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 Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Revenue: Service revenue $ 33,301 $ 27,848 $ 95,693 $ 76,551 Subscriber equipment sales 4,325 4,766 11,505 13,271 Total revenue 37,626 32,614 107,198 89,822 Operating expenses: Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 11,294 9,648 32,783 27,848 Cost of subscriber equipment sales 3,490 4,099 9,153 9,856 Cost of subscriber equipment sales - reduction in the value of inventory 8,537 71 8,553 853 Marketing, general and administrative 10,707 9,196 29,741 28,974 Reduction in value of long-lived assets 166,001 242 166,526 242 Depreciation, amortization and accretion 24,238 24,072 72,151 72,031 Total operating expenses 224,267 47,328 318,907 139,804 Loss from operations ( 186,641 ) ( 14,714 ) ( 211,709 ) ( 49,982 ) Other (expense) income: (Loss) gain on extinguishment of debt — ( 829 ) — 1,835 Interest income and expense, net of amounts capitalized ( 7,583 ) ( 11,406 ) ( 24,300 ) ( 33,758 ) Derivative gain (loss) 662 229 ( 1,066 ) ( 2,210 ) Foreign currency loss ( 9,406 ) ( 4,752 ) ( 13,297 ) ( 4,642 ) Pension settlement loss ( 1,501 ) — ( 1,501 ) — Other ( 45 ) 473 344 407 Total other (expense) income ( 17,873 ) ( 16,285 ) ( 39,820 ) ( 38,368 ) Loss before income taxes ( 204,514 ) ( 30,999 ) ( 251,529 ) ( 88,350 ) Income tax (benefit) expense ( 153 ) ( 114 ) 51 317 Net loss $ ( 204,361 ) $ ( 30,885 ) $ ( 251,580 ) $ ( 88,667 ) Other comprehensive loss: Foreign currency translation adjustments 6,613 3,185 11,249 3,269 Defined benefit pension plan liability adjustment 2,073 $ — $ 2,073 $ — Comprehensive loss $ ( 195,675 ) $ ( 27,700 ) $ ( 238,258 ) $ ( 85,398 ) Net loss per common share: Basic $ ( 0.11 ) $ ( 0.02 ) $ ( 0.14 ) $ ( 0.05 ) Diluted ( 0.11 ) ( 0.02 ) ( 0.14 ) ( 0.05 ) Weighted-average shares outstanding: Basic 1,800,504 1,793,144 1,799,364 1,755,362 Diluted 1,800,504 1,793,144 1,799,364 1,755,362 See accompanying notes to unaudited interim condensed consolidated financial statements. 1 GLOBALSTAR, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) (Unaudited) September 30, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 14,749 $ 14,304 Accounts receivable, net of allowance for credit losses of $ 2,923 and $ 2,962 , respectively 29,594 21,182 Inventory 8,563 13,829 Prepaid expenses and other current assets 13,085 19,558 Total current assets 65,991 68,873 Property and equipment, net 532,680 672,156 Operating lease right of use assets, net 28,396 32,041 Prepaid satellite construction costs and related customer receivable 83,178 — Intangible and other assets, net of accumulated amortization of $ 10,633 and $ 11,189 , respectively 36,293 41,036 Total assets $ 746,538 $ 814,106 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,867 $ 6,247 Vendor financing 63,765 — Accrued expenses 28,048 28,947 Payables to affiliates 142 444 Deferred revenue 53,121 25,927 Total current liabilities 146,943 61,565 Long-term debt 262,175 237,932 Operating lease liabilities 25,796 29,237 Deferred revenue, net 171,651 112,054 Other non-current liabilities 4,393 7,887 Total non-current liabilities 464,015 387,110 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred Stock of $ 0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at September 30, 2022 and December 31, 2021, respectively — — Series A Preferred Convertible Stock of $ 0.0001 par value; one share authorized and none issued and outstanding at September 30, 2022 and December 31, 2021, respectively — — Voting Common Stock of $ 0.0001 par value; 2,150,000,000 shares authorized; 1,800,523,430 and 1,796,528,871 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 180 180 Nonvoting Common Stock of $ 0.0001 par value; no shares authorized and no ne issued and outstanding at September 30, 2022 and December 31, 2021, respectively — — Additional paid-in capital 2,155,117 2,146,710 Accumulated other comprehensive income 15,212 1,890 Retained deficit ( 2,034,929 ) ( 1,783,349 ) Total stockholders’ equity 135,580 365,431 Total liabilities and stockholders’ equity $ 746,538 $ 814,106 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, 2022 1,796,529 $ 180 $ 2,146,710 $ 1,890 $ ( 1,783,349 ) $ 365,431 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation 703 — 2,230 — — 2,230 Contribution of services — — 47 47 Recognition of stock-based compensation of employee stock purchase plan — — 117 — — 117 Common stock issued in connection with conversion of 2013 8.00 % Notes 2,253 — 2,548 — — 2,548 Other comprehensive loss — — — ( 679 ) — ( 679 ) Net loss — — — — ( 20,462 ) ( 20,462 ) Balances – March 31, 2022 1,799,485 $ 180 $ 2,151,652 $ 1,211 $ ( 1,803,811 ) $ 349,232 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation 546 — 879 — — 879 Contribution of services — — 47 — — 47 Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation 446 — 617 — — 617 Other comprehensive income — — — 5,315 — 5,315 Net loss — — — — ( 26,757 ) ( 26,757 ) Balances – June 30, 2022 1,800,477 $ 180 $ 2,153,195 $ 6,526 $ ( 1,830,568 ) $ 329,333 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation 46 — 1,815 — — 1,815 Contribution of services — — 47 — — 47 Recognition of stock-based compensation of employee stock purchase plan — — 60 — — 60 Other comprehensive income — — — 8,686 — 8,686 Net loss — — — — ( 204,361 ) ( 204,361 ) Balances – September 30, 2022 1,800,523 $ 180 $ 2,155,117 $ 15,212 $ ( 2,034,929 ) $ 135,580 3 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 stock for employee stock options and recognition of stock-based compensation 1,998 — 1,932 — — 1,932 Contribution of services — — 47 — — 47 Recognition of stock-based compensation of employee stock purchase plan — — 79 — — 79 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 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation 173 — 576 — — 576 Contribution of services — — 47 — — 47 Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation 1,187 — 406 — — 406 Other comprehensive loss — — — ( 3,158 ) — ( 3,158 ) Net loss — — — — ( 21,449 ) ( 21,449 ) Balances – June 30, 2021 1,793,063 $ 179 $ 2,143,319 $ ( 2,860 ) $ ( 1,728,506 ) $ 412,132 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation 244 — 544 — — 544 Contribution of services — — 47 — — 47 Recognition of stock-based compensation of employee stock purchase plan — — 102 — — 102 Other comprehensive income — — — 3,185 — 3,185 Net loss — — — — ( 30,885 ) ( 30,885 ) Balances – September 30, 2021 1,793,307 $ 179 $ 2,144,012 $ 325 $ ( 1,759,391 ) $ 385,125 See accompanying notes to unaudited interim condensed consolidated financial statements. 