What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-06 · 100 added, 65 removed, 532 unchanged (24% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

2020 June 30,

2019 June 30,

2020 June 30,

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Service revenue $ 28,385 $ 34,152 $ 84,410 $ 86,971

30 unchanged sentences

(In thousands, except par value and share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Current assets:

30 unchanged sentences

Preferred Stock of $ 0.0001 par value;

100,000,000 shares authorized and none issued and outstanding at June 30, 2020 and December 31, 2019, respectively

100,000,000 shares authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Series A Preferred Convertible Stock of $ 0.0001 par value;

one share authorized and none issued and outstanding at June 30, 2020 and December 31, 2019, respectively

one share authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Voting Common Stock of $ 0.0001 par value;

1,900,000,000 shares authorized;

1,670,289,833 shares and 1,464,544,144 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

1,670,355,013 and 1,464,544,144 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Nonvoting Common Stock of $ 0.0001 par value;

no shares authorized and none issued and outstanding at June 30, 2020 and December 31, 2019, respectively

no shares authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 2,094,983 1,970,047

28 unchanged sentences

Balances – June 30, 2020 1,670,290 $ 167 $ 2,093,877 $ 486 $ ( 1,624,044 ) $ 470,486

Net issuance of restricted stock awards and recognition of stock-based compensation 14 — 945 945

Contribution of services — — 47 — — 47

Recognition of stock-based compensation of employee stock purchase plan — — 99 99

Common stock issued in connection with conversion of 2013 8.00 % Notes

51 — 15 — — 15

Other comprehensive loss — — — ( 91 ) — ( 91 )

Net loss — — — — ( 24,946 ) ( 24,946 )

Balances – September 30, 2020 1,670,355 $ 167 $ 2,094,983 $ 395 $ ( 1,648,990 ) $ 446,555

Shares Common

17 unchanged sentences

Balances – June 30, 2019 1,451,738 $ 145 $ 1,940,113 $ ( 4,607 ) $ ( 1,542,765 ) $ 392,886

Issuances (forfeitures) of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation ( 102 ) — 966 — — 966

Contribution of services — — 47 — — 47

Recognition of stock-based compensation of employee stock purchase plan — — 110 — — 110

Other comprehensive income — — — 1,022 — 1,022

Net income — — — — 21,111 21,111

Balances – September 30, 2019 1,451,636 $ 145 $ 1,941,236 $ ( 3,585 ) $ ( 1,521,654 ) $ 416,142

See accompanying notes to unaudited interim condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

2020 June 30,

Nine Months Ended

September 30,

2020 September 30,

Cash flows provided by (used in) operating activities:

7 unchanged sentences

Noncash interest and accretion expense 25,694 13,932

Unrealized foreign currency loss (gain) 7,619 ( 975 )

Change to estimated impact upon adoption of ASC 606 — ( 3,885 )

Unrealized foreign currency loss 7,850 1,213

Other, net ( 104 ) 344

25 unchanged sentences

Cash, cash equivalents and restricted cash, end of period $ 74,336 $ 87,449

September 30,

2020 December 31,

3 unchanged sentences

Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 74,336 $ 59,128

Six Months Ended

2020 June 30,

Nine Months Ended

September 30,

2020 September 30,

Supplemental disclosure of cash flow information:

30 unchanged sentences

In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, condensed consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year or any future period.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recent Developments:

3 unchanged sentences

In recent months, some governmental agencies have partially lifted restrictions, but significant economic uncertainties remain.

The Company performed a detailed analysis of its financial statements, liquidity position and business operations to assess the impact caused by COVID-19 for the period ended June 30, 2020 and through the release date of these condensed consolidated financial statements.

Among other effects, the Company has accommodated certain pricing concessions requested by customers and experienced lower demand for its products and services, particularly from its retail customers and those that operate in the oil and gas market.

While the full extent and duration of the impact is unknown, the Company expects a continuation of this lower demand at least until these industries fully recover.

