunk) - The implementation of a new ERP system in Q1 2022 resulted in changes to internal controls, but management concluded these changes did not materially affect, or were not reasonably likely to materially affect, the company's internal control over financial reporting[177](index=177&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings.) The company reported no legal proceedings for the period - There were no legal proceedings to report[179](index=179&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors.) No material changes to the company's risk factors were reported since the filing of the 2022 Annual Report - No material changes to the company's risk factors were reported since the filing of the 2022 Annual Report[180](index=180&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits.) Key exhibits filed include the Purchase Agreement and Indenture for the March 2023 note issuance, a Prepayment Agreement, and an amendment to the Key Terms Agreement - Key exhibits filed include the Purchase Agreement and Indenture for the March 2023 note issuance, a Prepayment Agreement, and an amendment to the Key Terms Agreement[184](index=184&type=chunk)

Globalstar, Inc. (NYSE:GSAT) Q4 2022 Earnings Conference Call March 7, 2022 9:00 AM ET Company Participants Jay Monroe - Executive Chairman Rebecca Clary - Vice President and Chief Financial Officer David Kagan - Chief Executive Officer Timothy Taylor - Vice President, Finance, Business Operations and Strategy Kyle Pickens - Vice President of Strategy and Communications Conference Call Participants Simon Flannery - Morgan Stanley George Sutton - Craig-Hallum Capital Mike Crawford - B. Riley Securities Jaso ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 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) (State or Other Jurisdiction of Incorporation or Organi ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Presents Globalstar's unaudited interim consolidated financial statements, detailing operations, balance sheets, equity, cash flows, and key notes [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Consolidated Statements of Operations (Three Months Ended September 30) | Metric (in thousands) | 2022 | 2021 | YoY Change (%) | | :-------------------- | :--- | :--- | :------------- | | Service revenue | $33,301 | $27,848 | 19.6% | | Subscriber equipment sales | $4,325 | $4,766 | -9.3% | | Total revenue | $37,626 | $32,614 | 15.4% | | Total operating expenses | $224,267 | $47,328 | 373.9% | | Loss from operations | $(186,641) | $(14,714) | 1168.5% | | Net loss | $(204,361) | $(30,885) | 561.6% | | Basic Net loss per common share | $(0.11) | $(0.02) | 450.0% | Consolidated Statements of Operations (Nine Months Ended September 30) | Metric (in thousands) | 2022 | 2021 | YoY Change (%) | | :-------------------- | :--- | :--- | :------------- | | Service revenue | $95,693 | $76,551 | 25.0% | | Subscriber equipment sales | $11,505 | $13,271 | -13.3% | | Total revenue | $107,198 | $89,822 | 19.3% | | Total operating expenses | $318,907 | $139,804 | 128.1% | | Loss from operations | $(211,709) | $(49,982) | 323.6% | | Net loss | $(251,580) | $(88,667) | 183.7% | | Basic Net loss per common share | $(0.14) | $(0.05) | 180.0% | [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheet (as of September 30, 2022 vs. December 31, 2021) | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total assets | $746,538 | $814,106 | $(67,568) | | Total current liabilities | $146,943 | $61,565 | $85,378 | | Long-term debt | $262,175 | $237,932 | $24,243 | | Total stockholders' equity | $135,580 | $365,431 | $(229,851) | - Prepaid satellite construction costs and related customer receivable increased significantly from $0 to **$83.2 million**, reflecting new satellite procurement activities[14](index=14&type=chunk) - Deferred revenue (current and non-current) increased substantially from **$25.9 million** to **$53.1 million** (current) and **$112.1 million** to **$171.7 million** (non-current), primarily due to advanced payments for wholesale capacity services under the Service Agreements[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY) Changes in Stockholders' Equity (Nine Months Ended September 30, 2022) | Metric (in thousands) | January 1, 2022 | September 30, 2022 | Change | | :-------------------- | :-------------- | :----------------- | :----- | | Total Stockholders' Equity | $365,431 | $135,580 | $(229,851) | | Net loss | $(1,783,349) (Retained Deficit) | $(2,034,929) (Retained Deficit) | $(251,580) | | Additional Paid-In Capital | $2,146,710 | $2,155,117 | $8,407 | | Accumulated Other Comprehensive Income | $1,890 | $15,212 | $13,322 | - The significant decrease in total stockholders' equity is primarily driven by the net loss of **$204.4 million** for the three months ended September 30, 2022, and **$251.6 million** for the nine months ended September 30, 2022[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Consolidated Statements of Cash Flows (Nine Months Ended September 30) | Activity (in thousands) | 2022 | 2021 | Change | | :---------------------- | :--- | :--- | :----- | | Net cash provided by operating activities | $31,705 | $107,166 | $(75,461) | | Net cash used in investing activities | $(25,306) | $(30,033) | $4,727 | | Net cash used in financing activities | $(5,886) | $(82,725) | $76,839 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $445 | $(5,649) | $6,094 | - Operating cash flow decreased significantly due to unfavorable working capital changes, despite higher net income after non-cash adjustments. In 2021, working capital was favorably impacted by **$95.5 million** in prepayments from the Partner[180](index=180&type=chunk) - Investing activities saw lower cash usage in 2022 due to gateway upgrades nearing completion, while still funding network upgrades and the launch of the on-ground spare satellite[181](index=181&type=chunk) - Financing activities in 2022 primarily included a **$6.3 million** principal repayment of the 2019 Facility Agreement, a significant reduction compared to 2021 which included **$126.7 million** in 2009 Facility Agreement payments offset by **$43.7 million** from warrant exercises[182](index=182&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Basis of Presentation](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) - Globalstar provides Mobile Satellite Services (MSS) including voice, data, and wholesale capacity through its global satellite network, with Thermo Companies as the principal owner[25](index=25&type=chunk) - Apple Inc. (Partner) announced new satellite-enabled services in September 2022, for which Globalstar will be the satellite operator. The Services are expected to launch in Q4 2022[29](index=29&type=chunk)[31](index=31&type=chunk) - Globalstar terminated second-generation Duplex services in early 2021, making it permanent after the Partner's announcement, leading to a **$174.3 million** reduction in value of related assets in Q3 2022[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Revenue](index=10&type=section&id=2.%20REVENUE) Revenue Disaggregation by Type (Three Months Ended September 30) | Revenue Type (in thousands) | 2022 | 2021 | YoY Change (%) | | :-------------------------- | :--- | :--- | :------------- | | Duplex service | $9,021 | $9,632 | -6.3% | | SPOT service | $11,753 | $11,873 | -1.0% | | Commercial IoT service | $4,673 | $4,458 | 4.8% | | Wholesale capacity services | $6,972 | $1,301 | 435.9% | | Total service revenue | $33,301 | $27,848 | 19.6% | | Total subscriber equipment sales | $4,325 | $4,766 | -9.3% | | Total revenue | $37,626 | $32,614 | 15.4% | Revenue Disaggregation by Type (Nine Months Ended September 30) | Revenue Type (in thousands) | 2022 | 2021 | YoY Change (%) | | :-------------------------- | :--- | :--- | :------------- | | Duplex service | $22,103 | $23,530 | -6.0% | | SPOT service | $34,544 | $33,996 | 1.6% | | Commercial IoT service | $14,381 | $13,443 | 6.9% | | Wholesale capacity services | $22,640 | $3,999 | 466.1% | | Total service revenue | $95,693 | $76,551 | 25.0% | | Total subscriber equipment sales | $11,505 | $13,271 | -13.3% | | Total revenue | $107,198 | $89,822 | 19.3% | - Wholesale capacity services revenue saw a substantial increase, driven by satellite network access and related services under the Service Agreements with Apple Inc.[35](index=35&type=chunk)[150](index=150&type=chunk) Accounts Receivable (as of September 30, 2022 vs. December 31, 2021) | Receivable Type (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :----------------------------- | :----------- | :----------- | :----- | | Subscriber accounts receivable | $13,954 | $12,825 | $1,129 | | Wholesale capacity accounts receivable | $12,727 | $1,861 | $10,866 | | Agency agreement accounts receivable | $2,913 | $6,496 | $(3,583) | | Long-term wholesale capacity accounts receivable | $69,646 | $0 | $69,646 | | Total accounts receivable | $99,240 | $21,182 | $78,058 | Contract Liabilities (as of September 30, 2022 vs. December 31, 2021) | Liability Type (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :---------------------------- | :----------- | :----------- | :----- | | Short-term contract liabilities | $53,121 | $25,927 | $27,194 | | Long-term contract liabilities | $171,651 | $112,054 | $59,597 | | Total contract liabilities | $224,772 | $137,981 | $86,791 | - Wholesale capacity contract liabilities, particularly advanced payments for services, significantly increased from **$111.3 million** to **$199.9 million**, reflecting ongoing work under the Service Agreements[46](index=46&type=chunk) [3. Leases](index=12&type=section&id=3.