4 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2022 September 30, 2021 Cash flows provided by operating activities: Net loss $ ( 251,580 ) $ ( 88,667 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 72,151 72,031 Change in fair value of derivatives 1,066 2,210 Stock-based compensation expense 4,433 3,044 Amortization of deferred financing costs 419 2,341 Reduction in value of long-lived assets and inventory 175,079 1,095 Provision for credit losses 754 1,029 Noncash interest and accretion expense 23,788 26,537 Unrealized foreign currency loss 13,399 4,639 Loss on pension settlement 1,501 — Gain on extinguishment of debt — ( 1,835 ) Noncash reversal of tariff accrual — ( 912 ) Other, net ( 3,002 ) ( 625 ) Changes in operating assets and liabilities: Accounts receivable ( 952 ) ( 7,013 ) Inventory ( 1,295 ) 276 Prepaid expenses and other current assets 1,788 ( 1,595 ) Other assets 352 ( 1,883 ) Accounts payable and accrued expenses ( 10,272 ) 15,197 Payables to affiliates ( 303 ) ( 309 ) Other non-current liabilities ( 2,602 ) ( 259 ) Deferred revenue 6,981 81,865 Net cash provided by operating activities 31,705 107,166 Cash flows used in investing activities: Network upgrades (including capitalized interest) ( 18,604 ) ( 24,766 ) Property and equipment additions ( 5,839 ) ( 4,209 ) Sale of property and equipment — 350 Purchase of intangible assets ( 863 ) ( 1,408 ) Net cash used in investing activities ( 25,306 ) ( 30,033 ) Cash flows used in financing activities: Principal payments of the 2019 Facility Agreement ( 6,341 ) — Principal payments of the 2009 Facility Agreement — ( 126,664 ) Proceeds from exercise of warrants — 43,678 Payments for debt and equity issuance costs — ( 133 ) Proceeds from issuance of common stock and exercise of options 455 394 Net cash used in financing activities ( 5,886 ) ( 82,725 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 68 ) ( 57 ) Net increase (decrease) in cash, cash equivalents and restricted cash 445 ( 5,649 ) Cash, cash equivalents and restricted cash, beginning of period 14,304 68,023 Cash, cash equivalents and restricted cash, end of period $ 14,749 $ 62,374 As of: September 30, 2022 December 31, 2021 Reconciliation of cash and cash equivalents Cash and cash equivalents $ 14,749 $ 14,304 Total cash and cash equivalents cash shown in the statement of cash flows $ 14,749 $ 14,304 Nine Months Ended September 30, 2022 September 30, 2021 Supplemental disclosure of cash flow information: Cash paid for interest $ — $ 4,017 Supplemental disclosure of non-cash financing and investing activities: Increase in capitalized accrued interest for network upgrades $ 8,615 $ 1,703 Capitalized accretion of debt discount and amortization of prepaid financing costs 1,305 379 Satellite construction assets acquired through vendor financing arrangement 69,896 — Forgiveness of principal and interest of Paycheck Protection Program loan — 5,030 See accompanying notes to unaudited interim condensed consolidated financial statements. 5 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 and wholesale capacity 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, 2021, as filed with the SEC on February 25, 2022 (the “2021 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. 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, 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, 2022 are not necessarily indicative of the results that may be expected for the full year or any future period. Recent Developments Service Agreements On September 7, 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). The Company will be the satellite operator for these Services pursuant to the agreement (the “Service Agreement”) first disclosed in the Company’s Form 10-K for the year ended December 31, 2019, and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Services constitute the potential service which was previously described and disclosed as the Terms Agreement. Since execution of the Service Agreements in 2020, the parties have completed several milestones including (i) a feasibility phase, (ii) material upgrades to Globalstar’s ground network, (iii) construction of 10 new gateways around the world, (iv) the successful launch of the ground spare satellite, and (v) rigorous in-field system testing. The Service Agreements generally require Globalstar to allocate network capacity (as described below) to support the Services and provide for the inclusion of Globalstar’s Band 53/n53 in Partner’s cellular-enabled devices that use the Services, for use by third parties, subject to certain terms and conditions. It is currently expected that Partner will make the Services available to customers during the fourth quarter of 2022 (the “Service Launch”). Discontinuation of Second-Generation Duplex Products and Services The Company has been evaluating the continuation of second-generation Duplex services in light of other potential uses for the Company’s capacity, such as those within the Service Agreements. In early 2021, the Company terminated its second-generation Duplex services, which supported approximately 1,800 subscribers, to allow extended testing of the Services to Partner; however, such termination was considered temporary unless or until Partner announced its intent to proceed with 6 launch of the Services. Due to this shift in strategy triggered by Partner's September announcement, the Company evaluated the recoverability of its second-generation Duplex assets, including gateway property, prepaid licenses and royalties, and inventory during the third quarter of 2022. As a result of this shift in strategy, the Company recorded reductions in the value of equipment and long-lived assets totaling $ 174.3 million during the third quarter of 2022 (refer to Note 7: Fair Value Measurements for further discussion). The Company will continue to support first-generation Duplex services, including voice communications and data transmissions. Refer to Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 8: Commitments and Contingencies for further discussion of the financial statement impact of the Service Agreements. 