Globalstar, Inc. 10-Q

Item 1. Financial Statements. GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per share data) (Unaudited) Three Months Ended March 31, 2021 March 31, 2020 Revenue: Service revenue $ 23,086 $ 28,935 Subscriber equipment sales 3,843 3,259 Total revenue 26,929 32,194 Operating expenses: Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 9,077 8,728 Cost of subscriber equipment sales 2,899 2,643 Marketing, general and administrative 10,097 11,091 Depreciation, amortization and accretion 24,116 23,817 Total operating expenses 46,189 46,279 Loss from operations ( 19,260 ) ( 14,085 ) Other (expense) income: Interest income and expense, net of amounts capitalized ( 11,574 ) ( 14,010 ) Derivative loss ( 1,129 ) ( 821 ) Foreign currency loss ( 4,315 ) ( 8,953 ) Other 22 ( 333 ) Total other (expense) income ( 16,996 ) ( 24,117 ) Loss before income taxes ( 36,256 ) ( 38,202 ) Income tax expense 77 21 Net loss $ ( 36,333 ) $ ( 38,223 ) Other comprehensive loss: Foreign currency translation adjustments 3,242 5,303 Comprehensive loss $ ( 33,091 ) $ ( 32,920 ) Net loss per common share: Basic $ ( 0.02 ) $ ( 0.02 ) Diluted ( 0.02 ) ( 0.02 ) Weighted-average shares outstanding: Basic 1,679,754 1,557,960 Diluted 1,679,754 1,557,960 See accompanying notes to unaudited interim condensed consolidated financial statements. 1 GLOBALSTAR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) (Unaudited) March 31, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 8,369 $ 13,330 Restricted cash 47,303 3,625 Accounts receivable, net of allowance for credit losses of $ 3,776 and $ 4,352 , respectively 28,257 22,147 Inventory 12,730 13,736 Prepaid expenses and other current assets 15,348 15,649 Total current assets 112,007 68,487 Property and equipment, net 695,967 715,909 Restricted cash 51,068 51,068 Operating lease right of use assets, net 14,455 14,400 Intangible and other assets, net of accumulated amortization of $ 10,249 and $ 9,998 , respectively 39,800 38,229 Total assets $ 913,297 $ 888,093 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 55,299 $ 58,824 Accounts payable 5,370 2,917 Accrued expenses 27,145 25,916 Payables to affiliates 303 581 Deferred revenue 25,903 25,977 Total current liabilities 114,020 114,215 Long-term debt, less current portion 335,626 326,586 Operating lease liabilities 13,408 13,726 Employee benefit obligations 3,585 3,650 Derivative liabilities 1,867 123 Deferred revenue 5,728 3,280 Other non-current liabilities 3,353 3,448 Total non-current liabilities 363,567 350,813 Commitments and contingencies Stockholders’ equity: Preferred Stock of $ 0.0001 par value; 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 March 31, 2021 and December 31, 2020, respectively — — Voting Common Stock of $ 0.0001 par value; 1,900,000,000 shares authorized; 1,791,702,906 and 1,674,668,617 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 179 167 Nonvoting Common Stock of $ 0.0001 par value; 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 Accumulated other comprehensive income (loss) 298 ( 2,944 ) Retained deficit ( 1,707,057 ) ( 1,670,724 ) Total stockholders’ equity 435,710 423,065 Total liabilities and stockholders’ equity $ 913,297 $ 888,093 See accompanying notes to unaudited interim condensed consolidated financial statements. 2 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) (Unaudited) Common Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Deficit Total Balances – January 1, 2021 1,674,669 $ 167 $ 2,096,566 $ ( 2,944 ) $ ( 1,670,724 ) $ 423,065 Net issuance of restricted stock awards and recognition of stock-based compensation 1,915 — 1,875 — — 1,875 Contribution of services — — 47 — — 47 Recognition of stock-based compensation of employee stock purchase plan — — 79 — — 79 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 Net loss — — — — ( 36,333 ) ( 36,333 ) Balances – March 31, 2021 1,791,703 $ 179 $ 2,142,290 $ 298 $ ( 1,707,057 ) $ 435,710 Common Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Deficit Total Balances – January 1, 2020 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 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 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. 3 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2021 March 31, 2020 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 derivatives 1,129 821 Stock-based compensation expense 1,090 1,280 Amortization of deferred financing costs 1,166 1,861 Provision for credit losses 420 721 Noncash interest and accretion expense 8,275 9,250 Unrealized foreign currency loss 4,270 8,942 Other, net ( 96 ) 19 Changes in operating assets and liabilities: Accounts receivable ( 6,930 ) ( 2,559 ) Inventory 453 174 Prepaid expenses and other current assets ( 77 ) 3,452 Other assets 531 ( 953 ) Accounts payable and accrued expenses 4,326 ( 1,598 ) Payables to affiliates ( 277 ) 120 Other non-current liabilities ( 83 ) ( 10 ) Deferred revenue 2,532 ( 2,509 ) Net cash provided by operating activities 4,512 