%20LEASES) Operating Lease Liabilities (as of September 30, 2022 vs. December 31, 2021) | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Right-of-use asset, net | $28,396 | $32,041 | $(3,645) | | Total operating lease liabilities | $28,260 | $31,738 | $(3,478) | - The Company began capitalizing certain lease costs related to the Service Agreements in Q4 2021, which will be amortized over the related performance obligation term[49](index=49&type=chunk) - Additional operating leases for new gateway locations, with an expected impact of approximately **$4.7 million** in right-of-use assets and lease liabilities, were executed but not yet commenced as of September 30, 2022[55](index=55&type=chunk) [4. Property and Equipment](index=15&type=section&id=4.%20PROPERTY%20AND%20EQUIPMENT) Property and Equipment, Net (as of September 30, 2022 vs. December 31, 2021) | Component (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :----------------------- | :----------- | :----------- | :----- | | First and second-generation satellites in service | $1,262,254 | $1,195,509 | $66,745 | | Second-generation satellite, on-ground spare | $0 | $32,442 | $(32,442) | | Ground component | $79,848 | $282,268 | $(202,420) | | Construction in progress: Space component | $63,504 | $16,394 | $47,110 | | Construction in progress: Ground component | $16,303 | $33,998 | $(17,695) | | Total property and equipment, net | $532,680 | $672,156 | $(139,476) | - A second-generation on-ground spare satellite was successfully launched in June 2022 and placed into service, contributing **$66.7 million** in costs[56](index=56&type=chunk) - The Company recorded **$161.2 million** in reduction in value of long-lived assets (primarily ground component and construction in progress) during Q3 2022 due to the discontinuation of second-generation Duplex services[59](index=59&type=chunk)[60](index=60&type=chunk) - New satellite construction costs totaled **$13.5 million** in prepaid costs and **$56.4 million** in construction in progress as of September 30, 2022, with **95%** expected to be reimbursed by the Partner[57](index=57&type=chunk) [5. Long-Term Debt and Other Financing Arrangements](index=16&type=section&id=5.%20LONG-TERM%20DEBT%20AND%20OTHER%20FINANCING%20ARRANGEMENTS) Long-Term Debt and Vendor Financing (in thousands) | Debt Type | Sep 30, 2022 (Carrying Value) | Dec 31, 2021 (Carrying Value) | Change | | :-------------------------- | :---------------------------- | :---------------------------- | :----- | | 2019 Facility Agreement | $262,175 | $236,525 | $25,650 | | Vendor financing | $63,765 | $0 | $63,765 | | 8.00% Convertible Senior Notes Issued in 2013 | $0 | $1,407 | $(1,407) | | Total debt and vendor financing | $325,940 | $237,932 | $88,008 | - The 2019 Facility Agreement, maturing in November 2025, had a principal outstanding of **$285.3 million** as of September 30, 2022, and requires mandatory prepayments based on excess cash flow[62](index=62&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Vendor financing of **$63.8 million** was recorded for the new satellite procurement agreement with MDA, with an amendment in October 2022 extending payment deferrals and introducing **7%** annual interest[65](index=65&type=chunk)[66](index=66&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The remaining **$1.4 million** principal of the 2013 **8.00%** Convertible Senior Notes was converted into **2.3 million** shares of common stock in Q1 2022, resulting in a net gain of less than **$0.1 million** on extinguishment[68](index=68&type=chunk)[69](index=69&type=chunk) - The Company is actively pursuing new debt financing in Q4 2022 to fund the construction and launch costs for the new satellites, as required by the Service Agreements[67](index=67&type=chunk)[190](index=190&type=chunk) [6. Derivatives](index=18&type=section&id=6.%20DERIVATIVES) Fair Values of Derivative Instruments (in thousands) | Derivative Instrument | Sep 30, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Compound embedded derivative with the 2019 Facility Agreement | $(798) | $484 | | Compound embedded derivative with the 2013 8.00% Notes | $0 | $(1,364) | Derivative Gain (Loss) (in thousands) | Period | 2022 (in thousands) | 2021 (in thousands) | | :----- | :------------------ | :------------------ | | Three Months Ended Sep 30 | $662 | $229 | | Nine Months Ended Sep 30 | $(1,066) | $(2,210) | - The 2013 **8.00%** Notes derivative is no longer outstanding after conversion in Q1 2022. The 2019 Facility Agreement derivative's fair value changed from an asset to a liability, driven by increased probability of refinancing[73](index=73&type=chunk)[78](index=78&type=chunk)[82](index=82&type=chunk) [7. Fair Value Measurements](index=18&type=section&id=7.%20FAIR%20VALUE%20MEASUREMENTS) - The Company's derivatives are classified as Level 3 fair value measurements, requiring significant unobservable inputs[78](index=78&type=chunk) Reduction in the Value of Assets (in thousands) | Asset Type | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Prepaid licenses and royalties (current) | $183 | $183 | | Prepaid licenses and royalties (non-current) | $4,514 | $4,514 | | Internally developed technology and software | $1,271 | $1,271 | | Spectrum intangible assets | $142 | $667 | | Property and equipment, net | $159,891 | $159,891 | | Grand Total | $166,001 | $166,526 | - A reduction in the value of inventory totaling **$8.5 million** was recorded in Q3 2022 due to the discontinuation of second-generation Duplex products and related prepayments[90](index=90&type=chunk) [8. Commitments and Contingencies](index=21&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) - The Service Agreements with Apple Inc. require Globalstar to allocate **85%** of its network capacity, provide and maintain required resources, prioritize services, and maintain quality standards[93](index=93&type=chunk) - Globalstar is required to refinance all outstanding loans under the 2019 Facility Agreement upon (Thermo's portion) and within **90 days** (other lenders' portion) of the Services commencement[94](index=94&type=chunk) - The Partner may elect to receive warrants to purchase up to **2.64%** of Globalstar's common stock, with an estimated **49.1 million** shares and **$49.8 million** in proceeds[95](index=95&type=chunk)[110](index=110&type=chunk) - The Satellite Procurement Agreement with MDA for **17** new satellites has a total contract price of **$327.0 million**, with **95%** of capital expenditures and certain other costs to be reimbursed by the Partner[97](index=97&type=chunk) [9. Related Party Transactions](index=23&type=section&id=9.%20RELATED%20PARTY%20TRANSACTIONS) - Payables to Thermo and other affiliates were **$0.1 million** as of September 30, 2022, down from **$0.4 million** at December 31, 2021[99](index=99&type=chunk) - Thermo's participation in the 2019 Facility Agreement was **$95.1 million**, with **$9.7 million** in paid-in-kind interest accrued during the nine months ended September 30, 2022[103](index=103&type=chunk) - A lock-up and right of first offer agreement between Partner and Thermo restricts Thermo from transferring Globalstar common stock if it would reduce their holding below **51%** for **5 years** from Service Launch[104](index=104&type=chunk) [10. Pensions and Other Employee Benefits](index=24&type=section&id=10.%20PENSIONS%20AND%20OTHER%20EMPLOYEE%20BENEFITS) - The Company's Retirement Plan was terminated and settled in August 2022, resulting in a **$1.5 million** pension settlement loss[106](index=106&type=chunk)[173](index=173&type=chunk) [11. Loss Per Share](index=24&type=section&id=11.