2. REVENUE 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, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Service revenue: Subscriber services Duplex $ 9,021 $ 9,632 $ 22,103 $ 23,530 SPOT 11,753 11,873 34,544 33,996 Commercial IoT 4,673 4,458 14,381 13,443 Wholesale capacity services (1) 6,972 1,301 22,640 3,999 Engineering and other services 882 584 2,025 1,583 Total service revenue 33,301 27,848 95,693 76,551 Subscriber equipment sales: Duplex $ 15 $ 265 $ 288 $ 889 SPOT 1,558 2,619 4,707 6,764 Commercial IoT 2,713 1,841 6,427 5,452 Other 39 41 83 166 Total subscriber equipment sales 4,325 4,766 11,505 13,271 Total revenue $ 37,626 $ 32,614 $ 107,198 $ 89,822 (1) Prior to the third quarter of 2022, revenue from Wholesale capacity services was included in Engineering and other services in the table above. Wholesale capacity services include satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways under the Service Agreements with Partner. As consideration for the services to be provided by Globalstar after the Service Launch, Partner will make payments to Globalstar under the Service Agreements, including a recurring service fee, payments relating to certain service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria. Additionally, following the launch of the next-generation satellites being constructed pursuant to the satellite procurement agreement, Partner has agreed to make additional service payments equal to (i) 95 % of the approved capital expenditures under the satellite procurement agreement and related launch costs (to be paid on a straight-line basis over the useful life of the satellites); (ii) certain costs of the Company’s borrowings related to the new satellites; and (iii) other approved costs. 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): 7 Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Service revenue: United States $ 24,250 $ 19,677 $ 71,413 $ 54,348 Canada 5,288 5,236 13,105 13,442 Europe 1,737 2,039 4,891 5,607 Central and South America 1,898 996 5,882 2,592 Others 128 ( 100 ) 402 562 Total service revenue $ 33,301 $ 27,848 $ 95,693 $ 76,551 Subscriber equipment sales: United States $ 2,034 $ 3,130 $ 5,817 $ 7,740 Canada 1,634 563 3,311 2,430 Europe 231 505 1,176 1,511 Central and South America 420 546 1,177 1,538 Others 6 22 24 52 Total subscriber equipment sales $ 4,325 $ 4,766 $ 11,505 $ 13,271 Total revenue $ 37,626 $ 32,614 $ 107,198 $ 89,822 Accounts Receivable The Company records trade accounts receivable from its customers, including MSS subscribers and Partner under the Service Agreements, when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future. In addition to receivables arising from the sale of goods or services, the Company also has certain arrangements whereby it acts as an agent to procure goods and perform services on behalf of Partner under the Service Agreements. Receivables are included in Accounts receivable, net of allowance for credit losses, on the Company's consolidated balance sheets except for the long-term portion of the wholesale capacity accounts receivable, which is included in Prepaid satellite construction costs and related customer receivable. The Company's receivable balances by type and classification are presented in the table below net of allowance for credit losses and may include amounts related to earned but unbilled revenue (amounts in thousands). As of: September 30, 2022 December 31, 2021 Accounts receivable, net of allowance for credit losses Subscriber accounts receivable $ 13,954 $ 12,825 Wholesale capacity accounts receivable 12,727 1,861 Agency agreement accounts receivable 2,913 6,496 Total accounts receivable, net of allowance for credit losses $ 29,594 $ 21,182 Long-term wholesale capacity accounts receivable 69,646 — Total accounts receivable (short-term and long-term), net of allowance for credit losses $ 99,240 $ 21,182 In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constell ation. Under the Service Agreements, subject to certain conditions, Partner is required to reimburse 95 % of the capital expenditures and certain other costs incurred for this contract. In accordance with the expected timing of payment from Partner, $ 11.6 million is recorded in Wholesale capacity accounts receivable and $ 69.6 million is recorded as in Long-term wholesale capacity accounts receivable in the table above. Contract Liabilities Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. Contract liabilities reflect balances from its customers, including MSS subscribers and the Partner under the Service 8 Agreements. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands). As of: September 30, 2022 December 31, 2021 Short-term contract liabilities Subscriber contract liabilities $ 23,212 $ 24,940 Wholesale capacity contract liabilities 29,909 987 Total short-term contract liabilities $ 53,121 $ 25,927 Long-term contract liabilities Subscriber contract liabilities $ 1,669 $ 1,783 Wholesale capacity contract liabilities, net of contract asset 169,982 110,271 Total long-term contract liabilities $ 171,651 $ 112,054 Total contract liabilities $ 224,772 $ 137,981 For subscriber contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was $ 22.8 million and $ 23.8 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was less than $ 0.1 million and zero , respectively. The duration of the Company’s contracts with subscribers is generally one year or less. As of September 30, 2022, the Company expects to recognize $ 23.2 million, or approximately 93 %, of its remaining performance obligations during the next twelve months . The term of the Company's wholesale capacity contract with its Partner under the Service Agreements is indefinite; therefore, the related contract liabilities may be recognized into revenue over various periods driven by the expected related service or recoupment periods. As of September 30, 2022, the Company expects to recognize $ 29.9 million, or approximately 15 %, of its remaining performance obligations during the next twelve months . The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands). As of: September 30, 2022 December 31, 2021 Wholesale capacity contract liabilities, net: Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1) $ 99,405 $ 96,362 Advanced payments for services expected to be performed with the recently launched ground spare satellite during Phases 1 and 2 25,652 16,981 Advanced payments (both received and contractually owed) for services expected to be performed with the next-generation satellite constellation during Phase 2 78,151 — Contract asset ( 3,317 ) ( 2,085 ) Wholesale capacity contract liabilities, net $ 199,891 $ 111,258 (1) In accordance with applicable accounting guidance, the Company records imputed interest associated with the significant financing component, totaling $ 4.9 million and $ 1.9 million as of September 30, 2022 and December 31, 2021, respectively, which is included in deferred revenue. 