What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-06 · 204 added, 322 removed, 310 unchanged (63% of the section changed)

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(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30,

2020 September 30,

2019 September 30,

2020 September 30,

Three Months Ended

2021 March 31,

Service revenue $ 23,086 $ 28,935

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Loss from operations ( 19,260 ) ( 14,085 )

Other income (expense):

Other (expense) income:

Interest income and expense, net of amounts capitalized ( 11,574 ) ( 14,010 )

Derivative gain 1,225 50,156 1,564 142,280

Foreign currency gain (loss) 266 ( 2,194 ) ( 7,373 ) ( 1,228 )

Derivative loss ( 1,129 ) ( 821 )

Foreign currency loss ( 4,315 ) ( 8,953 )

Other 22 ( 333 )

Total other (expense) income ( 16,996 ) ( 24,117 )

(Loss) income before income taxes ( 24,888 ) 21,151 ( 87,736 ) 53,195

Loss before income taxes ( 36,256 ) ( 38,202 )

Income tax expense 77 21

Net (loss) income $ ( 24,946 ) $ 21,111 $ ( 87,905 ) $ 53,071

Other comprehensive (loss) income:

Net loss $ ( 36,333 ) $ ( 38,223 )

Other comprehensive loss:

Foreign currency translation adjustments 3,242 5,303

Comprehensive (loss) income $ ( 25,037 ) $ 22,133 $ ( 84,061 ) $ 53,325

Net (loss) income per common share:

Comprehensive loss $ ( 33,091 ) $ ( 32,920 )

Net loss per common share:

Basic $ ( 0.02 ) $ ( 0.02 )

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(In thousands, except par value and share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

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Restricted cash 47,303 3,625

Accounts receivable, net of allowance of $ 4,539 and $ 2,952 , respectively

Accounts receivable, net of allowance for credit losses of $ 3,776 and $ 4,352 , respectively

28,257 22,147

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Preferred Stock of $ 0.0001 par value;

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

100,000,000 shares authorized and none issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Series A Preferred Convertible Stock of $ 0.0001 par value;

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

one share authorized and none issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Voting Common Stock of $ 0.0001 par value;

1,900,000,000 shares authorized;

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

1,791,702,906 and 1,674,668,617 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Nonvoting Common Stock of $ 0.0001 par value;

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

no shares authorized and none issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 2,142,290 2,096,566

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Recognition of stock-based compensation of employee stock purchase plan — — 79 — — 79

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

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

Issuance of stock for employee stock option exercises 83 — 57 — — 57

Issuance of stock for warrant exercises 115,036 12 43,666 — — 43,678

Other comprehensive income — — — 3,242 — 3,242

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Balances – March 31, 2021 1,791,703 $ 179 $ 2,142,290 $ 298 $ ( 1,707,057 ) $ 435,710

Net issuance of restricted stock awards and recognition of stock-based compensation 1,354 — 922 — — 922

Contribution of services — — 47 — — 47

Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation 1,188 — 482 — — 482

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

44 — 16 — — 16

Other comprehensive loss — — — ( 1,368 ) — ( 1,368 )

Net loss — — — ( 24,736 ) ( 24,736 )

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

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

Contribution of services — — 47 — — 47

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

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

51 — 15 — — 15

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

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

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

Shares Common

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Balances – January 1, 2020 1,464,544 $ 146 $ 1,970,047 $ ( 3,449 ) $ ( 1,559,401 ) $ 407,343

Net issuance of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation 3,285 — 1,000 — — 1,000

Contribution of services — — 47 — — 47

Recognition of stock-based compensation of employee stock purchase plan — — 77 — — 77

Stock offering issuance costs — — ( 195 ) ( 195 )

Other comprehensive loss — — — ( 270 ) — ( 270 )

Net income — — — — 25,771 25,771

Balances – March 31, 2019 1,450,069 $ 145 $ 1,938,293 $ ( 4,109 ) $ ( 1,548,954 ) $ 385,375

Net issuance of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation 232 — 968 — — 968

Contribution of services — — 197 — — 197

Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation 1,437 — 500 — — 500

Investment in business — — 155 — — 155

Other comprehensive loss — — — ( 498 ) — ( 498 )

Net income — — — — 6,189 6,189

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

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

Net issuance of restricted stock awards and recognition of stock-based compensation 3,020 1 1,729 — — 1,730

Contribution of services — — 91 — — 91

Recognition of stock-based compensation of employee stock purchase plan — — 102 — — 102

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

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

Other comprehensive income — — — 5,303 — 5,303

Net income — — — — 21,111 21,111

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

Net loss — — — — ( 38,223 ) ( 38,223 )

Balances – March 31, 2020 1,667,704 $ 167 $ 2,092,410 $ 1,854 $ ( 1,599,308 ) $ 495,123

See accompanying notes to unaudited interim condensed consolidated financial statements.

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(In thousands)

Nine Months Ended

September 30,

2020 September 30,

Cash flows provided by (used in) operating activities:

Net (loss) income $ ( 87,905 ) $ 53,071

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

Three Months Ended

2021 March 31,

Cash flows provided by operating activities:

Net loss $ ( 36,333 ) $ ( 38,223 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, amortization and accretion 24,116 23,817

Change in fair value of derivative assets and liabilities ( 1,564 ) ( 142,280 )

Change in fair value of derivatives 1,129 821

Stock-based compensation expense 1,090 1,280

Amortization of deferred financing costs 1,166 1,861

Provision for bad debts 1,496 1,436

Provision for credit losses 420 721

Noncash interest and accretion expense 8,275 9,250

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

Unrealized foreign currency loss 4,270 8,942

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Cash flows used in investing activities:

Second-generation network costs (including interest) ( 4,307 ) ( 1,350 )

Network upgrades (including capitalized interest) ( 3,093 ) ( 151 )

Property and equipment additions ( 1,212 ) ( 1,067 )

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Cash flows provided by (used in) financing activities:

Principal payments of the Facility Agreement ( 3,373 ) ( 47,435 )

Principal payments of the First Lien Facility Agreement ( 4,357 ) ( 276 )

Proceeds from exercise of warrants 43,678 —

Payments for debt and equity issuance costs ( 133 ) ( 145 )

Proceeds from PPP Loan 4,973 —

Proceeds from Subordinated Loan Agreement — 62,000

Proceeds from issuance of common stock and exercise of options and warrants 346 402

Net cash provided by financing activities 872 13,566

Proceeds from issuance of common stock and exercise of options 57 —

Net cash provided by (used in) financing activities 39,245 ( 421 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 66 ) ( 155 )

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Cash, cash equivalents and restricted cash, end of period $ 106,740 $ 61,579

September 30,

2021 December 31,

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Restricted cash (See Note 4 for further discussion on restrictions)

98,371 54,693

Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 106,740 $ 68,023

Nine Months Ended

September 30,

2020 September 30,

Three Months Ended

2021 March 31,

Supplemental disclosure of cash flow information:

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Supplemental disclosure of non-cash financing and investing activities:

Increase in capitalized accrued interest for second-generation network costs $ 1,176 $ 364

Increase in capitalized accrued interest for network upgrades $ 447 $ 454

Capitalized accretion of debt discount and amortization of prepaid financing costs 122 130

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(“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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however, management believes the disclosures made are adequate to make the information presented not misleading.

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 28, 2020 (the “2019 Annual Report”).

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 4, 2021 (the “2020 Annual Report”).

The preparation of condensed consolidated financial statements in conformity with U.S.

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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.

The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation.

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

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

Recent Developments:

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

Various levels of governmental agencies and authorities have taken measures to reduce the spread of COVID-19, including “stay at home” orders, social distancing and closures of non-essential businesses.

These measures, as well as the pandemic itself, have significantly impacted economic conditions around the world and created uncertainties in the economy.

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

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

Among other effects, the Company has accommodated certain pricing concessions requested by customers and experienced lower demand for its products and services, particularly from its 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.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year or any future period.

COVID-19-Risks and Uncertainties

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

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and the sustainability of supply chains.

In accordance with the Company's accounting policies disclosed in its 2019 Annual Report, the Company reviews the carrying value of long-lived assets, intangible assets and inventory when circumstances warrant an assessment in order to evaluate whether indicators of impairment exist.

The Company updated its internal projections as part of this assessment to reflect the reduction in cash flows from operations that it currently expects will result from COVID-19.

The Company expects these reductions to be temporary;

therefore, no indicator of impairment was identified.

For inventory, the carrying value of inventory on hand was lower than its expected net realizable value;

accordingly, no impairment was necessary.

For accounts receivable, the Company increased its loss rate for certain receivables as discussed in more detail in Note 3:

Credit Losses.

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

The Company continues to monitor its ability to remain in compliance with financial covenants over the next twelve months.

Long-Term Debt and Other Financing Arrangements and Risk Factors:

"The effect of an epidemic or pandemic, including the current COVID-19 pandemic, could have an adverse impact on our operations and the operations of our customers and may have a material adverse impact on our financial condition and results of operations" for further discussion.

If the Company is able to remain in compliance, its sources of liquidity are expected to be sufficient to cover its obligations over the next twelve months.

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.

As previously stated, the full impact of COVID-19 on the Company's condensed consolidated financial statements is uncertain at this time and the Company will continue to reassess the impact at each reporting period.

During 2021, the Company began to evaluate its eligibility for the Employee Retention Tax Credit program and relief under the American Rescue Plan Act.

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 as outlined in ASU No.

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

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

2018-14 related to the defined benefit plan.

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.

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

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

In August 2020, the FASB issued ASU No.

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

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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

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 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 when it became effective on January 1, 2020.

Credit Losses for a discussion of the impact to the Company's condensed consolidated financial statements and required disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

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

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.

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 as outlined in ASU No.

This ASU, which became effective for public entities for annual periods beginning after December 15, 2020, adds certain narrative disclosures and removes other disclosures related to defined benefit plans.

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

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

Fair Value Measurements.

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

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 became 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.

Disaggregation of Revenue

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2021 March 31, 2020

Service revenue:

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Commercial IoT 4,481 4,310

IGO 95 139 295 484

Engineering and other 966 4,839

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Commercial IoT 1,521 1,413

Other 4 51 54 123

Total subscriber equipment sales 3,843 3,259

Total revenue $ 26,929 $ 32,194

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

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

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

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

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2021 March 31, 2020

Service revenue:

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Total revenue $ 26,929 $ 32,194

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

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

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

Accounts Receivable

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

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

As of March 31, 2021 and December 31, 2020, $ 2.3 million and $ 1.9 million, respectively, related to these agreements was included in accounts receivable on the Company’s condensed consolidated balance sheet.

The Company also has agreements whereby it acts as an agent to procure goods and perform services on behalf of the customer.

As of March 31, 2021 and December 31, 2020, the Company recorded $ 10.2 million and $ 4.7 million, respectively, in accounts receivable related to these arrangements.

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, totaling $ 0.3 million, was received in March 2021.

Contract Liabilities

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

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

The amount of revenue recognized during the three months ended March 31, 2021 and 2020 from performance obligations included in the contract liability balance at the beginning of each of the periods was $ 10.5 million and $ 13.3 million, respectively.

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

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

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

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

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

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

CREDIT LOSSES

Adoption of ASU No.

2016-13 "Credit Losses"

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.

Credit Losses

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 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 doubtful accounts, 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 doubtful accounts.

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

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 nine-month period ending September 30, 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 doubtful accounts as of September 30, 2020 (in thousands):

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

Impact of adoption of ASU 2016-13 1,684

Provision, net of recoveries 1,496

Write-offs and other adjustments ( 1,593 )

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

however, from time to time, the Company performs services over multi-year contracts.

As of March 31, 2021, the Company expects to recognize $ 26.0 million, or approximately 82 %, of its remaining performance obligations during the next twelve months .

PROPERTY AND EQUIPMENT

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

2021 December 31,

Globalstar System:

Space component

First and second-generation satellites in service $ 1,195,509 $ 1,195,509

Second-generation satellite, on-ground spare 32,443 32,443

Ground component 279,157 272,492

Construction in progress:

Ground component 15,224 19,327

Other 4,330 3,298

Total Globalstar System 1,526,663 1,523,069

Internally developed and purchased software 24,368 23,984

Equipment 9,335 9,679

Land and buildings 3,049 3,110

Leasehold improvements 1,670 1,655

Total property and equipment 1,565,085 1,561,497

Accumulated depreciation ( 869,118 ) ( 845,588 )

Total property and equipment, net $ 695,967 $ 715,909

The ground component of construction in progress includes costs (including capitalized interest) incurred for assets to upgrade the Company's ground infrastructure in certain regions around the world.

We expect to deploy these gateway assets based on coverage optimization.

During the first quarter of 2021, the Company placed $ 7.4 million of costs into service associated with its new antennas.

Amounts included in the Company’s second-generation satellite, on-ground spare balance as of March 31, 2021, and December 31, 2020, 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.

This satellite has not been placed into service;

therefore, the Company has not started to record depreciation expense.

LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Amount Unamortized Discount and Deferred Financing Costs Carrying

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Amount Unamortized Discount and Deferred Financing Costs Carrying

Facility Agreement $ 186,988 $ 7,331 $ 179,657 $ 190,361 $ 10,185 $ 180,176

Second Lien Term Loan Facility 222,908 33,267 189,641 201,495 35,448 166,047

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

First Lien Facility Agreement $ 182,631 $ 5,333 $ 177,298 $ 186,988 $ 6,373 $ 180,615

Second Lien Facility Agreement 238,378 31,080 207,298 230,597 32,125 198,472

8.00 % Convertible Senior Notes Issued in 2013

1,376 — 1,376 1,376 — 1,376

Payroll Protection Program Loan 4,973 37 4,936 — — —

Paycheck Protection Program Loan 4,973 20 4,953 4,973 26 4,947

Total Debt 427,358 36,433 390,925 423,934 38,524 385,410

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The principal amounts shown above include payment of in-kind interest, as applicable.

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

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

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

The current portion of long-term debt represents the scheduled principal repayments under the First Lien Facility Agreement (described below) and the Paycheck Protection Program ("PPP") loan (described below) due within one year of the balance sheet date.

First Lien 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 %.

In 2009, the Company entered into the First Lien Facility Agreement (as amended) 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 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.

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

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 financial covenants and is unable to obtain a sufficient Equity Cure Contribution or obtain a waiver, it would be in default under the 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 September 30, 2020, the Company was in compliance with respect to the covenants of the Facility Agreement.

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

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

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

These payments reduce future principal payment obligations.

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

The required balance in the debt service reserve account is fixed

and must equal at least $ 50.9 million.

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

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

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

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

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

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 warrant proceeds received during the first quarter of 2021 (discussed below) would qualify as an Equity Cure Contribution, if needed for compliance with first half 2021 financial covenants.

The Company is in discussions with its senior lenders to evaluate 2021 projected capital expenditures relative to covenant levels set forth in the First Lien Facility Agreement.

As of March 31, 2021, the Company was in compliance with 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 2021, the Company was required to pay $ 4.4 million to its first lien lenders resulting from the Excess Cash Flow calculation as of December 31, 2020.

This payment reduces 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 must equal at least $ 50.9 million.

As of March 31, 2021, the balance in the debt service reserve account was $ 51.1 million and is classified as non-current restricted cash on the Company's condensed consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the First Lien Facility Agreement in December 2022 of $ 109.5 million.

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.

The Company fulfilled this requirement in March 2021 with proceeds from the exercise of all the warrants issued to the Second Lien Facility Agreement lenders in November 2019.

The Company received proceeds totaling $ 47.3 million, of which $ 3.6 million was received in December 2019 and the remaining $ 43.7 million was received during the first quarter of 2021.

In April 2021, these proceeds were used to pay the principal payment due on June 30, 2021 of $ 33.1 million, and then the remaining proceeds were applied to the next principal payment due on December 31, 2021 of $ 20.0 million.

The proceeds are retained in the equity proceeds account under the First Lien Facility Agreement and recorded in current restricted cash on the Company's condensed consolidated balance sheet as of March 31, 2021.

Second Lien Facility Agreement

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 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).

As additional consideration for the loan, the Company issued the lenders warrants to purchase 124.5 million shares of voting common stock at an exercise price of $ 0.38 per share.

These warrants expire on March 31, 2021.

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

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

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

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

All of these warrants were exercised before their expiration date on March 31, 2021, resulting in proceeds to the Company totaling $ 47.3 million.

As of March 31, 2021, the Company was in compliance with the covenants of the Second Lien Facility Agreement.

Refer to Note 5:

Derivatives and Note 6:

Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the Second Lien Term Loan Facility Agreement.

Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the Second Lien Facility Agreement.

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 were subordinated to the Company’s obligations under the Facility Agreement and the Second Lien Term Loan Facility.

The Loan Agreement was convertible into shares of common stock at a conversion price of $ 0.69 (as adjusted) per share of common stock and accrued interest at 12 % per annum, which was capitalized and added to the outstanding principal in lieu of cash payments.

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.

8 unchanged sentences

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.

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, $ 55.5 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 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.

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 (or cash, at the option of the Company and subject to the consent of its lenders under the Facility Agreement and Second Lien Term Loan Facility).

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.

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.

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

As of March 31, 2021, the Company was in compliance with respect to the terms of the 2013 8.00 % Notes and the Indenture.

The amount by which the if-converted value of the 2013 8.00 % Notes exceeded the principal amount at March 31, 2021, assuming conversion at the closing price of the Company's common stock on that date of $ 1.35 per share, is approximately $ 1.3 million.

Refer to Note 5:

1 unchanged sentence

Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00 % Notes.

Payroll Protection Program Loan

In April 2020, the Company sought relief under the CARES Act and received a $ 5.0 million loan under the Payroll Protection Program ("PPP").

Paycheck Protection Program Loan

In April 2020, the Company sought relief under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and received a $ 5.0 million loan under the PPP.

This loan (the "PPP Loan") is an unsecured debt obligation and is scheduled to mature in April 2022.

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

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.

Uncertainties exist around if and when the PPP Loan will be repaid.

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.

1 unchanged sentence

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

As previously discussed, 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.

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.

In connection with certain existing borrowing arrangements, the Company was required to record derivative instruments on its condensed 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 condensed 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 condensed consolidated balance sheets (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Derivative assets:

Compound embedded derivative with the Second Lien Facility Agreement $ 901 $ 286

Total derivative assets $ 901 $ 286

Derivative liabilities:

1 unchanged sentence

$ ( 1,867 ) $ ( 123 )

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

Compound embedded derivative with the Second Lien Term Loan Facility ( 1,012 ) ( 2,000 )

Total derivative liabilities $ ( 1,867 ) $ ( 123 )

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

Three Months Ended Nine Months Ended

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

The derivative asset recorded for the Compound embedded derivative with the Second Lien Facility Agreement is 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 (loss) in the Company’s condensed consolidated statement of operations (in thousands):

Three Months Ended

March 31, 2021 March 31, 2020

Compound embedded derivative with the 2013 8.00 % Notes

1 unchanged sentence

Compound embedded derivative with the Loan Agreement with Thermo — 212

Compound embedded derivative with the Second Lien Term Loan Facility 1,128 — 988 —

Total derivative gain $ 1,225 $ 50,156 $ 1,564 $ 142,280

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 contingent put features within the Second Term Loan Facility.

Compound embedded derivative with the Second Lien Facility Agreement 615 ( 1,280 )

Total derivative loss $ ( 1,129 ) $ ( 821 )

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 condensed consolidated statements of operations and its condensed 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 condensed consolidated balance sheet.

The Company classifies its derivatives consistent with the classification of the underlying debt on the Company's condensed consolidated balance sheet.

Fair Value Measurements for further discussion.

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

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 condensed consolidated statements of operations.

Recurring Fair Value Measurements

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

September 30, 2020

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

March 31, 2021

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

Compound embedded derivative with the Second Lien Facility Agreement $ — $ — $ 901 $ 901

Total assets measured at fair value $ — $ — $ 901 $ 901

Compound embedded derivative with the 2013 8.00 % Notes

$ — $ — $ ( 1,867 ) $ ( 1,867 )

Compound embedded derivative with the Second Lien Term Loan Facility — — ( 1,012 ) ( 1,012 )

Total liabilities measured at fair value $ — $ — $ ( 1,867 ) $ ( 1,867 )

1 unchanged sentence

(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

$ — $ — $ ( 123 ) $ ( 123 )

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

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

Total liabilities measured at fair value $ — $ — $ ( 123 ) $ ( 123 )

Derivative Liabilities

All of the Company's derivative liabilities are 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 condensed consolidated statements of operations.

2013 8.00 % Notes and Loan Agreement with Thermo

2013 8.00 % Notes

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

September 30, 2020

March 31, 2021

Volatility Risk-Free

2 unchanged sentences

100 % - 119 %

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

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

Derivatives for further discussion.

0.2 % $ 0.69 17 % $ 1.35

December 31, 2020

3 unchanged sentences

0.1 % $ 0.69 19 % $ 0.34

Compound embedded derivative with the Loan Agreement with Thermo 70 % - 130 %

1.6 % $ 0.69 27 % $ 0.52

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

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

2013 8.00 % Notes

Fluctuation in the Company’s stock price is a significant driver of the changes in the compound embedded derivative with the 2013 8.00 % Notes during each reporting period.

As the stock price increases, the value to the holder of the instrument generally increases, thereby increasing the liability on the Company’s condensed consolidated balance sheet.

The Company's stock price increased nearly 300 % from December 31, 2020 to March 31, 2021, driving a significant increase in the liability at March 31, 2021.

Stock price volatility is also a significant input used in the fair value measurement of the compound embedded derivative with the 2013 8.00 % Notes.

The simulated fair value of this liability is sensitive to changes in the expected volatility of the Company's stock price.

Increases in expected volatility generally result in a higher fair value measurement.

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 12 % and 13 % at March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021 and 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.

When the discount yield decreases and is lower than the blended interest rate of the underlying debt, the fair value of the derivative asset increases.

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

Rollforward of Recurring Level 3 Liabilities

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):

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):

Balance at beginning of period, January 1, 2021 and 2020, respectively $ 163 $ ( 3,792 )

Issuance of compound embedded derivative with the Second Lien Term Loan Facility — ( 2,000 )

Derivative adjustment related to conversions and exercises — 1,058

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

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

Unrealized (loss) gain, included in derivative loss ( 1,129 ) 2,897

Balance at end of period, March 31, 2021 and December 31, 2020, respectively

$ ( 966 ) $ 163

Fair Value of Debt Instruments

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

September 30, 2020 December 31, 2019

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

March 31, 2021 December 31, 2020

Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value

Loan Agreement with Thermo $ — $ — $ 116,543 $ 88,886

2013 8.00 % Notes

$ 1,376 $ 1,184 $ 1,376 $ 1,122

Nonrecurring Fair Value Measurements

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

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 4:

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.

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

RELATED PARTY TRANSACTIONS

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

Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.3 million and $ 0.6 million as of March 31, 2021 and December 31, 2020, respectively.

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.

During each of the three months ended March 31, 2021 and 2020, these expenses charged to the Company were $ 0.2 million, respectively.

Additionally, during the first quarter of 2021, Thermo invoiced us for certain legal fees incurred totaling approximately $0.1 million relating to Thermo's participation in the Second Lien Facility Agreement;

these costs were recorded as debt issuance costs included in long-term debt on the Company's condensed consolidated balance sheet as of March 31, 2021.

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 10 years.

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

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

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

In November 2019, the Company entered into the Second Lien Term Loan Facility.

Thermo's participation in the Second Lien Term Loan Facility was $ 95.1 million.

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 each of the three months ended March 31, 2021 and 2020, the Company incurred lease expense of $ 0.4 million, respectively, under this lease agreement.

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.

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

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

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

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

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 .

Interest accrued since inception with respect to Thermo's portion of the debt outstanding on the Second Lien Facility Agreement was approximately $ 18.1 million, of which $ 3.6 million was accrued during the three months ended March 31, 2021.

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.

Thermo exercised 9.5 million warrants in 2019 and the remaining warrants, totaling 50.0 million, during the first quarter of 2021 and, accordingly, no warrants were outstanding as of March 31, 2021.

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

(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.

LOSS PER SHARE

Loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

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

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

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

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

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

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

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

2020 2019 2020 2019

Net (loss) income $ ( 24,946 ) $ 21,111 $ ( 87,905 ) $ 53,071

Effect of dilutive securities:

2013 8.00 % Notes

( 73 ) ( 132 ) ( 287 ) ( 548 )

Loan Agreement with Thermo — ( 45,205 ) 2,505 ( 127,743 )

Loss to common stockholders plus assumed conversions $ ( 25,019 ) $ ( 24,226 ) $ ( 85,687 ) $ ( 75,220 )

Weighted average common shares outstanding:

Basic shares outstanding 1,670,315 1,451,703 1,632,554 1,450,146

Incremental shares from assumed exercises, conversions and other issuance of:

Stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan — 4,089 — 5,179

2013 8.00 % Notes

— 2,021 — 2,021

Loan Agreement with Thermo — 189,921 — 189,921

Diluted shares outstanding 1,670,315 1,647,734 1,632,554 1,647,267

Net (loss) income per common share:

Basic $ ( 0.01 ) $ 0.01 $ ( 0.05 ) $ 0.04

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

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

The following table sets forth the computation of basic and diluted loss per common share as of March 31, 2021 and 2020 (amounts in thousands, except per share data):

Three Months Ended

March 31, 2021 March 31, 2020

Net loss $ ( 36,333 ) $ ( 38,223 )

Weighted average shares outstanding 1,679,754 1,557,960

Net loss per common share - basic and diluted $ ( 0.02 ) $ ( 0.02 )

For the three months ended March 31, 2021 and 2020, 5.5 million shares and 7.2 million shares, respectively, of common stock related to the Company's 2013 8.00 % Notes and 2006 Equity Incentive Plan were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

Additionally, at March 31, 2020, 115.0 million warrants issued to the lenders of the Second Lien Facility Agreement were outstanding.

These warrants were exercised in March 2021.

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

What changed 10-Q

Item 1. Financial Statements