%20LOSS%20PER%20SHARE) Net Loss Per Common Share | Period | Basic & Diluted EPS (2022) | Basic & Diluted EPS (2021) | | :----- | :------------------------- | :------------------------- | | Three Months Ended Sep 30 | $(0.11) | $(0.02) | | Nine Months Ended Sep 30 | $(0.14) | $(0.05) | - Approximately **9.4 million** and **8.8 million** shares of potential common stock were excluded from diluted EPS calculations for the three and nine months ended September 30, 2022, respectively, due to their anti-dilutive effect[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Globalstar's financial condition, operations, and strategic shift towards IoT and wholesale capacity services [Overview](index=26&type=section&id=Overview) - Globalstar provides Mobile Satellite Services (MSS) including voice, data, and wholesale capacity through its global satellite network[115](index=115&type=chunk) - The Company entered a **$327.0 million** agreement to acquire **17** new satellites by 2025, with **95%** of capital expenditures to be reimbursed by Apple Inc. (Partner) under the Service Agreements[116](index=116&type=chunk) - Apple Inc. announced new satellite-enabled services in September 2022, for which Globalstar will be the satellite operator, expected to launch in Q4 2022[118](index=118&type=chunk) [Communications Products and Services](index=26&type=section&id=Communications%20Products%20and%20Services) - Globalstar offers Duplex (two-way voice/data), SPOT (one/two-way messaging/location), Commercial IoT (one-way data), Wholesale Capacity Services (satellite network access for Partner), and Engineering and Other services[119](index=119&type=chunk) - The Company terminated second-generation Duplex services in early 2021, permanently abandoning related assets in Q3 2022 due to a strategic shift towards IoT-enabled devices and the Service Agreements[121](index=121&type=chunk) - New Commercial IoT offerings include the Realm Enablement Suite, featuring Integrity 150 (solar-powered asset tracking) and ST150M (satellite modem module), expanding environmentally friendly initiatives[122](index=122&type=chunk) [Globalstar System](index=27&type=section&id=Globalstar%20System) - The Globalstar System comprises a constellation of Low Earth Orbit (LEO) satellites (second-generation and first-generation) and active ground stations (gateways)[123](index=123&type=chunk)[115](index=115&type=chunk) - Second-generation satellites are designed for longer lifespan, **40%** greater capacity, and lower cost compared to first-generation satellites[123](index=123&type=chunk) - The system utilizes patented CDMA technology for ground network communication and proprietary technology for SPOT and Commercial IoT services, aiming for superior service levels compared to geostationary (GEO) satellites[124](index=124&type=chunk)[125](index=125&type=chunk) [Customers](index=27&type=section&id=Customers) - As of September 30, 2022, Globalstar had approximately **762,000** subscribers across various markets, including recreation, government, oil and gas, and maritime[126](index=126&type=chunk) - Approximately **25,000** subscribers in Russia were removed from the count in Q1 2022 due to service disconnection following the invasion of Ukraine[126](index=126&type=chunk)[146](index=146&type=chunk) - Wholesale capacity revenue is primarily derived from the Partner (Apple Inc.), with intentions to offer remaining satellite capacity to other commercial customers for IoT and other initiatives[127](index=127&type=chunk) [Spectrum and Regulatory Structure](index=28&type=section&id=Spectrum%20and%20Regulatory%20Structure) - Globalstar benefits from a worldwide allocation of radio frequency spectrum, enabling cost-effective global deployment of products and services[128](index=128&type=chunk) - The FCC granted authority in 2017 for terrestrial broadband services over **11.5 MHz** of licensed MSS spectrum, designated as Band 53 by 3GPP, with a 5G variant known as n53 approved in 2020[129](index=129&type=chunk)[130](index=130&type=chunk) - Qualcomm Technologies' Snapdragon X65 modem-RF System includes support for Band n53, significantly expanding the potential device ecosystem, further enhanced by its inclusion in Partner's cellular-enabled devices[131](index=131&type=chunk) [Performance Indicators](index=29&type=section&id=Performance%20Indicators) - Key performance indicators include total revenue, subscriber growth and churn rate, average monthly revenue per user (ARPU), operating income, adjusted EBITDA, and capital expenditures[137](index=137&type=chunk) Average Number of Subscribers and ARPU (Monthly) | Metric | Sep 30, 2022 (Avg Subscribers) | Sep 30, 2021 (Avg Subscribers) | Sep 30, 2022 (ARPU) | Sep 30, 2021 (ARPU) | | :---------------- | :----------------------------- | :----------------------------- | :------------------ | :------------------ | | Duplex | 41,204 | 45,004 | $72.98 | $71.34 | | SPOT | 276,203 | 271,843 | $14.18 | $14.56 | | Commercial IoT | 444,397 | 410,630 | $3.51 | $3.62 | | Total | 762,232 | 754,325 | | | [Revenue Analysis](index=29&type=section&id=Revenue%20Analysis) - Total revenue increased **15%** to **$37.6 million** for the three months and **19%** to **$107.2 million** for the nine months ended September 30, 2022, primarily driven by wholesale capacity services[135](index=135&type=chunk) - Duplex service revenue decreased **6%** for both periods due to an **8-10%** decrease in average subscribers, a trend expected to continue as investments shift to IoT[147](index=147&type=chunk) - Commercial IoT service revenue increased **5-7%** due to an increase in average subscribers (**8%** for three months, **6%** for nine months), despite production delays from component shortages[149](index=149&type=chunk) - Wholesale capacity service revenue surged by **$5.7 million** (three months) and **$18.6 million** (nine months), driven by performance obligations under the Service Agreements, including gateway expansion and Procurement Agreement work[150](index=150&type=chunk) - SPOT equipment sales decreased by **$1.1 million** (three months) and **$2.1 million** (nine months) due to lower sales volume and inventory shortages, with back orders for core products[153](index=153&type=chunk) [Operating Expenses Analysis](index=32&type=section&id=Operating%20Expenses%20Analysis) - Total operating expenses significantly increased to **$224.3 million** (three months) and **$318.9 million** (nine months) in 2022, primarily due to reductions in the value of inventory and long-lived assets[155](index=155&type=chunk) - Cost of services increased by **$1.6 million** (three months) and **$4.9 million** (nine months), driven by higher personnel costs, lease expenses for new teleport leases related to Service Agreements, and professional fees for ERP system implementation[157](index=157&type=chunk) - A reduction in the value of inventory of **$8.5 million** was recorded in Q3 2022 due to the strategic shift away from second-generation Duplex assets[159](index=159&type=chunk) - Marketing, General and Administrative (MG&A) expenses increased by **$1.5 million** (three months) and **$0.8 million** (nine months), mainly due to higher personnel costs (including stock-based compensation and bonuses) and professional/legal fees, partially offset by lower subscriber acquisition costs[161](index=161&type=chunk) - A **$166.0 million** reduction in the value of long-lived assets was recorded in Q3 2022, primarily for second-generation Duplex assets (gateways, related technology, prepaid licenses, and royalties) deemed no longer recoverable[164](index=164&type=chunk) [Other (Expense) Income Analysis](index=34&type=section&id=Other%20%28Expense%29%20Income%20Analysis) - In 2021, a **$5.0 million** gain on extinguishment of debt was recorded from the forgiveness of the Paycheck Protection Program (PPP) loan, with no similar activity in 2022[166](index=166&type=chunk) - Net interest income and expense decreased by **$3.8 million** (three months) and **$9.5 million** (nine months) in 2022, primarily due to higher capitalized interest[167](index=167&type=chunk) - Derivative gains of **$0.7 million** (three months) and losses of **$1.1 million** (nine months) were recorded in 2022, driven by changes in the valuation of embedded features in debt instruments, particularly the 2019 Facility Agreement[169](index=169&type=chunk) - Foreign currency losses increased by **$4.6 million** (three months) and **$8.7 million** (nine months) in 2022, due to the strengthening of the U.S. dollar[172](index=172&type=chunk) - A **$1.5 million** pension settlement loss was recorded in August 2022 upon the settlement of the Company's remaining pension liability[173](index=173&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - Principal near-term liquidity requirements include operating costs, capital expenditures, and repayment of vendor financing for satellite procurement[174](index=174&type=chunk) - Primary liquidity sources are cash on hand, cash flows from operations, and vendor financing, with potential future sources including warrant exercises and new debt/equity financings[175](index=175&type=chunk) - Cash and cash equivalents were **$14.7 million** as of September 30, 2022, slightly up from **$14.3 million** at December 31, 2021[176](index=176&type=chunk) - Total debt and vendor financing increased by **$88.0 million** to **$325.9 million** as of September 30, 2022, mainly due to **$63.8 million** in vendor financing draws and a higher carrying value of the 2019 Facility Agreement[176](index=176&type=chunk)[177](index=177&type=chunk) - The Company is required to maintain minimum liquidity of **$10.0 million** under the Service Agreements[175](index=175&type=chunk) [Off-Balance Sheet Transactions](index=37&type=section&id=Off-Balance%20Sheet%20Transactions) - The Company has no material off-balance sheet transactions[192](index=192&type=chunk) [Recently