3. LEASES 9 The following tables disclose the components of the Company’s finance and operating leases (amounts in thousands): As of: September 30, 2022 December 31, 2021 Operating leases: Right-of-use asset, net $ 28,396 $ 32,041 Short-term lease liability (recorded in accrued expenses) 2,464 2,501 Long-term lease liability 25,796 29,237 Total operating lease liabilities $ 28,260 $ 31,738 Finance leases: Right-of-use asset, net (recorded in intangible and other current assets, net) $ 109 $ 8 Short-term lease liability (recorded in accrued expenses) 17 6 Long-term lease liability (recorded in non-current liabilities) 75 3 Total finance lease liabilities $ 92 $ 9 Lease Cost The components of lease cost are reflected in the table below (amounts in thousands): Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Operating lease cost: Amortization of right-of-use assets $ 584 $ 661 $ 1,908 $ 1,815 Interest on lease liabilities 571 545 1,848 1,256 Capitalized lease cost ( 215 ) — ( 702 ) — Finance lease cost: Amortization of right-of-use assets 4 1 7 9 Short-term lease cost 205 38 413 117 Total lease cost $ 1,149 $ 1,245 $ 3,474 $ 3,197 In accordance with the Service Agreements, the Company began capitalizing certain costs to fulfill this contract during the fourth quarter of 2021, including lease expense, as shown in the table above. These capitalized lease costs will be amortized over the expected term of the related performance obligation. Interest on finance lease liabilities was less than $ 0.1 million for the three and nine months ended September 30, 2022 and 2021; accordingly, these amounts are not shown in the table above. Weighted-Average Remaining Lease Term and Discount Rate The following table discloses the weighted-average remaining lease term and discount rate for finance and operating leases. 10 As of: September 30, 2022 December 31, 2021 Weighted-average lease term Finance leases 4.8 years 1.6 years Operating Leases 9.9 years 10.6 years Weighted-average discount rate Finance leases 10.2 % 7.0 % Operating leases 8.4 % 8.4 % Supplemental Cash Flow Information The below table discloses supplemental cash flow information for operating leases (in thousands): Nine Months Ended September 30, 2022 September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 3,675 $ 3,420 Operating and financing cash flows from finance leases were each less than $ 0.1 million for each of the nine months ended September 30, 2022 and 2021; accordingly, these cash flows are not shown in the table above. Maturity Analysis The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of September 30, 2022 (amounts in thousands): Operating Leases Finance Leases 2022 (remaining) $ 1,180 $ 8 2023 4,775 25 2024 4,649 23 2025 4,677 23 2026 4,724 23 Thereafter 21,584 15 Total lease payments $ 41,589 $ 117 Imputed interest ( 13,329 ) ( 25 ) Discounted lease liability $ 28,260 $ 92 As of September 30, 2022, the Company executed additional operating leases for new gateway locations. These leases have not yet commenced as of September 30, 2022, since the lessors are continuing to ready the sites for use. Accordingly, these leases are not included on the consolidated balance sheet as of September 30, 2022 or in the maturity table above. The Company is in the process of evaluating these lease obligations and expects the impact of these leases to be an increase of right of use assets and lease liabilities of approximately $ 4.7 million. 11 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): September 30, 2022 December 31, 2021 Globalstar System: Space component First and second-generation satellites in service $ 1,262,254 $ 1,195,509 Second-generation satellite, on-ground spare — 32,442 Ground component 79,848 282,268 Construction in progress: Space component 63,504 16,394 Ground component 16,303 33,998 Other 8,658 4,123 Total Globalstar System 1,430,567 1,564,734 Internally developed and purchased software 22,127 20,823 Equipment 8,002 8,590 Land and buildings 1,662 1,149 Leasehold improvements 2,075 2,088 Total property and equipment 1,464,433 1,597,384 Accumulated depreciation ( 931,753 ) ( 925,228 ) Total property and equipment, net $ 532,680 $ 672,156 Amounts included in "second-generation satellite, on-ground spare" in the table above consist of costs related to one of the Company's second-generation satellites that was stored as an on-ground spare satellite until its launch in June 2022. The costs to prepare this satellite for launch were included in "construction in progress - space component" in the table above prior to its launch. During 2022, $ 66.7 million in costs associated with the construction and launch of this spare satellite (including capitalized interest) were placed into service. Since this satellite is expected to remain as an in-orbit spare and will only be raised to its operational orbit at a future date if needed, it was placed into service following its successful launch. In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constell ation. As of September 30, 2022, the Company recorded $ 13.5 million as prepaid satellite construction costs and $ 56.4 million in construction in progress on its consolidated balance sheet. As the Company incurs this construction in progress, it earns the right to receive certain payments from Partner associated with this phase of the Service Agreements as well as certain associated advanced payments under the Service Agreements. The ground component of construction in progress includes costs incurred for assets to upgrade the Company's ground infrastructure, including costs associated with the procurement of new gateway antennas. During 2022, the Company placed $ 16.8 million of costs into service associated with these antennas (including capitalized interest), which are included in ground component in the table above. These capital expenditures relate primarily to gateway upgrade work in connection with the Service Agreements. As discussed in Note 1: Basis of Presentation and Note 7: Fair Value Measurements, t he Company evaluated the recoverability of its second-gener ation Duplex assets on September 7, 2022. This evaluation resulted in the removal of the second-generation Duplex assets from the Company's long-lived asset grouping. The reduction in value of long-lived assets recorded during the third quarter of 2022 totaled $ 161.2 million. The table below reflects the reduction in value of long-lived assets by each component of Property and equipment, net, and Intangible and other assets, net, previously recorded on the Company's consolidated balance sheets (amounts in thousands, reflected net of accumulated depreciation and amortization, as applicable, prior to their write downs). 