The Company performed a detailed analysis of its financial statements, liquidity position and business operations to assess the impact caused by COVID-19 for the period ended September 30, 2020 and through the release date of these condensed consolidated financial statements.

While the full extent and duration of the impact is unknown, the Company expects a continuation of this lower demand at least until this industry fully recovers.

While the Company also initially experienced a reduction in demand from its customers that operate in the retail industry, this demand has recovered, due in part to the re-opening of most retailer store locations.

Additionally, the Company began and expects to continue to operate with a remote workforce, manage a supply chain sourcing predominantly from China, and engage with international regulators remotely to advance the terrestrial spectrum authorization process.

36 unchanged sentences

The Company has not yet determined the impact this standard will have on its condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

Among other things, ASU No.

2020-06 simplifies the guidance in ASC 470 by eliminating two of the three models that require separating embedded conversion features from convertible instruments.

This ASU is effective for public entities for annual and interim periods beginning after December 15, 2021.

Early adoption is permitted as of the beginning of any interim or annual reporting period, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

For existing debt instruments, the Company does not expect this standard will have a material impact to its condensed consolidated financial statements or related disclosures.

Recently Adopted Accounting Pronouncements

13 unchanged sentences

This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019.

Company adopted this standard when it became effective on January 1, 2020.

The Company adopted this standard when it became effective on January 1, 2020.

The adoption of this standard impacted certain of the Company's disclosures included in Note 6:

2 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Service revenue:

13 unchanged sentences

Engineering and other service revenue includes revenue generated primarily from certain governmental and engineering service contracts.

During the three and six months ended June 30, 2020, the Company recognized $ 2.0 million and $ 6.0 million, respectively, in revenue related to the completion of certain milestones for non-recurring engineering services under the Terms Agreement described in its 2019 Annual Report.

During the three and nine months ended September 30, 2020, the Company recognized $ 2.0 million and $ 8.0 million, respectively, in revenue related to the completion of certain milestones for non-recurring engineering services under the Terms Agreement described in its 2019 Annual Report.

The Company attributes equipment revenue to various countries based on the location where equipment is sold.

1 unchanged sentence

The following table discloses revenue disaggregated by geographical market (amounts in thousands):

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Service revenue:

13 unchanged sentences

Total revenue $ 32,757 $ 38,614 $ 95,315 $ 99,883

As disclosed in the Company's 2019 Annual Report, during the third quarter of 2019, the Company changed its calculation of the estimated impact from the initial adoption of ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") on January 1, 2018.

The Company recorded a cumulative adjustment to service revenue during the third quarter of 2019;

this adjustment included an out-of-period amount of $ 3.9 million.

Accounts Receivable

The Company has agreements with certain of its independent gateway operators ("IGOs") whereby the parties net settle outstanding payables and receivables between the respective entities on a periodic basis.

As of June 30, 2020 and December 31, 2019, $ 6.3 million and $ 6.5 million, respectively, related to these agreements was included in accounts receivable on the Company’s condensed consolidated balance sheet.

As of September 30, 2020 and December 31, 2019, $ 6.4 million and $ 6.5 million, respectively, related to these agreements was included in accounts receivable on the Company’s condensed consolidated balance sheet.

Contract Liabilities

Contract liabilities, which are included in deferred revenue on the Company’s condensed consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration.

The amount of revenue recognized during the six months ended June 30, 2020 and 2019 from performance obligations included in the contract liability balance at the beginning of each of the periods was $ 24.4 million and $ 21.4 million, respectively.

The amount of revenue recognized during the nine months ended September 30, 2020 and 2019 from performance obligations included in the contract liability balance at the beginning of each of the periods was $ 27.5 million and $ 29.5 million, respectively.

In general, the duration of the Company’s contracts is one year or less;

however, from time to time, the Company offers multi-year contracts.

As of June 30, 2020, the Company expects to recognize $ 27.0 million, or approximately 84 %, of its remaining performance obligations during the next twelve months .