Issued Accounting Pronouncements](index=37&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - The Company has not identified any recently issued accounting standards that will have a material impact on its condensed consolidated financial statements[193](index=193&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Discusses Globalstar's exposure to foreign currency and interest rate risks, and its management strategies - Globalstar's international sales are primarily denominated in Canadian dollars, Brazilian reais, and euros, exposing it to foreign currency exchange risk[195](index=195&type=chunk) - The Company reduces currency risk by requiring USD payments and purchasing foreign currencies on the spot market, but does not currently use hedging instruments[195](index=195&type=chunk) - Future refinancing of vendor financing may expose the Company to the risk of rising interest rates if borrowings bear floating rates[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management evaluated disclosure controls and procedures, confirming effectiveness despite ERP system changes - As of September 30, 2022, the Company's disclosure controls and procedures were deemed effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[199](index=199&type=chunk) - The implementation of a new ERP system in Q1 2022 led to changes in reporting processes and internal control over financial reporting, automating procedures and standardizing business processes, with no adverse effects[201](index=201&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings.) No legal proceedings to report - The Company has no legal proceedings to disclose[202](index=202&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors.) Outlines key risks from global macro-economic conditions, Apple Service Launch uncertainty, and financing challenges - Uncertain global macro-economic and political conditions, including inflation, interest rates, and the Russia-Ukraine conflict, could materially adversely affect the Company's operations and financial condition[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - There is no assurance that the Service Launch with Apple Inc. will occur or that expected revenues will be received, as the agreements impose substantial obligations and are terminable[207](index=207&type=chunk) - Volatility in financial markets may impede the Company's ability to access capital markets for required financing (for Service Agreements and Procurement Agreement) during Q4 2022, potentially leading to higher borrowing costs and more stringent terms[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities or use of proceeds to report - This item is not applicable[209](index=209&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) No defaults upon senior securities to report - The Company has no defaults upon senior securities to disclose[209](index=209&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) No mine safety disclosures to report - This item is not applicable[209](index=209&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information.) Updates on vendor financing arrangement, including an October 2022 amendment for payment deferrals and interest - On October 28, 2022, the Company amended its satellite procurement agreement with MDA, extending payment deferral dates and introducing a **7%** annual interest rate on outstanding amounts, with two **$7.0 million** payments due in October and November 2022, and remaining amounts due in December 2022[209](index=209&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits.) Lists exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL taxonomy - Exhibits include the Third Amended and Restated Certificate of Incorporation, Fourth Amended and Restated Bylaws, Section 302 and 906 Certifications, and XBRL Instance and Taxonomy documents[210](index=210&type=chunk) [Signatures](index=41&type=section&id=Signatures) Contains signatures of the Principal Executive Officer and Principal Financial Officer, certifying the report - The report is signed by David B. Kagan, Chief Executive Officer, and Rebecca S. Clary, Chief Financial Officer, on November 3, 2022[215](index=215&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) Globalstar presents unaudited condensed consolidated financial statements, including operations, balance sheets, equity, and cash flows, with detailed notes [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) For the three and six months ended June 30, 2022, Globalstar reported an increased net loss, primarily driven by higher operating expenses and foreign currency losses, despite increased total revenue | Metric | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Total Revenue | $36,800 | $30,279 | $69,572 | $57,208 | | Loss from operations | $(11,356) | $(16,008) | $(25,068) | $(35,268) | | Total other (expense) income | $(15,280) | $(5,087) | $(21,947) | $(22,083) | | Net loss | $(26,757) | $(21,449) | $(47,219) | $(57,782) | | Basic Net loss per common share | $(0.01) | $(0.01) | $(0.03) | $(0.03) | [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2022, Globalstar's total assets increased to **$944.2 million** from **$814.1 million** at December 31, 2021, primarily due to property and equipment and prepaid satellite construction costs, with total liabilities also increasing due to vendor financing and deferred revenue | Metric | June 30, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :------------------------------------------ | :----------------------------- | :------------------------------- | | Total current assets | $69,731 | $68,873 | | Property and equipment, net | $708,005 | $672,156 | | Prepaid satellite construction costs and related customer receivable | $94,164 | — | | Total assets | $944,151 | $814,106 | | Total current liabilities | $139,980 | $61,565 | | Long-term debt | $257,451 | $237,932 | | Deferred revenue, net | $182,376 | $112,054 | | Total liabilities and stockholders' equity | $944,151 | $814,106 | | Total stockholders' equity | $329,333 | $365,431 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Stockholders' equity decreased from **$365.4 million** at January 1, 2022, to **$329.3 million** at June 30, 2022, primarily due to a net loss and other comprehensive loss, partially offset by restricted stock awards and stock-based compensation | Metric | Balances – January 1, 2022 (USD thousands) | Balances – June 30, 2022 (USD thousands) | | :------------------------------------------------------------------------------------------------ | :---------------------------------------- | :-------------------------------------- | | Total Stockholders' Equity | $365,431 | $329,333 | | Net loss (for the six months ended June 30, 2022) | N/A | $(47,219) | | Other comprehensive income (for the six months ended June 30, 2022) | N/A | $4,636 | | Additional paid-in capital (increase from Jan 1 to June 30, 2022) | $2,146,710 | $2,153,195 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash provided by operating activities significantly decreased to **$20.8 million** for the six months ended June 30, 2022, from **$55.9 million** in the prior year, mainly due to unfavorable working capital changes, while investing activities used more cash and financing activities shifted to a net provision | Metric | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $20,771 | $55,920 | | Net cash used in investing activities | $(22,392) | $(11,998) | | Net cash provided by (used in) financing activities | $449 | $(45,228) | | Net decrease in cash, cash equivalents and restricted cash | $(1,163) | $(1,315) | | Cash, cash equivalents and restricted cash, end of period | $13,141 | $66,708 | - Non-cash financing and investing activities for the six months ended June 30, 2022, included **$73.6 million** for satellite construction assets acquired through a vendor financing arrangement[19](index=19&type=chunk) [Notes to Unaudited Interim Condensed Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20UNAUDITED%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes detail accounting policies, estimates, and financial statement line items, covering revenue, leases, property and equipment, long-term debt, derivatives, fair value, commitments, related party transactions, and loss per share [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) Globalstar operates as a single Mobile Satellite Services (MSS) segment, providing global voice and data communications, with interim financial statements prepared under U.S. GAAP - Globalstar's sole reportable segment is its Mobile Satellite Services (MSS) business, offering global voice and data communications[22](index=22&type=chunk) - **Thermo Companies**, through commonly controlled affiliates, is the principal owner and largest stockholder of Globalstar[22](index=22&type=chunk) [2. Revenue](index=9&type=section&id=2.