12 Three months ended September 30, 2022 Property and equipment, net Ground component $ 154,144 Construction in progress: ground component 5,545 Equipment 202 Total property and equipment, net $ 159,891 Intangible and other assets, net $ 1,271 Total reduction in value of long-lived assets $ 161,162 5. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS Long-term debt and vendor financing consists of the following (in thousands): September 30, 2022 December 31, 2021 Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value 2019 Facility Agreement $ 285,296 $ 23,121 $ 262,175 $ 263,812 $ 27,287 $ 236,525 Vendor financing 63,765 — 63,765 — — — 8.00 % Convertible Senior Notes Issued in 2013 — — — 1,407 — 1,407 Total debt and vendor financing $ 349,061 $ 23,121 $ 325,940 $ 265,219 $ 27,287 $ 237,932 Less: current portion 63,765 — 63,765 — — — Long-term debt and vendor financing $ 285,296 $ 23,121 $ 262,175 $ 265,219 $ 27,287 $ 237,932 The principal amounts shown above include payment of in-kind interest. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion. All amounts outstanding associated with the Company's vendor financing arrangement are due within the next twelve months and, therefore, are reflected as a current liability on the Company's consolidated balance sheets. 2019 Facility Agreement In November 2019, the Company entered into a $ 199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement"). The 2019 Facility Agreement is scheduled to mature in November 2025. The loans under the 2019 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). In August 2022, the Company received a waiver letter from its lenders increasing permitted capital expenditures for 2022. As of September 30, 2022, the Company was in compliance with the covenants of the 2019 Facility Agreement. The 2019 Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the 2019 Facility Agreement) on a semi-annual basis. The Company generated excess cash flow for the six-month measurement period ended June 30, 2022 and was required to pay $ 6.3 million to its lenders in August 2022. This payment reduced future principal payment obligations. The Service Agreements require the Company to refinance all loans outstanding under the 2019 Facility Agreement; the portion held by Thermo is to be refinanced upon commencement of Services (expected to be November 2022) and the remaining portion is to be refinanced within 90 days of the commencement of Services. Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2019 Facility Agreement. 13 Vendor Financing In February 2022, the Company entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation (“MDA”) (see Note 8: Commitments and Contingencies for further discussion). As of September 30, 2022, the Company had recorded $ 63.8 million in short-term vendor financing on its consolidated balance sheet associated with this agreement. This agreement provided for deferrals of milestone payments through August 2022 at a 0 % interest rate. On October 28, 2022, the Company executed an amendment to extend this payment deferral date and allow for other related changes in terms, including two $ 7.0 million payments (one of which was made on October 31, 2022 and the second is required to be made in November 2022) and interest that will accrue on the amount outstanding at an annual rate of 7 %. The total interest accrued was $ 0.2 million as of September 30, 2022. All remaining amounts outstanding are required to be paid in December 2022. Concurrently, the Company continues to pursue debt financing for the funding of the construction and launch costs for these satellites (discussed below). New Satellite Construction Financing As discussed in Note 4: Property and Equipment and Note 8: Commitments and Contingencies, the Company entered into a contract with MDA to construct new satellites. Under the Service Agreements, the Company is required to raise additional debt capital for the construction and launch of the new satellites and targets to complete such financing during the fourth quarter of 2022. 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. Interest was paid in cash at a rate of 5.75 % and in additional notes at a rate of 2.25 %. In February 2022, the Company notified the holders of the 8.00 % Notes of its intention to redeem all of the outstanding amount of principal and interest in March 2022. Prior to the Company's intended redemption of the 8.00 % Notes, the holders converted the remaining principal amount outstanding of $ 1.4 million into 2.3 million shares of Globalstar common stock in February and March 2022. The 2013 8.00 % Notes were converted into shares of common stock at a conversion price of $ 0.69 per share of common stock. As a result of the conversions during 2022, the Company recorded gains and losses on extinguishment of debt resulting from the difference between the fair value of shares of Globalstar common stock issued to the holders and the principal amount of the notes that converted as well as the write-offs of the embedded derivative associated with the 2013 8.00 % Notes. The net impact to the Company's condensed consolidated statement of operations in 2022 was a gain of less than $0.1 million. Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00 % Notes. 2009 Facility Agreement In 2009, the Company entered into a 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 "2009 Facility Agreement"). The 2009 Facility Agreement was fully repaid in November 2021. As a result of prepayments made under the 2009 Facility Agreement during the second and third quarters of 2021, the Company wrote off $ 2.3 million and $ 0.8 million, respectively, in deferred financing costs, which represented the portion of debt prepaid by the Company in the second and third quarters of 2021, and were recorded as a loss on extinguishment of debt on its condensed consolidated statements of operations. Paycheck Protection Program Loan In April 2020, the Company sought relief under the CARES Act and received a $ 5.0 million loan under the Paycheck Protection Program ("PPP"), (the "PPP Loan"). In June 2021, the Small Business Administration ("SBA") approved the Company's request for forgiveness of all amounts outstanding under the PPP Loan, including accrued interest. 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 the entire principal balance, including accrued interest, was forgiven in June 2021, the Company recorded a gain on extinguishment of debt totaling $ 5.0 million on its condensed consolidated statements of operations for the period ended June 30, 2021. 