What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-04 compared with 2020-02-28 · 692 added, 718 removed, 853 unchanged (62% of the section changed)

2 unchanged sentences

Audited Consolidated Financial Statements of Globalstar, Inc.

Report of Crowe LLP, independent registered public accounting firm

Report of Ernst & Young LLP, independent registered public accounting firm 46

Consolidated balance sheets at December 31, 2020 and 2019

5 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Globalstar, Inc.

Covington, Louisiana

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Globalstar, Inc.

(the "Company") as of December 31, 2019 and 2018 , the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019 , and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2019 , based on criteria established in Internal Control - Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018 , and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 , based on criteria established in Internal Control - Integrated Framework:

(2013) issued by COSO.

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A - Management's Annual Report on Internal Control over Financial Reporting .

Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

To the Board of Directors and Stockholders of Globalstar, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Globalstar, Inc.

(the Company) as of December 31, 2020, and the related consolidated statement of operations, comprehensive loss, stockholders’ equity, and cash flows for the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 4, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, and as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Useful life of Space component assets

Description of the Matter At December 31, 2020, the Company had $1.2 billion of Space component assets recorded as property and equipment.

As discussed in Note 1 to the consolidated financial statements, the Company’s Space component assets are depreciated on a straight-line basis over their estimated useful life, which is currently estimated to be 15 years.

Management’s estimate of the useful life of its Space component assets was based on estimated design life, information from the Company’s engineering department and overall Company strategy for the use of the assets.

Auditing the Company’s estimate of the useful life of its Space component assets involved a high degree of subjectivity due to the application of management’s judgment when evaluating the available information to determine the estimated useful life.

The resulting estimated useful life has a significant effect on the timing of recognition of depreciation expense given the magnitude of the carrying amount of the Space component assets.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to determine the estimate useful life of its Space component assets, including controls over management’s evaluation of the available information to determine the estimated useful life.

Our testing of the Company's estimated useful life of the Space component assets included, among other procedures, evaluating the application of available information to determine their estimated useful life.

We compared management’s useful life to the manufacturer’s estimated design life, publicly available information on the estimated useful life of similar assets, operation and performance of the assets per the Company’s engineering group, and the life of its first-generation satellite constellation.

Additionally, we evaluated the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful life estimate.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

New Orleans, Louisiana

March 4, 2021

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders Globalstar, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Globalstar, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Globalstar, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2020, and the related notes and our report dated March 4, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

New Orleans, Louisiana

March 4, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Globalstar, Inc.

Covington, Louisiana

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Globalstar, Inc.

(the "Company") as of December 31, 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Crowe LLP

We have served as the Company's auditor since 2006.

We served as the Company's auditor from 2006 to 2019.

Oak Brook, Illinois

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Restricted cash 3,625 622

Accounts receivable, net of allowance of $2,952 and $3,382, respectively

Accounts receivable, net of allowance for credit losses of $ 4,352 and $ 2,952 , respectively

22,147 21,760

Inventory 13,736 16,341

Prepaid expenses and other current assets 15,649 16,931

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Intangible and other assets, net of accumulated amortization of $ 9,998 and $ 9,009 , respectively

38,229 35,645

Total assets $ 888,093 $ 965,590

LIABILITIES AND STOCKHOLDERS’ EQUITY

4 unchanged sentences

Payables to affiliates 581 261

Derivative liabilities

Deferred revenue 25,977 29,910

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Total non-current liabilities 350,813 495,187

Commitments and contingent liabilities (Notes 9 and 10)

Commitments and contingent liabilities (Note 9)

Stockholders’ equity:

Preferred Stock of $ 0.0001 par value;

100,000,000 shares authorized and none issued and outstanding at December 31, 2019 and 2018, respectively

100,000,000 shares authorized and no ne issued and outstanding at December 31, 2020 and 2019, respectively

Series A Preferred Convertible Stock of $ 0.0001 par value;

one share authorized and none issued and outstanding at December 31, 2019 and 2018, respectively

one share authorized and no ne issued and outstanding at December 31, 2020 and 2019, respectively

Voting Common Stock of $ 0.0001 par value;

1,900,000,000 shares authorized and 1,464,544,144 shares issued and outstanding at December 31, 2019;

1,500,000,000 shares authorized and 1,446,783,645 shares issued and outstanding at December 31, 2018

1,900,000,000 shares authorized;

1,674,668,617 shares and 1,464,544,144 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Nonvoting Common Stock of $ 0.0001 par value;

no shares authorized and none issued and outstanding at December 31, 2019;

400,000,000 shares authorized and none issued and outstanding at December 31, 2018

no sh ares authorized and no ne issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Additional paid-in capital 2,096,566 1,970,047

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Year Ended December 31,

2020 2019 2018

Service revenue $ 113,191 $ 113,386 $ 111,089

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Loss from operations ( 59,163 ) ( 64,046 ) ( 47,379 )

Other income (expense):

Loss on extinguishment of debt

Gain on equity issuance

Other (expense) income:

Interest income and expense, net of amounts capitalized ( 48,429 ) ( 62,464 ) ( 43,612 )

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Gain on legal settlement — 120 6,779

Total other income (expense)

Income (loss) before income taxes

Foreign currency (loss) gain ( 727 ) 64 ( 3,070 )

Other ( 3,555 ) ( 2,878 ) ( 229 )

Total other (expense) income ( 49,814 ) 79,915 40,988

(Loss) income before income taxes ( 108,977 ) 15,869 ( 6,391 )

Income tax expense 662 545 125

Net income (loss)

Net income (loss) per common share:

Net (loss) income $ ( 109,639 ) $ 15,324 $ ( 6,516 )

Net (loss) income per common share:

Basic $ ( 0.07 ) $ 0.01 $ ( 0.01 )

Diluted ( 0.07 ) ( 0.07 ) ( 0.01 )

Weighted-average shares outstanding:

Basic 1,642,359 1,450,768 1,269,548

Diluted 1,642,359 1,655,191 1,269,548

See accompanying notes to Consolidated Financial Statements.

GLOBALSTAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

Year Ended December 31,

Net income (loss)

Other comprehensive income (loss):

2020 2019 2018

Net (loss) income $ ( 109,639 ) $ 15,324 $ ( 6,516 )

Other comprehensive (loss) income:

Defined benefit pension plan liability adjustment 2,042 1,097 ( 64 )

Net foreign currency translation adjustment ( 1,537 ) ( 707 ) 3,164

Total other comprehensive income (loss)

Total comprehensive income (loss)

Total other comprehensive income 505 390 3,100

Total comprehensive (loss) income $ ( 109,134 ) $ 15,714 $ ( 3,416 )

See accompanying notes to Consolidated Financial Statements.

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(In thousands)

Accumulated Other Comprehensive Income (Loss)

Balances – December 31, 2016

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

Contribution of services

Issuance and recognition of stock-based compensation of employee stock purchase plan

Issuance of stock to Terrapin

Issuance of stock to Thermo from exercise of warrants

Issuance of stock to Thermo for equity financing

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

Issuance of stock for legal settlement

Issuance of stock for public offering

Stock offering issuance costs

Investment in business

Other comprehensive loss

Shares Common

Amount Additional

Capital Accumulated Other Comprehensive Income (Loss) Retained

Deficit Total

Balances – December 31, 2017 1,261,949 $ 126 $ 1,869,339 $ ( 6,939 ) $ ( 1,571,302 ) $ 291,224

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

Net issuance of restricted stock awards and recognition of stock-based compensation 11,892 2 7,726 — — 7,728

Contribution of services — — 428 — — 428

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Impact of adoption of ASC 606 — — — — 3,093 3,093

Net loss — — — — ( 6,516 ) ( 6,516 )

Balances – December 31, 2018 1,446,784 $ 145 $ 1,937,364 $ ( 3,839 ) $ ( 1,574,725 ) $ 358,945

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

Net issuance of restricted stock awards and recognition of stock-based compensation 6,003 — 4,118 — — 4,118

Contribution of services — — 338 — — 338

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Investment in business — — 155 — — 155

Fair value of warrants issued in connection with Second Lien Term Loan Facility

Fair value of warrants issued in connection with Second Lien Facility Agreement — — 23,562 — — 23,562

Issuance of stock for warrant exercises 9,500 1 3,609 — — 3,610

Other comprehensive income — — — 390 — 390

Net income — — — — 15,324 15,324

Balances – December 31, 2019 1,464,544 $ 146 $ 1,970,047 $ ( 3,449 ) $ ( 1,559,401 ) $ 407,343

Net issuance of restricted stock awards and recognition of stock-based compensation 7,637 1 4,766 — — 4,767

Contribution of services — — 232 — — 232

Issuance and recognition of stock-based compensation of employee stock purchase plan 2,253 — 1,048 — — 1,048

Common stock issued in connection with conversion of Loan Agreement with Thermo 200,140 20 120,441 — — 120,461

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

95 — 32 — — 32

Impact of adoption of Credit Loss Standard — — — — ( 1,684 ) ( 1,684 )

Other comprehensive income — — — 505 — 505

Net loss — — — — ( 109,639 ) ( 109,639 )

Balances – December 31, 2020 1,674,669 $ 167 $ 2,096,566 $ ( 2,944 ) $ ( 1,670,724 ) $ 423,065

See accompanying notes to Consolidated Financial Statements.

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Year Ended December 31,

Cash flows provided by (used in) operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

2020 2019 2018

Cash flows provided by operating activities:

Net (loss) income $ ( 109,639 ) $ 15,324 $ ( 6,516 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation, amortization and accretion 96,815 95,772 90,438

Change in fair value of derivative assets and liabilities

Change in fair value of derivative liabilities ( 2,897 ) ( 145,073 ) ( 81,120 )

Stock-based compensation expense 5,670 5,700 6,995

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Reduction in the value of long-lived assets and inventory 1,078 1,540 —

Provision for bad debts

Non-cash interest and accretion expense

Loss on extinguishment of debt

Change in fair value related to equity issuance

Provision for credit losses 1,656 1,747 1,398

Noncash interest and accretion expense 33,847 21,453 14,541

Revision to contract termination charge — — ( 20,478 )

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

Unrealized foreign currency (gain) loss

Loss on pension settlement 2,075 455 —

Noncash revenue recognized from terminated contract ( 2,916 ) — —

Unrealized foreign currency loss (gain) 1,362 ( 192 ) 3,057

Other, net 338 143 919

Changes in operating assets and liabilities:

Accounts receivable ( 8,494 ) ( 4,299 ) ( 3,792 )

Inventory 2,176 ( 1,664 ) ( 486 )

Prepaid expenses and other current assets 981 ( 421 ) ( 7,926 )

Other assets ( 890 ) 864 ( 3,794 )

Accounts payable and accrued expenses ( 197 ) ( 173 ) 3,979

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Cash flows provided by (used in) financing activities:

Principal payments of the Facility Agreement

Principal payments of the First Lien Facility Agreement ( 3,373 ) ( 199,029 ) ( 77,866 )

Proceeds from PPP Loan 4,973 — —

Net proceeds from common stock offering and exercise of warrants — 3,610 59,100

Proceeds from Thermo Common Stock Purchase Agreement

Payment of debt restructuring fee

Payment of financing costs

Payments for debt and equity issuance costs ( 1,074 ) ( 6,166 ) ( 276 )

Proceeds from Subordinated Loan Agreement — 62,000 —

Payoff of Subordinated Loan Agreement — ( 62,000 ) —

Proceeds from Second Lien Term Loan Facility

Proceeds from issuance of stock to Terrapin

Proceeds from issuance of common stock and exercise of options and warrants

Proceeds from Second Lien Facility Agreement — 192,990 —

Proceeds from issuance of common stock and exercise of options 638 672 846

Net cash provided by (used in) financing activities 1,164 ( 7,923 ) ( 18,196 )

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As of December 31,

2020 2019 2018

Reconciliation of cash, cash equivalents and restricted cash

1 unchanged sentence

Restricted cash (See Note 6 for further discussion on restrictions)

54,693 51,522 60,278

Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 68,023 $ 59,128 $ 75,490

1 unchanged sentence

Cash paid for:

Interest $ 10,918 $ 27,353 $ 25,867

Income taxes 68 45 155

Year Ended December 31,

2020 2019 2018

Supplemental disclosure of non-cash financing and investing activities:

Increase in capitalized accrued interest for second-generation network costs $ 1,638 $ 434 $ 2,093

Fair value of warrants issued with Second Lien Term Loan Facility

Capitalized accretion of debt discount and amortization of prepaid financing costs 447 501 1,898

Issuance of common stock for legal settlement

Principal amount of debt converted into common stock

Reduction of debt discount and issuance costs due to note conversions

Fair value of common stock issued upon conversion of debt

Reduction in derivative liability due to conversion of debt

Principal amount of Loan Agreement with Thermo converted into common stock 137,366 — —

Reduction of debt discount and issuance costs due to conversion of Loan Agreement with Thermo 17,963 — —

Fair value of common stock issued upon conversion of Loan Agreement with Thermo 84,059 — —

Reduction in derivative liability due to conversion of Loan Agreement with Thermo 1,058 — —

Fair value of warrants issued with Second Lien Facility Agreement — 23,562 —

See accompanying notes to Consolidated Financial Statements.

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Globalstar, Inc.

(“Globalstar” or the “Company”) was formed as a Delaware limited liability company in November 2003 and was converted into a Delaware corporation on March 17, 2006.

Globalstar provides Mobile Satellite Services (“MSS”) including voice and data communications services through its global satellite network.

(“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications services through its global satellite network.

The Company’s only reportable segment is its MSS business.

Thermo Companies, through commonly controlled affiliates, (collectively, “Thermo”) is the principal owner and largest stockholder of Globalstar.

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and transportation.

Globalstar currently provides the following communications services via satellite which are available only with equipment designed to work on the Globalstar network:

two-way voice communication and data transmissions using mobile or fixed devices, including the GSP-1700 phone, two generations of our Sat-Fi ® , the Sat-Fi ® Remote Antenna Station, and other fixed and data-only devices ("Duplex");

one-way or two-way communication and data transmissions using mobile devices, including the SPOT family of products, such as SPOT X ® , SPOT Gen3 ® and SPOT Trace ® , that transmit messages and the location of the device ("SPOT");

one-way data transmissions using a mobile or fixed device that transmits its location and other information to a central monitoring station, including commercial IoT products, such as the battery- and solar-powered SmartOne, STX-3 and STINGR ("Commercial IoT").

Globalstar provides Duplex, SPOT and Commercial IoT products and services to customers directly and through a variety of independent agents, dealers and resellers, and independent gateway operators (“IGOs”).

Globalstar currently provides the following communications services:

• two-way voice communication and data transmissions using mobile or fixed devices, including the GSP-1700 phone, two generations of the Sat-Fi ® and other fixed and data-only devices ("Duplex");

• one-way or two-way communication and data transmissions using mobile devices, including the SPOT family of products, such as SPOT X ® , SPOT Gen4 TM and SPOT Trace ® , that transmit messages and the location of the device ("SPOT");

• one-way data transmissions using a mobile or fixed device that transmits its location and other information to a central monitoring station, including commercial IoT products, such as the battery- and solar-powered SmartOne, STX-3 and ST100 ("Commercial IoT");

• engineering services to assist certain customers in developing new applications to operate on the Company's network, enhancements to the Company's ground network and other communication services using the Company's MSS and terrestrial spectrum licenses ("Engineering and Other").

Globalstar provides Duplex, SPOT and Commercial IoT products and services to customers directly and through a variety of independent agents, dealers, resellers and independent gateway operators (“IGOs”).

COVID-19 Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic.

The impact caused by COVID-19 for the period ended December 31, 2020 and through the release date of these consolidated financial statements included, among other effects, the accommodation of certain pricing concessions requested by customers and experienced lower demand for its products and services, particularly from its customers 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 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.

There are a number of uncertainties that could impact the Company's future results of operations, including the effectiveness of COVID-19 mitigation measures;

the duration of the pandemic;

global economic conditions;

changes to the Company's operations;

changes in consumer confidence, behaviors and spending;

work from home trends;

and the sustainability of supply chains.

In accordance with the Company's accounting policies disclosed in this Report, the Company reviews the carrying value of long-lived assets, amortizable intangible assets and inventory when circumstances warrant an assessment in order to evaluate whether indicators of impairment exist.

No indicators of impairment of long-lived assets or intangible assets were identified;

furthermore, the reduction in cash flows from the areas of the business impacted by COVID-19 are expected to be temporary.

For inventory associated with the areas of the business impacted by COVID-19, the carrying value of inventory on hand was already lower than its expected net realizable value;

accordingly, no impairment has been necessary in connection with

For accounts receivable, the Company increased its loss rate for certain receivables as discussed in more detail in this Note 1:

Summary of Significant Accounting Policies.

Revised internal cash flow and financial projections have also been evaluated in light of financial covenant requirements in the Company's facility agreements.

This liquidity assessment considers relief granted to the Company under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act), including a $ 5.0 million loan the Company received in April 2020 under the payroll protection program, which the Company expects to be forgiven, and the deferral of the payment of certain payroll taxes.

Additionally, the Company evaluated tax law changes pursuant to the CARES Act and revised its net operating loss carryforwards and other estimates, as necessary.

For further discussion relating to the matters discussed above, see Note 6:

Long-Term Debt and Other Financing Arrangements and Note 13:

Use of Estimates in Preparation of Financial Statements

4 unchanged sentences

The Company evaluates estimates on an ongoing basis.