As of September 30, 2020, the Company expects to recognize $ 28.3 million, or approximately 85 %, of its remaining performance obligations during the next twelve months .

Additionally, approximately $ 2.9 million, which is classified as non-current deferred revenue as of September 30, 2020, is related to a contract executed in 2007 for the construction of a gateway in Nigeria.

Subsequent to the quarter end, the Company took steps to terminate this contract due to a lack of performance by the partner.

If this contract is terminated under the terms of the agreement, the deferred revenue balance may be recognized into revenue.

CREDIT LOSSES

8 unchanged sentences

Accounts receivable are uncollateralized, without interest, and consist primarily of receivables from the sale of Globalstar services and equipment.

For service customers,

payment is generally due within thirty days of the invoice date and for equipment customers, payment is generally due within thirty to sixty days of the invoice date, or, for some customers, may be made in advance of shipment.

For service customers, payment is generally due within thirty days of the invoice date and for equipment customers, payment is generally due within thirty to sixty days of the invoice date, or, for some customers, may be made in advance of shipment.

Credit Losses

3 unchanged sentences

The estimate of the allowance for credit losses is computed using aging schedules by type of revenue (service and subscriber equipment), by product (Duplex, SPOT and Commercial IoT) and by country.

As discussed above, accounts receivable are considered past due in accordance with the contractual terms of the arrangements.

As discussed above, accounts receivable are considered past due in accordance with the contractual terms of the applicable arrangements.

The Company applies a loss rate to its portfolio of trade receivables based on past-due status and records an allowance for doubtful accounts, which represents the expected losses of those trade receivables over their estimated contractual life.

6 unchanged sentences

COVID-19 has resulted in some disruption to the Company, primarily as it relates to the volume of equipment sales and uncertainties impacting the collection of certain outstanding receivables.

Although the Company expects this disruption to be temporary, it has considered the potential impact of COVID-19 on its portfolio of trade receivables and has increased its loss rate for such receivables for the period ending June 30, 2020, where necessary.

The Company will continue to reassess its sales and collections of receivables each reporting period to support its allowance across its portfolio.

The following is a summary of the activity in the allowance for doubtful accounts as of June 30, 2020 (in thousands):

Balance at beginning of period $ 2,952

The following is a summary of the activity in the allowance for doubtful accounts as of September 30, 2020 (in thousands):

Balance at beginning of period, December 31, 2019 $ 2,952

Impact of adoption of ASU 2016-13 1,684

1 unchanged sentence

Write-offs and other adjustments ( 1,593 )

Balance at end of period $ 5,136

Balance at end of period, September 30, 2020 $ 4,539

LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Amount Unamortized Discount and Deferred Financing Costs Carrying

12 unchanged sentences

The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion, as further described below.

portion of long-term debt represents the scheduled principal repayment under the Facility Agreement due within one year of the balance sheet date.

The current portion of long-term debt represents the scheduled principal repayments under the Facility Agreement and the PPP Loan due within one year of the balance sheet date.

First Lien Facility Agreement

11 unchanged sentences

The acceleration of the Company's indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-acceleration provisions.

As of June 30, 2020, the Company was in compliance with respect to the covenants of the Facility Agreement.

As of September 30, 2020, the Company was in compliance with respect to the covenants of the Facility Agreement.

The Company continues to monitor the impact of COVID-19 on its results of operations and liquidity relative to compliance with financial covenants over the next twelve months.

The Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the Facility Agreement) on a semi-annual basis.

During 2020, the Company was required to pay $ 0.3 million and $ 3.1 million to its first lien lenders resulting from the Excess Cash Flow calculations as of December 31, 2019 and June 30, 2020, respectively.

These payments reduce future principal payment obligations.

The Facility Agreement also requires the Company to maintain a debt service reserve account, which is pledged to secure all of the Company's obligations under the Facility Agreement.

The required balance in the debt service reserve account is fixed and must equal at least $ 50.9 million.

As of June 30, 2020, the balance in the debt service reserve account was $ 51.2 million and is classified as non-current restricted cash on the Company's condensed consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the Facility Agreement in December 2022.