14 6. DERIVATIVES The Company has identified various embedded derivatives resulting from certain features in the Company’s existing borrowing arrangements, requiring recognition on its consolidated balance sheets. None of these derivative instruments are designated as a hedge. The following table discloses the fair values of the derivative instruments on the Company’s consolidated balance sheets (in thousands): September 30, 2022 December 31, 2021 Derivative (liabilities) assets: Compound embedded derivative with the 2019 Facility Agreement $ ( 798 ) $ 484 Compound embedded derivative with the 2013 8.00 % Notes $ — ( 1,364 ) As of September 30, 2022 and December 31, 2021, the derivative (liability) asset recorded for the Compound embedded derivative with the 2019 Facility Agreement was reflected in Other non-current liabilities and Intangible and other assets, net, respectively, on the Company's consolidated balance sheets. During the first quarter of 2022, the remaining principal amount of the 2013 8.00 % Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding. 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 Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Compound embedded derivative with the 2013 8.00 % Notes $ — $ 284 $ 216 $ ( 2,537 ) Compound embedded derivative with the 2019 Facility Agreement 662 ( 55 ) ( 1,282 ) 327 Total derivative gain (loss) $ 662 $ 229 $ ( 1,066 ) $ ( 2,210 ) The fair value of each embedded derivative is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in its 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 consolidated balance sheet. See Note 7: Fair Value Measurements for further discussion. 7. 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). 15 The Company's derivatives are classified as Level 3. The Company marks-to-market its derivatives 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. During the first quarter of 2022, the remaining principal amount of the 2013 8.00 % Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding See Note 5: Long-Term Debt and Other Financing Arrangements and Note 6: Derivatives for further discussion. 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): September 30, 2022 (Level 1) (Level 2) (Level 3) Total Balance Liabilities: Compound embedded derivative with the 2019 Facility Agreement $ — $ — $ ( 798 ) $ ( 798 ) Total liabilities measured at fair value $ — $ — $ ( 798 ) $ ( 798 ) December 31, 2021 (Level 1) (Level 2) (Level 3) Total Balance Assets: Compound embedded derivative with the 2019 Facility Agreement $ — $ — $ 484 $ 484 Total assets measured at fair value $ — $ — $ 484 $ 484 Liabilities: Compound embedded derivative with the 2013 8.00 % Notes $ — $ — $ ( 1,364 ) $ ( 1,364 ) Total liabilities measured at fair value $ — $ — $ ( 1,364 ) $ ( 1,364 ) 2013 8.00 % Notes The significant quantitative Level 3 inputs utilized in the valuation model are shown in the table below: December 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 120 % - 139 % 0.5 % $ 0.69 18 % $ 1.16 16 Fluctuation in the Company’s stock price and stock price volatility were significant drivers of the change in the compound embedded derivative with the 2013 8.00 % Notes. Increases in these inputs resulted in a higher fair value measurement. 2019 Facility Agreement The compound embedded derivative with the 2019 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 22 % and 13 % at September 30, 2022 and December 31, 2021, respectively. When the discount yield utilized in the valuation is higher than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in a liability for the Company. Conversely, when the discount yield is lower than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in an asset for the Company. 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. As the expected timing and amount of prepayments decrease, the fair value of the embedded derivative also decrease. During the third quarter of 2022, the Company's expected probability of refinancing the 2019 Facility Agreement increased and therefore the fair value of the embedded derivative reduced. See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion. 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, 2022 and 2021, respectively $ ( 880 ) $ 163 Derivative adjustment related to conversions 1,148 — Unrealized loss, included in derivative loss ( 1,066 ) ( 1,043 ) Balance at end of period, September 30, 2022 and December 31, 2021, respectively $ ( 798 ) $ ( 880 ) Fair Value of Debt Instruments and Vendor Financing The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement without incurring significant additional costs. Unlike typical long-term debt, certain terms for this instrument are not readily available and generally involve a variety of factors, including due diligence by the debt holders. The Company's vendor financing arrangement is recorded at net carrying value, which approximates fair value. As previously disclosed, the remaining principal amount of the 2013 8.00 % Notes was converted into shares of Globalstar common stock during 2022; accordingly, there is no value in the table below as of September 30, 2022. The following table sets forth the carrying value and estimated fair value of the Company's Level 3 financial instrument (in thousands): September 30, 2022 December 31, 2021 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value 2013 8.00 % Notes $ — $ — $ 1,407 $ 1,265 See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt instruments. 17 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. Derivative Liabilities On February 17, 2022 and March 9, 2022, the remaining principal balance of the 2013 8.00 % Notes was converted into shares of Globalstar common stock, eliminating the principal balance outstanding. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements. As a result of the conversion, the Company wrote off the proportionate fair value of the compound embedded derivative liability with the 2013 8.00 % Notes based on the value of the derivative on each conversion date. As of each conversion date, the fair value of the compound embedded derivative liability with the 2013 8.00 % Notes was $ 0.8 million. The significant quantitative Level 3 inputs utilized in the valuation models as of the conversion date are shown in the table below: February 17, 2022 Risk-Free Interest Rate Note Conversion Price Discount Rate Market Price of Common Stock Compound embedded derivative with the 2013 8.00 % Notes 0.06 % $ 0.69 18 % $ 1.00 March 9, 2022 Risk-Free Interest Rate Note Conversion Price Discount Rate Market Price of Common Stock Compound embedded derivative with the 2013 8.00 % Notes 0.18 % $ 0.69 19 % $ 1.21 Prepaid and Other Current Assets, Intangible and Other Assets and Long-Lived Assets Prepaid and other current assets, intangible and other assets and long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. During 2022, the Company wrote down the value of certain assets as reflected in the table below (in thousands). Reduction in the Value of Assets Three Months Ended Nine Months Ended September 30, 2022 Prepaid and other current assets Prepaid licenses and royalties (1) $ 183 $ 183 Intangible and other assets, net Prepaid licenses and royalties (1) 4,514 4,514 Internally developed technology and software (2) 1,271 1,271 Spectrum intangible assets (3) 142 667 Property and equipment, net (2) 159,891 159,891 Grand Total $ 166,001 $ 166,526 (1). While developing its second-generation Duplex products and services, the Company signed various licensing and royalty agreements necessary for the manufacture and distribution of such products and services. These prepayments were classified as either current or non-current based on the estimated portion of expense to be recognized over the next twelve months. As of September 7, 2022, approximately $ 0.2 million and $ 4.5 million, respectively, was recorded in Prepaid and other current assets and Intangible and other assets, net, on the Company's consolidated balance sheets. On September 7, 2022, these prepaid assets were no longer considered recoverable. The Company recorded a reduction in value of long-lived assets on its condensed consolidated statements of operations for the amount shown in the table above during the third quarter of 2022. 18 (2). During 2018 and 2019, the Company placed into service second-generation ground Duplex assets (including associated developed technology and software upgrades) which represented the gateways capable of providing commercial traffic to support Sat-Fi2®. Additionally, the Company recorded certain costs in construction in progress for spare software associated with the second-generation Duplex assets. On September 7, 2022, the Company re-assessed its asset grouping for long-lived assets and determined that the second-generation Duplex assets are no longer part of the Company's overall satellite and ground network. These second-generation Duplex assets will no longer provide future cash flows to the Company. As of September 7, 2022, approximately $ 1.3 million was recorded in Intangible and other assets, net, and $ 159.9 million was recorded in Property and equipment, net. The Company recorded a reduction in value of long-lived assets on its condensed consolidated statements of operations for the amount shown in the table above during the third quarter of 2022. (3). During the second and third quarters of 2022, the Company wrote off approximately $ 0.5 million and $ 0.1 million, respectively, of work in progress associated with its spectrum intangible assets, previously recorded in Intangible and other assets, net, on its consolidated balance sheets. The work in progress was related to efforts to obtain spectrum licensing authority in certain countries around the world; during the second and third quarters of 2022, the Company determined that it would not continue pursing such authorities in these countries and recorded a reduction in the value of long-lived assets in its condensed consolidated statements of operations during the nine months ended September 30, 2022. Inventory In addition to the items discussed above relative to the Company's second-generation Duplex assets, the Company wrote down the value of equipment held in inventory during the third quarter of 2022. Included in the Company's inventory balance were second-generation Duplex assets, including finished goods, chips and component parts to be used in manufacturing such devices as well as second-generation Duplex gateway spare parts, totaling $ 6.9 million. Additionally, the Company recorded amounts prepaid to its product manufacturer related to second-generation Duplex products, previously included in Prepaid and other current assets on its consolidated balance sheets totaling $ 1.6 million. The Company concluded that there was no remaining net realizable value of its second-generation Duplex inventory including prepayments to its product manufacturer. Accordingly, during the third quarter of 2022, the Company recorded a reduction in the value of inventory and prepaid and other current assets totaling $ 8.5 million on its condensed consolidated statements of operations, representing the carrying value of these assets on September 7, 2022. 8. COMMITMENTS AND CONTINGENCIES Service Agreements The Service Agreements set forth the primary terms for the Company to provide services to Partner and incur costs related primarily to new gateways and upgrades at existing gateways as well as satellite construction and launch costs. The Service Agreements have no expiration date but provide that each party may terminate subject to certain notice requirements and, in some cases, other conditions. In the event Partner terminates the agreements or the deliverables for the second phase of the contract, Partner will reimburse the Company for the cost of materials purchased or manufactured through the date of such termination notice, subject to certain conditions. The Service Agreements also provide for various commitments with which the Company must comply, including to: • Allocate 85 % of its current and future network capacity to support the Services; • Provide and maintain all resources, including personnel, software, satellite, gateways, satellite spectrum and regulatory rights necessary to provide the Services (the “Required Resources”); • Prioritize the Services and provide Partner with priority access to the Required Resources, including the Company’s licensed satellite spectrum; • Maintain minimum quality and coverage standards and provide continuity of service; • Allow Partner to recoup advance payments made to Globalstar from future service fees or, to the extent recoupment is not possible, to repay such amounts in cash; and, • Provide the Resource Protections as defined in the Service Agreements. The Service Agreements require the Company to raise additional debt capital for the construction and launch of the new satellites, which the Company targets to be complete during the fourth quarter of 2022. 