Significant estimates include the value of derivative instruments, the allowance for doubtful accounts, the net realizable value of inventory, the useful life and value of property and equipment, the value of stock-based compensation, and income taxes.

Principles of Consolidation

4 unchanged sentences

Restricted Cash

Restricted cash is comprised of funds held in escrow by the agent for the Company’s senior secured facility agreement (the “Facility Agreement”) to secure the Company’s principal and interest payment obligations related to its Facility Agreement.

Restricted cash is classified as either a current or non-current asset on the Company's Consolidated Balance Sheet based on when these funds are expected to be used to pay principal and interest due under the Facility Agreement.

Restricted cash is comprised of funds held in escrow by the agent for the Company’s senior secured facility agreement (the “First Lien Facility Agreement”) to secure the Company’s principal and interest payment obligations related to its First Lien Facility Agreement.

Concentration of Credit Risk

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Accounts and Notes Receivable

On January 1, 2020, the Company adopted the provisions of ASU No.

2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments , and recognized the cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained deficit.

As a result of adopting ASU No.

2016-13, the Company recorded a net decrease to stockholders' equity of $ 1.7 million, which resulted in an increase to the opening retained deficit balance as of January 1, 2020.

The most significant driver of this adjustment was the Company’s change in accounting policy related to expected losses (rather than incurred losses) from trade receivables applied to its portfolio based on historical and future performance.

Receivables are recorded when the right to consideration from the customer becomes unconditional, which is generally upon billing or upon satisfaction of a performance obligation, whichever is earlier.

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.

The Company performs ongoing credit evaluations of its customers and impairs receivable balances by recording specific allowances for bad debts based on factors such as current trends, the length of time the receivables are past due and historical collection experience.

Accounts receivable are considered past due in accordance with the contractual terms of the arrangements.

Accounts receivable balances that are determined likely to be uncollectible are included in the allowance for doubtful accounts.

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.

The Company performs ongoing credit evaluations of its customers and impairs receivable balances by recording specific allowances for credit losses based on factors such as supportable and reasonable current trends, the length of time the receivables are past due and historical collection experience.

The Company believes that historical collection experience is the most reasonable basis for predicting future performance.

The Company’s major portfolio of contract assets are customer receivables and, as such, historical delinquency percentages are generally consistent over time.

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 applicable arrangements.

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

The estimated life may vary by service and product type, but is generally less than one year.

Allowances are generally recorded for all aging categories of outstanding receivables, including those in the current category (which is a change from legacy GAAP).

Accounts receivable balances that are determined likely to be uncollectible are included in the allowance for credit losses.

After attempts to collect a receivable have failed, the receivable is written off against the allowance.

Effective January 1, 2020, the Company adopted ASU No.

2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments .

The consolidated financial statements, including related disclosures, will reflect this adoption in prospective financial periods.

The following is a summary of the activity in the allowance for doubtful accounts (in thousands):

In March 2020, after the Company adopted ASU No.

2016-13, the World Health Organization declared the outbreak COVID-19 a global pandemic.

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 year ended December 31, 2020, in limited circumstances.

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 credit losses (in thousands):

Year Ended December 31,

2020 2019 2018

Balance at beginning of period $ 2,952 $ 3,382 $ 3,610

Impact of adoption of ASU 2016-13 1,684 — —

Provision, net of recoveries 1,656 1,747 1,398

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Balance at end of period $ 4,352 $ 2,952 $ 3,382

Inventory consists primarily of purchased products, including subscriber equipment devices which work on the Company’s network, of approximately $12.0 million and $8.6 million as of December 31, 2019 and 2018 , respectively, as well as ground infrastructure assets expected to be used as spare parts of approximately $4.3 million and $5.7 million as of December 31, 2019 and 2018 , respectively.

Inventory is stated at the lower of cost and net realizable value.

Inventory consists primarily of purchased products, including subscriber equipment devices, which work on the Company’s network, of approximately $ 9.5 million and $ 12.0 million as of December 31, 2020 and 2019, respectively, as well as ground infrastructure assets expected to be used as spare parts of approximately $ 4.3 million as of December 31, 2020 and 2019, respectively.

Inventory is stated at the lower of cost or net realizable value.

Cost is computed using the first-in, first-out (FIFO) method.

Inventory write downs are measured as the difference between the cost of inventory and the net realizable value and are recorded as a cost of subscriber equipment sales - reduction in the value of inventory in the Company’s Consolidated Financial Statements.

At the point of any inventory write down to net realizable value, a new, lower cost basis for that inventory is established, and any subsequent changes in facts and circumstances do not result in the restoration of the former cost basis or increase in that newly established cost basis.

Product sales and returns from the previous 12 months and future demand forecasts are reviewed and excess and obsolete inventory is written off.

For the years ended December 31, 2020 and 2019, the Company wrote down the value of inventory by $ 0.7 million and $ 0.4 million, respectively, after adjusting for changes in net realizable value.

In 2020, the Company discontinued production of a second-generation Duplex device, which was the majority of the write down recorded.

The remaining reduction in value of inventory recorded during 2020 was driven by an evaluation of excess or obsolete inventory related to end of life products and technology.

In 2019, the Company reduced the carrying value of gateway spare parts due to excess hardware parts.

In 2017, the carrying value of certain products, particularly in international locations, was higher than the net realizable value;

additionally, the Company recorded a reduction in the value of prepaid inventory

due to design changes for products under development.

During the year ended December 31, 2018, no write down of inventory was required.

During the year ended December 31, 2018, no write down of inventory was recorded.

Property and Equipment

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Space Component - 15 years from the commencement of service

Ground Component - Up to 15 years from commencement of service

Ground Component - 7 or 15 years from commencement of service

Software, Facilities & Equipment - 3 to 10 years

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Leasehold Improvements - Shorter of lease term or the estimated useful lives of the improvements

The estimated useful lives of the Company's Space and Ground components were based on estimated design life, information from the Company's engineering department and overall Company strategy for the use of these assets.

The Company evaluates and revises the estimated depreciable lives assigned to property and equipment based on changes in facts and circumstances.

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For assets that are sold or retired, including satellites that are de-orbited and no longer providing services, the estimated cost and accumulated depreciation is removed from property and equipment.

The Company assesses the impairment of long-lived assets when indicators of impairment are present.

The Company assesses the impairment of property and equipment whenever events or changes in circumstances indicate that the recorded value may not be recoverable.

Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs.

If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

If the asset is not recoverable, its carrying value would be adjusted down to fair value and an impairment loss would be recorded.

Additionally, the Company routinely performs profitability analyses to determine if investments in certain products and/or services remain viable.

In the event the Company decides not to support a product or service, or determines that an asset is not expected to generate future benefit, the asset may be abandoned and an impairment loss may be recorded on the associated assets.

Assets held for sale are carried at the lower of cost or fair value less estimated cost to sell;

these assets are generally classified as current on the Company's consolidated balance sheets as the disposal of these assets is expected within one year.

As of December 31, 2019, the Company had approximately $0.5 million of assets classified as held for sale due to the anticipated disposal of its former gateway location in Nicaragua.

The change in classification from held and used to held for sale resulted in an impairment for long-lived assets of $1.1 million, which was recorded during 2019 in the Company's consolidated statement of operations.

As of December 31, 2020 and 2019, the Company had approximately $ 0.3 million and $ 0.5 million, respectively, of assets classified as held for sale due to the anticipated disposal of its former gateway location in Nicaragua.

The change in classification from held and used to held for sale resulted in an initial impairment of long-lived assets of $ 1.1 million during 2019, which was recorded in the Company's consolidated statement of operations.

In the fourth quarter of 2020, the Company signed a contract for the sale of this property;

the final selling price (net of estimated costs to sell) is $ 0.3 million and, as a result, the Company recorded an additional impairment totaling $ 0.2 million.

The Company has operating and finance leases for facilities and equipment throughout the United States and around the world, including corporate offices, satellite control centers, ground control centers, gateways and certain equipment.

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The Company has elected to combine lease and nonlease components, if applicable.

As of December 31, 2019 , there are no leases not yet commenced that create significant rights and obligations.

For operating leases, the Company records lease expense on a straight-line basis over the lease term in either marketing, general and administrative expense or cost of services, depending on the nature of the underlying asset.

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Variable lease payments excluded from the measurement of the lease liability are uncommon and, when incurred, are immaterial for the Company.

The Company’s leases have remaining lease terms of less than 1 year to 12 years .

The Company’s existing leases have remaining lease terms of less than 1 year to 11 years.

Lease terms include renewal or termination options that the Company is reasonably certain to exercise.

For leases with a term of twelve months or less, the Company does not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.

For leases with a term of twelve months or less, the Company does not record a right-of-use asset and associated lease liability on its consolidated balance sheet.

The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable.

Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs.

If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

If a right-of-use asset is not recoverable, its carrying value would be adjusted down to fair value and an impairment loss would be recorded.

Derivative Instruments

Upon inception of a contract, the Company evaluates if the contract contains a derivative instrument.

The Company has financing arrangements that are hybrid instruments that contain embedded derivative features.

Derivative instruments are recognized as either assets or liabilities in the consolidated balance sheets and are measured at fair value with gains or losses recognized in earnings.

The Company determines the fair value of derivative instruments based on available market data using appropriate valuation models.

The Company determines the fair value of derivative instruments based on available market data and assumptions developed by management using appropriate valuation models.

Deferred Financing Costs

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As of December 31, 2020 and 2019, the Company had net deferred financing costs of $ 38.5 million and $ 43.6 million, respectively.

The increase in deferred financing costs from 2018 to 2019 is driven by additions for the Second Lien Term Loan Facility Agreement entered into in November 2019 offset by a reduction in costs related to the Company's Facility Agreement that was modified in November 2019 (see Note 6:

Long-Term Debt and Other Financing Arrangements ).

Fair Value of Financial Instruments

The Company believes it is not practicable to determine the fair value of the Facility Agreement and Second Lien Term Loan Facility.

The Company believes it is not practicable to determine the fair value of the First Lien Facility Agreement, the Second Lien Facility Agreement and the Payroll Protection Program Loan ("PPP Loan").

Interest rates and other terms for long-term debt are not readily available and generally involve a variety of factors, including due diligence by the debt holders.

For the Company's other debt instruments, which include the Loan Agreement with Thermo and the Company’s 8.00% Convertible Senior Notes Issued in 2013 (“2013 8.00% Notes”), the fair value of debt is calculated using inputs consistent with those used to calculate the fair value of the derivatives embedded in these instruments.

For the Company’s 8.00 % Convertible Senior Notes Issued in 2013 (“2013 8.00 % Notes”), the fair value of debt is calculated using inputs consistent with those used to calculate the fair value of the derivatives embedded in these instruments.

Litigation, Commitments and Contingencies

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Revenue Recognition and Deferred Revenue

Effective January 1, 2018, the Company adopted ASC 606 using the modified retrospective method.

As such, the revenue accounting policies below reflect the Company's policies after adoption of this standard.

Refer to the Company's annual report on Form 10-K for the year ended December 31, 2017 for its revenue accounting policies in place during 2017 and 2016.

Revenue consists primarily of satellite voice and data service revenue and revenue generated from the sale of fixed and mobile devices as well as other products and accessories.

Revenue consists primarily of satellite voice and data service revenue, revenue generated from the sale of fixed and mobile devices, and revenue from providing engineering and support services.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

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Revenue is measured based on the consideration specified in a contract with a customer, adjusted for credits and discounts, as applicable, and is recognized when the Company satisfies a performance obligation by transferring control over a product or service to a customer.

Unless otherwise disclosed, service revenue is recognized over a period of time and revenue from the sale of subscriber equipment is recognized at a point in time.

Generally, service revenue is recognized over a period of time and revenue from the sale of subscriber equipment is recognized at a point in time.

The recognition of revenue for service is over time as the customer simultaneously receives and consumes the benefits of the Company’s performance over the contract term.

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The following describes the principal activities from which the Company generates its revenue.

The Company’s only reportable segment is its MSS business.

Duplex Service Revenue.

The Company recognizes revenue for monthly access fees in the period services are rendered.

Access fees represent the minimum monthly charge for each line of service based on its associated rate plan.

The Company also recognizes revenue for airtime minutes and data in excess of the monthly access fees in the period such minutes or data are used.

The Company offers certain annual plans whereby a customer prepays for a predetermined amount of minutes and data.

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The Company sells Commercial IoT services as monthly, annual or multi-year plans and recognizes revenue ratably over the service term or as service is used, beginning when the service is activated by the customer.

Independent Gateway Operator ("IGO") Service Revenue.

The Company owns and operates its satellite constellation and earns a portion of its revenues through the sale of airtime minutes or data on a wholesale basis to IGOs.

Revenue from services provided to IGOs is recognized based upon airtime minutes or data packages used by customers of the IGOs and in accordance with contractual fee arrangements.

Equipment Revenue.

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This estimate is adjusted periodically to reflect actual rebates given to the Company’s customers.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues.

Other Service Revenue.

Other service revenue includes primarily revenue associated with engineering services to assist customers in developing new applications related to its system.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of subscriber equipment sales.

Engineering and Other Service Revenue.

Other service revenue includes primarily revenue associated with engineering services to assist customers in developing new applications to operate on its network.

The revenue associated with these engineering services is generally recorded over time as the services are rendered, and the Company's obligation to the customer is satisfied.

Additionally, the Company owns and operates its satellite constellation and earns a portion of its revenues through the sale of airtime minutes or data on a wholesale basis to IGOs.

Revenue from services provided to IGOs is recognized based upon airtime minutes or data packages used by customers of the IGOs and in accordance with contractual fee arrangements.

Multiple-Element Arrangement Contracts.

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The Company recognizes compensation expense in the financial statements for both employee and non-employee share-based awards based on the grant date fair value of those awards.

For stock options, the Company uses the Black-Scholes option pricing model to estimate fair values of stock options.

Option pricing models, including the Black-Scholes model, require the use of input estimates and assumptions, including expected volatility, term, and risk-free interest rate.

The assumptions for expected volatility and expected term most significantly affect the estimated grant-date fair value.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards on the date of grant.

For restricted stock awards and units, the fair value is determined from the stock price on the grant date.

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The Company's estimate for pre-vesting forfeitures is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term.

Stock Compensation for a description of methods used to determine the Company's assumptions.

For share-based awards with a performance condition that affects vesting, the Company recognizes compensation cost for awards if and when the performance condition is probable of achievement.

For awards with a performance condition, the Company reassesses the probability of vesting at each reporting period and adjusts compensation cost based on the Company's probability assessment.

Stock Compensation for a description of methods used to determine the Company's assumptions.

Foreign Currency

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Income and expense items are translated at the average exchange rates prevailing during the reporting period.

For 2019 , 2018 and 2017 , the foreign currency translation adjustments were net losses of $0.7 million , net gains of $3.2 million and net losses of $1.9 million , respectively.

Foreign currency transaction gains/losses were approximately net gains of $0.1 million , net losses of $3.1 million and net losses of $2.2 million for each of 2019 , 2018 , and 2017 , respectively.

These were classified as other income (expense) on the consolidated statement of operations.

For 2020, 2019 and 2018, the foreign currency translation adjustments were net losses of $ 1.5 million, net losses of $ 0.7 million and net gains of $ 3.2 million, respectively.

Foreign currency transaction gains/losses were approximately net losses of $ 0.7 million, net gains of $ 0.1 million and net losses of $ 3.1 million for each of 2020, 2019, and 2018, respectively.

These were classified as other (expense) income on the consolidated statement of operations.

Asset Retirement Obligation

Liabilities arising from legal obligations associated with the retirement of long-lived assets are measured at fair value and recorded as a liability.

Upon initial recognition of a liability for retirement obligations, the Company records an asset, which is depreciated over the life of the asset to be retired.

Liabilities arising from legal obligations associated with the retirement of gateway long-lived assets are measured at fair value and recorded as a liability.

Upon initial recognition of a liability for retirement obligations, the Company also capitalizes, as part of the asset carrying amount, the estimated costs associated with its expected retirement.

This asset is depreciated over the life of the gateway to be retired.

Accretion of the asset retirement obligation liability and depreciation of the related assets are included in depreciation, amortization and accretion in the accompanying consolidated statements of operations.

The Company capitalizes, as part of the carrying amount, the estimated costs associated with the eventual retirement of gateways owned by the Company.

As of both December 31, 2019 and 2018 , the Company had accrued approximately $1.5 million , respectively, for asset retirement obligations.

The Company believes this estimate will be sufficient to satisfy the Company’s obligation under leases to remove the gateway equipment and restore the sites to their original condition.

As of both December 31, 2020 and 2019, the Company had accrued approximately $ 1.6 million and $ 1.5 million, respectively, for asset retirement obligations.

The Company believes this estimate will be sufficient to satisfy the Company’s obligation under site leases to remove the gateway equipment and restore the lease sites to their original condition.

Warranty Expense

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These costs are expensed as incurred as cost of services and include primarily the cost of new product development, chip set design and other engineering work.

Advertising Expenses

Advertising costs were $3.4 million , $3.6 million and $2.5 million for 2019 , 2018 , and 2017 , respectively.

These costs are expensed as incurred as marketing, general and administrative expenses.

The Company is taxed as a C corporation for U.S.

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The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date;

however, as the Company has full valuation allowance on its deferred tax assets, there is no impact to the consolidated statements of operations and balance sheets.

The Company also recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized.

however, as the Company has a full valuation allowance on its deferred tax assets, there is no impact to the consolidated statements of operations and balance sheets.

The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized.

In assessing the likelihood of realization, management considers:

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and (iv) tax planning strategies.

Comprehensive Income (Loss)

All components of comprehensive income (loss), including the minimum pension liability adjustment and foreign currency translation adjustment, are reported in the financial statements in the period in which they are recognized.

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Earnings (Loss) Per Share

The Company is required to present basic and diluted earnings (loss) per share.

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The numerator used to calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net income (loss).

Comprehensive (Loss) Income

All components of comprehensive (loss) income, including the minimum pension liability adjustment and foreign currency translation adjustment, are reported in the financial statements in the period in which they are recognized.

Comprehensive (loss) income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

(Loss) Earnings Per Share

The Company is required to present basic and diluted (loss) earnings per share.

Basic (loss) earnings per share is computed by dividing (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The numerator used to calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net (loss) income.

Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive.

Potentially dilutive securities include primarily outstanding stock-based awards, convertible notes, warrants and shares issuable pursuant to the Company's Employee Stock Purchase Plan.

The effect of potentially dilutive common shares for the Company's convertible notes are calculated using the if-converted method.

Generally, for all other potentially dilutive common shares, the effect is calculated using the treasury stock method.

Intangible and Other Assets

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The Company re-evaluates the useful life determination for wireless licenses annually, or more frequently if needed, to determine whether events and circumstances continue to support an indefinite useful life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

If an indicator is present, the Company would measure recoverability by comparing the carrying amount to the future undiscounted cash flows the asset is expected to generate.

If the asset is not recoverable, the undiscounted cash flows do not exceed the carrying amount and the carrying amount would be adjusted down to its fair value.

Intangible Assets Subject to Amortization

Our intangible assets that do not have indefinite lives (primarily developed technology and customer relationships) are amortized over their estimated useful lives.

For information related to each major classes of intangible assets, including accumulated amortization and estimated average useful lives, see Note 5:

For information related to each major class of intangible assets, including accumulated amortization and estimated average useful lives, see Note 5:

Intangible and Other Assets.

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In May 2018, the Company entered into a settlement agreement related a business economic loss claim.

The Company received proceeds of $ 7.4 million, net of legal fees, related to this settlement.

The Company received the two installments of $ 3.7 million each in January 2019 and January 2020.

As part of the Company's assessment, it considered that the terms of the settlement agreement are final (e.g.

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Therefore, the Company recorded a receivable and non-operating income for the amount of the settlement.

The Company imputed interest on this receivable in accordance with ASC 835-30-15-2 as it represents a contractual right to receive money on fixed or determinable dates.

The difference between the present value and the face amount was treated as a discount and is being amortized as interest income over the life of the claim using the interest method.

Contingencies for further discussion.

Costs to Obtain a Contract

The Company also capitalizes costs to obtain a contract, which include certain deferred subscriber acquisition costs which are amortized consistently with the pattern of transfer of the good or delivery of the service to which the asset relates.

When a contract terminates prior to the end of its expected life, the remaining deferred costs asset associated with it becomes impaired.

An immediate recognition of expense for individual remaining costs to obtain a contract following deactivation is not practicable.

Because early terminations are factored into the determination of the expected customer life and therefore affect the amortization period, the Company does not recognize early termination expense on individual assets because the incremental effect would be immaterial and doing so would be impractical.

When this receivable was recorded in 2018, the Company imputed interest in accordance with ASC 835-30-15-2 as it represented a contractual right to receive money on fixed or determinable dates.

The difference between the present value and the face amount was treated as a discount and was amortized as interest income over the life of the claim using the interest method.

Contract Acquisition Costs

The Company also capitalizes incremental costs to obtain a contract, or contract acquisition costs, to the extent it expects to recover them.

These capitalized costs primarily include deferred subscriber acquisition costs and are amortized consistently with the pattern of transfer of the good or delivery of the service to which the asset relates.

When a contract terminates prior to the end of its expected life, the remaining contract acquisition cost associated with it becomes impaired and the amount is expensed.

Total contract acquisition costs were $ 2.4 million and $ 2.0 million as of December 31, 2020 and 2019, respectively, and are recorded in other assets on the Company's consolidated balance sheet.

These costs are typically amortized to marketing, general and administrative expenses over three years , which considers anticipated contract renewals.

For the years ended December 31, 2020, 2019 and 2018, the amount of amortization related to contract acquisition costs was $ 2.1 million, $ 1.4 million and $ 1.5 million, respectively.

Impairment of Intangible and Other Assets

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If the Company determines that an impairment exists, any related loss is estimated based on fair values.

Other Information

Advertising Expenses

Advertising costs were $ 2.5 million, $ 3.4 million and $ 3.6 million for 2020, 2019, and 2018, respectively.

These costs are expensed as incurred as marketing, general and administrative expenses.

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

In August 2018, the FASB issued ASU No.

2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans .

As part of the FASB's disclosure framework project, it has changed the disclosure requirements for defined pension and other post-retirement benefit plans.

The FASB eliminated disclosure requirements related to the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, if any, information related to Japanese Welfare Pension Insurance Law, information about the amount of future annual benefits covered by insurance contracts and significant transactions between the employer or related parties and the plan, and the disclosure of the effects of a one-percentage-point change in the assumed health care cost trend rates on the (1) aggregate of the service and interest cost components of net periodic benefit costs and the (2) benefit obligation for postretirement health care benefits.

Entities will be required to disclose the weighted-average interest crediting rate for cash balance plans and other plans with promised interest crediting rates as well as an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

As part of the FASB's disclosure framework project, it has changed the disclosure requirements for defined pension and other post-retirement benefit plans as outlined in ASU No.

This ASU is effective for public entities for annual periods beginning after December 15, 2020.

Early adoption is permitted as of the beginning of any annual reporting period.

This ASU will have an impact on the Company's disclosures.

Recently Issued and Implemented Financial Reporting Rules

In April 2019, the SEC adopted the final rules under SEC Releases 33-10618 and 34-85381, FAST Act Modernization and Simplification of Regulation S-K.

Among other things, the amendments 1) allow registrants who present financial statements covering three years in their periodic reports to omit discussion of the earliest year from management's discussion and analysis if the discussion was included in a prior filing, 2) allow registrants to omit certain information and exhibits from their periodic reports without submitting confidential treatment requests to the Commission, 3) clarify and streamline certain risk factor and property disclosure requirements, 4) require all filings to include hyperlinks to information that is incorporated by reference in current filings to the information available on EDGAR, as applicable, and 5) require registrants to apply XBRL tags to certain information on cover pages of SEC filings.

Certain of the amended rules became effective April 2, 2019 or May 2, 2019 and have been applied to any filings after these dates, except for the XBRL tagging requirement, which is effective for accelerated filers for fiscal reports ending on or after June 15, 2020.

These final rules did not (or will not) have a material impact on its disclosures and financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases .

ASU 2016-02 amended the FASB Accounting Standards Codification (“ASC”) and created a new ASC Topic 842, “Leases” (“ASC 842”).

This ASU became effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

This ASU adds certain narrative disclosures and removes other disclosures as outlined in ASU No.

2018-14 related to the defined benefit plan as outlined in ASU No.

The Company adopted this standard when it became effective on January 1, 2021.

Leases for further discussion, including the impact on the Company's condensed consolidated financial statements and required disclosures.

The adoption of this standard will impact certain of the Company's disclosures in future filings.

In December 2019, the FASB issued ASU No.

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

2019-12 amends the accounting treatment for income taxes by simplifying and clarifying certain aspects of the existing guidance.

This ASU is effective for public entities for annual and interim periods beginning after December 15, 2020.

The Company adopted this standard when it became effective on January 1, 2021.

The adoption of this standard did not have a material effect on the Company's financial statements or related disclosures.

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 consolidated financial statements or related disclosures.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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2016-13, as amended, significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The standard will replace today’s incurred loss approach with an expected loss model for instruments measured at amortized cost.

Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

The standard replaced the incurred loss approach with an expected loss model for instruments measured at amortized cost.

Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

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

The Company adopted this standard on January 1, 2020.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements and will impact certain of the Company's related disclosures in future filings.

In February 2018, the FASB issued ASU No.

2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

This guidance allows companies to reclassify items in accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).

This ASU is effective for all entities for annual and interim periods beginning after December 15, 2018.

The Company adopted this standard on January 1, 2019.

The adoption of this standard did not have a material effect on the Company's financial statements or related disclosures.

In June 2018, the FASB issued ASU No.

2018-07, Compensation - Stock Compensation:

Improvements to Nonemployee Share-Based Payment Accounting .

ASU 2018-07 aligns the accounting for share-based payment awards issued to employees and nonemployees.

Measurement of equity-classified nonemployee awards will now be valued on the grant date and will no longer be remeasured through the performance completion date.

This amendment also changes the accounting for nonemployee awards with performance conditions to recognize compensation cost when achievement of the performance condition is probable, rather than upon achievement of the performance condition, as well as eliminating the requirement to reassess the equity or liability classification for nonemployee awards upon vesting, except for certain award types.

This ASU is effective for public entities for annual and interim periods beginning after December 15, 2018.

The Company adopted this standard on January 1, 2019.

The adoption of this standard did not have a material effect on the Company's financial statements or related disclosures.

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

See further discussion above in " Accounts and Notes Receivable " in this Note for a discussion of the impact to the Company's consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

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As part of the FASB's disclosure framework project, it has eliminated, amended and added disclosure requirements for fair value measurements.

Entities will no longer be required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements.

Public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

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

The Company adopted this standard on January 1, 2020.

The adoption of this standard will impact certain of the Company's disclosures in future filings.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

This ASU requires companies to defer specified implementation costs in a cloud computing arrangement that are often expensed under current US GAAP and recognize these costs to expense over the noncancellable term of the arrangement.

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

The Company adopted this standard on January 1, 2020.

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Entities are no longer required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements.

Public companies are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

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

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 8:

Fair Value Measurements.

Disaggregation of Revenue

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

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Service revenue:

Duplex $ 33,878 $ 43,679 $ 41,223

SPOT 46,417 50,461 52,363

Commercial IoT 17,174 16,972 13,459

Engineering and Other 15,722 2,274 4,044

Total service revenue 113,191 113,386 111,089

Subscriber equipment sales:

Duplex $ 1,883 $ 1,325 $ 2,021

SPOT 8,176 7,617 8,425

Commercial IoT 5,140 9,300 8,444

Other 97 90 134

Total subscriber equipment sales 15,296 18,332 19,024

Total revenue $ 128,487 $ 131,718 $ 130,113

(1) Effective January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, “Revenue from Contracts with Customers” (“ASC 606”).

This standard was adopted using the modified retrospective method and, as such, amounts reflected in the table for the year ended December 31, 2017 have not been adjusted.

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

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

December 31, 2019

December 31, 2018

December 31, 2017 (1)

December 31, 2020 December 31, 2019 December 31, 2018

Service revenue:

United States $ 84,290 $ 80,704 $ 78,918

Canada 18,217 20,709 20,186

Europe 7,040 8,628 9,190

Central and South America 2,717 2,513 2,183

Others 927 832 612

Total service revenue 113,191 113,386 111,089

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United States $ 8,226 $ 9,937 $ 11,756

Canada 3,741 4,632 3,051

Europe 1,639 1,707 2,487

Central and South America 1,674 1,946 1,472

Others 16 110 258

Total subscriber equipment sales 15,296 18,332 19,024

Total revenue $ 128,487 $ 131,718 $ 130,113

(1) Effective January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, “Revenue from Contracts with Customers” (“ASC 606”).

This standard was adopted using the modified retrospective method and, as such, amounts reflected in the table for the year ended December 31, 2017 have not been adjusted.

During the third quarter of 2019, the Company changed its calculation of the estimated impact from the initial adoption of ASC 606) on January 1, 2018.

In accordance with ASC 606, the Company accrues contract breakage to revenue based on historical usage patterns.

The original calculation of the adoption impact did not reduce deferred revenue and retained deficit enough for revenue that would have been recognized under ASC 606 for contracts that were open at the adoption date.

This adjustment was immaterial to the Company’s financial statements for each period since January 1, 2018.

Accordingly, the Company recorded a cumulative adjustment to increase service revenue during the third quarter of 2019;

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

Contract Balances

The following table discloses information about accounts receivable, costs to obtain a contract (as recorded in intangible and other assets, net on the Company's consolidated balance sheet), and contract liabilities (as recorded in both current and long-term deferred revenue on the Company's consolidated balance sheet) from contracts with customers (amounts in thousands):

December 31, 2019

December 31, 2018

Accounts receivable

Capitalized costs to obtain a contract

Contract liabilities

During the third quarter of 2019, the Company revised its calculation of the estimated impact from the initial adoption of ASC 606 to recognize additional revenue that should have been recognized under ASC 606 for contracts that were open at the adoption date.

The adjustment, which totaled $ 3.9 million, was recorded to Duplex service revenue and was deemed immaterial to the Company’s financial statements for each period since January 1, 2018;

this was reflected as an out-of-period amount.

Accounts Receivable

Included in the accounts receivable balance in the table above are contract assets, which represent primarily unbilled amounts related to performance obligations satisfied by the Company, of $2.2 million and $0.7 million as of December 31, 2019 and 2018 , respectively.

The increase in this balance is primarily attributable to the timing and higher volume of sales to one of our Commercial IoT value-added-resellers ("VAR").

The Company recognizes the revenue for performance obligations in the period they are satisfied and then bills this VAR for both hardware and service on a monthly basis over the subsequent twelve-month period.

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

As of December 31, 2020 and 2019, $ 1.9 million and $ 6.5 million, respectively, related to these agreements was included in accounts receivable on the Company’s consolidated balance sheet.

The reduction in this accounts receivable balance from December 31, 2018 resulted primarily from the write-off of the receivable due from the Company's Mexican IGO partner following that gateway being shut down during 2019 and the settlement of the receivable due from the Argentinian IGO partner following the acquisition of their MSS license by Globalstar in 2019.

During the year ended December 31, 2019 and 2018 , impairment loss on receivables from contracts with customers was $4.8 million and $3.9 million , respectively, including both provisions for bad debt and the reversal of revenue for accounts where collectability is not reasonably assured.

The increase in the impairment loss on receivables during 2019 compared to 2018 was driven primarily by a specific reserve related to one of the Company's IGOs, which shut down gateway operations during the quarter ended March 31, 2019.

Costs to Obtain a Contract

The Company also capitalizes costs to obtain a contract, which include certain deferred subscriber acquisition costs that are amortized consistently with the pattern of transfer of the good or delivery of the service to which the asset relates.

The Company’s subscriber acquisition costs primarily include dealer and internal sales commissions and certain other costs, including but not limited to, promotional costs, cooperative marketing credits and shipping and fulfillment costs.

The Company capitalizes incremental costs to obtain a contract to the extent it expects to recover them.

These capitalized contract costs include only internal and external initial activation commissions because these costs are considered incremental and would not have been incurred if the contract had not been obtained.

These capitalized costs are included in other assets on the Company’s consolidated balance sheet and are amortized to marketing, general and administrative expenses on the Company’s consolidated statement of operations on a straight-line basis over the estimated customer life of three years, which considers anticipated contract renewals.

For the year ended December 31, 2019 and 2018 , the amount of amortization related to previously capitalized costs to obtain a contract was $1.4 million and $1.5 million , respectively.

The decrease in this balance from December 31, 2019 to 2020 was due to a net settlement with one of the Company's IGOs that reduced outstanding accounts receivable and accounts payable balances during the fiscal year end December 31, 2020.

Contract Liabilities

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

As of December 31, 2019 , the total transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was $35.2 million .

The amount of revenue recognized during the year ended December 31, 2019 from performance obligations included in the contract liability balance at the beginning of the period was $30.9 million .

The amount of revenue recognized during the year ended December 31, 2018 from performance obligations included in the contract liability balance at the beginning of the period was $28.7 million .

The amount of revenue recognized during the years ended December 31, 2020 and 2019 from performance obligations included in the contract liability balance at the beginning of these periods was $ 31.2 million and $ 30.9 million, respectively.

Additionally, during the fourth quarter of 2020, the Company recognized $ 2.9 million of revenue previously included in non-current deferred revenue related to a contract executed in 2007 for the construction of a gateway in Nigeria, upon its termination due to a lack of performance by the partner, and the Company's performance of all obligations in accordance with the terms of the contract.

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 December 31, 2019 , the Company expects to recognize $29.9 million , or approximately 85% , of its remaining performance obligations during the next twelve months and $2.4 million , or approximately 7% , between two to six years from the balance sheet date.

The remaining $2.9 million , or approximately 8% , is related to a single contract and will be recognized as work is performed by the Company, the timing of which is currently unknown.

Adoption of ASC Topic 842 “Leases”

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective method.

The Company has presented financial results and applied its accounting policies for the period beginning January 1, 2019 under ASC 842, while prior period results and accounting policies have not been adjusted and are reflected under legacy GAAP pursuant to ASC 840.

In connection with the adoption of ASC 842, the Company performed an analysis of contracts under ASC 840 to ensure proper assessment of leases (or embedded leases) in existence as of January 1, 2019.

The Company elected the package of practical expedients permitted under ASC 842, which allows the Company not to reassess 1) whether any expired or existing contracts as of the adoption date are or contain a lease, 2) lease classification for any expired or existing leases as of the adoption date and 3) initial direct costs for any existing leases as of the adoption date.

The most significant impact of applying ASC 842 was the recognition of right-of-use assets and lease liabilities for operating leases in its condensed consolidated balance sheet.

For finance leases, the accounting remained generally consistent with legacy GAAP;

however, the existing capital lease and obligation for these leases have been reclassified to a right-of-use asset and lease liability.

On January 1, 2019, the Company recognized an initial operating right-of-use asset of $3.3 million and associated operating lease liabilities of $3.7 million .

Since adoption of ASC 842 on January 1, 2019, the Company entered into additional leases, most significantly a lease agreement for its new headquarters location (see further discussion in Note 12:

Related Party Transactions ), resulting in the recognition of additional right-of-use assets and associated lease liabilities of $14.3 million .

There was no impact to opening retained deficit as of January 1, 2019.

As of December 31, 2020, the Company expects to recognize $ 26.0 million, or approximately 89 %, of its remaining performance obligations during the next twelve months .

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

December 31, 2019

December 31, 2020 December 31, 2019

Operating leases:

Right-of-use asset, net $ 14,400 $ 15,871

Short-term lease liability (as recorded in accrued expenses)

Short-term lease liability (recorded in accrued expenses) 1,330 1,634

Long-term lease liability 13,726 14,747

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Finance leases:

Right-of-use asset, net (as recorded in intangible and other current assets, net)

Short-term lease liability (as recorded in accrued expenses)

Long-term lease liability (as recorded in non-current liabilities)

Right-of-use asset, net (recorded in intangible and other current assets, net) $ 19 $ 95

Short-term lease liability (recorded in accrued expenses) 11 68

Long-term lease liability (recorded in non-current liabilities) 9 19

Total finance lease liabilities $ 20 $ 87

Impact on Financial Statements

The following table summarizes the impact of the adoption of ASC 842 on the Company’s condensed consolidated balance sheet.

There was no impact on the Company’s condensed consolidated statement of operations as a result of this adoption.

Amounts are in thousands.

Condensed Consolidated Balance Sheet

As of December 31, 2019

Impact on change in accounting policy

December 31, 2019

Right-of-use asset, net

Intangible and other assets, net

Property and equipment, net

Accrued expenses

Lease liabilities

Other non-current liabilities

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

As noted above, prior periods have not been adjusted under the modified retrospective method of adoption.

Twelve Months Ended December 31, 2019

For the years ended December 31, 2020 and 2019, the Company has presented financial results and applied its accounting policies under ASC 842;

for the year ended December 31, 2018, financial results and accounting policies have not been adjusted and are reflected under legacy GAAP pursuant to ASC 840.

Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019

Operating lease cost:

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Total lease cost $ 3,380 $ 3,113

As reported under legacy GAAP, total rent expense for 2018 and 2017 was approximately $1.4 million and $1.3 million , respectively.

As reported under legacy GAAP, total rent expense for 2018 was approximately $ 1.4 million.

The increase in lease expense from 2018 to 2019 was due primarily to the lease entered into in February 2019 with Thermo Covington, LLC for the Company's new headquarters office.

Weighted-Average Remaining Lease Term and Discount Rate

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

December 31, 2019

December 31, 2020 December 31, 2019

Weighted-average lease term

Finance leases

Operating Leases

Finance leases 1.8 years 1.5 years

Operating Leases 8.3 years 8.9 years

Weighted-average discount rate

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The below table discloses supplemental cash flow information for finance and operating leases (in thousands).

Twelve Months Ended December 31, 2019

As noted above, presentation for the year ended December 31, 2018 has not been adjusted under the modified retrospective method of adoption.

Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

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The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of December 31, 2020 (amounts in thousands):

Operating Leases

Finance Leases

Operating Leases Finance Leases

2021 $ 2,597 $ 11

Thereafter 8,803 —

Total lease payments $ 21,176 $ 21

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Discounted lease liability $ 15,056 $ 20

As of December 31, 2020, the Company had executed additional operating leases, primarily for new gateway locations, that are expected to commence during 2021.

Accordingly, these leases are not included on the balance sheet as of December 31, 2020 or in the maturity table above.

The Company is in the process of evaluating these lease obligations.

PROPERTY AND EQUIPMENT

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Globalstar System:

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Ground component 19,327 16,040

Next-generation software upgrades

Other 3,298 5,132

Total Globalstar System 1,523,069 1,518,671

Internally developed and purchased software 23,984 18,922

Equipment 9,679 8,731

Land and buildings 3,110 3,287

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The ground component of construction in progress also includes costs (including capitalized interest) associated with the Company's contract for the procurement and production of new gateway antennas.

In January 2019, the Company completed technology upgrades to allow customers to use Sat-Fi2 ® in certain areas of Latin America.

Accordingly, it placed into service approximately $7.9 million of construction in progress (including capitalized interest)

related to the deployment of two RANs to this region.

Additionally, a portion of internally developed and purchased software assets were retired during 2019, driving the decrease in the table above.

Offsetting these decreases was an increase in construction in progress related to the procurement and production of new antennas for substantially all of the Company's gateways.

The Company plans to deploy these antennas over the next few years.

As of December 31, 2020, approximately $ 7.9 million of the ground component of CIP

includes costs associated with new antennas for certain of the Company's gateways around the world.

The Company expects these assets to be placed into service in the near future.

Amounts included in the Company’s second-generation satellite, on-ground spare balance as of December 31, 2020 and 2019, consist primarily of costs related to a spare second-generation satellite that has not been placed in orbit, but is capable of being included in a future launch.

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Year Ended December 31,

2020 2019 2018

Interest cost eligible to be capitalized $ 50,721 $ 64,058 $ 51,819

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Year Ended December 31,

2020 2019 2018

Depreciation Expense $ 84,853 $ 83,575 $ 81,779

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Year Ended December 31,

2020 2019 2018

Amortization Expense $ 11,962 $ 12,197 $ 8,659

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The amortization expense in the table above reflects primarily the 15-year life of these assets from the in-service date.

Geographic Location of Long-Lived Assets

Geographic Location of Property and Equipment

Long-lived assets consist primarily of property and equipment and are attributed to various countries based on the physical location of the asset, except for the Company’s satellites which are included in the long-lived assets of the United States.

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Year Ended December 31,

Long-lived assets:

Property and equipment:

United States $ 687,302 $ 772,498

Canada 11,814 12,239

Europe 3,170 3,126

Central and South America 13,614 11,786

Total long-lived assets

Total property and equipment $ 715,909 $ 799,914

INTANGIBLE AND OTHER ASSETS

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The Company has intangible assets not subject to amortization, which include certain costs to obtain or defend regulatory authorizations and a portion of capitalized interest associated with these assets.

These costs include primarily efforts related to the enhancement of the Company's licensed MSS spectrum to provide terrestrial wireless services as well as costs with international regulatory agencies to obtain similar terrestrial authorizations outside of the United States.

These costs primarily include efforts related to the enhancement of the Company's licensed MSS spectrum to provide terrestrial wireless services as well as costs with international regulatory agencies to obtain similar terrestrial authorizations outside of the United States.

This category includes work in progress assets as well as indefinite lived assets already placed into service.

The Company also has intangible assets subject to amortization, which include primarily developed technology and definite lived MSS licenses.

The Company also has intangible assets subject to amortization, which primarily include developed technology and definite lived MSS licenses.

The gross carrying amount and accumulated amortization of the Company's intangible assets consist of the following (in thousands):

December 31, 2019

December 31, 2018

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

December 31, 2020 December 31, 2019

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Intangible Assets Not Subject to Amortization $ 21,496 $ — $ 21,496 $ 18,288 $ — $ 18,288

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Developed technology $ 11,856 $ ( 7,016 ) $ 4,840 $ 11,692 $ ( 6,232 ) $ 5,460

Customer relationships

Regulatory authorizations 1,866 ( 682 ) 1,184 1,937 ( 477 ) 1,460

During 2019, the Company completed the acquisition of certain assets and related government authorizations from the owner of its IGO in Argentina.

Included in this asset purchase was an indefinite lived spectrum license totaling $1.0 million .

For 2019 and 2018 , the Company recorded amortization expense on these intangible assets of $1.1 million and $0.6 million , respectively.

$ 13,722 $ ( 7,698 ) $ 6,024 $ 13,629 $ ( 6,709 ) $ 6,920

Total $ 35,218 $ ( 7,698 ) $ 27,520 $ 31,917 $ ( 6,709 ) $ 25,208

As of December 31, 2020 and 2019, customer relationships totaling $ 2.1 million and trade names totaling $ 0.2 million were fully amortized and have been removed from the table above.

For the twelve months ended December 31, 2020, the Company recorded amortization expense on these intangible assets of $ 1.1 million.

Amortization expense is recorded in operating expenses in the Company’s consolidated statements of operations.

Excluding the effects of any acquisitions, dispositions or write-downs subsequent to December 31, 2020, total estimated annual amortization of intangible assets is as follows (in thousands):

Thereafter 1,956

Total $ 6,024

Other assets consist of the following (in thousands):

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Long-term prepaid licenses and royalties 4,679 5,037

Business economic loss claim receivable (see Note 10 for further discussion)

International tax receivables 619 800

Investments in businesses 1,589 2,089

Compound embedded derivative with the Second Lien Facility Agreement 286 —

Other long-term assets 1,132 535

Total other assets $ 10,709 $ 10,437

LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

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

December 31, 2019

December 31, 2018

Unamortized Discount and Deferred Financing Costs

Facility Agreement

Second Lien Term Loan Facility

December 31, 2020 December 31, 2019

Amount Unamortized Discount and Deferred Financing Costs Carrying

Value Principal

Amount Unamortized Discount and Deferred Financing Costs Carrying

First Lien Facility Agreement

$ 186,988 $ 6,373 $ 180,615 $ 190,361 $ 10,185 $ 180,176

Second Lien Facility Agreement 230,597 32,125 198,472 201,495 35,448 166,047

Loan Agreement with Thermo — — — 135,105 18,562 116,543

8.00 % Convertible Senior Notes Issued in 2013

1,376 — 1,376 1,410 — 1,410

Payroll Protection Program Loan 4,973 26 4,947 — — —

Total Debt 423,934 38,524 385,410 528,371 64,195 464,176

Current Portion 58,824 — 58,824 — — —

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

As of December 31, 2019 , there is no current portion of long-term debt since there are no scheduled principal repayments due within one year of the balance sheet date.

As discussed further below, the Company completed a broad-scale refinancing during November 2019, including an amendment and restatement of the Facility Agreement and issuance of a second lien term loan facility agreement (the "Second Lien Term Loan Facility").

Facility Agreement

In 2009, the Company entered into the Facility Agreement with a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Crédit Agricole Corporate and Investment Bank and Crédit Industriel et Commercial, as arrangers, and BNP Paribas, as the security agent.

The Facility Agreement was amended and restated in July 2013, August 2015, June 2017 and November 2019.

The Facility Agreement is scheduled to mature in December 2022.

Indebtedness under the Facility Agreement bears interest at a floating rate of LIBOR plus a margin that increases by 0.5% each year to a maximum rate of LIBOR plus 5.75% .

As of December 31, 2020, the current portion of long-term debt represents the scheduled principal repayments under the First Lien Facility Agreement and the PPP Loan due within one year of the balance sheet date.

First Lien Facility Agreement

In 2009, the Company entered into the First Lien Facility Agreement with a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Crédit Agricole Corporate and Investment Bank and Crédit Industriel et Commercial, as arrangers, and BNP Paribas, as the security agent.

The First Lien Facility Agreement was amended and restated in July 2013, August 2015, June 2017 and November 2019.

The First Lien Facility Agreement is scheduled to mature in December 2022.

Indebtedness under the First Lien Facility Agreement bears interest at a floating rate of LIBOR plus a margin that increases by 0.5 % each year to a maximum rate of LIBOR plus 5.75 %.

The current interest rate is LIBOR plus 4.75 %.

Interest on the Facility Agreement is payable semi-annually in arrears on June 30 and December 31 of each calendar year.

Ninety-five percent of the Company's obligations under the Facility Agreement are guaranteed by Bpifrance Assurance Export S.A.S.

Interest on the First Lien Facility Agreement is payable semi-annually in arrears on June 30 and December 31 of each calendar year.

Ninety-five percent of the Company's obligations under the First Lien Facility Agreement are guaranteed by Bpifrance Assurance Export S.A.S.

("BPIFAE"), the French export credit agency.

The Company's obligations under the Facility Agreement are guaranteed on a senior secured basis by all of its domestic subsidiaries and are secured by a first priority lien on substantially all of the assets of the Company and its domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100% of the equity of the Company's domestic subsidiaries and 65% of the equity of certain foreign subsidiaries.

The Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants, including the following:

The Company's obligations under the First Lien Facility Agreement are guaranteed on a senior secured basis by all of its domestic subsidiaries and are secured by a first priority lien on substantially all of the assets of the Company and its domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100 % of the equity of the Company's domestic subsidiaries and 65 % of the equity of certain foreign subsidiaries.

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 First Lien Facility Agreement, which was approved by the Company's senior lenders.

The First Lien Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants, including the following:

• The Company's capital expenditures do not exceed $ 15.0 million per year;

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• The Company maintains at all times a minimum liquidity balance of $ 4.0 million;

The Company achieves for each period the following minimum adjusted consolidated EBITDA (as defined in the Facility Agreement) (amounts in thousands):

Minimum Amount

• The Company achieves for each period the following minimum adjusted consolidated EBITDA (as defined in the First Lien Facility Agreement) (amounts in thousands):

Period Minimum Amount

1/1/20-6/30/20 $ 18,245

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• The Company maintains a minimum debt service coverage ratio of 1.00 :1;

The Company maintains a maximum net debt to adjusted consolidated EBITDA ratio of 4.90 :1 for the December 31, 2019 measurement period, decreasing gradually each semi-annual period until the requirement equals 2.50 :1 for the four semi-annual measurement periods leading up to December 31, 2022;

• The Company maintains a maximum net debt to adjusted consolidated EBITDA ratio of 3.96 :1 for the December 31, 2020 measurement period and 2.50 :1 for the four semi-annual measurement periods leading up to December 31, 2022;

• The Company maintains a minimum interest coverage ratio of 3.63 :1 for the December 31, 2020 measurement period, increasing gradually each semi-annual period until the requirement equals 5.25 :1 for the two semi-annual measurement periods leading up to December 31, 2022;

• The Company makes mandatory prepayments in specified circumstances and amounts, including if the Company generates excess cash flow, monetizes its spectrum rights, receives the proceeds of certain asset dispositions or receives more than $ 145.0 million from the sale of additional debt or equity securities.

Additionally, the covenants in the Facility Agreement limit the Company's ability to, among other things, incur or guarantee additional indebtedness;

Additionally, the covenants in the First Lien Facility Agreement limit the Company's ability to, among other things, incur or guarantee additional indebtedness;

make certain investments, acquisitions or capital expenditures above certain agreed levels;

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and transfer or sell assets.

In calculating compliance with the financial covenants of the Facility Agreement, the Company may include certain cash funds contributed to the Company from the issuance of the Company's common stock and/or subordinated indebtedness.

In calculating compliance with the financial covenants of the First Lien Facility Agreement, the Company may include certain cash funds contributed to the Company from the issuance of the Company's common stock and/or subordinated indebtedness.

These funds are referred to as "Equity Cure Contributions" and may be used to achieve compliance with financial covenants through maturity.

If the Company violates any covenants and is unable to obtain a sufficient Equity Cure Contribution or obtain a waiver, or is unable to make payments to satisfy its debt obligations under the Facility Agreement when due and is unable to obtain a waiver, it would be in default under the Facility Agreement and payment of the indebtedness could be accelerated.

If the Company violates any financial covenants and is unable to obtain a sufficient Equity Cure Contribution or obtain a waiver, it would be in default under the First Lien Facility Agreement and payment of the indebtedness could be accelerated.

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

As of December 31, 2019 , the Company was in compliance with respect to the covenants of the Facility Agreement.

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.

As part of the amendment to the Facility Agreement in November 2019, the required balance in the debt service reserve account is fixed and must equal at least $50.9 million .

As of December 31, 2019 , the balance in the debt service reserve account was approximately $51.5 million , of which $50.9 million is classified as non-current restricted cash on the Company's consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the Facility Agreement in December 2022.

The remaining balance of $0.6 million is classified as current and represents the portion of the debt service reserve account in excess of the required balance.

The Company expects to receive this amount from its lenders during the next twelve months.

On November 26, 2019, the Company, Thermo, the lenders and the BPIFAE and Security Agent entered into a Fourth Global Amendment and Restatement Agreement (the “2019 GARA”).

Pursuant to the 2019 GARA, the Facility Agreement was amended and restated and the Company, Thermo and the lenders agreed to the following:

The $151.6 million prepayment of the next three scheduled principal payments and a portion of the fourth scheduled principal payment using proceeds from the Second Lien Term Loan Facility (as described in more detail below), cash on hand and proceeds from the reduction of the Company's debt service reserve account;

A $10.0 million reduction to the required balance in the debt service reserve account, which will remain at approximately $50.9 million through the maturity date;

Revisions to the remaining repayment schedule to reduce the amount of scheduled principal payments prior to maturity, leaving a final scheduled principal payment upon maturity of $109.5 million ;

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 other equity to be applied towards the principal payment due on June 30, 2021 and then, if applicable, to the next scheduled principal payments;

A reset of financial covenant levels based on the Company's 2019 business plan agreed with the lenders under the Facility Agreement;

An extension of the Company's ability to make Equity Cure Contributions to prevent certain financial covenant defaults through the maturity date;

Amendment fees of $1.4 million paid to the agent for the Lenders and BPI in connection with the 2019 GARA.

The 2019 GARA was considered a debt modification pursuant to applicable accounting guidance.

As such, fees paid to the creditors were capitalized on the Company's consolidated balance sheet as deferred financing costs and fees paid to the Company's advisors and other third parties were expensed in the Company's statement of operations for the period ended December 31, 2019.

Additionally, as a result of this modification, the Company wrote off $7.3 million in deferred financing costs, which represents the portion of debt prepaid by the Company in November 2019.

As of December 31, 2020, the Company was in compliance with respect to the covenants of the First Lien Facility Agreement.

The First Lien Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the First Lien 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.

The Company expects to make another prepayment in 2021 from Excess Cash Flow as of December 31, 2020.

These payments reduce future principal payment obligations.

The First Lien 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 First Lien Facility Agreement.

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

As of December 31, 2020, the balance in the debt service reserve

account was approximately $ 51.1 million and is classified as non-current restricted cash on the Company's consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the First Lien Facility Agreement in December 2022.

The amended and restated First Lien Facility Agreement includes a requirement that the Company raise no less than $ 45.0 million from the sale of equity prior to March 30, 2021.

These proceeds will be applied towards the principal payment due on June 30, 2021 and then, if applicable, to the next scheduled principal payments.

The Company currently expects to fulfill this requirement with proceeds from the exercise of the remaining warrants issued to the Second Lien Facility Agreement lenders in November 2019.

The Company will access equity and debt capital markets, if necessary to fund any remaining requirements not satisfied through warrant proceeds.

In December 2019, the Company received proceeds of $ 3.6 million from the exercise of a portion of warrants issued to the Second Lien Facility Agreement lenders, which is retained in the equity proceeds account under the First Lien Facility Agreement and is recorded in current restricted cash on the Company's consolidated balance sheet as of December 31, 2020.

Since December 31, 2020, certain of the Second Lien Facility Agreement lenders exercised approximately 5.5 million warrants at a price of $ 0.38 per share, the proceeds of which will be used to fulfill a portion of the $ 45.0 million requirement discussed above.

Subordinated Loan Agreement

In July 2019, the Company entered into a Subordinated Loan Agreement (the “Subordinated Loan Agreement”) with Thermo Funding Company LLC (an affiliated entity to Thermo), and certain unaffiliated parties (together with Thermo, the “Lenders”).

Under the Subordinated Loan Agreement, the Lenders lent $62.0 million to the Company for the primary purpose of funding the June 30, 2019 scheduled payment of interest and principal under the Company’s Facility Agreement and for certain other purposes.

Under the Subordinated Loan Agreement, the Company received $ 62.0 million to fund the June 30, 2019 payment of interest and principal under the Company’s First Lien Facility Agreement and for certain other purposes.

The Subordinated Loan Agreement accrued interest at 15 % per annum, which was capitalized and added to the outstanding principal in lieu of cash payments.

Prior to repayment, the Subordinated Loan Agreement had accrued a total of $ 4.0 million.

In November 2019, the Subordinated Loan Agreement was paid in full from a portion of the proceeds from the Second Lien Term Loan Facility (see further discussion below).

There were no unamortized deferred financing costs on the repayment debt.

The payoff of the Subordinated Loan Agreement was considered a debt extinguishment pursuant to applicable accounting guidance.

As such, fees paid to the Company's advisors and other third parties were capitalized on the Company's consolidated balance sheet as deferred financing costs and fees paid to the Company's creditors, including the value of the original issue discount and warrants, were expensed in the Company's statement of operations for the period ended December 31, 2019.

Additionally, a gain or loss on extinguishment of debt is generally recorded upon an extinguishment of a debt instrument.

Such gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price (including the new Second Lien Term Loan Facility, warrants issued to the holders and fees paid to the lenders) and net carrying amount of the Subordinated Loan Agreement.

Based on an assessment of the transaction, the Company estimated the reacquisition price to be $66.0 million , which is equal to the net carrying value of the extinguished debt.

Therefore, the Company did not record a gain or loss on extinguishment of debt.

Furthermore, the Company was required to record the portion of the Second Lien Term Loan Facility, which was used to pay off the Subordinated Loan Agreement, at fair value at inception.

The fair value was determined based on various factors and included the value of the warrants issued to the Second Lien Term Loan Facility holders.

The Company’s Board of Directors considered the Subordinated Loan Agreement and the related transactions and unanimously concluded that they constitute a “Permitted Financing” under Article Eleventh of the Second Amended and Restated Certificate of Incorporation of the Company.

Second Lien Term Loan Facility

In November 2019, the Company entered into a $199.0 million Second Lien Term Loan Facility with Thermo, EchoStar Corporation and certain other unaffiliated lenders.

The Second Lien Term Loan Facility is scheduled to mature in November 2025.

The loans under the Second Lien Term Loan Facility bear interest at a blended rate of 13.5% per annum to be paid in kind (or in cash at the option of the Company, subject to restrictions in the Facility Agreement).

In November 2019, the Subordinated Loan Agreement was paid in full from a portion of the proceeds from the Second Lien Facility Agreement (see further discussion below).

For further discussion on the accounting treatment of the Subordinated Loan Agreement, refer to the Globalstar Annual Report on Form 10-K for the year ended December 31, 2019.

Second Lien Facility Agreement

In November 2019, the Company entered into a $ 199.0 million Second Lien Facility Agreement with Thermo, EchoStar Corporation and certain other unaffiliated lenders.

The Second Lien Facility Agreement is scheduled to mature in November 2025.

The loans under the Second Lien Facility Agreement bear interest at a blended rate of 13.5 % per annum to be paid in kind (or in cash at the option of the Company, subject to restrictions in the First Lien Facility Agreement).

The cash proceeds from this loan were net of a 3 %, or $ 6.0 million, original issue discount (the "OID").

The portion of this OID that was not included in the reacquisition price of the Subordinated Loan Agreement (see previous section) was recorded as a debt discount of $4.0 million .

A portion of this OID was recorded as a debt discount of $ 4.0 million.

This debt discount was netted against the principal amount of the loan and is being accreted using an effective interest method to interest expense over the term of the loan.

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These warrants expire on March 31, 2021.

As of December 31, 2020, approximately 115.0 million warrants remain outstanding.

Since December 31, 2020, an additional 5.5 million warrants were exercised at a price of $ 0.38 per share.

The Company determined that the warrants were equity instruments and recorded them as a part of stockholders’ equity.

The portion of the warrants fair value that was not included in the reacquisition price of the Subordinated Loan Agreement (see previous section) was recorded as a debt discount of $15.8 million .

A portion of the warrants fair value was recorded as a debt discount of $ 15.8 million.

This debt discount was netted against the principal amount of the loan and is being accreted using an effective interest method to interest expense over the term of the loan.

In December 2019, Thermo exercised 9.5 million warrants resulting in cash proceeds to the Company of $3.6 million .

A portion of the proceeds from the Second Lien Term Loan Facility was used to repay all of the Company’s Subordinated Loan Agreement.

The remaining proceeds of the Second Lien Term Loan Facility were used towards the prepayment of scheduled principal payments under the Facility Agreement.

The Second Lien Term Loan Facility contains customary events of default and requires that the Company satisfy various financial and non-financial covenants.

Unless shown below, covenants under the Second Lien Term Loan Facility are consistent with the covenants under the Company's Facility Agreement (discussed above).

The financial covenants in the Second Lien Term Loan Facility require the Company to:

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 Facility Agreement, which was approved by the Company's second lien lenders.

The Second Lien Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants.

Unless shown below, covenants under the Second Lien Facility Agreement are consistent with the covenants under the Company's First Lien Facility Agreement (discussed above).

The financial covenants in the Second Lien Facility Agreement require the Company to:

• maintain at all times a minimum liquidity balance of $ 3.6 million;

achieve for each period the following minimum adjusted consolidated EBITDA (as defined in the Second Lien Term Loan Facility) (amounts in thousands):

Minimum Amount

• achieve for each period the following minimum adjusted consolidated EBITDA (as defined in the Second Lien Facility Agreement) (amounts in thousands):

Period Minimum Amount

1/1/20-6/30/20 $ 16,400

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1/1/21-6/30/21 $ 18,500

7/1/21-12/31/21 $ 24,100

• maintain a minimum debt service coverage ratio of 0.90 :1;

maintain a maximum net debt to adjusted consolidated EBITDA ratio of 5.39 :1 for the December 31, 2019 measurement period, decreasing gradually each semi-annual period until the requirement equals 2.75 :1 for the four semi-annual measurement periods leading up to December 31, 2022;

• maintain a maximum net debt to adjusted consolidated EBITDA ratio of 4.36 :1 for the December 31, 2020 measurement period and 2.75 :1 for the four semi-annual measurement periods leading up to December 31, 2022;

• maintain a minimum interest coverage ratio of 3.27 :1 for the December 31, 2020 measurement period, increasing gradually each semi-annual period until the requirement equals 4.73 :1 for the two semi-annual measurement periods leading up to December 31, 2022.

As of December 31, 2019 , the Company was in compliance with the covenants of the Second Lien Term Loan Facility.

The portion of the Second Lien Term Loan Facility proceeds that was used to repay the Subordinated Loan Agreement was considered a debt extinguishment pursuant to applicable accounting guidance.

As of December 31, 2020, the Company was in compliance with the covenants of the Second Lien Facility Agreement.

The portion of the Second Lien Facility Agreement proceeds that was used to repay the Subordinated Loan Agreement was considered a debt extinguishment pursuant to applicable accounting guidance.

See discussion in the Subordinated Loan Agreement section above for further information.

The remaining Second Lien Term Loan Facility was recorded at its carrying value at inception.

The Company evaluated the various embedded derivatives within the Second Lien Term Loan Facility related to certain contingently exercisable put options.

Due to the substantial discount upon issuance, as calculated under applicable accounting guidance, these prepayment features within the Second Lien Term Loan Facility were required to be bifurcated and separately valued.

The Company recorded the compound embedded derivative liability as a non-current liability on its consolidated balance sheets with a corresponding debt discount, which is netted against the face value of the Second Lien Term Loan Facility.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the maturity of the Second Lien Term Loan Facility using an effective interest rate method.

The fair value of the compound embedded derivative liability is marked-to-market at the end of each reporting period, with any changes in value reported in the consolidated statements of operations.

The Company determines the fair value of the compound embedded derivative using a probability weighted discounted cash flow model.

Thermo's participation in the Second Lien Term Loan Facility was reviewed and approved on the Company's behalf by the Strategic Review Committee, which is a committee of disinterested and independent directors who are represented by independent legal counsel.

The remaining Second Lien Facility Agreement was recorded at its carrying value at inception.

The Company evaluated the various embedded derivatives within the Second Lien Facility Agreement related to certain contingently exercisable put options.

Due to the substantial discount upon issuance, as calculated under applicable accounting guidance, these prepayment features were required to be bifurcated and separately valued.

The Company initially recorded the compound embedded derivative liability as a non-current liability on its consolidated balance sheets with a corresponding debt discount, which is netted against the face value of the Second Lien Facility Agreement.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the maturity date using an effective interest rate method.

Thermo's participation in the Second Lien Facility Agreement was reviewed and approved on the Company's behalf by the Strategic Review Committee, which is a committee of disinterested and independent directors who are represented by independent legal counsel.

Related Party Transactions for further information on the role and responsibility of the Strategic Review Committee.

Thermo Loan Agreement

In connection with the amendment and restatement of the Facility Agreement in July 2013, the Company amended and restated its loan agreement with Thermo (the “Loan Agreement”).

All obligations of the Company to Thermo under the Loan Agreement are subordinated to the Company’s obligations under the Facility Agreement and the Second Lien Term Loan Facility.

The Loan Agreement is convertible into shares of common stock at a conversion price of $0.69 (as adjusted) per share of common stock.

The Loan Agreement accrues interest at 12% per annum, which is capitalized and added to the outstanding principal in lieu of cash payments.

As of December 31, 2019 , $91.6 million of interest had accrued since 2009 with respect to the Loan Agreement;

the Loan Agreement is included in long-term debt on the Company's consolidated balance sheets based on its contractual maturity date.

The Company will make payments to Thermo only when permitted by the Facility Agreement and the Second Lien Term Loan Facility.

Principal and interest under the Loan Agreement become due and payable six months after the obligations under the Facility Agreement have been paid in full;

however, the November 2019 Finance Documents (including the amended and restated Facility Agreement and the Second Lien Term Loan Facility) permit the conversion of all amounts outstanding under the Loan Agreement by June 30, 2022, or earlier if the Company has a change in control or if any acceleration of the maturity of the loans under the Facility Agreement or Second Lien Term Loan Facility occurs.

In connection with the November 2019 refinancing, Thermo committed to convert the total principal balance outstanding under the Loan Agreement by March 31, 2020;

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

Upon conversion, the remaining debt discount and deferred financing costs is written off through the statement of operations and the associated derivative liability (discussed below) is marked-to-market at the conversion date and then extinguished through the statement of operations.

In connection with the amendment and restatement of the First Lien Facility Agreement in July 2013, the Company amended and restated its loan agreement with Thermo (the “Loan Agreement”).

The Loan Agreement was convertible into shares of common stock at a conversion price of $ 0.69 (as adjusted) per share of common stock.

The Loan Agreement accrued interest at 12 % per annum, which was capitalized and added to the outstanding principal in lieu of cash payments.

On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement, which totaled $ 137.4 million and included accrued interest since inception of $ 93.9 million.

This conversion resulted in the issuance of 200.1 million shares of common stock.

In accordance with applicable accounting guidance for debt extinguishment with related parties, upon conversion, the remaining debt discount was written off and recorded as a contribution to capital though equity and the associated derivative liability was marked to market at the conversion date and then extinguished through equity as a contribution to capital.

The Company evaluated the various embedded derivatives within the Loan Agreement (See Note 8:

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The Company determined that the conversion option and the contingent put feature upon a fundamental change required bifurcation from the Loan Agreement.

The conversion option and the contingent put feature were not deemed clearly and closely related to the Loan Agreement and were separately accounted for as a standalone derivative.

The Company recorded this compound embedded derivative liability as a non-current liability on its consolidated balance sheets with a corresponding debt discount, which is netted against the face value of the Loan Agreement.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the maturity of the Loan Agreement using an effective interest rate method.

The stated maturity is used as the expected term for purposes of amortizing the debt discount, despite the Company's expectation of an earlier conversion as of December 31, 2019, based on the applicable accounting rules.

The fair value of the compound embedded derivative liability is marked-to-market

at the end of each reporting period, or upon conversion, with any changes in value reported in the consolidated statements of operations.

The Company determines the fair value of the compound embedded derivative using a Monte Carlo simulation model.

The Company recorded this compound embedded derivative liability as a non-current liability on its consolidated balance sheets with a corresponding debt discount, which was netted against the face value of the Loan Agreement.

Prior to conversion in February 2020, the Company was accreting the debt discount associated with the compound embedded derivative

liability to interest expense through the maturity of the Loan Agreement using an effective interest rate method.

The stated maturity was used as the expected term for purposes of amortizing the debt discount, despite the Company's expectation of an earlier conversion, based on the applicable accounting rules.

8.00 % Convertible Senior Notes Issued in 2013

In May 2013, the Company issued $54.6 million aggregate principal amount of its 2013 8.00% Notes.

The 2013 8.00% Notes are convertible into shares of common stock at a conversion price of $0.69 per share of common stock, as adjusted pursuant to the terms of the Fourth Supplemental Indenture between the Company and U.S.

Bank National Association, as Trustee (the “Indenture”).

The 2013 8.00% Notes are senior unsecured debt obligations that will mature on April 1, 2028, subject to various call and put features, and bear interest at a rate of 8.00% per annum.

In 2013, the Company issued $ 54.6 million aggregate principal amount of its 2013 8.00 % Notes.

The 2013 8.00 % Notes are convertible into shares of common stock at a conversion price of $ 0.69 per share of common stock, as adjusted pursuant to the terms of the indenture (the “Indenture”).

The 2013 8.00 % Notes are senior unsecured debt obligations that mature on April 1, 2028, subject to various call and put features, and bear interest at a rate of 8.00 % per annum.

Interest is paid in cash at a rate of 5.75 % and in additional notes at a rate of 2.25 %.

Since issuance, $55.4 million of principal amount of the 2013 8.00% Notes have been converted;

no amount was converted during 2019.

Subject to certain conditions set forth in the Indenture, the Company may redeem the 2013 8.00% Notes, with the prior approval of the majority lenders under the Facility Agreement and the Second Lien Term Loan Facility, in whole or in part, at a price equal to the principal amount of the 2013 8.00% Notes to be redeemed plus all accrued and unpaid interest thereon.

As of December 31, 2019 , the 2013 8.00% Notes have not been redeemed by the Company.

A holder of the 2013 8.00% Notes has the right, at the holder’s option, to require the Company to purchase some or all of the 2013 8.00% Notes held by it on April 1, 2023, or at any time if there is a Fundamental Change (as defined in the Indenture), at a price equal to the principal amount of the 2013 8.00% Notes to be purchased plus accrued and unpaid interest.

Subject to the procedures for conversion and other terms and conditions of the Indenture, a holder may convert its 2013 8.00% Notes at its option at any time prior to April 1, 2028, into shares of common stock (or, at the option of the Company, cash in lieu of all or a portion thereof, provided that, under the Facility Agreement and the Second Lien Term Loan Facility, the Company may pay cash only with the consent of the majority lenders).

Since issuance, $ 55.5 million of principal amount of the 2013 8.00 % Notes have been converted resulting in the issuance of 98.6 million shares of Globalstar common stock.

The Company may redeem the 2013 8.00 % Notes, with the prior approval of the majority lenders under the First Lien Facility Agreement and the Second Lien Facility Agreement, in whole or in part, at a price equal to the principal amount of the 2013 8.00 % Notes to be redeemed plus all accrued and unpaid interest thereon.

A holder of the 2013 8.00 % Notes has the right to require the Company to purchase some or all of the 2013 8.00 % Notes held by it on April 1, 2023, or at any time if there is a Fundamental Change (as defined in the Indenture), at a price equal to the principal amount of the 2013 8.00 % Notes to be purchased plus accrued and unpaid interest.

A holder may convert its 2013 8.00 % Notes at its option at any time prior to April 1, 2028 into shares of common stock.

The Indenture provides for customary events of default.

If there is an event of default, the Trustee may, at the direction of the holders of 25% or more in aggregate principal amount of the 2013 8.00% Notes, accelerate the maturity of the 2013 8.00% Notes.

As of December 31, 2020, the Company was in compliance with respect to the terms of the 2013 8.00 % Notes and the Indenture.

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The Company determined that the conversion option and the contingent put feature within the Indenture required bifurcation from the 2013 8.00 % Notes.

The Company did not deem the conversion option and the contingent put feature to be clearly and closely related to the 2013 8.00% Notes and separately accounted for them as a standalone derivative.

The Company recorded this compound embedded derivative liability as a liability on its consolidated balance sheets with a corresponding debt discount which was netted against the face value of the 2013 8.00 % Notes.

The debt discount associated with the compound embedded derivative liability has been fully accreted as of September 30, 2017, following significant conversions in August 2017.

The Company is marking to market the fair value of the compound embedded derivative liability at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in the consolidated statements of operations.

The Company determines the fair value of the compound embedded derivative using a Monte Carlo simulation model.

The debt discount has been fully accreted as of September 30, 2017.

Payroll Protection Program Loan

In April 2020, the Company sought relief under the CARES Act and received a $ 5.0 million loan under the PPP.

The PPP Loan is an unsecured debt obligation and is scheduled to mature in April 2022.

As permitted under the CARES Act, the Company applied for loan forgiveness in December 2020, inclusive of both principal and accrued interest, in accordance with the terms of the CARES Act, based on payroll costs incurred since disbursement of the PPP Loan.

Any amount not forgiven by the Small Business Administration (the "SBA") is subject to an interest rate of 1.00% per annum commencing on the date of the PPP Loan.

Principal and interest payments due under the PPP Loan are generally deferred until the review and approval of any forgiveness is made by the SBA, subject to the PPP rules.

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.

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.

The Company expects the PPP Loan to be forgiven, but cannot provide assurance of such forgiveness until it has been approved by the Company's lender and the SBA.

Any portion of the PPP Loan that is forgiven will be recorded in the Company's condensed consolidated statement of operations as a gain on extinguishment of debt in the period of forgiveness.

Debt maturities

Annual debt maturities for each of the five years following December 31, 2020 and thereafter are as follows (in thousands):

2021 $ 58,824

Total $ 423,934

Amounts in the above table are calculated based on amounts outstanding at December 31, 2020, and therefore exclude paid-in-kind interest payments that will be made in future periods.

On February 19, 2020, Thermo converted into shares of common stock the principal amount outstanding under the Loan Agreement;

however, the maturity of the Loan Agreement is shown in 2023 in the table above, consistent with its contractual life.

In connection with certain existing borrowing arrangements, the Company was required to record derivative instruments on its consolidated balance sheets.

The Company has identified various embedded derivatives resulting from certain features in the Company’s existing borrowing arrangements, requiring recognition on its consolidated balance sheets.

None of these derivative instruments are designated as a hedge.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Derivative assets:

Compound embedded derivative with the Second Lien Facility Agreement $ 286 $ —

Total derivative assets $ 286 $ —

Derivative liabilities:

Compound embedded derivative with the 2013 8.00 % Notes

$ ( 123 ) $ ( 522 )

Compound embedded derivative with the Loan Agreement with Thermo — ( 1,270 )

Compound embedded derivative with the Second Lien Term Loan Facility

Compound embedded derivative with the Second Lien Facility Agreement — ( 2,000 )

Total derivative liabilities $ ( 123 ) $ ( 3,792 )

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

As of December 31, 2020, the derivative asset recorded for the Compound embedded derivative with the Second Lien Facility Agreement was included in Intangible and other assets, net on the Company's consolidated balance sheets.

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

Year ended December 31,

Interest rate cap

2020 2019 2018

Compound embedded derivative with the 2013 8.00 % Notes

Compound embedded derivative with the Loan Agreement with Thermo 212 144,838 80,551

Compound embedded derivative with the Second Lien Facility Agreement 2,286 — —

Total derivative gain $ 2,897 $ 145,073 $ 81,120

Intangible and Other Assets

Interest Rate Cap

In June 2009, in connection with entering into the Facility Agreement, under which interest accrues at a variable rate, the Company entered into five ten -year interest rate cap agreements, which matured in December 2019.

The interest rate cap agreements reflect a variable notional amount at interest rates that provide coverage to the Company for exposure resulting from escalating interest rates over the term of the Facility Agreement.

The interest rate cap provides limits on the six-month Libor rate (“Base Rate”) used to calculate the coupon interest on outstanding amounts on the Facility Agreement and is capped at 5.50% should the Base Rate not exceed 6.5% .

Should the Base Rate exceed 6.5% , the Company’s Base Rate will be 1% less than the then six-month Libor rate.

The Company paid an approximately $12.4 million upfront fee for the interest rate cap agreements.

The interest rate cap did not qualify for hedge accounting treatment, and changes in the fair value of the agreements are included in the consolidated statements of operations.

The value of the interest rate cap was zero as of both December 31, 2019 and December 31, 2018 .

Derivative Liabilities

The Company has identified various embedded derivatives resulting from certain features in the Company’s debt instruments, including the conversion option and the contingent put feature within both the 2013 8.00% Notes and the Loan Agreement with Thermo as well as certain contingently exercisable put features within the Second Lien Term Loan Facility.

The fair value of each embedded derivative liability is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in its consolidated statements of operations and its consolidated statements of cash flows as an operating activity.

The Company classifies its derivative liabilities consistent with the classification of the underlying debt on the Company's consolidated balance sheet.

The fair value of each embedded derivative is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in its consolidated statements of operations and its consolidated statements of cash flows as an operating activity.

The Company classifies its derivatives consistent with the classification of the underlying debt on the Company's consolidated balance sheet.

Fair Value Measurements for further discussion.

Each liability and the features embedded in the debt instrument which required the Company to account for the instrument as a derivative are described below.

Each liability or asset and the features embedded in the debt instrument, which required the Company to account for the instrument as a derivative, are described below.

Compound Embedded Derivative with 2013 8.00 % Notes

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Compound Embedded Derivative with the Loan Agreement with Thermo

As a result of the conversion option and the contingent put feature within the Loan Agreement with Thermo as amended and restated in 2013, the Company recorded a compound embedded derivative liability on its consolidated balance sheets with a corresponding debt discount that is netted against the face value of the Loan Agreement.

As a result of the conversion option and the contingent put feature within the Loan Agreement with Thermo as amended and restated in 2013, the Company recorded a compound embedded derivative liability on its consolidated balance sheets with a corresponding debt discount that was netted against the face value of the Loan Agreement.

The Company determined the fair value of the compound embedded derivative liability using a Monte Carlo simulation model.

Compound Embedded Derivative with the Second Lien Term Loan Facility

As a result of certain contingently exercisable put features within the Second Lien Term Loan Facility, the Company recorded a compound embedded derivative liability on its consolidated balance sheet with a corresponding debt discount that is netted against the face value of the Second Lien Term Loan Facility.

During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was extinguished.

Long-Term Debt and Other Financing Arrangements for further discussion.

Compound Embedded Derivative with the Second Lien Facility Agreement

As a result of certain contingently exercisable put features within the Second Lien Facility Agreement, the Company initially recorded a compound embedded derivative liability on its consolidated balance sheet with a corresponding debt discount that is netted against the face value of the Second Lien Facility Agreement.

The Company determined the fair value of the compound embedded derivative liability using a probability weighted discounted cash flow model.

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Recurring Fair Value Measurements

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

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

Fair Value Measurements at December 31, 2020:

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

Compound embedded derivative with the Second Lien Facility Agreement $ — $ — $ 286 $ 286

Total assets measured at fair value $ — $ — $ 286 $ 286

Compound embedded derivative with the 2013 8.00 % Notes

Compound embedded derivative with the Loan Agreement with Thermo

Compound embedded derivative with the Second Lien Term Loan Facility

$ — $ — $ ( 123 ) $ ( 123 )

Total liabilities measured at fair value $ — $ — $ ( 123 ) $ ( 123 )

Fair Value Measurements at December 31, 2019:

Compound embedded derivative with the 2013 8.00% Notes

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

Compound embedded derivative with 8.00 % Notes Issued in 2013

$ — $ — $ ( 522 ) $ ( 522 )

Compound embedded derivative with the Loan Agreement with Thermo — — ( 1,270 ) ( 1,270 )

Compound embedded derivative with the Second Lien Facility Agreement — — ( 2,000 ) ( 2,000 )

Total liabilities measured at fair value $ — $ — $ ( 3,792 ) $ ( 3,792 )

Interest Rate Cap

The fair value of the interest rate cap is determined using observable pricing inputs including benchmark yields, reported trades and broker/dealer quotes at the reporting date.

As previously disclosed, the value of the interest rate cap was zero as of both December 31, 2019 and December 31, 2018 , accordingly, the interest rate cap is not reflected in the tables above.

Derivatives for further discussion.

The Company has three derivative liabilities classified as Level 3.

The Company marks-to-market these liabilities at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s consolidated statements of operations.

All of the Company's derivative assets and liabilities are classified as Level 3.

The Company marks-to-market these assets and liabilities at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s consolidated statements of operations.

Derivatives for further discussion.

Derivative Liabilities - 2013 8.00% Notes and Loan Agreement with Thermo

2013 8.00 % Notes and Loan Agreement with Thermo

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

December 31, 2020:

Risk-Free Interest Rate

Note Conversion Price

Market Price of Common Stock

Volatility Risk-Free Interest Rate Note Conversion Price Discount

Rate Market Price of Common Stock

Compound embedded derivative with the 2013 8.00 % Notes

Compound embedded derivative with the Loan Agreement with Thermo

0.1 % $ 0.69 19 % $ 0.34

During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was extinguished and, therefore, as of December 31, 2020, the value was zero .

Long-Term Debt and Other Financing Arrangements and Note 7:

Derivatives for further discussion.

December 31, 2019:

Risk-Free Interest Rate

Note Conversion

Market Price of Common Stock

Volatility Risk-Free Interest Rate Note Conversion

Price Discount

Rate Market Price of Common Stock

Compound embedded derivative with the 2013 8.00 % Notes

1.6 % $ 0.69 27 % $ 0.52

Compound embedded derivative with the Loan Agreement with Thermo 70 - 130 %

Fluctuation in the Company’s stock price is a significant driver of the changes in the derivative valuations during each reporting period.

The Company’s stock price decreased 19% from December 31, 2018 to December 31, 2019 .

As the stock price decreases, the value to the holder of the instrument generally decreases, thereby decreasing the liability on the Company’s consolidated balance sheets.

Stock price volatility is another significant unobservable input used in the fair value measurement of each of the Company’s derivative instruments.

The simulated fair value of these liabilities is sensitive to changes in the expected volatility of the Company’s stock price.

Decreases in expected volatility would generally result in a lower fair value measurement.

Probability of a change of control is another significant unobservable input used in the fair value measurement of the Company’s derivative instruments.

Subject to certain restrictions in each indenture, the Company’s debt instruments contain certain provisions whereby holders may require the Company to purchase all or any portion of the convertible debt instrument upon a change of control.

A change of control will occur upon certain changes in the ownership of the Company or certain events relating to the trading of the Company’s common stock.

The simulated fair value of the derivative liabilities above is sensitive to changes in the assumed probabilities of a change of control.

Increases in the assumed probability of a change of control in the short-term

would generally result in a lower fair value measurement, while increases in the assumed probability of a change in control in the long-term would generally result in a higher fair value measurement.

Expected term is another significant input used in the fair value measurement of the Company's derivative instruments.

As previously discussed, in November 2019, the Company completed the refinancing of its debt obligations.

In connection with this refinancing, Thermo committed to convert the total principal balance outstanding under the Loan Agreement by March 31, 2020;

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

For the valuation of the associated compound embedded derivative, this probability of conversion was modeled into the valuation as of December 31, 2019, which resulted in a reduction of the derivative value during 2019.

In addition to the inputs described above, the valuation model used to calculate the fair value measurement of the compound embedded derivatives within the Company’s 2013 8.00% Notes and Loan Agreement with Thermo included the following inputs and features:

payment in kind interest payments, make whole premiums, a 40 -day stock issuance settlement period upon conversion, and the principal balance of each loan at the balance sheet date.

There are also certain put and call features within the 2013 8.00% Notes that impact the valuation model.

Derivative Liabilities - Second Lien Term Loan Facility

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

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

These mandatory prepayments include, but are not limited to, prepayments upon change of control, excess cash flow from spectrum monetization, and excess cash flow from the Company's core satellite business.

Rollforward of Recurring Level 3 Liabilities

The following table presents a rollforward for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

1.6 % $ 0.69 27 % $ 0.52

Second Lien Facility Agreement

The compound embedded derivative with the Second Lien Facility Agreement 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 13 % and 18 % at December 31, 2020 and 2019, respectively.

As of December 31, 2020, the discount yield utilized in the valuation was lower than the blended interest rate of the underlying debt.

As a result, the features embedded in the underlying debt resulted in an asset for the Company.

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 Assets and Liabilities

The following table presents a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

Year Ended December 31,

Balance at beginning of period

Issuance of compound embedded derivative with the Second Lien Term Loan Facility

Balances at beginning of period $ ( 3,792 ) $ ( 146,865 )

Derivative adjustment related to conversions 1,058 —

Issuance of compound embedded derivative with the Second Lien Facility Agreement — ( 2,000 )

Unrealized gain, included in derivative gain 2,897 145,073

Balance at end of period

Balances at end of period $ 163 $ ( 3,792 )

Fair Value of Debt Instruments

The Company believes it is not practicable to determine the fair value of the Facility Agreement and the Second Lien Term Loan Facility without incurring significant additional costs.

The Company believes it is not practicable to determine the fair value of the First Lien Facility Agreement, the Second Lien Facility Agreement and the PPP Loan without incurring significant additional costs.

Unlike typical long-term debt, interest rates and other terms for these instruments are not readily available and generally involve a variety of factors, including due diligence by the debt holders.

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):

December 31, 2019

December 31, 2018

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

December 31, 2020 December 31, 2019

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

Loan Agreement with Thermo $ — $ — $ 116,543 $ 88,886

2013 8.00 % Notes

1,376 1,122 1,410 875

Nonrecurring Fair Value Measurements

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

pursuant to applicable accounting guidance, measuring the fair value of an instrument classified in shareholders’ equity is generally consistent with the requirement for measuring liabilities.

On November 27, 2019, the Company entered into a Second Lien Term Loan Facility Agreement.

As additional consideration for the loan, the Company issued the lenders warrants to purchase 124.5 million shares of voting common stock at a strike price of $0.38 .

The Company determined that the warrants were equity instruments and recorded them as a part of stockholders’ equity.

The fair value of the warrants was estimated using a Black-Scholes option-pricing model.

On the date of issuance, the fair value of the warrants was $23.6 million .

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

November 27, 2019

Risk-Free Interest Rate

Exercise Price

Market Price of Common Stock

Warrants issued in connection with the Second Lien Term Loan Facility

Compound Embedded Derivative with the Loan Agreement with Thermo

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

On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement with Thermo into shares of common stock.

See further discussion in Note 6:

Long-Term Debt and Other Financing Arrangements.

As a result of the conversion, the Company wrote off the total fair value of the compound embedded derivative liability with the Loan Agreement with Thermo based on the derivative value on the conversion date of $ 1.1 million.

This embedded derivative was classified as a Level 3 fair value measurement on the Company's consolidated balance sheet.

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

February 19, 2020

Volatility Risk-Free Interest Rate Note Conversion Price Discount Rate Market Price of Common Stock

Compound embedded derivative with the Loan Agreement with Thermo 70 - 130 %

1.4 % $ 0.69 27 % $ 0.42

Long-Lived Assets

Long-lived assets and intangible and other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

During 2019, the Company reclassified its former gateway location in Nicaragua to held for sale as, among other factors, the Company intends on disposing of this asset in the next twelve months.

In its 2019 consolidated statement of operations, the Company recorded a reduction in the carrying value of this asset of $0.5 million to equal fair value less estimated costs to sell.

During 2019, the Company reclassified its former gateway location in Nicaragua from held and used to held for sale.

This asset was originally recorded at a total fair value of $ 1.6 million prior to the reduction in its value, resulting in a total loss of $ 1.1 million during 2019.

During 2018, a reduction in the value of long-lived assets and/or intangible and other assets was not required.

Contractual Obligations - Second-Generation Network

As of December 31, 2019 , the Company had purchase commitments with certain vendors related to the procurement, deployment and maintenance of the second-generation network.

These commitments include primarily a purchase commitment with MIL-SAT LLC for the procurement and production of new antennas for substantially all of the Company's gateways.

As of December 31, 2019 , the Company's remaining purchase obligations under this commitment are approximately $14.6 million ;

the timing of payments is driven by work performed under the contract over the remaining contract period, approximately three years.

Other Commitments

As of December 31, 2019, the fair value less estimated cost to sell was $ 0.5 million.

During the fourth quarter of 2020, the Company signed a contract for the sale of this property;

the final selling price (net of estimated cost to sell) is $ 0.3 million and, accordingly, the Company recorded an additional impairment totaling $ 0.2 million during 2020.

Additionally, during the fourth quarter of 2020, the Company wrote down $ 0.2 million related to of the ground portion of construction in progress for one of its gateways resulting from an analysis made over these balances.

COMMITMENTS AND CONTINGENCIES

Network Obligations

The Company has purchase commitments with certain vendors related to the procurement, deployment and maintenance of the Company's network.

As of December 31, 2020, the Company's remaining purchase obligations under certain of these noncancellable commitments are approximately $ 8.1 million;

the timing of payments is driven by work performed under the contracts over the remaining contract periods, which range from approximately one to three years .

Inventory Purchase Commitments

The Company has inventory purchase commitments with its third party product manufacturers in the normal course of business.

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The Company estimates that its open inventory purchase commitments as of December 31, 2020 were approximately $ 6.4 million.

As of December 31, 2019 , approximately $1.1 million related to these commitments was recorded in prepaid expenses and other current assets on the Company's consolidated balance sheet.

CONTINGENCIES

Securities Claim

On September 25, 2018, a shareholder action was filed against Globalstar, Inc.

(the “Company” or “Globalstar”), members of the Board of Directors, Thermo Companies, Inc., and certain members of Globalstar management in the Court of Chancery of the State of Delaware (the “Court”), captioned Mudrick Capital Management, LP, et al.

Monroe, et al., C.A.

2018-0699-TMR (the "Action").

As previously disclosed, on December 14, 2018, all parties to the Action, including plaintiffs Mudrick Capital Management, L.P.

(“Mudrick Capital”) and Warlander Asset Management (“Warlander”, and, together with Mudrick Capital, the “Plaintiffs”), entered into a stipulation and agreement of settlement, compromise and release of stockholder derivative action (the “Settlement Agreement”) to settle all claims asserted against all defendants in the Action.

On September 5, 2019, the Court approved the Settlement Agreement and awarded to the Plaintiffs' attorneys a fee of $4.5 million , inclusive of expenses, which was paid in November 2019.

The Plaintiff's award, as well as other costs incurred by the Company directly associated with the Action, exceeded the Company's retention limit of $1.5 million for a "securities claim" under its directors and officers insurance policy.

The Company's primary insurance provider paid the $4.5 million settlement award directly to the Plaintiff's in November 2019.

Additionally, the Company received a total of $2.4 million during 2019 as reimbursement for other costs incurred by the Company directly associated with the Action.

According to ASC 450, a recovery related to a contingent loss (e.g., insurance recovery) is a contingent gain.

Recovery of a recorded contingent loss shall be recognized only when realization of the recovery is deemed probable and reasonably estimable.

Accordingly, in December 2019, the Company recorded a gain of $1.7 million , which represents the portion of the total $2.4 million insurance recovery that was previously treated as a contingent gain.

This gain was recorded in marketing, general and administrative expenses during the fourth quarter of 2019.

Tariff Ruling

In September 2019, U.S Customs and Border Protection ("CBP") issued a ruling related to the classification of certain of the Company's core products imported from China.

This classification, which carries 25% tariffs upon import, is inconsistent with the classification the Company previously used based on external legal advice.

As a result of the CBP ruling, the Company recorded a payable of approximately $1.8 million in accrued expenses on the Company's December 31, 2019 consolidated balance sheet related to goods imported from China since July 2018.

The Company recorded an offsetting receivable for a portion of the payable that is recoverable as a duty drawback;

this receivable represents the portion of duties owed for equipment transferred to foreign subsidiaries for sale.

The Company plans on filing a protest against this ruling to challenge the classification and reduce the amounts owed.

The Company cannot provide any assurance that it may be successful in achieving a favorable outcome;

as such, the Company is accounting for this matter as a gain contingency and may record any such gain from a reimbursement or change in ruling in future periods if and when the contingency is resolved.

Credit Card Processor Reserve

The Company is required to maintain a reserve of $ 5.0 million with its credit card processor to address any liability arising from potential charge-backs.

The balance at December 31, 2020 was $ 5.0 million and is recorded in prepaid expenses and other current assets on the Company's consolidated balance sheet as the required reserve is held with the credit card processor.

Business Economic Loss Claim

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The Company received the two installments of $ 3.7 million each in January 2019 and January 2020.

As of December 31, 2019, the $3.7 million received in January 2020 was recorded in prepaid and other current assets on the Company's consolidated balance sheet.

The Company evaluated the facts and circumstances surrounding this settlement and determined that under ASC 450, this contingent gain was considered realizable as the signed settlement was enforceable, the counterparty had the wherewithal to pay the amount and the proceeds met the definition of an asset.

Accordingly, during 2018, the Company recorded the present value of the proceeds of $6.8 million and a discount of $0.6 million .

The present value of the net proceeds of $6.8 million was recorded in other income on the Company's consolidated statement of operations.

The discount of $0.6 million was recorded on the Company's consolidated balance sheet and was accreted to interest income over the term of the receivable using the effective interest method.

Customer Bankruptcy Claim

During 2020, one of the Company's customers filed for Chapter 11 of the United States Bankruptcy Code resulting in the Company reserving all open receivables due from the customer.

This customer's plan of reorganization was confirmed by the bankruptcy court and the order was issued in January 2021.

The cure payment is expected to be made to Globalstar in early 2021 totaling $ 0.3 million.

As of December 31, 2020, the confirmation was not yet made and accordingly the Company is accounting for this matter as a gain contingency and has recorded such gain in 2021, when the contingency was resolved and payment was made.

Other Litigation

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Legal costs related to these matters are expensed as incurred.

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

In management's opinion, there is no pending litigation, dispute or claim, which could be expected to have a material adverse effect on the Company's financial condition, results of operations or liquidity.

ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES

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Accrued inventory 499 702

Accrued asset purchase

Accrued tariffs 1,795 1,795

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Total accrued expenses $ 25,916 $ 24,874

Other accrued expenses include primarily advertising costs, vendor services, warranty reserve, occupancy costs, accrued network costs and estimated payroll shortfall under the Cooperative Endeavor Agreement with the Louisiana Department of Economic Development (“LED”).

Accrued compensation and benefits include primarily accrued vacation, payroll, benefits and taxes.

The increase in this balance from December 31, 2019 to 2020 is due primarily to higher accrued vacation balances as well as deferred payroll taxes (as discussed below).

Accrued tariffs represent amounts payable to U.S Customs and Border Protection for a ruling issued in September 2019 related to the classification of certain of the Company's core products imported from China.

The Company plans on filing a protest against this ruling to challenge the classification and reduce the amounts owed.

Other accrued expenses include primarily vendor services, warranty reserve, occupancy costs and accrued network costs.

For the year ended December 31, 2019, other accrued expenses also included the estimated payroll shortfall under the Cooperative Endeavor Agreement with the Louisiana Department of Economic Development.

The following is a summary of the activity in the warranty reserve account, which is included in other accrued expenses above (in thousands):

Year Ended December 31,

2020 2019 2018

Balance at beginning of period $ 186 $ 153 $ 143

Provision 543 525 372

Utilization ( 517 ) ( 492 ) ( 362 )

Balance at end of period $ 212 $ 186 $ 153

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Deferred tax liability 755 395

Deferred rent and other deferred expense

Capital lease obligations

Liability related to the Cooperative Endeavor Agreement with the State of Louisiana

Deferred payroll taxes under CARES Act 423 —

Foreign tax contingencies 633 1,086

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Summary of Significant Accounting Policies.

Foreign tax contingencies reflect primarily amounts owed by the Company's Brazilian subsidiary pursuant to refinancing programs in country as well as certain pre-acquisition tax liabilities arising from the Company's acquisition of the former IGO in Brazil in 2008.

The Company relocated its headquarters to Louisiana in 2010.

In connection with its relocation, the Company entered into a Cooperative Endeavor Agreement with the LED, which expired on December 31, 2019, whereby the Company was reimbursed for certain qualified relocation costs and annual lease expenses.

Under the terms of the agreement, since its relocation in 2010, the Company was reimbursed a total of $5.8 million for qualifying relocation and lease expenses and $1.3 million for facility improvements and replacement equipment in connection with the relocation through December 31, 2019 .

Deferred payroll taxes under the CARES Act reflect the Company's employer share of social security taxes that were originally due during a portion of 2020.

The Company expects these amounts will be repaid in two installments in December 2021 and December 2022;

amounts in the table above reflect the portion due in December 2022.

Foreign tax contingencies reflect primarily amounts owed by the Company's Brazilian subsidiary pursuant to refinancing programs in country.

RELATED PARTY TRANSACTIONS

Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.6 million and $ 0.3 million as of December 31, 2020 and 2019, respectively.

This decrease is related to the timing of expenses incurred by Thermo on behalf of the Company related to the shareholder litigation discussed in Note 10:

Contingencies .

Transactions with Thermo

Certain general and administrative expenses are incurred by Thermo on behalf of the Company.

These expenses, which include non-cash expenses that the Company accounts for as a contribution to capital, related to services provided by certain executive officers of Thermo and expenses incurred by Thermo on behalf of the Company which are charged to the Company.

These expenses, which include non-cash expenses that the Company accounts for as a contribution to capital, related to services provided by certain executive officers of Thermo, and expenses incurred by Thermo on behalf of the Company that are charged to the Company.

The expenses charged are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time.

The expenses charged to the Company were $ 0.6 million, $ 0.5 million, and $ 1.5 million for the periods ended December 31, 2020, 2019 and 2018, respectively.

2018 included approximately $0.7 million of expenses incurred by Thermo on behalf of the Company related to the shareholder litigation that did not recur in 2019.

In February 2019, the Company entered into a lease agreement with Thermo Covington, LLC for the Company's new headquarters office.

Annual lease payments for the new location are $1.4 million per year, increasing at a rate of 2.5% per year, for a lease term of ten years.

During the twelve months ended December 31, 2019 , the Company incurred lease expense of $1.5 million due to Thermo under this lease agreement.

As of December 31, 2019 , the principal amount outstanding under the Loan Agreement with Thermo was $135.1 million , and the fair value of the compound embedded derivative liability associated with the Loan Agreement was $1.3 million .

During 2019 and 2018 , interest accrued on the Loan Agreement was approximately $15.4 million and $13.6 million, respectively.

As previously disclosed, Thermo committed to convert the total principal balance outstanding under the Loan Agreement by March 31, 2020;

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

In February 2019, the Company entered into a lease agreement with Thermo Covington, LLC for the Company's headquarters office.

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

During the twelve months ended December 31, 2020 and 2019, the Company incurred lease expense of $ 1.6 million and $ 1.5 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.

In July 2019, the Company entered into a Subordinated Loan Agreement, effective June 28, 2019, with Thermo and certain unaffiliated parties.

Thermo's participation in the Subordinated Loan Agreement was $ 53.8 million and $ 3.4 million of interest had accrued prior to its pay down.

In November 2019, the Company entered into the Second Lien Term Loan Facility which was used in part to repay the entire balance of the Subordinated Loan Agreement.

Thermo's participation in the Second Lien Term Loan Facility was $95.1 million .

In November 2019, the Company entered into the Second Lien Facility Agreement.

Thermo's participation in the Second Lien Facility Agreement was $ 95.1 million.

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

During 2019, interest accrued with respect to Thermo's portion of the debt outstanding on the Second Lien Term Loan Facility was approximately $1.2 million .

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.

In December 2019, Thermo exercised 9.5 million warrants resulting in cash proceeds to the Company of $3.6 million .

Interest accrued since inception with respect to Thermo's portion of the debt outstanding on the Second Lien Facility Agreement was approximately $ 14.5 million, of which $ 13.4 million was accrued during the twelve months ended December 31, 2020.

In connection with the issuance of the Second Lien Facility Agreement, 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 December 31, 2020, approximately 50.0 million warrants remain outstanding and expire on March 31, 2021.

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

The Company has a Strategic Review Committee that is required to remain in existence for as long as Thermo and its affiliates beneficially own forty-five percent ( 45 %) or more of Globalstar’s outstanding common stock.

To the extent permitted by applicable law, the Strategic Review Committee has exclusive responsibility for the oversight, review and approval of, among other things and subject to certain exceptions, any acquisition by Thermo and its affiliates of additional newly-issued securities of the Company and any transaction between the Company and Thermo and its affiliates with a value in excess of $ 250,000 .

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

In April 2018, Globalstar entered into a merger agreement with certain Thermo entities, which are controlled by James Monroe III, Executive Chairman of the Board of Directors of Globalstar and former Chief Executive Officer of Globalstar.

The transaction was unanimously recommended by the Special Committee of the Board of Directors of Globalstar, consisting entirely of disinterested independent directors, and unanimously approved by the full Board of Directors.

On July 31, 2018, Globalstar, following the unanimous recommendation of its Special Committee of independent directors and Thermo, terminated the merger agreement by mutual written agreement.

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

As previously disclosed, in connection with the Settlement Agreement discussed in Note 10:

Contingencies , the Company formed a Strategic Review Committee that is required to remain in existence for as long as Thermo and its affiliates beneficially own forty-five percent ( 45% ) or more of Globalstar’s outstanding common stock.

To the extent permitted by applicable law, the Strategic Review Committee will have exclusive responsibility for the oversight, review and approval of, among other things and subject to certain exceptions, any acquisition by Thermo and its affiliates of additional newly-issued securities of the Company and any transaction between the Company and Thermo and its affiliates with a value in excess of $250,000 .

The approval of any of the foregoing transactions will require the vote of at least a majority of the Strategic Review Committee.

PENSIONS AND OTHER EMPLOYEE BENEFITS

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The Company's funding policy is to fund the Globalstar Plan in accordance with the Internal Revenue Code and regulations.

In December 2019, the Company settled a portion of the pension liability related to terminated vested employees in the Globalstar Plan as a de-risking strategy.

The total settlement of $1.7 million was paid out through the assets held in the Globalstar Plan.

The settlement resulted in a reduction to the projected benefit obligation and a corresponding decrease to plan assets as of December 31, 2019.

Additionally, in accordance with ASC 715 Compensation — Retirement Benefits , the Company recognized a loss of $0.5 million in its consolidated statement of operations during the twelve-month period ended December 31, 2019 associated with this settlement.

This loss represents the pro rata portion of actuarial losses that were previously deferred in other comprehensive income.

In each of December 2020 and 2019, the Company settled a portion of the pension liability related to retirees and terminated vested employees in the Globalstar Plan as a de-risking strategy.

The total settlements for 2020 and 2019 were $ 7.7 million and $ 1.7 million, respectively, and were paid out through the assets held in the Globalstar Plan.

The settlements resulted in a reduction to the projected benefit obligation and a corresponding decrease to plan assets as of both December 31, 2020 and 2019.

Additionally, in accordance with ASC 715 Compensation — Retirement Benefits , the Company recognized losses totaling $ 2.1 million and $ 0.5 million, respectively, and these losses are included in other income (expense) in its consolidated statement of operations during the twelve-month periods ended December 31, 2020 and 2019 associated with these settlements.

The losses represent the pro rata portion of actuarial losses that were previously deferred in other comprehensive income.

Defined Benefit Pension Obligation and Funded Status

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Projected benefit obligation, beginning of year $ 16,509 $ 17,150

Service cost 176 195

Interest cost 521 706

Actuarial (gain) loss

Actuarial loss 671 1,147

Settlement ( 7,669 ) ( 1,660 )

Benefits paid ( 1,029 ) ( 1,029 )

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Employer contributions 715 230

Settlement ( 7,669 ) ( 1,660 )

Benefits paid ( 1,029 ) ( 1,029 )

4 unchanged sentences

Year Ended December 31,

2020 2019 2018

Net periodic benefit cost:

Service cost $ 176 $ 195 $ 194

Interest cost 521 706 663

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Amortization of unrecognized net actuarial loss 300 404 374

Settlement 2,075 455 —

Total net periodic benefit cost $ 2,279 $ 966 $ 330

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For the Year Ended December 31,

2020 2019 2018

Benefit obligation assumptions:

Discount rate 2.50 % 3.28 % 4.25 %

Rate of compensation increase

Rate of compensation increase N/A N/A N/A

Net periodic benefit cost assumptions:

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Expected rate of return on plan assets 6.50 % 6.50 % 6.50 %

Rate of compensation increase

Rate of compensation increase N/A N/A N/A

The assumptions, investment policies and strategies for the Globalstar Plan are determined by the Globalstar Plan Committee.

11 unchanged sentences

Debt securities 45 45

Total 100 % 100 %

The fair values of the Company’s pension plan assets by asset category were as follows (in thousands):

December 31, 2020

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

United States equity securities $ 2,426 $ — $ 2,426 $ —

1 unchanged sentence

Fixed income securities 1,553 — 1,553 —

Other 931 — 931 —

Total $ 5,529 $ — $ 5,529 $ —

December 31, 2019

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

United States equity securities $ 5,501 $ — $ 5,501 $ —

1 unchanged sentence

Fixed income securities 3,725 — 3,725 —

Other 1,789 — 1,789 —

Total $ 12,381 $ — $ 12,381 $ —

Accumulated Benefit Obligation

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The benefit payments to retirees over the next ten years are expected to be paid as follows (in thousands):

2026 - 2030 2,605

For 2020 and 2019, the Company contributed $ 0.7 million and $ 0.2 million, respectively, to the Globalstar Plan.

1 unchanged sentence

The Company has a defined contribution employee savings plan, or “401(k),” which provides that the Company may match the contributions of participating employees up to a designated level.

Under this plan, the matching contributions were approximately $0.6 million , $0.6 million and $0.4 million for 2019 , 2018 , and 2017 , respectively.

The increase in matching contributions during 2018 was due to increased headcount as well as an increase to the matching contribution percentage by the Company during 2018.

The components of income tax expense (benefit) were as follows (in thousands):

Under this plan, the matching contributions were approximately $ 0.6 million for each of 2020, 2019, and 2018.

The components of income tax expense were as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Federal tax $ — $ — $ —

State tax 54 56 30

Foreign tax 248 94 95

Total 302 150 125

Federal and state tax 360 395 —

Foreign tax — — —

Total 360 395 —

Income tax expense $ 662 $ 545 $ 125

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

income (loss) $ ( 82,740 ) $ 47,545 $ 28,699

1 unchanged sentence

Total income (loss) before income taxes $ ( 108,977 ) $ 15,869 $ ( 6,391 )

As of December 31, 2019 , the Company had cumulative U.S.

and foreign net operating loss carryforwards for income tax reporting purposes of approximately $1.8 billion and $242.0 million , respectively.

As of December 31, 2018 , the Company had cumulative U.S.

and foreign net operating loss carryforwards for income tax reporting purposes of approximately $1.8 billion and $228.9 million , respectively.

The current net operating loss carryforwards expire from 2020 through 2039 , with less than 1% expiring prior to 2025 .

As of December 31, 2020 and 2019, the Company had cumulative U.S.

and foreign net operating loss ("NOL") carryforwards for income tax reporting purposes of approximately $ 1.8 billion and $ 0.2 billion, respectively.

The vast majority of these NOL carryforwards were generated prior to 2018 and expire from 2021 through 2040, with less than 1 % expiring prior to 2025, and the remaining NOL carryforwards do not expire.

The components of net deferred income tax assets were as follows (in thousands):

Federal and foreign net operating loss, interest limitation and credit carryforwards

Federal and foreign NOL and credit carry-forwards $ 507,105 $ 475,171

Property and equipment and other long-term assets ( 133,086 ) ( 153,049 )

Accruals and reserves

Reserves and disallowed interest 6,349 2,310

Deferred tax assets before valuation allowance 380,368 324,432

Valuation allowance ( 381,123 ) ( 324,827 )

Net deferred income tax asset (liability)

Net deferred income tax liability $ ( 755 ) $ ( 395 )

The change in the valuation allowance during 2020 of $ 56.3 million was due to the Company providing valuation allowances against all of the tax benefit generated from its consolidated net losses.

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deferred tax assets and the Company’s reconciliation of various deferred tax assets to reflect the remaining cumulative differences, the Company has remeasured all U.S.

deferred tax assets resulting in a decrease in both the deferred tax asset and the associated valuation allowance.

Due to the limitation on utilization of state net operating losses, the Company recorded a deferred tax liability and income tax expense during 2019 .

deferred tax assets resulting in an increase in both the deferred tax asset and the associated valuation allowance.

The change in property and equipment and other long-term assets was driven primarily by depreciation due to the difference between tax and book depreciable lives.

Due to the limitation on utilization of state NOLs, the Company recorded deferred tax liabilities of $ 0.8 million and $ 0.4 million as of December 31, 2020 and 2019.

The actual provision for income taxes differs from the statutory U.S.

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Year Ended December 31,

2020 2019 2018

Provision at U.S.

statutory rate of 21% for each of 2019 and 2018 and 35% for 2017

statutory rate of 21% $ ( 22,885 ) $ 3,333 $ ( 1,349 )

State income taxes, net of federal benefit ( 1,386 ) 1,055 890

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Adjustment to reserved deferred assets ( 48,485 ) 62,085 —

Remeasurement of U.S.

deferred tax assets (Federal and State)

Adjustment to state deferred rate 4,200 13,639 —

Other (including amounts related to prior year tax matters) 8 98 205

Total $ 662 $ 545 $ 125

The Company operates in various U.S.

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As of December 31, 2020, the Company had not provided foreign withholding taxes on approximately $ 3.0 million of undistributed earnings from certain foreign subsidiaries indefinitely invested outside the U.S.

On December 22, 2017, the United States (“U.S.”) enacted significant changes to the U.S.

tax law following the passage and signing of the Tax Act.

The Tax Act included significant changes to existing tax law substantially effective January 1, 2018, including a permanent reduction to the U.S.

federal corporate income tax rate from 35% to 21%, changes to the NOL utilization regulations, repeal of alternative minimum tax, a one-time deemed repatriation tax on deferred foreign income (“Transition Tax”), implementation of a territorial tax system, implementation of anti-deferral and anti-base erosion provisions, and provisions to both accelerate and limit certain deductions.

The Company has revalued its deferred tax assets and liabilities based on the new corporate tax rate.

As the Company’s deferred tax assets have a full valuation allowance, the Company has not recorded any income statement impact as a result of the remeasurement of net deferred tax assets.

Accordingly, the tax law changes did not have a material impact to the financial statements of the Company.

Also, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment.

SAB 118 provides for a measurement period of up to one year from the date of enactment.

During the measurement period, companies need to reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

The Company completed its analysis of the Tax Act and no adjustments were made to the provisional amounts recorded in the Company’s financial statements for the period ending on December 31, 2017.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Act.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or treating any taxes on GILTI inclusions as period costs are both acceptable methods subject to an accounting policy election.

The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2019 and December 31, 2018 .

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The numerator used to calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net income (loss).

The Company elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2020 and 2019.

As previously discussed in Note 1:

Summary of Significant Accounting Policies, the CARES Act was enacted in March 2020 to provide economic relief to eligible business and individuals impacted by COVID-19.

The Company evaluated the impact the CARES Act legislation has on its liquidity and tax positions.

The net impact to the Company's NOL carryforwards as of December 31, 2019 was $ 14.8 million due to the change in the interest limitations permitted under the CARES Act.

(LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed by dividing (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The numerator used to calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net (loss) income.

Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive.

Potentially dilutive securities include primarily outstanding stock-based awards, convertible notes, warrants and shares issuable pursuant to the Company's Employee Stock Purchase Plan.

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

The effect of potentially dilutive common shares for the Company's convertible notes are calculated using the if-converted method.

Generally, for all other potentially dilutive common shares, the effect is calculated using the treasury stock method.

The following table sets forth the 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):

Year ended December 31,

Net income (loss)

2020 2019 2018

Net (loss) income $ ( 109,639 ) $ 15,324 $ ( 6,516 )

Effect of dilutive securities:

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Incremental shares from assumed exercises, conversions and other issuance of:

Stock options, restricted stock, restricted stock units and ESPP

Stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan — 4,743 —

2013 8.00 % Notes

Loan Agreement with Thermo — 195,805 —

Warrants issued in connection with Second Lien Term Loan Facility

Warrants issued in connection with Second Lien Facility Agreement — 1,831 —

Diluted shares outstanding 1,642,359 1,655,191 1,269,548

Income (loss) per share:

For the years ended December 31, 2018, and 2017, 201.7 million and 176.5 million shares of potential common stock, respectively, were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

In connection with the Second Lien Term Loan Facility entered into in November 2019, the Company issued 124.5 million warrants to purchase the Company's common stock to the debt holders as consideration for the loan.

As of December 31, 2019 , approximately 115.0 million warrants remain outstanding.

Refer to Note 6:

Long-Term Debt and Other Financing Arrangements for further discussion on these warrants.

Net (loss) income per common share:

Basic $ ( 0.07 ) $ 0.01 $ ( 0.01 )

Diluted $ ( 0.07 ) $ ( 0.07 ) $ ( 0.01 )

For the years ended December 31, 2020 and 2018, 4.2 million shares and 201.7 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

Additionally, as of December 31, 2020, 115.0 million warrants issued to the lenders of the Second Lien Facility Agreement were outstanding and not reflected in the 4.2 million potentially dilutive security amount above as they were out of the money as of December 31, 2020.

STOCK COMPENSATION

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As of December 31, 2020 and 2019, the number of shares of common stock that was authorized and remained available for issuance under the Equity Plan was 26.7 million and 34.4 million, respectively.

In 2019, the stockholders of Globalstar approved amendments to the Company's Equity Plan;

key changes included the authorization of an additional 28.9 million shares for future issuance as well as extension of the term of the Equity Plan through February 2029.

Stock Options

The Company has granted incentive stock options under the Equity Plan.

These options have various vesting terms, but generally vest in equal installments over three or four years and expire in ten years.

These options have various vesting terms, but generally vest in equal installments over three years and expire in ten years .

Non-vested options are generally forfeited upon termination of employment.

The Company recognizes compensation expense for stock option grants based on the fair value at the date of grant using the Black-Scholes option pricing model.

The Company recognizes compensation expense for stock option grants over the employee's requisite service period, which is generally based on the vesting period, based on the fair value at the date of grant using the Black-Scholes option pricing model.

The Company uses historical data, among other factors, to estimate the expected stock price volatility, the expected option life and the expected forfeiture rate.

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Year Ended December 31,

2020 2019 2018

Risk-free interest rate 1.7 % 2.5 % 2 % - 3 %

Expected term of options (years) 5 5 5

Volatility 72 % 63 % 63 %

Weighted average grant-date fair value per share $ 0.32 $ 0.29 $ 0.26

The following table represents the Company’s stock option activity for the year ended December 31, 2020:

Weighted Average

Shares Weighted Average

Exercise Price

Outstanding at January 1, 2020

7,827,464 $ 1.42

Granted 700,000 0.54

Forfeited or expired ( 543,296 ) 1.34

Outstanding at December 31, 2020

7,984,168 1.35

Exercisable at December 31, 2020

The Company did not grant any stock options during 2019, accordingly, no amounts are shown in the table above.

The following table summarizes the aggregate intrinsic value of stock options exercised during the years indicated below (in thousands):

Year Ended December 31,

Intrinsic value of stock options exercised

6,918,029 $ 1.45

No stock options were exercised during 2020, accordingly, no amounts are shown in the table above.

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

Net cash proceeds during the year ended December 31, 2019 from the exercise of stock options was less than $0.1 million .

The aggregate intrinsic value of all outstanding stock options at December 31, 2019 was $0.1 million with a remaining contractual life of 6.5 years.

The aggregate intrinsic value of all vested stock options at December 31, 2019 was $0.1 million with a remaining contractual life of 6.5 years.

The following table presents compensation expense related to stock options for the years indicated below (in millions):

Year Ended December 31,

Total compensation expense

In recent years, the Company has adjusted its philosophy related to equity compensation and has increased the volume of grants of restricted stock award and units (shown in more detail below) and has decreased the volume of grants of stock options.

This change in compensation philosophy has resulted in lower compensation cost recognized during 2019.

The aggregate intrinsic value of all outstanding stock options at December 31, 2020 was nearly zero with a remaining contractual life of 6.0 years.

The aggregate intrinsic value of all vested stock options at December 31, 2020 was nearly zero with a remaining contractual life of 6.2 years.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 0.3 million, $ 0.3 million and $ 1.1 million, respectively, of compensation expense related to stock options.

As of December 31, 2020, unrecognized compensation expense related to nonvested stock options outstanding was approximately $ 0.4 million to be recognized over a weighted-average period of 1.4 years.

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Year Ended December 31,

2020 2019 2018

Weighted average grant date fair value $ 0.36 $ 0.46 $ 0.49

The following is a rollforward of the activity in restricted stock for the year ended December 31, 2020:

Weighted Average

Shares Weighted Average

Nonvested at January 1, 2020

9,292,800 $ 0.56

Granted 7,894,009 0.36

Vested ( 9,344,341 ) 0.48

Forfeited ( 106,860 ) 0.41

Nonvested at December 31, 2020

Approximately 2.0 million performance-based restricted stock awards are reflected in the nonvested balance at January 1, 2019 and December 31, 2019.

The following table represents the compensation expense related to restricted stock for the years indicated below (in millions):

Year Ended December 31,

Total compensation expense

7,735,608 $ 0.46

Included in the non-vested balance at December 31, 2020 are approximately 2.0 million performance-based restricted stock awards that will vest upon the achievement of certain milestones.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 4.5 million, $ 4.3 million and $ 3.9 million, respectively, of compensation expense related to restricted stock.

The total fair value, as calculated on the day of vesting, of restricted stock awards that vested during 2020, 2019 and 2018 was $ 3.3 million, $ 4.1 million, and $ 3.1 million, respectively.

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Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “Plan”) which provides eligible employees of the Company and its subsidiaries with an opportunity to acquire shares of its common stock at a discount.

The Company has an Employee Stock Purchase Plan (the “Plan”) which provides eligible employees of the Company with an opportunity to acquire shares of its common stock at a discount.

The maximum aggregate number of shares of common stock that may be purchased through the Plan is 14.0 million shares.

The number of shares that may be purchased through the Plan will be subject to proportionate adjustments to reflect stock splits, stock dividends, or other changes in the Company’s capital stock.

In 2019, the stockholders of Globalstar approved an amendment to the Company's Equity Plan;

key changes included the authorization of an additional 7.0 million shares for future issuance as well as a 2% annual increase to the maximum aggregate number of shares available for grant in future years.

The Plan permits eligible employees to purchase shares of common stock during two semi-annual offering periods beginning on June 15 and December 15 (the “Offering Periods”), unless adjusted by the Company's Board of Directors or one of its designated committees.

The Plan permits eligible employees to purchase shares of common stock during two semi-annual offering periods beginning on June 15 and December 15 (the “Offering Periods”).

Eligible employees may purchase shares of up to 15 % of their total compensation per pay period, but may purchase in any calendar year no more than the lesser of $ 25,000 in fair market value of common stock or 500,000 shares of common stock, as measured as of the first day of each applicable Offering Period.

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Fair market value is equal to the lesser of the closing price of a share of common stock on either the first day or the last day of the Offering Period.

For the years ended December 31, 2019 and 2018 , the Company received $0.6 million and $0.5 million , respectively, related to shares issued under this plan.

For each of 2019 and 2018 , the Company recorded compensation expense of approximately $0.5 million , which is reflected in marketing, general and administrative expenses.

For each of 2020 and 2019, the Company received $ 0.6 million in proceeds related to shares issued under this plan.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded compensation expense of approximately $ 0.4 million, $ 0.5 million and $ 0.5 million, respectively, which is reflected in marketing, general and administrative expenses.

Additionally, the Company has issued approximately 10.5 million shares through December 31, 2020 related to the Plan.

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Expected term (months) 6 6

Volatility 123 % 128 %

Weighted average grant-date fair value per share $ 0.18 $ 0.20

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Total accumulated other comprehensive loss $ ( 2,944 ) $ ( 3,449 )

The minimum pension liability adjustment in the table above includes a settlement loss of $0.5 million .

In December 2019, the Company settled a portion of its pension liability related to terminated vested employees in the Globalstar Plan as a de-risking strategy.

The settlement resulted in a reduction to the projected benefit obligation and a corresponding decrease to plan assets as of December 31, 2019.

In accordance with ASC 715 Compensation — Retirement Benefits , the Company recognized a loss of $0.5 million in other comprehensive income and non-operating expense during 2019 associated with this settlement.

This loss represents the pro rata portion of actuarial losses that were previously deferred in other comprehensive income.

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

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of consolidated quarterly financial information (amounts in thousands, except per share data):

Quarter Ended

Total revenue

Loss from operations

Net income (loss)

Basic income (loss) per common share

Diluted loss per common share

Shares used in basic per share calculations

Shares used in diluted per share calculations

Quarter Ended

Total revenue

Operating income (loss)

Net income (loss)

Basic income (loss) per common share

Diluted loss per common share

Shares used in basic per share calculations

Shares used in diluted per share calculations

During the third quarter of 2019, the Company identified a misapplication of GAAP in the previously reported calculation of net income (loss) attributable to common stockholders in the numerator of diluted EPS for certain prior periods.

The correction of this calculation had no impact on net income (loss), retained deficit or any other financial statement line items.

For comparative purposes, prior period calculations of diluted EPS have been adjusted to conform to current period presentation, as necessary, throughout this filing.

For each of the periods ended December 31, 2020 and 2019, the minimum pension liability adjustment in the table above includes a settlement loss of $ 2.1 million and $ 0.5 million, respectively.

See further discussion in Note 12:

Pensions and Other Employee Benefits.

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data