4,605 Cash flows used in investing activities: Network upgrades (including capitalized interest) ( 3,093 ) ( 151 ) Property and equipment additions ( 1,212 ) ( 1,067 ) Purchase of intangible assets ( 669 ) ( 360 ) Net cash used in investing activities ( 4,974 ) ( 1,578 ) Cash flows provided by (used in) financing activities: 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 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 ) Net increase in cash, cash equivalents and restricted cash 38,717 2,451 Cash, cash equivalents and restricted cash, beginning of period 68,023 59,128 Cash, cash equivalents and restricted cash, end of period $ 106,740 $ 61,579 As of: March 31, 2021 December 31, 2020 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 8,369 $ 13,330 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 Three Months Ended March 31, 2021 March 31, 2020 Supplemental disclosure of cash flow information: Cash paid for interest $ 40 $ 41 Supplemental disclosure of non-cash financing and investing activities: Increase in capitalized accrued interest for network upgrades $ 447 $ 454 Capitalized accretion of debt discount and amortization of prepaid financing costs 122 130 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 See accompanying notes to unaudited interim condensed consolidated financial statements. 4 GLOBALSTAR, INC. NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Globalstar, Inc. (“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. The Company’s Executive Chairman of the Board controls Thermo. Two other members of the Company's Board of Directors are also directors, officers or minority equity owners of various Thermo entities. The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); 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, 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. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. The Company evaluates estimates on an ongoing basis. The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation. These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidation. 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 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; 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. 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. 2020-06: Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . Among other things, ASU No. 2020-06 simplifies the guidance in ASC 470 by eliminating two of the three models that require separating embedded conversion features from convertible instruments. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2021. Early adoption is permitted as of the beginning of any interim or annual reporting period, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For existing debt instruments, the Company does not expect this standard will have a material impact to its condensed consolidated financial statements or related disclosures. 5 Recently Adopted Accounting Pronouncements 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 as outlined in ASU No. 2018-14. 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 did not have a material effect on the Company's disclosures. In December 2019, the FASB issued ASU No. 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . ASU No. 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. 2. REVENUE Disaggregation of Revenue The following table discloses revenue disaggregated by type of product and service (amounts in thousands): Three Months Ended March 31, 2021 March 31, 2020 Service revenue: Duplex $ 6,655 $ 7,663 SPOT 10,984 12,123 Commercial IoT 4,481 4,310 Engineering and other 966 4,839 Total service revenue 23,086 28,935 Subscriber equipment sales: Duplex $ 293 $ 404 SPOT 1,915 1,407 Commercial IoT 1,521 1,413 Other 114 35 Total subscriber equipment sales 3,843 3,259 Total revenue $ 26,929 $ 32,194 6 The Company attributes equipment revenue to various countries based on the location where equipment is sold. Service revenue is generally attributed to the various countries based on the Globalstar entity that holds the customer contract. The following table discloses revenue disaggregated by geographical market (amounts in thousands): Three Months Ended March 31, 2021 March 31, 2020 Service revenue: United States $ 16,443 $ 22,689 Canada 3,830 3,971 Europe 1,711 1,361 Central and South America 781 710 Others 321 204 Total service revenue 23,086 28,935 Subscriber equipment sales: United States $ 2,172 $ 1,443 Canada 749 1,083 Europe 479 494 Central and South America 421 266 Others 22 ( 27 ) Total subscriber equipment sales 3,843 3,259 Total revenue $ 26,929 $ 32,194 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 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 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 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 . 7 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): March 31, 2021 December 31, 2020 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. 8 4. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS Long-term debt consists of the following (in thousands): March 31, 2021 December 31, 2020 Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value 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 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 Less: Current Portion 55,299 — 55,299 58,824 — 58,824 Long-Term Debt $ 372,059 $ 36,433 $ 335,626 $ 365,110 $ 38,524 $ 326,586 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. 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 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. 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 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. 9 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 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. 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 Facility Agreement. Thermo Loan Agreement 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. Refer to Note 5: Derivatives and Note 6: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the Loan Agreement with Thermo. 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 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 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 March 31, 2021, the Company was in compliance with respect to the terms of the 2013 8.00 % Notes and the Indenture. 10 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: Derivatives and Note 6: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00 % Notes. 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 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. 5. DERIVATIVES 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): 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: Compound embedded derivative with the 2013 8.00 % Notes $ ( 1,867 ) $ ( 123 ) Total derivative liabilities $ ( 1,867 ) $ ( 123 ) 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 $ ( 1,744 ) $ 247 Compound embedded derivative with the Loan Agreement with Thermo — 212 Compound embedded derivative with the Second Lien Facility Agreement 615 ( 1,280 ) Total derivative loss $ ( 1,129 ) $ ( 821 ) 11 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 derivatives consistent with the classification of the underlying debt on the Company's condensed consolidated balance sheet. See Note 6: Fair Value Measurements for further discussion. 6. FAIR VALUE MEASUREMENTS The Company follows the authoritative guidance for fair value measurements relating to financial and non-financial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: 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 assets and liabilities measured at fair value on a recurring basis (in thousands): March 31, 2021 (Level 1) (Level 2) (Level 3) Total Balance Assets: Compound embedded derivative with the Second Lien Facility Agreement $ — $ — $ 901 $ 901 Total assets measured at fair value $ — $ — $ 901 $ 901 Liabilities: Compound embedded derivative with the 2013 8.00 % Notes $ — $ — $ ( 1,867 ) $ ( 1,867 ) Total liabilities measured at fair value $ — $ — $ ( 1,867 ) $ ( 1,867 ) 12 December 31, 2020 (Level 1) (Level 2) (Level 3) Total Balance Assets: Compound embedded derivative with the Second Lien Facility Agreement $ — $ — $ 286 $ 286 Total assets measured at fair value $ — $ — $ 286 $ 286 Liabilities: Compound embedded derivative with the 2013 8.00 % Notes $ — $ — $ ( 123 ) $ ( 123 ) Total liabilities measured at fair value $ — $ — $ ( 123 ) $ ( 123 ) 2013 8.00 % Notes The significant quantitative Level 3 inputs utilized in the valuation models are shown in the tables below: March 31, 2021 Stock Price Volatility Risk-Free Interest Rate Note Conversion Price Discount Rate Market Price of Common Stock Compound embedded derivative with the 2013 8.00 % Notes 100 % - 119 % 0.2 % $ 0.69 17 % $ 1.35 December 31, 2020 Stock Price Volatility Risk-Free Interest Rate Note Conversion Price Discount Rate Market Price of Common Stock Compound embedded derivative with the 2013 8.00 % Notes 40 % - 85 % 0.1 % $ 0.69 19 % $ 0.34 13 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 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 ) Derivative adjustment related to conversions and exercises — 1,058 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 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 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 2013 8.00 % Notes $ 1,376 $ 1,184 $ 1,376 $ 1,122 14 7. RELATED PARTY TRANSACTIONS 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 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 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 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. See Note 4: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt and financing transactions with Thermo. 8. 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 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 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 ) 15 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.