19 The Service Agreements require the Company (i) upon commencement of the Services, to refinance all loans outstanding under the 2019 Facility Agreement that are held by affiliates of the Thermo and (ii) within 90 days of the commencement of the Services, to refinance all loans outstanding under the 2019 Facility Agreement that are held by persons other than Thermo. The Service Agreements also provide that Partner may elect to receive warrants (the "Warrants") to purchase up to 2.64 % of the Company’s outstanding common stock (see further discussion in Note 11: Loss Per Share). In addition, Partner has the right, but not the obligation, to participate in certain issuances of the Company’s equity securities, in order to maintain its percentage interest in the Company (determined on a fully diluted basis, assuming exercise of all the Warrants). Refer to Note 1: Basis of Presentation, Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 5: Long-Term Debt and Other Financing Arrangements for further discussion. Satellite Procurement Agreement In February 2022, the Company entered into a satellite procurement agreement with MDA pursuant to which Globalstar will acquire 17 satellites that will replenish Globalstar's existing constellation of satellites and ensure long-term continuity of its mobile satellite services. Globalstar is acquiring the satellites to provide continuous satellite services to Partner under the Service Agreements, as well as services to Globalstar’s current and future customers. Globalstar maintains the option to acquire additional satellites under the contract. Globalstar plans to contract separately for launch services and launch insurance for the new satellites. The total contract price for the initial 17 satellites is $ 327.0 million; Globalstar has the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The satellites are expected to be manufactured during the next three years . Under the Service Agreements, subject to certain conditions, Partner is required to reimburse 95 % of the capital expenditures and certain other costs incurred for this contract. Refer to Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the vendor financing arrangement with MDA. 9. RELATED PARTY TRANSACTIONS Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.1 million and $ 0.4 million as of September 30, 2022 and December 31, 2021, 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. The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments started at $ 1.4 million per year in 2019 and increase at a rate of 2.5 % per year, for a lease term of ten years . During each of the nine months ended September 30, 2022 and 2021, the Company incurred lease expense of $ 1.2 million under this lease agreement. 20 In November 2019, the Company entered into the 2019 Facility Agreement. Thermo's participation in the 2019 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 2019 Facility Agreement was approximately $ 39.4 million, of which $ 9.7 million was accrued during the nine months ended September 30, 2022. As discussed in Note 8: Commitments and Contingencies, the Service Agreements require the Company to refinance all loans outstanding under the 2019 Facility Agreement; the portion associated with Thermo is required to be refinanced upon commencement of Services, which is expected to be during the fourth quarter of 2022. In connection with the Service Agreements, in September 2022, Partner and Thermo entered into a lock-up and right of first offer agreement that generally (i) requires Thermo to offer any shares of Globalstar common stock to Partner before transferring them to any other Person other than affiliates of Thermo and (ii) prohibits Thermo from transferring shares of Globalstar common stock if such transfer would cause Thermo to hold less than 51.00 % of the outstanding common stock of the Company for a period of 5 years from the Service Launch (as defined in Note 1: Basis of Presentation). This agreement does not prohibit the Company from entering into a change of control transaction at any time. Additionally, upon commencement of the Services, the Service Agreements require the Company to refinance all loans outstanding under the 2019 Facility Agreement that are held by Thermo. See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt and financing transactions with Thermo. 10. PENSIONS AND OTHER EMPLOYEE BENEFITS Defined Benefit Plan In January 2022, the Company received consent from its senior lenders to terminate the Retirement Plan of Globalstar, Inc. (the "Pension Plan"). The Pension Plan was frozen, effective October 23, 2003, for participation and benefit accrual purposes. The Pension Plan was settled in August 2022, which resulted in the Company no longer have any remaining pension plan obligations as of September 30, 2022. The total settlement of $ 7.7 million was paid out through assets held in the Pension Plan and cash, totaling $ 5.0 million and $ 2.7 million, respectively, Upon settlement, the Company recorded a pension settlement loss totaling $ 1.5 million, reflected in Other income (expense) on the Company's condensed consolidated statements of operations during the nine months ended September 30, 2022. 11. 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 income. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. When outstanding, 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 during each of the three and nine months ended September 30, 2022 and 2021 (amounts in thousands, except per share data): Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Net loss $ ( 204,361 ) $ ( 30,885 ) $ ( 251,580 ) $ ( 88,667 ) Weighted average shares outstanding 1,800,504 1,793,144 1,799,364 1,755,362 Net loss per common share - basic and diluted $ ( 0.11 ) $ ( 0.02 ) $ ( 0.14 ) $ ( 0.05 ) 21 For the three months ended September 30, 2022 and 2021, 9.4 million and 11.0 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive. For the nine months September 30, 2022 and 2021, 8.8 million and 10.2 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 Service Agreements also provide that Partner may elect to receive warrants (the "Warrants") to purchase up to 2.64 % of the Company’s outstanding common stock, to be calculated on a fully diluted basis on the date Partner begins providing the Services (estimated to be November 2022), at a blended exercise price of $ 1.01 , which is based on the price of Globalstar common stock on the dates of certain past milestones provided under the Service Agreements. As of September 30, 2022, the estimated Warrants to purchase shares of Globalstar common stock is 49.1 million with estimated proceeds to the Company totaling $ 49.8 million. Partner is under no obligation to receive the Warrants or to exercise them.