%20Revenue) Total revenue increased for both the three and six months ended June 30, 2022, driven by a significant rise in Engineering and other service revenue, largely from the Terms Agreement, while subscriber equipment sales declined due to inventory shortages | Revenue Type | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Duplex Service | $6,936 | $7,243 | $13,082 | $13,898 | | SPOT Service | $11,536 | $11,139 | $22,791 | $22,123 | | Commercial IoT Service | $5,038 | $4,504 | $9,708 | $8,985 | | Engineering and other Service | $9,538 | $2,731 | $16,811 | $3,697 | | Total Service Revenue | $33,048 | $25,617 | $62,392 | $48,703 | | Total Subscriber Equipment Sales | $3,752 | $4,662 | $7,180 | $8,505 | | Total Revenue | $36,800 | $30,279 | $69,572 | $57,208 | - Revenue from the Terms Agreement for certain costs incurred by the Company was **$8.8 million** and **$15.7 million** for the three and six months ended June 30, 2022, respectively, significantly higher than the prior year[27](index=27&type=chunk) | Geographical Market | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | US Service Revenue | $24,875 | $18,228 | $47,163 | $34,671 | | Canada Service Revenue | $4,128 | $4,376 | $7,817 | $8,206 | | Central and South America Service Revenue | $2,248 | $815 | $3,984 | $1,596 | | US Equipment Sales | $2,227 | $2,438 | $3,783 | $4,610 | | Canada Equipment Sales | $879 | $1,118 | $1,677 | $1,867 | - As of June 30, 2022, the Company recorded **$83.4 million** in receivables related to performance obligations under the Terms Agreement, with **$74.8 million** classified as non-current[30](index=30&type=chunk) - Contract liabilities (deferred revenue) totaled **$199.8 million** as of June 30, 2022, including **$75.0 million** for advance payments and **$124.8 million** for network upgrades and satellite construction costs under the Terms Agreement[33](index=33&type=chunk) [3. Leases](index=11&type=section&id=3.%20Leases) Globalstar's operating lease right-of-use assets and liabilities decreased slightly, while finance lease assets and liabilities remained minimal, with total lease cost increasing due to higher operating lease costs | Metric | June 30, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Operating lease right-of-use asset, net | $29,964 | $32,041 | | Total operating lease liabilities | $29,576 | $31,738 | | Total finance lease liabilities | $6 | $9 | | Metric | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Total lease cost | $1,137 | $1,098 | $2,325 | $1,952 | - The weighted-average remaining lease term for operating leases was **10.2 years** at June 30, 2022, with a weighted-average discount rate of **8.4%**[39](index=39&type=chunk) - The Company executed additional operating leases for new gateway locations, not yet commenced, with an expected increase of lease liabilities of approximately **$4.7 million**[41](index=41&type=chunk) [4. Property and Equipment](index=13&type=section&id=4.%20Property%20and%20Equipment) Total property and equipment, net, increased to **$708.0 million** at June 30, 2022, from **$672.2 million** at December 31, 2021, driven by a spare satellite launch and initial costs for new satellite procurement, largely reimbursed by a customer | Metric | June 30, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | First and second-generation satellites in service | $1,261,793 | $1,195,509 | | Construction in progress: Space component | $57,542 | $16,394 | | Total property and equipment, net | $708,005 | $672,156 | - During Q2 2022, **$65.1 million** in costs for the construction and launch of a spare satellite were placed into service, with **85%** reimbursed by the customer under the Terms Agreement[42](index=42&type=chunk) - The Company entered an agreement in February 2022 to purchase new satellites, recording **$19.4 million** as prepaid construction costs and **$54.2 million** in construction in progress, with **95%** of these capital expenditures to be reimbursed by the customer[43](index=43&type=chunk) [5. Long-Term Debt and Other Financing Arrangements](index=14&type=section&id=5.%20Long-Term%20Debt%20and%20Other%20Financing%20Arrangements) Long-term debt increased to **$257.5 million** at June 30, 2022, primarily due to the 2019 Facility Agreement, while the 2013 8.00% Convertible Senior Notes were fully converted into common stock, and new vendor financing of **$73.6 million** was recorded for satellite procurement | Debt Instrument | June 30, 2022 Carrying Value (USD thousands) | December 31, 2021 Carrying Value (USD thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | 2019 Facility Agreement | $257,451 | $236,525 | | 8.00% Convertible Senior Notes Issued in 2013 | — | $1,407 | | Total Debt | $257,451 | $237,932 | - The 2019 Facility Agreement, with a principal amount of **$282.0 million** at June 30, 2022, bears **13.5% PIK interest** and requires a **$6.0 million** prepayment in August 2022 due to excess cash flow[46](index=46&type=chunk)[47](index=47&type=chunk) - The remaining **$1.4 million** principal of the 2013 8.00% Notes was converted into **2.3 million shares** of common stock in Q1 2022, resulting in a net gain on extinguishment of less than **$0.1 million**[49](index=49&type=chunk)[50](index=50&type=chunk) - Vendor financing of **$73.6 million** was recorded for satellite procurement, with payment deferrals through August 2022 at **0% interest**, and the Company plans to seek an extension[52](index=52&type=chunk) - The Paycheck Protection Program (PPP) loan of **$5.0 million**, including accrued interest, was forgiven in June 2021, resulting in a gain on extinguishment of debt[54](index=54&type=chunk) [6. Derivatives](index=16&type=section&id=6.%20Derivatives) Globalstar recognized derivative losses of **$1.2 million** and **$1.7 million** for the three and six months ended June 30, 2022, respectively, primarily due to changes in the fair value of the compound embedded derivative with the 2019 Facility Agreement, while the 2013 8.00% Notes derivative is no longer outstanding | Derivative Instrument | June 30, 2022 Fair Value (USD thousands) | December 31, 2021 Fair Value (USD thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Compound embedded derivative with the 2019 Facility Agreement | $(1,460) | $484 | | Compound embedded derivative with the 2013 8.00% Notes | — | $(1,364) | | Derivative Loss | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Compound embedded derivative with the 2013 8.00% Notes | — | $(1,077) | $216 | $(2,821) | | Compound embedded derivative with the 2019 Facility Agreement | $(1,242) | $(233) | $(1,944) | $382 | | Total derivative loss | $(1,242) | $(1,310) | $(1,728) | $(2,439) | [7. Fair Value Measurements](index=16&type=section&id=7.%20Fair%20Value%20Measurements) The Company's derivatives are classified as Level 3 fair value measurements, requiring significant unobservable inputs, with the 2019 Facility Agreement derivative shifting to a liability due to an increased discount yield, and the 2013 8.00% Notes derivative written off upon conversion - All of Globalstar's derivative instruments are classified as **Level 3 fair value measurements**, indicating reliance on significant unobservable inputs[60](index=60&type=chunk) | Derivative Instrument | June 30, 2022 (Level 3, USD thousands) | December 31, 2021 (Level 3, USD thousands) | | :------------------------------------------ | :------------------------------------ | :---------------------------------------- | | Compound embedded derivative with the 2019 Facility Agreement | $(1,460) | $484 | | Compound embedded derivative with the 2013 8.00% Notes | — | $(1,364) | - The discount yield for the 2019 Facility Agreement derivative increased from **13%** at December 31, 2021, to **20%** at June 30, 2022, causing the derivative to become a liability[64](index=64&type=chunk) - During Q2 2022, the Company wrote off **$0.5 million** of work in progress related to spectrum intangible assets, as efforts to obtain licensing authority in certain countries were discontinued[71](index=71&type=chunk) [8. Commitments and Contingencies](index=19&type=section&id=8.%20Commitments%20and%20Contingencies) Globalstar's primary commitments include obligations under the Terms Agreement for services and network upgrades, and a satellite procurement agreement to acquire **17 new satellites** for **$327.0 million**, with **95%** of these capital expenditures to be reimbursed by the counterparty - The Terms Agreement outlines commitments for Globalstar to provide services and incur costs for new and upgraded gateways, as well as satellite construction and launch[72](index=72&type=chunk) - In February 2022, Globalstar entered a satellite procurement agreement for **17 new satellites** totaling **$327.0 million**, with an option for additional satellites. The counterparty to the Terms Agreement will reimburse **95%** of these capital expenditures[74](index=74&type=chunk)[75](index=75&type=chunk) - Deferred milestone payments of approximately **$74.0 million** under the satellite procurement agreement are due in August 2022, and the Company intends to seek an extension[76](index=76&type=chunk) [9. Related Party Transactions](index=20&type=section&id=9.%20Related%20Party%20Transactions) Globalstar has ongoing related party transactions with Thermo, its principal owner, including payables for normal purchases, reimbursement for general and administrative expenses, a lease agreement for its headquarters, and Thermo's participation in the 2019 Facility Agreement - Payables to Thermo and other affiliates for normal purchase transactions were **$0.4 million** as of June 30, 2022, and December 31, 2021[77](index=77&type=chunk) - Globalstar incurred **$0.8 million** in lease expense for its headquarters from Thermo Covington, LLC during each of the six months ended June 30, 2022 and 2021[79](index=79&type=chunk) - Thermo's participation in the 2019 Facility Agreement was **$95.1 million**, with **$8.3 million** in PIK interest accrued during the six months ended June 30, 2022[80](index=80&type=chunk) [10. Loss Per Share](index=20&type=section&id=10.%20Loss%20Per%20Share) Globalstar reported a basic and diluted net loss per common share of **$(0.01)** for the three months and **$(0.03)** for the six months ended June 30, 2022, consistent with the prior year, as potential common stock was anti-dilutive due to net losses | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss (USD thousands) | $(26,757) | $(21,449) | $(47,219) | $(57,782) | | Weighted average shares outstanding (thousands) | 1,799,886 | 1,791,943 | 1,798,784 | 1,736,158 | | Net loss per common share - basic and diluted (USD) | $(0.01) | $(0.01) | $(0.03) | $(0.03) | - Approximately **7.8 million** and **7.6 million shares** of potential common stock were excluded from diluted shares outstanding for the three and six months ended June 30, 2022, respectively, because their inclusion would be anti-dilutive[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Globalstar's Q2 2022 financial performance, condition, and liquidity, covering MSS, KPIs, revenue, expenses, and capital resources [Overview](index=21&type=section&id=Overview) Globalstar provides global Mobile Satellite Services (MSS) through its LEO satellite network, expanding its constellation with **17 new satellites** and developing new IoT products like the Realm Enablement Suite, while also pursuing terrestrial broadband services using its licensed 2.4GHz spectrum - Globalstar provides Mobile Satellite Services (MSS) including voice and data communications via its global satellite network, which includes LEO second-generation and certain first-generation satellites[88](index=88&type=chunk)[89](index=89&type=chunk) - The company entered a satellite procurement agreement in February 2022 to acquire **17 new satellites** for **$327.0 million** to replenish its constellation, with **95%** of capital expenditures to be reimbursed by a customer under the Terms Agreement[91](index=91&type=chunk) - Globalstar introduced the **Realm Enablement Suite** in June 2022, an innovative portfolio of satellite asset tracking hardware and software solutions, including the **Integrity 150** solar-powered device and **ST150M** satellite modem module[96](index=96&type=chunk)[97](index=97&type=chunk) - The FCC granted Globalstar authority to provide terrestrial broadband services over **11.5 MHz** of its licensed MSS spectrum (**Band 53/n53**), with Qualcomm Technologies' Snapdragon X65 modem-RF System supporting Band n53, expanding the potential device ecosystem[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - As of June 30, 2022, Globalstar had approximately **762,000 subscribers** worldwide, with **25,000 subscribers** in Russia disconnected due to the invasion of Ukraine[98](index=98&type=chunk) [Performance Indicators](index=24&type=section&id=Performance%20Indicators) Management monitors key performance indicators such as total revenue, subscriber growth and churn rate, average monthly revenue per user (ARPU) for Duplex, SPOT, and Commercial IoT, operating income, adjusted EBITDA, and capital expenditures to assess business growth, customer satisfaction, financial performance, and future revenue potential - Key performance indicators include total revenue, subscriber growth and churn rate, ARPU (Duplex, SPOT, Commercial IoT), operating income, adjusted EBITDA, and capital expenditures[106](index=106&type=chunk) [Comparison of the Results of Operations for the three and six months ended June 30, 2022 and 2021](index=24&type=section&id=Comparison%20of%20the%20Results%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030,%202022%20and%202021) Globalstar experienced a **21%** and **22%** increase in total revenue for the three and six months ended June 30, 2022, respectively, primarily driven by a significant rise in Engineering and other service revenue, while operating expenses increased due to higher cost of services and asset reductions, and other expenses were impacted by derivative losses and foreign currency fluctuations [Revenue](index=24&type=section&id=Revenue) Total revenue increased by **21%** to **$36.8 million** and **22%** to **$69.6 million** for the three and six months ended June 30, 2022, respectively, largely fueled by a substantial increase in Engineering and other service revenue, while Duplex service revenue declined and subscriber equipment sales were negatively impacted by supply chain disruptions | Metric | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $36,800 | $30,279 | $69,572 | $57,208 | | Duplex Service Revenue | $6,936 (19% of Total) | $7,243 (24% of Total) | $13,082 (19% of Total) | $13,898 (24% of Total) | | SPOT Service Revenue | $11,536 (31% of Total) | $11,139 (37% of Total) | $22,791 (33% of Total) | $22,123 (39% of Total) | | Commercial IoT Service Revenue | $5,038 (14% of Total) | $4,504 (15% of Total) | $9,708 (14% of Total) | $8,985 (16% of Total) | | Engineering and other Service Revenue | $9,538 (26% of Total) | $2,731 (9% of Total) | $16,811 (24% of Total) | $3,697 (6% of Total) | | Total Service Revenue | $33,048 (90% of Total) | $25,617 (85% of Total) | $62,392 (90% of Total) | $48,703 (85% of Total) | | Total Equipment Revenue | $3,752 (10% of Total) | $4,662 (15% of Total) | $7,180 (10% of Total) | $8,505 (15% of Total) | | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average Duplex Subscribers | 42,723 | 44,160 | 43,295 | 45,913 | | Duplex ARPU (monthly USD) | $54.12 | $54.67 | $50.36 | $50.45 | | Average SPOT Subscribers | 277,815 | 264,508 | 276,633 | 265,127 | | SPOT ARPU (monthly USD) | $13.84 | $14.04 | $13.73 | $13.91 | | Average Commercial IoT Subscribers | 433,578 | 409,346 | 431,652 | 408,043 | | Commercial IoT ARPU (monthly USD) | $3.87 | $3.67 | $3.75 | $3.67 | | Total Average Subscribers | 754,553 | 745,617 | 764,920 | 746,678 | - Duplex service revenue decreased by **4%** and **6%** for the three and six months ended June 30, 2022, respectively, due to a decline in average subscribers, a trend expected to continue as the company shifts investment to IoT[114](index=114&type=chunk) - SPOT service revenue increased by **4%** and **3%** for the three and six months ended June 30, 2022, respectively, driven by a **5%** and **4%** increase in average subscribers, despite supply chain disruptions impacting equipment sales[115](index=115&type=chunk) - Commercial IoT service revenue increased by **12%** and **8%** for the three and six months ended June 30, 2022, respectively, due to a **6%** increase in average subscribers, despite component part shortages impacting equipment production[116](index=116&type=chunk)[120](index=120&type=chunk) - Engineering and other service revenue significantly increased by **$6.8 million** and **$13.1 million** for the three and six months ended June 30, 2022, primarily due to revenue recognized from the Terms Agreement for gateway expansion and satellite procurement[117](index=117&type=chunk) [Operating Expenses](index=26&type=section&id=Operating%20Expenses) Total operating expenses increased for both the three and six months ended June 30, 2022, primarily due to higher cost of services (personnel, new teleport leases, ERP implementation) and a reduction in the value of long-lived assets, partially offset by a reduction in inventory value and lower Marketing, General and Administrative (MG&A) expenses | Metric | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Total operating expenses | $48,156 | $46,287 | $94,640 | $92,476 | | Cost of services | $10,695 | $9,123 | $21,489 | $18,200 | | Cost of subscriber equipment sales | $3,097 | $2,858 | $5,663 | $5,757 | | Cost of subscriber equipment sales - reduction in the value of inventory | $16 | $782 | $16 | $782 | | Marketing, general and administrative | $9,693 | $9,681 | $19,034 | $19,778 | | Reduction in value of long-lived assets | $525 | — | $525 | — | - Cost of services increased by **$1.6 million** and **$3.3 million** for the three and six months ended June 30, 2022, respectively, due to higher personnel costs, new teleport leases, and professional fees for ERP system implementation[122](index=122&type=chunk) - MG&A expenses decreased by **$0.7 million** for the six months ended June 30, 2022, due to lower subscriber acquisition costs, termination of the dealer program, reduced advertising for Duplex products, and a reversal of a litigation accrual, partially offset by higher personnel costs[125](index=125&type=chunk) - A **$0.5 million** reduction in the value of intangible and other assets was recorded in Q2 2022 due to discontinuing spectrum licensing efforts in certain countries[126](index=126&type=chunk) [Other (Expense) Income](index=27&type=section&id=Other%20(Expense)%20Income) Other (expense) income shifted to a net expense for the three and six months ended June 30, 2022, primarily due to a significant foreign currency loss and derivative losses, while interest expense decreased due to higher capitalized interest, and the prior year included a gain on extinguishment of debt | Metric | Three Months Ended June 30, 2022 (USD thousands) | Three Months Ended June 30, 2021 (USD thousands) | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Gain on extinguishment of debt | — | $2,664 | — | $2,664 | | Interest income and expense, net | $(7,187) | $(10,778) | $(16,717) | $(22,352) | | Derivative loss | $(1,242) | $(1,310) | $(1,728) | $(2,439) | | Foreign currency (loss) gain | $(7,123) | $4,425 | $(3,891) | $110 | | Total other (expense) income | $(15,280) | $(5,087) | $(21,947) | $(22,083) | - The **$2.7 million** gain on extinguishment of debt in Q2 2021 was due to the forgiveness of the **$5.0 million** PPP loan, partially offset by a **$2.3 million** write-off of deferred financing costs from 2009 Facility Agreement prepayments[127](index=127&type=chunk) - Net interest expense decreased by **$3.6 million** and **$5.6 million** for the three and six months ended June 30, 2022, respectively, primarily due to higher capitalized interest[128](index=128&type=chunk) - Foreign currency loss of **$7.1 million** for the three months and **$3.9 million** for the six months ended June 30, 2022, was driven by the weakening of the Canadian dollar, Euro, and Brazilian real against the U.S. dollar[132](index=132&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Globalstar's liquidity requirements include operating costs, capital expenditures, and repayment of vendor financing for satellite procurement, with the company actively pursuing new debt financing and expecting current liquidity sources to be sufficient for the next twelve months, despite a slight decrease in cash and an increase in total debt - Principal near-term liquidity requirements include funding operating costs, capital expenditures, and repayment of vendor financing under the satellite Procurement Agreement[133](index=133&type=chunk) - Globalstar is actively pursuing a new debt financing arrangement to repay and fund amounts due under the Procurement Agreement, expecting current liquidity sources to be sufficient for the next twelve months[133](index=133&type=chunk) | Metric | June 30, 2022 (USD thousands) | December 31, 2021 (USD thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $13,141 | $14,304 | | Total carrying amount of debt outstanding | $257,451 | $237,932 | - The **$19.5 million** increase in debt carrying value was due to the 2019 Facility Agreement's PIK interest and debt discount accretion, partially offset by the conversion of the 2013 8.00% Notes[135](index=135&type=chunk) [Cash Flows for the six months ended June 30, 2022 and 2021](index=29&type=section&id=Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030,%202022%20and%202021) Net cash provided by operating activities decreased significantly to **$20.8 million** in 2022 from **$55.9 million** in 2021, primarily due to unfavorable working capital changes, while net cash used in investing activities increased to **$22.4 million** mainly for network upgrades and satellite launch costs, and financing activities provided **$0.4 million** in 2022 compared to a **$45.2 million** use in 2021 | Cash Flow Activity | Six Months Ended June 30, 2022 (USD thousands) | Six Months Ended June 30, 2021 (USD thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $20,771 | $55,920 | | Net cash used in investing activities | $(22,392) | $(11,998) | | Net cash provided by (used in) financing activities | $449 | $(45,228) | | Net decrease in cash and cash equivalents | $(1,163) | $(1,315) | - The decrease in operating cash flow was primarily due to unfavorable working capital changes, including **$51.6 million** in customer prepayments recorded as deferred revenue in 2021[137](index=137&type=chunk) - Investing cash flow increased due to costs for the spare satellite launch and network upgrades, partially offset by lower gateway upgrade costs as the project nears completion[138](index=138&type=chunk) [Indebtedness](index=29&type=section&id=Indebtedness) Globalstar's indebtedness primarily consists of the 2019 Facility Agreement, with **$282.0 million** principal outstanding at June 30, 2022, and new vendor financing of **$73.6 million** for satellite procurement, while the 2013 8.00% Convertible Senior Notes were fully converted into common stock in Q1 2022 - The 2019 Facility Agreement had **$282.0 million** principal outstanding at June 30, 2022, with a **13.5% PIK interest rate**, and the company expects a **$6.0 million** prepayment in August 2022[141](index=141&type=chunk)[142](index=142&type=chunk) - The remaining principal of the 2013 8.00% Notes was converted into **2.3 million shares** of common stock in February 2022, prior to its scheduled redemption[143](index=143&type=chunk) - Vendor financing for satellite procurement, with deferred payments of approximately **$74.0 million** due in August 2022, is being pursued for extension and broader debt financing[144](index=144&type=chunk) [Off-Balance Sheet Transactions](index=30&type=section&id=Off-Balance%20Sheet%20Transactions) Globalstar reported no material off-balance sheet transactions - The Company has no material off-balance sheet transactions[145](index=145&type=chunk) [Recently Issued Accounting Pronouncements](index=30&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Globalstar reviews new accounting guidance but has not identified any standards that will materially impact its condensed consolidated financial statements - Globalstar has not identified any recently issued accounting standards that will have a material impact on its condensed consolidated financial statements[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Globalstar is exposed to foreign currency exchange risk from international sales denominated in Canadian dollars, Brazilian reais, and euros, but currently does not use hedging instruments, and may face interest rate risk if future borrowings bear floating rates - Globalstar's international sales are primarily denominated in Canadian dollars, Brazilian reais, and euros, exposing the company to currency exchange risk[147](index=147&type=chunk) - The company does not currently purchase hedging instruments for foreign currencies but is obligated to enter currency hedges with 2019 Facility Agreement lenders if over **25%** of revenues are in a single non-U.S./Canadian dollar currency[147](index=147&type=chunk) - Globalstar may be exposed to rising interest rates if future borrowings, including the refinancing of vendor financing, bear floating rates[148](index=148&type=chunk) [Item 4. Controls and Procedures.](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that Globalstar's disclosure controls and procedures were effective as of June 30, 2022, and the implementation of a new ERP system in Q1 2022 resulted in anticipated changes to internal control over financial reporting, but these changes did not adversely affect the company's controls - As of June 30, 2022, Globalstar's disclosure controls and procedures were deemed effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[151](index=151&type=chunk) - The implementation of a new ERP system in Q1 2022 led to changes in reporting processes and internal control over financial reporting, but these changes did not adversely affect the company's controls[153](index=153&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings.](index=32&type=section&id=Item%201.%20Legal%20Proceedings.) Globalstar reported no legal proceedings - Globalstar has no legal proceedings to report[155](index=155&type=chunk) [Item 1A. Risk Factors.](index=32&type=section&id=Item%201A.%20Risk%20Factors.) Globalstar highlights risks from uncertain global macroeconomic and political conditions, including inflation, interest rates, and the impact of the Russia-Ukraine conflict on operations, financial performance, and supply chains, advising careful consideration of these and other risks disclosed in its 2021 Annual Report - Globalstar's results are materially affected by global economic and political conditions, including inflation, interest rates, and the availability of capital[156](index=156&type=chunk) - The invasion of Ukraine by Russia and resulting sanctions could adversely impact Globalstar's operations, financial performance, and supply chains[157](index=157&type=chunk)[158](index=158&type=chunk) - No material changes to risk factors were disclosed other than those related to global macro-economic and political conditions[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This item is not applicable to Globalstar for the reporting period - This item is not applicable[160](index=160&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) Globalstar reported no defaults upon senior securities - Globalstar has no defaults upon senior securities[160](index=160&type=chunk) [Item 4. Mine Safety Disclosures.](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to Globalstar for the reporting period - This item is not applicable[160](index=160&type=chunk) [Item 5. Other Information.](index=32&type=section&id=Item%205.%20Other%20Information.) Globalstar reported no other information - Globalstar has no other information to report[160](index=160&type=chunk) [Item 6. Exhibits.](index=33&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including the company's Certificate of Incorporation, Bylaws, Section 302 and 906 Certifications, and XBRL Taxonomy documents - Exhibits include the Third Amended and Restated Certificate of Incorporation, Fourth Amended and Restated Bylaws, Section 302 and 906 Certifications, and XBRL Taxonomy documents[161](index=161&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report is duly signed on behalf of Globalstar, Inc. by its Chief Executive Officer, David B. Kagan, and Chief Financial Officer, Rebecca S. Clary, on August 9, 2022 - The report was signed by David B. Kagan, Chief Executive Officer, and Rebecca S. Clary, Chief Financial Officer, on August 9, 2022[166](index=166&type=chunk)

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Globalstar reported increased Q1 2022 revenue of $32.8 million, a reduced net loss, and positive operating cash flow [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Globalstar's Q1 2022 total revenue increased to $32.8 million, driven by service revenue, narrowing the net loss to $20.5 million Q1 2022 vs Q1 2021 Statement of Operations (In thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Total Revenue** | **$32,772** | **$26,929** | | Service Revenue | $29,344 | $23,086 | | Subscriber Equipment Sales | $3,428 | $3,843 | | **Loss from Operations** | **($13,712)** | **($19,260)** | | Total Operating Expenses | $46,484 | $46,189 | | **Net Loss** | **($20,462)** | **($36,333)** | | Net Loss per Share (Basic & Diluted) | ($0.01) | ($0.02) | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets increased to $850.4 million, while total liabilities rose, leading to a decrease in stockholders' equity Balance Sheet Overview (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$850,426** | **$814,106** | | Cash and cash equivalents | $11,519 | $14,304 | | Property and equipment, net | $680,167 | $672,156 | | **Total Liabilities** | **$501,194** | **$448,675** | | Total current liabilities | $103,682 | $61,565 | | Long-term debt | $246,756 | $237,932 | | **Total Stockholders' Equity** | **$349,232** | **$365,431** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 net cash from operations was $7.6 million, while investing activities increased, resulting in a net cash decrease of $2.8 million Cash Flow Summary (In thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,569 | $4,512 | | Net cash used in investing activities | ($10,451) | ($4,974) | | Net cash provided by financing activities | $8 | $39,245 | | **Net (decrease) increase in cash** | **($2,785)** | **$38,717** | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) Notes detail satellite procurement, debt conversion, and significant revenue recognition from the 'Terms Agreement' - In February 2022, the company entered into a satellite procurement agreement to acquire **17 new satellites for $327.0 million** to replenish its constellation. A customer under the 'Terms Agreement' is required to reimburse **95%** of these capital expenditures[68](index=68&type=chunk) - During Q1 2022, the remaining **$1.4 million** principal of the 8.00% Convertible Senior Notes from 2013 was converted into **2.3 million shares** of common stock, fully extinguishing this debt[49](index=49&type=chunk) - The company recognized **$6.8 million** in 'Engineering and other' service revenue in Q1 2022 related to cost reimbursements from a customer under the 'Terms Agreement' for services rendered[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) MD&A discusses Q1 2022 revenue growth, strategic shift to IoT, new satellite procurement, and liquidity plans [Overview](index=20&type=section&id=Overview) Globalstar focuses on MSS and IoT, with a new $327 million satellite agreement and terrestrial spectrum advancements - Entered into a **$327.0 million** agreement in February 2022 to acquire **17 new satellites** to replenish its constellation, with delivery expected by 2025[86](index=86&type=chunk) - A customer under the 'Terms Agreement' is required to reimburse **95%** of the capital expenditures for the new satellites[86](index=86&type=chunk) - The company's terrestrial spectrum band, **n53**, is now supported in Qualcomm Technologies' Snapdragon X65 5G modem, expanding the potential device ecosystem[95](index=95&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2022 total revenue increased 22% to $32.8 million, driven by engineering service revenue, reducing operating loss Revenue by Type (In thousands) | Revenue Type | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$32,772** | **$26,929** | **21.7%** | | Total Service Revenue | $29,344 | $23,086 | 27.1% | | *Engineering and other* | *$7,273* | *$966* | *652.9%* | | Total Equipment Revenue | $3,428 | $3,843 | -10.8% | - The significant increase in Engineering and other service revenue was due to the timing and amount of revenue recognized under the Terms Agreement, including work to expand and upgrade gateways[111](index=111&type=chunk) - SPOT and Commercial IoT equipment sales were constrained by inventory shortages and supply chain disruptions, with several products on back order[113](index=113&type=chunk)[114](index=114&type=chunk) - MG&A expenses decreased by **$0.8 million**, primarily due to the reversal of a **$1.0 million** accrual related to 2018 shareholder litigation[119](index=119&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Globalstar's Q1 2022 cash was $11.5 million, with plans for senior secured financing to fund new satellites and refinance debt Key Liquidity Metrics (As of March 31, 2022) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $11.5 | | Total Debt (Carrying Amount) | $246.8 | | Q1 2022 Cash from Operations | $7.6 | - The company has a vendor financing agreement for its new satellites which provides for payment deferrals through **August 2022**, at which point deferred payments will become due[136](index=136&type=chunk) - The company intends to complete a senior secured financing to provide proceeds for the satellite construction and launch, and also expects to refinance its **2019 Facility Agreement**[136](index=136&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Globalstar faces foreign currency and interest rate risks but does not currently use hedging instruments - The company's primary market risks are foreign currency exchange fluctuations (**Canadian dollar**, **Brazilian real**, **euro**) and potential interest rate increases on future debt[140](index=140&type=chunk)[141](index=141&type=chunk) - The company does not currently use hedging instruments for foreign currency risk but is obligated to do so under certain conditions of its **2019 Facility Agreement**[140](index=140&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management confirmed effective disclosure controls, with a new ERP system implemented without material impact on internal controls - Management concluded that disclosure controls and procedures were **effective** as of **March 31, 2022**[144](index=144&type=chunk) - A new ERP system was implemented in **Q1 2022**, leading to changes in internal controls, but these changes were not deemed to have a **material adverse effect**[146](index=146&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings.) The company reported no material legal proceedings - None[147](index=147&type=chunk) [Risk Factors](index=30&type=page&id=Item%201A.%20Risk%20Factors.) Uncertain global macro-economic and political conditions, including the Ukraine conflict, pose significant risks - Uncertain global macro-economic and political conditions, including **inflation** and **interest rates**, pose a risk to operations and financial condition[148](index=148&type=chunk) - The invasion of Ukraine by Russia and related sanctions could lead to **market disruptions**, **supply chain interruptions**, and **significant volatility**, adversely impacting the business[149](index=149&type=chunk)[150](index=150&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits.) This section lists key exhibits including the Satellite Procurement Agreement and certifications - Key exhibits filed include the **Satellite Procurement Agreement** dated **February 21, 2022**, and **Section 302 and 906 certifications**[154](index=154&type=chunk)