The required balance in the debt service reserve account is fixed

and must equal at least $ 50.9 million.

As of September 30, 2020, the balance in the debt service reserve account was $ 51.2 million and is classified as non-current restricted cash on the Company's condensed consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the Facility Agreement in December 2022.

The amended and restated Facility Agreement includes a requirement that the Company raise no less than $ 45.0 million of equity prior to March 31, 2021 via the cash exercise of outstanding warrants or the sale of other equity, the proceeds of which are required to be applied towards the principal payment due on June 30, 2021 and then, if applicable, to the next scheduled principal payments.

1 unchanged sentence

however, it may be required to find alternative sources of equity capital if the Company's share price does not exceed the warrants' exercise price of $ 0.38 per share.

In December 2019, the Company received proceeds of $ 3.6 million from the exercise of a portion of warrants issued to the Second Lien Term Loan Facility Agreement lenders, which is retained in the equity proceeds account under the Facility Agreement and recorded in current restricted cash on the Company's condensed consolidated balance sheet as of June 30, 2020 and may be used to fulfill a portion of the $ 45.0 million requirement discussed above.

In December 2019, the Company received proceeds of $ 3.6 million from the exercise of a portion of warrants issued to the Second Lien Term Loan Facility Agreement lenders, which is retained in the equity proceeds account under the Facility Agreement and recorded in current restricted cash on the Company's condensed consolidated balance sheet as of September 30, 2020 and may be used to fulfill a portion of the $ 45.0 million requirement discussed above.

Second Lien Facility Agreement

4 unchanged sentences

These warrants expire on March 31, 2021.

As of June 30, 2020, approximately 115.0 million warrants remain outstanding.

As of September 30, 2020, approximately 115.0 million warrants remain outstanding.

As previously discussed, the Company received a loan under the CARES Act in April 2020.

Due to restrictions limiting the Company's ability to incur indebtedness, the execution of this loan required a waiver under the Second Lien Term Loan Facility, which was approved by the Company's second lien lenders.

As of June 30, 2020, the Company was in compliance with the covenants of the Second Lien Term Loan Facility.

As of September 30, 2020, the Company was in compliance with the covenants of the Second Lien Term Loan Facility.

Refer to Note 5:

22 unchanged sentences

The Indenture provides for customary events of default.

As of June 30, 2020, the Company was in compliance with respect to the terms of the 2013 8.00 % Notes and the Indenture.

As of September 30, 2020, the Company was in compliance with respect to the terms of the 2013 8.00 % Notes and the Indenture.

Refer to Note 5:

9 unchanged sentences

Furthermore, the Company's first and second lien lenders would require the Company to accelerate the repayment of any portion of the loan amount that is not forgiven.

As the deferral period allowed under the CARES Act is greater than twelve months from the balance sheet date, the loan is classified as long-term debt as of June 30, 2020.

The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the PPP Loan as debt under ASC 470.

4 unchanged sentences

The following table discloses the fair values of the derivative instruments on the Company’s condensed consolidated balance sheets (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Derivative liabilities:

4 unchanged sentences

Total derivative liabilities $ ( 1,170 ) $ ( 3,792 )

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

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Compound embedded derivative with the 2013 8.00 % Notes

17 unchanged sentences

The following tables provide a summary of the liabilities measured at fair value on a recurring basis (in thousands):

June 30, 2020

September 30, 2020

(Level 1) (Level 2) (Level 3) Total

15 unchanged sentences

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

June 30, 2020

September 30, 2020

Volatility Risk-Free

2 unchanged sentences

0.2 % $ 0.69 23 % $ 0.31

During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was extinguished and, therefore, as of June 30, 2020, the value was zero and there were no significant qualitative Level 3 inputs utilized in a valuation.

During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was extinguished and, therefore, as of September 30, 2020, the value was zero and there were no significant qualitative Level 3 inputs utilized in a valuation.

