Globalstar(GSAT) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements. 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) 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 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 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 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] Notes to Unaudited Interim Condensed Consolidated Financial Statements 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 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] - Thermo Companies, through commonly controlled affiliates, is the principal owner and largest stockholder of Globalstar[22] 2. Revenue 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] | 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] - 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] 3. Leases 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] - 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] 4. Property and Equipment 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] - 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] 5. Long-Term Debt and Other Financing Arrangements 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][47] - 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][50] - 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] - 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] 6. Derivatives 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 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] | 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] - 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] 8. Commitments and Contingencies 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] - 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][75] - 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] 9. Related Party Transactions 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] - 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] - 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] 10. Loss Per Share 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses Globalstar's Q2 2022 financial performance, condition, and liquidity, covering MSS, KPIs, revenue, expenses, and capital resources 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][89] - 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] - 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][97] - 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][101][102] - 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] Performance Indicators 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] Comparison of the Results of Operations for the three and six months ended June 30, 2022 and 2021 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 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] - 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] - 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][120] - 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] Operating Expenses 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] - 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] - 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] Other (Expense) Income 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] - 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] - 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] Liquidity and Capital Resources 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] - 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] | 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] Cash Flows for the six months ended June 30, 2022 and 2021 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] - 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] 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][142] - 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] - 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] Off-Balance Sheet Transactions Globalstar reported no material off-balance sheet transactions - The Company has no material off-balance sheet transactions[145] Recently Issued Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk. 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] - 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] - Globalstar may be exposed to rising interest rates if future borrowings, including the refinancing of vendor financing, bear floating rates[148] Item 4. Controls and Procedures. 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] - 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] PART II - OTHER INFORMATION Item 1. Legal Proceedings. Globalstar reported no legal proceedings - Globalstar has no legal proceedings to report[155] Item 1A. Risk Factors. 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] - The invasion of Ukraine by Russia and resulting sanctions could adversely impact Globalstar's operations, financial performance, and supply chains[157][158] - No material changes to risk factors were disclosed other than those related to global macro-economic and political conditions[159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This item is not applicable to Globalstar for the reporting period - This item is not applicable[160] Item 3. Defaults Upon Senior Securities. Globalstar reported no defaults upon senior securities - Globalstar has no defaults upon senior securities[160] Item 4. Mine Safety Disclosures. This item is not applicable to Globalstar for the reporting period - This item is not applicable[160] Item 5. Other Information. Globalstar reported no other information - Globalstar has no other information to report[160] Item 6. Exhibits. 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] 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]