Long-Term Debt and Other Financing Arrangements and Note 5:

9 unchanged sentences

The compound embedded derivative with the Second Lien Term Loan Facility is valued using a probability weighted discounted cash flow model.

The most significant observable input used in the fair value measurement is the discount yield, which was 19 % and 18 % at June 30, 2020 and December 31, 2019, respectively.

Increases in the discount yield generally will result in a higher fair value measurement in the model.

The unobservable inputs used in the fair value measurement include probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement.

The most significant observable input used in the fair value measurement is the discount yield, which was 17 % and 18 % at September 30, 2020 and December 31, 2019, respectively.

Decreases in the discount yield generally will result in a lower fair value measurement in the model.

The unobservable inputs used in the fair value measurement include the probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement.

Rollforward of Recurring Level 3 Liabilities

4 unchanged sentences

Unrealized gain, included in derivative gain 1,564 145,073

Balance at end of period, June 30, 2020 and December 31, 2019, respectively

Balance at end of period, September 30, 2020 and December 31, 2019, respectively

$ ( 1,170 ) $ ( 3,792 )

3 unchanged sentences

The following table sets forth the carrying values and estimated fair values of the Company's other debt instruments, which are classified as Level 3 financial instruments (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

14 unchanged sentences

RELATED PARTY TRANSACTIONS

Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.4 million and $ 0.3 million as of June 30, 2020 and December 31, 2019, respectively.

Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.5 million and $ 0.3 million as of September 30, 2020 and December 31, 2019, respectively.

Transactions with Thermo

4 unchanged sentences

Annual lease payments started at $ 1.4 million per year, increasing at a rate of 2.5 % per year, for a lease term of 10 years.

During the three months ended June 30, 2020 and 2019, the Company incurred lease expense of $ 0.4 million in each period under this lease agreement.

During the six months ended June 30, 2020 and 2019, the Company incurred lease expense of $ 0.8 million and $ 0.7 million, respectively, due to Thermo under this lease agreement.

During the three months ended September 30, 2020 and 2019, the Company incurred lease expense of $ 0.4 million in each period under this lease agreement.

During the nine months ended September 30, 2020 and 2019, the Company incurred lease expense of $ 1.2 million and $ 1.1 million, respectively, due to Thermo under this lease agreement.

On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement resulting in the issuance of 200.1 million shares of common stock.

2 unchanged sentences

This principal balance earns paid-in-kind interest at a rate of 13 % per annum.

Interest accrued since inception with respect to Thermo's portion of the debt outstanding on the Second Lien Term Loan Facility was approximately $ 7.6 million, of which $ 6.4 million was accrued during the six months ended June 30, 2020.

In connection with the issuance of the Second Lien Term Loan Facility, the holders received warrants to purchase shares of voting

common stock, of which Thermo received 59.5 million warrants with an exercise price of $ 0.38 per share.

As of June 30, 2020, approximately 50.0 million warrants remain outstanding.

Interest accrued since inception with respect to Thermo's portion of the debt outstanding on the Second Lien Term Loan Facility was approximately $ 11.0 million, of which $ 9.8 million was accrued during the nine months ended September 30, 2020.

In connection with the issuance of the Second Lien Term Loan Facility, the holders received warrants to purchase shares of voting common stock, of which Thermo received 59.5 million warrants with an exercise price of $ 0.38 per share.

As of September 30, 2020, approximately 50.0 million warrants remain outstanding.

Additionally, the Facility Agreement requires Thermo to maintain minimum and maximum ownership levels in the Company's common stock.

9 unchanged sentences

The following table sets forth the calculation of basic and diluted (loss) earnings per share and reconciles basic weighted average shares to diluted weighted average shares of common stock outstanding for the periods indicated (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

16 unchanged sentences

Diluted ( 0.01 ) ( 0.01 ) ( 0.05 ) ( 0.05 )

For each of the three and six months ended June 30, 2020, 4.4 million shares of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

For the three and nine months ended September 30, 2020, 4.3 million shares and 4.4 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements