What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-25 · 559 added, 483 removed, 998 unchanged (51% of the section changed)

3 unchanged sentences

Report of Ernst & Young LLP, independent registered public accounting firm (PCAOB ID 42 )

Report of Crowe LLP, independent registered public accounting firm (PCAOB ID 173 )

Consolidated balance sheets at December 31, 2022 and 2021

8 unchanged sentences

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

(the Company) as of December 31, 2021 and 2020 and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2022, expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

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

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

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

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

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

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

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

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

13 unchanged sentences

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

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

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

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

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

3 unchanged sentences

New Orleans, Louisiana

February 25, 2022

March 1, 2023

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

Opinion on Internal Control over Financial Reporting

We have audited Globalstar, Inc.’s (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Globalstar, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Globalstar, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated statements of operations, statements of comprehensive (loss) income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and our report dated February 25, 2022, expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, statements of comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 1, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

16 unchanged sentences

New Orleans, Louisiana

February 25, 2022

Report of Independent Registered Public Accounting Firm

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

Covington, Louisiana

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the Company's results of operations and cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

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

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

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

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

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

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

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

/s/ Crowe LLP

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

Oak Brook, Illinois

February 28, 2020

March 1, 2023

GLOBALSTAR, INC.

3 unchanged sentences

Cash and cash equivalents $ 32,082 $ 14,304

Restricted cash — 3,625

Accounts receivable, net of allowance for credit losses of $ 2,892 and $ 2,962 , respectively

4 unchanged sentences

Property and equipment, net 560,371 672,156

Restricted cash — 51,068

Operating lease right of use assets, net 30,859 32,041

Prepaid satellite construction costs and related customer receivable 122,496 —

Intangible and other assets, net of accumulated amortization of $ 10,908 and $ 11,189 , respectively

3 unchanged sentences

Current liabilities:

Current portion of long-term debt $ — $ 58,824

Accounts payable $ 3,843 $ 6,247

Vendor financing 59,822 —

Accrued expenses 58,446 28,947

2 unchanged sentences

Total current liabilities 197,076 61,565

Long-term debt, less current portion 237,932 326,586

Long-term debt 132,115 237,932

Operating lease liabilities 27,635 29,237

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Preferred Stock of $ 0.0001 par value;

100,000,000 shares authorized and no ne issued and outstanding at December 31, 2021 and 2020, respectively

Series A Preferred Convertible Stock of $ 0.0001 par value;

one share authorized and no ne issued and outstanding at December 31, 2021 and 2020, respectively

99,700,000 and 100,000,000 shares authorized and none issued and outstanding at December 31, 2022 and 2021, respectively

Series A Preferred Stock of $ 0.0001 par value;

300,000 shares authorized and 149,425 issued and outstanding at December 31, 2022;

no shares authorized and none issued and outstanding as of December 31, 2021

Voting Common Stock of $ 0.0001 par value;

2,150,000,000 and 1,900,000,000 shares authorized at December 31, 2021 and 2020, respectively;

1,796,528,871 shares and 1,674,668,617 shares issued and outstanding at December 31, 2021 and 2020, respectively

Nonvoting Common Stock of $ 0.0001 par value;

no sh ares authorized and no ne issued and outstanding at December 31, 2021 and 2020, respectively

2,150,000,000 shares authorized;

1,811,074,696 and 1,796,528,871 shares issued and outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital 2,345,612 2,146,710

Accumulated other comprehensive income (loss) 1,890 ( 2,944 )

Accumulated other comprehensive income 9,242 1,890

Retained deficit ( 2,040,264 ) ( 1,783,349 )

23 unchanged sentences

Derivative (loss) gain ( 805 ) ( 1,043 ) 2,897

Foreign currency (loss) gain ( 6,308 ) ( 727 ) 64

Foreign currency loss ( 6,592 ) ( 6,308 ) ( 727 )

Pension settlement loss ( 1,501 ) — ( 2,075 )

Other 463 368 ( 1,480 )

Total other (expense) income ( 47,421 ) ( 49,814 ) 79,915

(Loss) income before income taxes ( 112,924 ) ( 108,977 ) 15,869

Income tax (benefit) expense ( 299 ) 662 545

Net (loss) income $ ( 112,625 ) $ ( 109,639 ) $ 15,324

Net (loss) income per common share:

Total other expense ( 35,813 ) ( 47,421 ) ( 49,814 )

Loss before income taxes ( 256,842 ) ( 112,924 ) ( 108,977 )

Income tax expense (benefit) 73 ( 299 ) 662

Net loss $ ( 256,915 ) $ ( 112,625 ) $ ( 109,639 )

Net loss attributable to common shareholders (Note 14)

$ ( 258,252 ) $ ( 112,625 ) $ ( 109,639 )

Net loss per common share:

Basic $ ( 0.14 ) $ ( 0.06 ) $ ( 0.07 )

5 unchanged sentences

GLOBALSTAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

1 unchanged sentence

2022 2021 2020

Net (loss) income $ ( 112,625 ) $ ( 109,639 ) $ 15,324

Other comprehensive (loss) income:

Net loss $ ( 256,915 ) $ ( 112,625 ) $ ( 109,639 )

Other comprehensive income:

Defined benefit pension plan liability adjustment 2,073 410 2,042

1 unchanged sentence

Total other comprehensive income 7,352 4,834 505

Total comprehensive (loss) income $ ( 107,791 ) $ ( 109,134 ) $ 15,714

Total comprehensive loss $ ( 249,563 ) $ ( 107,791 ) $ ( 109,134 )

See accompanying notes to Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Shares Common

Amount Additional

Preferred Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Retained

Deficit Total

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

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

Contribution of services — — 338 — — 338

Issuance and recognition of stock-based compensation of employee stock purchase plan 2,257 — 1,096 — — 1,096

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

Investment in business — — 155 — — 155

Fair value of warrants issued in connection with 2019 Facility Agreement — — 23,562 — — 23,562

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

Other comprehensive income — — — 390 — 390

Net income — — — — 15,324 15,324

Shares Amount Shares Amount

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

16 unchanged sentences

Balances – December 31, 2021 — $ — 1,796,529 $ 180 $ 2,146,710 $ 1,890 $ ( 1,783,349 ) $ 365,431

Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation — — 11,577 1 10,588 — — 10,589

Contribution of services — — — — 188 — — 188

Issuance and recognition of stock-based compensation of employee stock purchase plan — — 716 — 1,135 — — 1,135

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

— — 2,253 — 2,548 — — 2,548

Fair value of Warrants granted to Partner — — — — 48,337 — — 48,337

Issuance of Series A Preferred Stock 149 — — — 105,342 — — 105,342

Gain on extinguishment of 2019 Facility Agreement with Thermo — — — — 30,764 — — 30,764

Other comprehensive income — — — — — 7,352 — 7,352

Net loss — — — — — — ( 256,915 ) ( 256,915 )

Balances – December 31, 2022 149 $ — 1,811,075 $ 181 $ 2,345,612 $ 9,242 $ ( 2,040,264 ) $ 314,771

See accompanying notes to Consolidated Financial Statements.

5 unchanged sentences

Cash flows provided by operating activities:

Net (loss) income $ ( 112,625 ) $ ( 109,639 ) $ 15,324

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

Net loss $ ( 256,915 ) $ ( 112,625 ) $ ( 109,639 )

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

Depreciation, amortization and accretion 93,884 96,237 96,815

1 unchanged sentence

Stock-based compensation expense 10,754 6,729 5,902

Noncash consideration, net, associated with wholesale capacity contract ( 292 ) — —

Amortization of deferred financing costs 520 2,562 4,243

3 unchanged sentences

Gain on extinguishment of debt ( 2,790 ) ( 3,098 ) —

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

Loss on pension settlement 1,501 — 2,075

1 unchanged sentence

Noncash reversal of tariff accrual — ( 1,023 ) —

Unrealized foreign currency loss (gain) 6,394 1,362 ( 192 )

Unrealized foreign currency loss 6,615 6,394 1,362

Other, net ( 2,631 ) ( 1,420 ) 106

10 unchanged sentences

Cash flows used in investing activities:

Network upgrades (including interest) ( 37,432 ) ( 7,317 ) ( 3,342 )

Network upgrades (including capitalized interest) ( 18,233 ) ( 37,432 ) ( 7,317 )

Satellite construction costs ( 14,000 ) — —

Property and equipment additions ( 7,076 ) ( 6,307 ) ( 5,157 )

4 unchanged sentences

Principal payments of the 2019 Facility Agreement ( 6,341 ) — —

Principal payments of the 2009 Facility Agreement — ( 186,990 ) ( 3,373 )

Payments for debt and equity issuance costs ( 626 ) ( 286 ) ( 1,074 )

3 unchanged sentences

Proceeds from PPP Loan — — 4,973

Proceeds from Subordinated Loan Agreement — — 62,000

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

Proceeds from 2019 Facility Agreement — — 192,990

Net cash (used in) provided by financing activities ( 6,048 ) ( 140,282 ) 1,164

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 22 ) ( 132 ) 52

Net (decrease) increase in cash, cash equivalents and restricted cash ( 53,719 ) 8,895 ( 16,362 )

Net increase (decrease) in cash, cash equivalents and restricted cash 17,778 ( 53,719 ) 8,895

Cash, cash equivalents and restricted cash, beginning of period 14,304 68,023 59,128

5 unchanged sentences

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

— 54,693 51,522

Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 32,082 $ 14,304 $ 68,023

8 unchanged sentences

Capitalized accretion of debt discount and amortization of prepaid financing costs 1,830 612 447

Satellite construction costs (including prepaid amounts) acquired through vendor financing arrangement 59,822 — —

Satellite construction assets in accrued expenses 36,139 — —

Principal amount of 2019 Facility Agreement converted into preferred equity 149,425 — —

Forgiveness of principal and interest of PPP Loan — 5,030 —

3 unchanged sentences

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

Fair value of warrants issued with 2019 Facility Agreement — — 23,562

See accompanying notes to Consolidated Financial Statements.

3 unchanged sentences

Globalstar, Inc.

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

(“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications 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’s satellite communications business supports Internet of Things ("IoT") data transmissions in a variety of applications and provides reliable connectivity in areas not served or underserved by terrestrial wireless and wireline networks and in circumstances where terrestrial networks are not operational due to natural or man-made disasters.

These communication services serve principally the following markets:

recreation and personal;

public safety and disaster relief;

maritime and fishing;

natural resources, mining and forestry;

construction;

and transportation.

Globalstar currently provides the following communications services:

• two-way voice communication and data transmissions via the GSP-1600 and GSP-1700 phones ("Duplex");

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

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

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

Globalstar provides Duplex, SPOT and Commercial IoT products and services to customers directly and through a variety of partners.

COVID-19 Risks and Uncertainties

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

the effectiveness of mitigation measures;

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.

As a result of COVID-19, the Company experienced an initial reduction in the volume of sales of subscriber equipment, received requests for service pricing concessions from certain customers, and was impacted by certain of its customers not being able to pay outstanding balances.

The Company has pursued various opportunities to mitigate the risks and uncertainties resulting from COVID-19, including, but not limited to, the receipt of a $ 5.0 million loan under the Paycheck Protection Program ("PPP") and the evaluation of its eligibility for the Employee Retention Tax Credit program as well as seeking relief under the American Rescue Plan Act.

In June 2021, the Small Business Administration ("SBA") fully approved the Company's request for forgiveness of all amounts outstanding, including accrued interest, under its PPP loan.

• two-way voice communication and data transmissions via the GSP-1600 and GSP-1700 phone ("Duplex");

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

• satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways ("Wholesale Capacity Services");

• engineering and other communication services using the Company's MSS and terrestrial spectrum licenses ("Engineering and Other").

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, as each is amended from time to time, the “Service Agreements”).

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 11 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 Partner to enable Band 53/n53 for use in cellular-enabled devices designated by Partner for use with the Services.

Partner made Services available to its customers in November 2022 (the “Service Launch”).

On February 27, 2023, Globalstar and its Partner agreed to amend the Service Agreements to provide for, among other things, Partner’s prepayment of $ 252 million to the Company (the “Prepayment”).

The Company plans to use the proceeds of the Prepayment to pay amounts currently due and payable, as well as other amounts as they become due and payable, under the satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA"), as well as launch, insurance and ancillary costs incurred for the construction and launch of these satellites .

The Prepayment replaces the Company's obligation to seek third-party financing for these costs as previously required under the Service Agreements and will be funded as needed on a quarterly basis subject to the terms in the agreement.

The remaining amount of the satellite costs is expected to be funded through the Company's operating cash flows.

The amount of the Prepayment and fees payable thereon will be recouped from amounts payable by Partner for services provided by the Company under the Service Agreements.

The Prepayment is expected to be recouped in installments for a period of 16 quarters beginning no later than the third quarter of 2025.

The Prepayment may also be repaid over time through excess cash flow sweeps or voluntary prepayments, as provided under the terms of the prepayment agreement.

For as long as any portion of the Prepayment is outstanding, the Company will be subject to certain covenants including (i) maintenance of a

minimum cash balance of $ 30 million, (ii) interest coverage and leverage ratios, and (iii) other customary negative covenants, including limitations on certain asset transfers, expenditures and investments.

Amounts payable by the Company in connection with the Prepayment will be guaranteed by Thermo, subject to applicable shareholder approval.

Prior to such shareholder approval, Thermo has agreed to provide support of certain of the Company’s obligations under the Service Agreements, the Satellite Procurement Agreement, and certain related contracts directly to the Partner.

As conditions precedent to Prepayment funding, the Company must (i) convert or refinance the remaining loans outstanding under the 2019 Facility Agreement by March 13, 2023 and (ii) grant Partner a first-priority lien in the Company’s assets to secure its obligations under the Service Agreements.

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 launch of the Services.

Due to this shift in strategy triggered by Partner's September 2022 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 8:

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 9:

Commitments and Contingencies for further discussion of the financial statement impact of the Service Agreements.

Use of Estimates in Preparation of Financial Statements

9 unchanged sentences

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less.

Restricted Cash

There was no balance in restricted cash as of December 31, 2021.

As of December 31, 2020, restricted cash was comprised of funds held in escrow by the agent for the Company’s facility agreement entered into in 2009 (the “2009 Facility Agreement”) to secure the Company’s principal and interest payment obligations related to its 2009 Facility Agreement.

Restricted cash was classified as either a current or non-current asset on the Company's Consolidated Balance Sheet based on when these funds were expected to be used to pay principal and interest due under the 2009 Facility Agreement.

As disclosed in Note 6:

Long-Term Debt and Other Financing Arrangements, the Company fully paid down the 2009 Facility Agreement during 2021.

Cash deposited in institutional money market funds, regular interest-bearing depository accounts and non-interest-bearing depository accounts are classified as cash and cash equivalents on the accompanying consolidated balance sheets.

Concentration of Credit Risk

1 unchanged sentence

Cash and cash equivalents and restricted cash consist primarily of highly liquid short-term investments deposited with financial institutions that are of high credit quality.

The Company performs credit evaluations of its customers’ financial condition and records reserves to provide for estimated credit losses .

For the year ended December 31, 2022, our Partner under the Service Agreements was responsible for 24 % of our revenue and 86 % of our receivable balance with no other customer responsible for more than 10% of our revenue or accounts receivable balance.

Accounts and Notes Receivable

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

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

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

The Company records trade accounts receivable from its customers when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future.

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

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

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

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

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

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

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

Payment is generally due within 45 days of the invoice date for this customer.

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

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

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

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

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

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

One type of the Company’s contract assets is customer receivables and, as such, historical delinquency percentages are generally consistent over time.

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

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

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

The estimated life may vary by service and product type, but is generally less

than one year.

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

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

Allowances are generally recorded for all aging categories of outstanding receivables, including those in the current category.

1 unchanged sentence

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

The Company considered the potential impact of COVID-19 on its portfolio of trade receivables and increased its loss rate for certain receivables, in limited circumstances.

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

The estimate of the allowance for credit losses on wholesale capacity receivables is based primarily on customer payment history and credit rating.

The Company believes that the risk of loss is extremely remote for this category of outstanding receivables.

The following is a summary of the activity in the allowance for credit losses (in thousands):

6 unchanged sentences

Balance at end of period $ 2,892 $ 2,962 $ 4,352

Inventory consists primarily of purchased products, including subscriber equipment devices, which work on the Company’s network, of approximately $ 9.6 million and $ 9.5 million as of December 31, 2021 and 2020, respectively, as well as ground infrastructure assets expected to be used as spare parts of approximately $ 4.2 million as of December 31, 2021 and 2020, respectively.

Inventory consists primarily of purchased products, including subscriber equipment devices, which work on the Company’s network, as well as component parts and other chips used in the manufacture of subscriber equipment devices, of approximately $ 9.0 million and $ 9.6 million as of December 31, 2022 and 2021, respectively, as well as ground infrastructure assets expected to be used as spare parts of approximately $ 0.3 million and $ 4.2 million as of December 31, 2022 and 2021, respectively.

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

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

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

For the years ended December 31, 2021 and 2020, the Company wrote down the value of inventory by $ 1.0 million and $ 0.7 million, respectively, after adjusting for changes in net realizable value.

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

For each the years ended December 31, 2022, 2021 and 2020, the Company wrote down the value of inventory by $ 8.6 million, $ 1.0 million and $ 0.7 million, respectively, after adjusting for changes in net realizable value.

In 2022, the Company wrote down the value of equipment consisting of 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.

In 2021, the Company wrote off certain Sat-Fi2 ® materials that were not likely to be used in production as well as defective inventory units that were no longer saleable.

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

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

Property and Equipment

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Capitalized costs associated with the Company’s Space Component, Ground Component, and other assets are tracked by fixed asset category and are allocated to each asset as it comes into service.

When a second-generation satellite is incorporated into the second-generation constellation, the Company begins depreciation on the date the satellite is placed into service, which was the point that the satellite reaches its orbital altitude, over its estimated depreciable life.

Generally, when a satellite is incorporated into the constellation, the Company begins depreciation on the date the satellite is placed into service, which was the point that the satellite reaches its orbital altitude, over its estimated depreciable life.

In June 2022, the Company launched an on-ground spare satellite.

The costs associated with the construction and launch of this spare satellite were placed into service after its successful launch 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.

The Company capitalizes interest costs associated with the costs of assets in progress.

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

As of December 31, 2020, the Company had approximately $ 0.3 million of assets classified as held for sale.

During 2021, the Company sold the property of its former gateway location in Nicaragua.

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

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

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

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

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Deferred Financing Costs

Deferred financing costs are those costs directly incurred in obtaining long-term debt.

These costs are amortized as additional interest expense over the expected term of the corresponding debt.

Deferred financing costs are recorded on the Company's consolidated balance sheets as a reduction in the carrying amount of the related debt liability.

Deferred financing costs are those costs directly incurred in issuing long-term debt or equity.

Costs associated with obtaining long-term debt are amortized as additional interest expense over the expected term of the corresponding instrument and are recorded on the Company's consolidated balance sheets as a reduction in the carrying amount of the related debt liability.

The Company classifies deferred financing costs consistent with the classification of the related debt outstanding at the end of the reporting period.

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Fair Value of Financial Instruments

The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement, the 2009 Facility Agreement and the PPP Loan.

The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement.

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

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

The Company's vendor financing arrangement is recorded at net carrying value, which approximates fair value.

Prior to conversion in the first quarter of 2022, the fair value of the Company’s 8.00 % Convertible Senior Notes Issued in 2013 (“2013 8.00 % Notes”) was calculated using inputs consistent with those used to calculate the fair value of the derivatives embedded in these instruments.

Litigation, Commitments and Contingencies

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Gain or loss on extinguishment of debt generally is recorded upon an extinguishment of a debt instrument or the conversion of certain of the Company’s convertible notes.

Gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price and net carrying amount of the debt, which includes unamortized debt issuance costs, and is recorded as an extinguishment gain or loss in the Company’s consolidated statement of operations.

Gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price and net carrying amount of the debt, which includes unamortized debt issuance costs and any derivative instruments, and is recorded as an extinguishment gain or loss in the Company’s consolidated statement of operations.

Revenue Recognition and Deferred Revenue

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

Revenue consists primarily of satellite voice and data service revenue, revenue generated from the sale of fixed and mobile devices, revenue generated from providing satellite network access and related services utilizing the Company's satellite spectrum and network of satellite and gateways, and revenue from providing engineering and other communication services.

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

Each type of revenue is a separate performance obligation with distinct deliverables and is therefore accounted for discretely.

Revenue is measured based on the consideration specified in a contract

with a customer, adjusted for credits and discounts, as applicable, and is recognized when the Company satisfies a performance obligation by transferring control over a product or service to a customer.

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

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

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Credits granted to customers are expensed or charged against revenue or accounts receivable over the remaining term of the contract.

Under the Service Agreements, the Company issued Partner the Warrants to purchase shares of Globalstar common stock;

the Warrants were recorded at the estimated fair value of the consideration granted based on a Black-Scholes pricing model.

The fair value of the Warrants was capitalized as a contract asset and will be recognized as a reduction of the transaction price over the estimated term of the Service Agreements.

Estimates related to earned but unbilled service revenue are calculated primarily using current subscriber data, including plan subscriptions and usage between the end of the billing cycle and the end of the period, or in accordance with the terms of the customer contract for satellite network access services.

The recognition of service revenue related to amounts allocated to performance obligations that were satisfied (or partially satisfied) in a previous period is not material to the Company’s financial statements.

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Under ASC 606, an entity should adjust the promised amount of the consideration for the effects of time value of money if the timing of the payments agreed upon by the parties to the contract provides the customer or the entity with a significant benefit of financing for the transfer of goods or services to the customer.

For certain engineering services provided pursuant to the Company's previously disclosed Terms Agreement (which is defined and discussed in more detail below in Engineering and Other Service Revenue ), the length of time between receipt of payment by the customer and transfer of services by the Company is greater than one year.

Accordingly, payments made by the customer pursuant to the Terms Agreement includes a significant financing component.

For certain payments associated with services provided under the Service Agreements, the length of time between receipt of payment by the customer and transfer of services by the Company is greater than one year.

Accordingly, payments made by Partner include a significant financing component.

The Company accretes interest expense using the effective interest rate method over the period in which these advance payments are outstanding.

The rate in which interest is computed is based on rates implicit in the Terms Agreement.

The rate in which interest is computed is based on rates implicit in the Service Agreements.

For the Company's subscriber contracts, transactions with a significant financing component are infrequent and not considered material to the Company as the time between cash collection and performance is generally less than one year.

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SPOT Service Revenue.

The Company sells SPOT services as monthly, annual or multi-year plans and recognizes revenue on a straight-line basis over the service term, beginning when the service is activated by the customer.

The Company sells SPOT services as monthly or annual plans and recognizes revenue on a straight-line basis over the service term, beginning when the service is activated by the customer.

Commercial IoT Service Revenue.

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

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

Wholesale Capacity Service Revenue :

The Company provides wholesale capacity services to Partner under the Service Agreements.

The Company allocates the transaction price under the Service Agreements to each performance obligation generally in proportion to their relative stand-alone selling prices.

Revenue is recognized when the performance obligations are performed, the timing of which may involve complex judgements by management.

Although the Service Agreements have no expiration date, the Company estimated its contract term based on the useful life of its existing satellite network and the expected useful life of the new satellite network under construction.

Equipment Revenue.

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Engineering and Other Service Revenue.

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

Other service revenue includes primarily revenue associated with engineering and other communication services using the Company's MSS and terrestrial spectrum licenses.

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

In February 2020, the Company entered into an agreement (i) providing for a customer to pay the Company for non-recurring engineering (NRE) services in connection with the assessment of a potential service utilizing certain of the Company's assets and capacity, and (ii) setting forth the primary terms for the potential development and operation of the service (the “Terms Agreement”).

In connection with the Terms Agreement, the Company has incurred certain costs to fulfill this contract.

In accordance with applicable accounting guidance, the Company nets these costs against the deferred revenue balance associated with this customer.

See further discussion below in Intangible and Other Assets .

Multiple-Element Arrangement Contracts.

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

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

Foreign Currency

The functional currency of the Company’s foreign consolidated subsidiaries is generally their local currency, unless the subsidiary operates in a hyperinflationary economy, such as Venezuela and Argentina.

The functional currency of the Company’s foreign consolidated subsidiaries is generally their local currency, except in certain scenarios, including when the subsidiary operates in a hyperinflationary economy, such as Venezuela and Argentina.

Assets and liabilities of its foreign subsidiaries are translated into United States dollars based on exchange rates at the end of the reporting period.

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

For 2021, 2020 and 2019, the foreign currency translation adjustments were net gains of $ 4.4 million, net losses of $ 1.5 million and net losses of $ 0.7 million, respectively.

Foreign currency transaction gains/losses were approximately net losses of $ 6.3 million, net losses of $ 0.7 million and net gains of $ 0.1 million for each of 2021, 2020, and 2019, respectively.

For 2022, 2021 and 2020, the foreign currency translation adjustments were net gains of $ 5.3 million, net gains of $ 4.4 million and net losses of $ 1.5 million, respectively.

Foreign currency transaction gains/losses were approximately net losses of $ 6.6 million, net losses of $ 6.3 million and net losses of $ 0.7 million for each of 2022, 2021, and 2020, respectively.

Asset Retirement Obligation

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

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

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

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As of December 31, 2022 and 2021, the Company had accrued approximately $ 3.0 million and $ 2.5 million, respectively, for asset retirement obligations.

During 2021, the Company continued the expansion of its gateway footprint in connection with the Terms Agreement, which resulted in the commencement of new leases and the installation of new equipment;

as a result of this expansion, the Company established new asset retirement obligations for six gateways resulting in a total increase to the liability of $ 0.8 million during 2021.

During 2022, the Company continued the expansion of its gateway footprint in connection with the Service Agreements, which resulted in the commencement of new leases and the installation of new equipment;

as a result of this expansion, the Company established new asset retirement obligations resulting in a total increase to the liability of $ 0.5 million during 2022.

There were no settlements during 2022.

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

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

Warranty Expense

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

(Loss) Earnings Per Share

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

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) income.

Earnings (Loss) Per Share

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

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

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

Prior to their conversion, the effect of potentially dilutive common shares for the Company's convertible notes were calculated using the if-converted method.

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

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

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

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

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

The Company assesses these intangible assets for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

In assessing whether it is more likely than not that such an asset is impaired, the Company assesses relevant events and circumstances that could affect the significant inputs used to determine the fair value of the asset.

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

Intangible Assets Subject to Amortization

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Intangible and Other Assets.

Prepaid Licenses and Royalties

The Company has signed various licensing and royalty agreements necessary for the manufacture and distribution of its products.

Amounts that are prepaid are recorded primarily in noncurrent assets on the Company's consolidated balance sheet.

The Company estimates the portion of expense incurred or royalties earned for the next 12 months and reclassifies these amounts to current assets on the Company's consolidated balance sheet each reporting period.

The Company will expense these amounts through depreciation expense over the life of the gateway, maintenance expense over the term of the services, or cost of goods sold on a per unit basis as these units are manufactured, sold, or activated.

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

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

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

Refer to Note 8:

Fair Value Measurements for further discussion on the impairment recorded for intangible assets for the year ended December 31, 2022.

Contract Costs

The Company also capitalizes incremental costs to obtain and/or fulfill a contract to the extent it expects to recover them.

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

For subscriber-driven contracts, these capitalized contract acquisition costs primarily include deferred subscriber acquisition costs and are amortized consistently with the pattern of transfer of the good or delivery of the service to which the asset relates.

For engineering and support service contracts, these contract costs may include certain expenses incurred by the Company prior to the customer benefiting from the service.

For wholesale capacity services provided to Partner, contract costs include certain expenses incurred by the Company prior to the customer benefiting from the service as well as noncash consideration issued to Partner under the Service Agreements.

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

Total contract acquisition costs were $ 1.7 million and $ 2.4 million as of December 31, 2021 and 2020, respectively, and are recorded in other assets on the Company's consolidated balance sheet.

For subscriber driven revenue, total contract acquisition costs were $ 1.0 million and $ 1.7 million as of December 31, 2022 and 2021, respectively, and are recorded in other assets on the Company's consolidated balance sheet.

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

For the years ended December 31, 2022, 2021 and 2020, the amount of amortization related to contract acquisition costs was $ 1.2 million, $ 2.1 million and $ 2.1 million, respectively.

Total costs to fulfill a contract were $ 2.1 million and zero as of December 31, 2021 and 2020, respectively, and are netted against the associated contract liability, which is recorded in deferred revenue on the Company's consolidated balance sheet.

As of December 31, 2021, costs to fulfill a contract are associated with one customer contract and are netted against this customer's contract liability balance in accordance with ASC 606.

These costs are amortized to cost of services or marketing, general and administrative expense over the period in which the Company commences its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided.

The Company did not amortize any costs to fulfill a contract during 2021.

Impairment of Intangible and Other Assets

The Company assesses these intangible assets for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

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

Other Information

For wholesale capacity services, total costs to fulfill a contract were $ 52.7 million and $ 2.1 million as of December 31, 2022 and 2021, respectively, and are netted against the associated contract liability, which is recorded in deferred revenue on the Company's consolidated balance sheet.

The majority of the increase in costs to fulfill a contract during 2022 was due to noncash consideration issued to Partner in the form of warrants to purchase shares of Globalstar common stock totaling $ 48.3 million at the issuance date (see Note 15:

Stock Compensation for further discussion).

These costs are amortized to cost of services or marketing, general and administrative expense or recorded as a reduction to revenue over the period in which the Company commences its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided.

For the year ended December 31, 2022, the amount of amortization expense related to costs to fulfill a contract was $ 0.1 million.

For the year ended December 31, 2022, the Company reduced revenue by $ 0.2 million associated with the amortization of the fair value of the noncash consideration issued to Partner.

The Company did not amortize any costs to fulfill a contract during 2021 or 2020.

Advertising Expenses

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Recently Issued Accounting Pronouncements

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

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No.

Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

ASU 2022-04 added certain disclosure requirements for buyers in supplier finance programs.

The amendments in the update require that buyers disclose qualitative and quantitative information about their supplier finance programs.

Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs.

This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose rollforward information, which is effective for fiscal years beginning after December 15, 2023.

The Company adopted this standard when it became effective on January 1, 2023 and expects this will impact future disclosures.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No.

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

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

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.

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

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

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

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

The adoption of this standard impacted certain of the Company's disclosures in this Report.

In December 2019, the FASB issued ASU No.

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

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

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

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

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

Disaggregation of Revenue

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

Twelve Months Ended December 31,

Year Ended December 31,

2022 2021 2020

Service revenue:

Subscriber services

Duplex $ 29,222 $ 31,197 $ 33,878

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Commercial IoT 19,516 17,951 17,174

Engineering and other 11,276 15,722 2,274

Wholesale capacity services 34,913 8,945 10,196

Engineering and other services 2,747 2,331 5,526

Total service revenue 132,068 106,464 113,191

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Total revenue $ 148,504 $ 124,297 $ 128,487

As consideration for the services provided by Globalstar under the Service Agreements, Partner makes payments to Globalstar, 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 other related criteria.

In connection with the amendment of the Service Agreements in February 2023, Partner agreed to pay the Company consideration related to performance obligations completed in prior periods.

The Company expects to recognize revenue in 2023 when payment is realized.

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

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

Twelve Months Ended December 31,

Year Ended December 31,

2022 2021 2020

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Accounts Receivable

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

As of December 31, 2021 and 2020, $ 0.7 million and $ 1.9 million, respectively, related to these agreements was included in accounts receivable on the Company’s consolidated balance sheet.

During 2021, the Company net settled certain of the balances, resulting in a decrease in accounts receivable.

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

As of December 31, 2021 and 2020, the Company recorded $ 6.5 million and $ 4.7 million, respectively, in accounts receivable related to these arrangements.

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 receivables (amounts in thousands):

As of December 31,

Accounts receivable, net of allowance for credit losses

Subscriber accounts receivable $ 14,850 $ 12,825

Wholesale capacity accounts receivable 7,234 1,861

Agency agreement accounts receivable 4,245 6,496

Total accounts receivable, net of allowance for credit losses $ 26,329 $ 21,182

Long-term wholesale capacity accounts receivable 111,026 —

Total accounts receivable (short-term and long-term), net of allowance for credit losses $ 137,355 $ 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 constellation.

Under the Service Agreements, subject to certain terms and conditions, Partner has agreed to make service payments equal to 95 % of the approved capital expenditures under the satellite procurement agreement (to be paid on a straight-line basis over the useful life of the satellites) and certain other costs incurred for the new satellites, as adjusted based on certain provisions, beginning with the Phase 2 Service Period.

As the Company incurs construction in progress associated with the MDA contract, it earns the right to receive certain payments from Partner associated with this phase of the Service Agreements.

In accordance with the expected timing of payment from Partner, $ 7.2 million is recorded in "Wholesale capacity accounts receivable" and $ 111.0 million is recorded 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.

The amount of revenue recognized during the years ended December 31, 2021 and 2020 from performance obligations included in the contract liability balance at the beginning of these periods was $ 24.1 million and $ 31.2 million, respectively.

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

In general, the duration of the Company’s contracts with subscribers is one year or less.

Contract liabilities reflect balances from its customers, including MSS subscribers and the Partner under the Service Agreements.

The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands).

As of December 31,

Short-term contract liabilities

Subscriber contract liabilities $ 21,987 $ 24,940

Wholesale capacity contract liabilities 52,652 987

Total short-term contract liabilities $ 74,639 $ 25,927

Long-term contract liabilities

Subscriber contract liabilities $ 1,704 $ 1,783

Wholesale capacity contract liabilities, net of contract asset 156,099 110,271

Total long-term contract liabilities $ 157,803 $ 112,054

Total contract liabilities $ 232,442 $ 137,981

For subscriber contract liabilities, the amount of revenue recognized during the years ended December 31, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was $ 23.4 million and $ 24.1 million, respectively.

For wholesale capacity contract liabilities, the amount of revenue recognized during the years ended December 31, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was $ 0.8 million and zero , respectively.

The duration of the Company’s contracts with subscribers is generally one year or less.

As of December 31, 2022, the Company expects to recognize $ 22.0 million, or approximately 93 %, of its remaining performance obligations during the next twelve months .

Contract liabilities also includes advance payments from a customer pursuant to an agreement related to the Terms Agreement discussed in Note 1:

Summary of Significant Accounting Policies.

The Company received two advance payments of $ 37.5 million each from this customer in June and September 2021.

These advanced payments are recorded in deferred revenue and classified as either short-term or long-term deferred revenue consistent with the expected timing of the Company's obligation to provide services to the customer over the recoupment period defined in the Terms Agreement.

As of December 31, 2021, the Company has recorded $ 1.0 million and $ 112.4 million as short-term and long-term deferred revenue, respectively, which reflects the advanced payments previously described as well as additional advance payments in connection with ongoing network upgrades.

Reflected in the deferred revenue balance is $ 1.9 million of imputed interest associated with the significant financing component related to these advance payments.

The total amount of deferred revenue associated with this customer also is reflected net of a contract asset of $ 2.1 million on its consolidated balance sheet as of December 31, 2021.

The Service Agreements have no expiration date;

therefore, the related contract liabilities may be recognized into revenue over various periods driven by the expected related service or recoupment periods.

As of December 31, 2022, the Company expects to recognize $ 52.7 million, or approximately 25 %, 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 December 31,

Wholesale capacity contract liabilities, net:

Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1)

$ 99,671 $ 96,362

Advanced payments for services expected to be performed with the recently launched ground spare satellite during Phases 1 and 2 25,438 16,981

Advanced payments (both received and contractually owed) for services expected to be performed with the next-generation satellite constellation during Phase 2 117,466 —

Advanced payments for the Phase 1 service fee and service-related operating expenses and capital expenditures

Contract asset (2)

( 52,696 ) ( 2,085 )

Wholesale capacity contract liabilities, net $ 208,751 $ 111,258

(1) In accordance with applicable accounting guidance, the Company records imputed interest associated with the significant financing component, totaling $ 5.3 million and $ 1.9 million as of December 31, 2022 and 2021, respectively, which is included in deferred revenue and represents the remaining amount to be recognized over the Company's performance obligations.

(2) In November 2022, the Company issued Warrants (as defined) to Partner (see Note 15:

Stock Compensation for further discussion).

The initial fair value of the Warrants at the time of issuance was $ 48.3 million and recorded in equity with an offset to a contract asset on the Company's consolidated balance sheets.

The fair value of the Warrants is recorded as a reduction to revenue over the period in which the Company commences its performance obligations

through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided.

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

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Total finance lease liabilities $ 87 $ 9

In connection with the Company's gateway expansion project related to the Terms Agreement, the Company has entered into various operating leases, predominately for new gateway sites, totaling $ 19.7 million during 2021.

The tables in this footnote reflect the relevant terms of these new leases.

In connection with the Company's gateway expansion project related to the Service Agreements, the Company commenced one operating lease during 2022 for a new gateway site totaling $ 2.1 million.

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

Twelve Months Ended December 31,

Year Ended December 31,

2022 2021 2020

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Total lease cost $ 4,819 $ 4,159 $ 3,380

In accordance with the Terms Agreement, the Company began capitalization of certain costs to fulfill this contract during 2021, including lease expense, as shown in the table above.

In accordance with the Service Agreements, the Company has capitalized certain costs to fulfill this contract, 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.

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

Twelve Months Ended December 31,

Year Ended December 31,

2022 2021 2020

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2023 $ 4,913 $ 25

2024 4,786 23

2025 4,814 23

2026 4,862 23

2027 4,740 15

Thereafter 17,823 —

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Discounted lease liability $ 30,382 $ 87

As of December 31, 2021, the Company had executed an additional operating lease for a new gateway location.

This lease has not yet commenced as of December 31, 2021 since the lessor is continuing to ready the site for use.

As of December 31, 2022, the Company had executed an additional operating lease for a new gateway location, which has not yet commenced since the lessor is continuing to ready the site for use.

Accordingly, this lease is not reflected on the balance sheet as of December 31, 2022 or in the maturity table above.

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

December 31, 2021 December 31, 2020

As of December 31,

Globalstar System:

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Total property and equipment, net $ 560,371 $ 672,156

The ground component of construction in progress includes costs (including capitalized interest) incurred for assets to upgrade the Company's ground infrastructure, including costs associated with the procurement of new gateway antennas.

During 2021, the Company placed $ 15.1 million of costs into service associated with these antennas, which are included in

ground component in the table above.

These capital expenditures relate primarily to gateway upgrade work in connection with the Terms Agreement.

Amounts included in the Company’s second-generation satellite, on-ground spare in the table above consist of costs related to a spare second-generation satellite that has not been placed in orbit.

The Company has entered into certain contracts for the preparation and launch of this spare satellite, which is expected to occur in 2022.

Costs to support these efforts are included in the space component of construction in progress in the table above;

the vast majority of these costs are being reimbursed by the customer under the Terms Agreement.

These reimbursements are recorded in deferred revenue on the Company's consolidated balance sheet as of December 31, 2021 and are discussed in Note 2:

In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constellation.

The agreement is described in more detail in Note 9:

Commitments and Contingencies.

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 with an initial contract price of $ 327 million for the purchase of new satellites that will replenish the Company's existing satellite constellation.

As of December 31, 2022, the Company recorded $ 11.5 million as prepaid satellite construction costs associated with the upfront milestone payment due upon signing and $ 98.5 million in construction in progress on its consolidated balance sheet.

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 $ 28.9 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:

Summary of Significant Accounting Policies and Note 8:

Fair Value Measurements, the Company evaluated the recoverability of its second-generation Duplex assets in September 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).

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

Capitalized Interest and Depreciation Expense

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Europe 2,393 5,136

Asia 4,410 2,752

Australia 4,503 421

Total property and equipment $ 560,371 $ 672,156

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

During 2021, the Company acquired the remaining ownership of its joint venture in South Korea and assumed ownership of the gateway and MSS licenses.

The Company recorded $ 1.3 million of intangible assets on its consolidated balance sheet during the year ended December 31, 2021.

These licenses are indefinite-lived and not subject to amortization.

For the year ended December 31, 2022, the Company recorded a reduction in value of assets associated with intangible assets totaling $ 0.7 million on its consolidated statements of operations (refer to Note 8:

Fair Value Measurements for further discussion).

Excluding the effects of any acquisitions, dispositions or write-downs subsequent to December 31, 2022, total estimated annual amortization of intangible assets is as follows (in thousands):

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Other assets consist of the following (in thousands):

Costs to obtain a contract $ 1,725 $ 2,404

Long-term prepaid licenses and royalties 4,380 4,679

International tax receivables 577 619

Investments in businesses 240 1,589

Compound embedded derivative with the 2019 Facility Agreement 484 286

Costs to obtain and fulfill a contract (Note 1)

$ 1,770 $ 1,725

Long-term prepaid licenses and royalties (Note 8) — 4,380

International tax receivables (Note 13)

Compound embedded derivative with the 2019 Facility Agreement (Note 7 and Note 8)

ERP software costs 1,131 919

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2019 Facility Agreement $ 143,213 $ 11,098 $ 132,115 $ 263,812 $ 27,287 $ 236,525

Vendor financing 59,822 59,822 — — —

8.00 % Convertible Senior Notes Issued in 2013

— — 1,407 — 1,407

2009 Facility Agreement

— — — 186,988 6,373 180,615

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

Total Debt 265,219 27,287 237,932 423,934 38,524 385,410

Total debt and vendor financing 203,035 11,098 191,937 265,219 27,287 237,932

current portion 59,822 — 59,822 — — —

Long-Term Debt $ 265,219 $ 27,287 $ 237,932 $ 365,110 $ 38,524 $ 326,586

Long-term debt and vendor financing $ 143,213 $ 11,098 $ 132,115 $ 265,219 $ 27,287 $ 237,932

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.

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

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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).

As previously disclosed, the Company fully paid down the remaining balance of the 2009 Facility Agreement.

As a result of this pay down, the lenders of the 2019 Facility Agreement are now senior lenders.

The remaining loans under the 2019 Facility Agreement bear interest at a rate of 14.0 % per annum to be paid in kind (or in cash, at the option of the Company).

The Service Agreements require the Company to refinance all loans outstanding under the 2019 Facility Agreement.

A portion was refinanced in November 2022 and the remaining portion is to be refinanced by March 13, 2023 (as amended).

On February 13, 2023, the Company provided notice, as required under the 2019 Facility Agreement, to the remaining lender of its intent to voluntarily prepay all remaining amounts due under the 2019 Facility Agreement.

In connection with our Partner's launch of Services on November 15, 2022, the Company was obligated to complete the Thermo Debt Conversion (as described in our Current Report on Form 8-K filed September 7, 2022).

To satisfy this obligation, the Company entered into an Exchange Agreement dated as of November 15, 2022 (the “Exchange Agreement”) with affiliates of Thermo and certain other lenders (collectively, the “Exchanging Lenders”) providing for the exchange of $ 149.4 million outstanding principal amount of, and accrued and unpaid interest on, the Exchanging Lenders’ loans under the 2019 Facility Agreement for 149,425 shares of 7.0 % Perpetual Preferred Stock, Series A, liquidation preference $ 1,000 per share (the “Series A Preferred Stock”).

The Company recorded the debt extinguishment in the fourth quarter of 2022 representing the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs, debt discounts and derivatives) and the reacquisition price of the debt.

In accordance with accounting guidance for debt extinguishment with related parties, the Company recorded the portion exchanged by Thermo of $ 30.8 million as a contribution to capital through equity on its consolidated balance sheets.

For the portion exchanged by other lenders, the Company recorded a gain on extinguishment of debt totaling $ 2.8 million on its consolidated statements of operations.

The Company's obligations under the 2019 Facility Agreement are guaranteed on a senior secured basis by all of its domestic subsidiaries' assets and are secured by a first priority lien on substantially all of the assets of the Company and its domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100 % of the equity of the Company's domestic subsidiaries and 65 % of the equity of certain foreign subsidiaries.

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All of the warrants issued to the lenders were exercised before their expiration date on March 31, 2021.

115.0 million of the warrants were exercised during 2021.

The proceeds to the Company for these warrants totaled $ 47.3 million.

The 2019 Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants, including the following:

• The Company's capital expenditures do not exceed $ 25.0 million for 2021 and $ 15.0 million for 2022, excluding capital expenditures for network upgrades associated with the Terms Agreement;

The 2019 Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants, including the following items that were in place as of December 31, 2022:

• The Company's capital expenditures do not exceed $ 25.0 million for 2021 or 2022, excluding capital expenditures for the replacement satellites and network upgrades associated with the Service Agreements;

• The Company's expenditures in connection with its spectrum rights do not exceed $ 20.0 million;

• The Company maintains at all times a minimum liquidity balance of $ 3.6 million;

• The Company achieves for each period the following minimum adjusted consolidated EBITDA (as defined in the 2019 Facility Agreement) (amounts in thousands):

Period Minimum Amount

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

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

1/1/22-6/30/22 $ 21,100

7/1/22-12/31/22 $ 27,100

• The Company achieves minimum adjusted consolidated EBITDA (as defined in the 2019 Facility Agreement) of $ 21.1 million and $ 27.1 million for the six-month periods ended June 30, 2022 and December 31, 2022, respectively;

• The Company maintains a minimum debt service coverage ratio of 0.90 :1;

• The Company maintains a maximum net debt to adjusted consolidated EBITDA ratio of 2.75 :1;

• The Company maintains a minimum interest coverage ratio of 3.94 :1 for the December 31, 2021 measurement period and 4.73 :1 for the two semi-annual measurement periods leading up to December 31, 2022;

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

Additionally, the covenants in the 2019 Facility Agreement limit the Company's ability to, among other things, incur or guarantee additional indebtedness;

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

pay dividends or repurchase or redeem capital stock or subordinated indebtedness;

grant liens on its assets;

incur restrictions on the ability of its subsidiaries to pay dividends or to make other payments to the Company;

enter into transactions with its affiliates;

merge or consolidate with other entities or transfer all or substantially all of its assets;

and transfer or sell assets.

In anticipation of business strategies related to projected capital expenditures and potential vendor financing in connection with fulfilling our obligations under the Terms Agreement, as well as the termination of the Globalstar pension plan and expected redemption of the 2013 8.00 % Notes, the Company received waivers from its senior lenders in August 2021 and January 2022 to permit such transactions.

In calculating compliance with the financial covenants of the 2019 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 2019 Facility Agreement and payment of the indebtedness could be accelerated.

• The Company maintains a minimum interest coverage ratio of 4.73 :1 for the two semi-annual measurement periods leading up to December 31, 2022.

The Company received waivers from its senior lenders to permit certain transactions during 2022.

including capital expenditures associated with our obligations under the Service Agreements, vendor financing associated with the MDA agreement, termination of the Globalstar pension plan, and redemption of the 2013 8.00 % Notes.

As of December 31, 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.

If the Company generates Excess Cash Flow in 2022, we will be required to make such prepayments.

These payments would reduce future principal payment obligations.

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 Company generated excess cash flow for the six-month measurement period ended December 31, 2022 and will be required to pay approximately $ 2.0 million if the debt remains outstanding on March 16, 2023.

The Company evaluated the various embedded derivatives within the 2019 Facility Agreement related to certain contingently exercisable put options.

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

Vendor Financing

In February 2022, the Company entered into a satellite procurement agreement with MDA (see Note 9:

Commitments and Contingencies for further discussion).

This agreement (as amended in October 2022 and January 2023) provides for deferrals of milestone payments through March 15, 2023.

The Company received a waiver from its senior lenders to permit this vendor financing as subordinated indebtedness, The Company has made $ 34 million in payments to MDA under this agreement, including $ 14 million during the fourth quarter 2022 and $ 20 million in January 2023.

Interest accrues on the amount outstanding at an annual rate of 7 %, which increased to 10.5 % on balances between December 2022 and March 2023.

As of December 31, 2022, the Company had recorded $ 59.8 million in short-term vendor financing and total accrued interest of $ 1.3 million on its consolidated balance sheet associated with this agreement.

The Company has also accrued $ 36.1 million on its consolidated balance sheet associated with work performed but not yet billed.

As discussed in the Recent Developments section of Note 1:

Summary of Significant Accounting Policies, in February 2023, Globalstar and its Partner under the Service Agreements agreed to amend the Service Agreements to provide for, among other things, Partner’s prepayment of $ 252 million to pay amounts currently due and payable, as well as other amounts as they become due and payable, under the satellite procurement agreement.

Series A Preferred Stock

As discussed above, on November 15, 2022, the Company issued 149,425 shares of Series A Preferred Stock in exchange for $ 149.4 million outstanding principal amount of its 2019 Facility Agreement, and recorded the fair value of the shares totaling $ 105.3 million on the Company's consolidated balance sheet.

The shares of Series A Preferred Stock do not possess voting rights, other than certain matters specifically affecting the rights and obligations of the Series A Preferred.

Holders of Series A Preferred Stock will be entitled to receive, when, as and if declared by our Board of Directors or a committee thereof, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00 % per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2023.

In January 2023, the Company's Board of Directors approved the payment of dividends totaling $ 1.3 million for the period November 15, 2022 through December 31, 2022, and these dividends have been paid.

Series A Preferred Stock may be redeemed by the Company, in whole or in part, at any time.

The holders of the Series A Preferred Stock do not have any rights to convert or require the Company to redeem such stock.

The holders of the Series A Preferred stock have customary liquidation preferences.

Refer to Note 8:

Fair Value Measurements for further discussion on the valuation of the preferred stock.

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 expects to redeem the 2013 8.00 % Notes, in whole or in part, at a price equal to the principal amount of the 2013 8.00 % Notes to be redeemed plus all accrued and unpaid interest thereon.

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

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

The Indenture provides for customary events of default.

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

The Company evaluated the various embedded derivatives within the Indenture for the 2013 8.00 % Notes.

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

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

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

During 2022, the holders converted the remaining principal amount outstanding of $ 1.4 million into 2.3 million shares of Globalstar common stock at a conversion price of $ 0.69 per share.

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 consolidated statements of operations in 2022 was a gain of less than $ 0.1 million.

Refer to Note 7:

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

The amount by which the if-converted value of the 2013 8.00 % Notes exceeded the principal amount at December 31, 2021, assuming conversion at the closing price of the Company's common stock on that date of $ 1.16 per share, is approximately $ 1.2 million.

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, totaling $ 1.5 million.

This redemption is expected to occur in March 2022 and be paid in cash if the holders do not convert their 8.00 % Notes prior to the redemption date.

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 amended and restated in July 2013, August 2015, June 2017 and November 2019.

The 2009 Facility Agreement was fully repaid in November 2021 prior to its scheduled maturity in December 2022.

Indebtedness under the 2009 Facility Agreement bore interest at a floating rate of LIBOR plus a margin as defined in the 2009 Facility Agreement.

The 2009 Facility Agreement required mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the 2009 Facility Agreement) on a semi-annual basis.

During 2021, the Company was required to pay $ 4.4 million to the lenders resulting from the Excess Cash Flow calculation as of December 31, 2020.

This payment reduced future principal payment obligations.

The amended and restated 2009 Facility Agreement included 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 2019 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 remaining scheduled principal payments due in each of June 2021 and December 2021.

In June and September 2021, the Company received two advance payments of $ 37.5 million each from a customer (see further discussion in Note 2:

The Company used these proceeds to pay a portion of the remaining amount due under the 2009 Facility Agreement.

In November 2021, the Company repaid the final outstanding amount under the 2009 Facility Agreement totaling $ 60.3 million using cash on hand and restricted cash;

the 2009 Facility Agreement required the Company to maintain a debt service reserve account, which was pledged to secure all of the Company's obligations under the 2009 Facility Agreement, and was previously classified as restricted cash on its consolidated balance sheet.

In connection with the debt prepayments and final payoff made during 2021, the Company wrote off $ 4.3 million in deferred financing costs, representing the portion of debt prepaid during 2021.

For the final pay off in November 2021, the Company recorded a gain on extinguishment of debt totaling $ 1.3 million on its consolidated statements of operations representing the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs) and the reacquisition price of the debt (primarily including of the partial refund of premiums).

As a result of the early pay off of the 2009 Facility Agreement, in December 2021, the Company received a partial refund of premiums previously paid totaling $ 2.6 million.

In 2009, the Company entered into a facility agreement with a syndicate of bank lenders (the "2009 Facility Agreement").

In 2021, the Company fully repaid the 2009 Facility Agreement prior to its scheduled maturity in December 2022.

In connection with the debt prepayments and final payoff made during 2021, the Company recorded net losses on extinguishment of debt totaling $ 1.9 million on its consolidated statements of operations representing the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs) and the reacquisition price of the debt (primarily including of the partial refund of premiums).

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.

Prior to forgiveness, the PPP Loan was an unsecured debt obligation and was scheduled to mature in April 2022.

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

In June 2021, the Small Business Administration 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 consolidated statements of operations for the period ended June 30, 2021.

Debt maturities

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Amounts in the above table are calculated based on amounts outstanding at December 31, 2022, and therefore exclude paid-in-kind interest payments that will be made in future periods.

Subsequent Event

In February 2022, the Company entered into a satellite procurement agreement (see Note 9:

Commitments and Contingencies for further discussion).

This agreement provides for payment deferrals of milestone payments from February 2022 through August 2022, at a 0 % interest rate.

In August 2022 all deferred payments will become due by which time Globalstar intends to complete a senior secured financing.

This financing is intended to provide sufficient proceeds for the construction and launch of the satellites and the Company expects to refinance its current 2019 Facility Agreement concurrent with or after the financing.

Additionally, amounts in the table above exclude the Company's vendor financing arrangement, of which $ 59.8 million was outstanding as of December 31, 2022 and future recoupment amounts due under the Service Agreements.

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.

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

Derivative assets:

Derivative (liabilities) assets:

Compound embedded derivative with the 2019 Facility Agreement $ ( 122 ) $ 484

Total derivative assets $ 484 $ 286

Derivative liabilities:

Compound embedded derivative with the 2013 8.00 % Notes

$ — $ ( 1,364 )

Total derivative liabilities $ ( 1,364 ) $ ( 123 )

The derivative asset recorded for the Compound embedded derivative with the 2019 Facility Agreement and the derivative liability recorded for the Compound embedded derivative with the 2013 8.00 % Notes are included in Intangible and other assets, net and other non-current liabilities, respectively, on the Company's consolidated balance sheets.

As of December 31, 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.

Prior to this conversion, the derivative liability associated with the 2013 8.00 % Notes was included in Other non-current liabilities on the Company's consolidated balance sheets.

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

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Total derivative (loss) gain $ ( 805 ) $ ( 1,043 ) $ 2,897

The fair value of each embedded derivative is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in its consolidated statements of operations and its consolidated statements of cash flows as an operating activity.

The 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 the consolidated statements of operations and consolidated statements of cash flows as a non-cash operating activity.

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

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Each liability or asset and the features embedded in the debt instrument, which required the Company to account for the instrument as a derivative, are described below.

Compound Embedded Derivative with the 2019 Facility Agreement

As a result of certain contingently exercisable put features within the 2019 Facility Agreement, the Company initially recorded a compound embedded derivative liability on its consolidated balance sheet with a corresponding debt discount that is netted against the face value of the 2019 Facility Agreement.

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

In November 2022, the Company exchanged a portion of the 2019 Facility Agreement into Series A Preferred Stock.

As a result of this exchange, the Company wrote off a portion of the embedded derivative associated with the 2019 Facility Agreement during the fourth quarter of 2022.

Long-Term Debt and Other Financing Arrangements for further discussion.

Compound Embedded Derivative with 2013 8.00 % Notes

As a result of the conversion option and the contingent put feature within the 2013 8.00 % Notes, the Company recorded a compound embedded derivative liability on its consolidated balance sheets with a corresponding debt discount that is netted against the face value of the 2013 8.00 % Notes.

As a result of the conversion option and the contingent put feature within the 2013 8.00 % Notes, the Company recorded a compound embedded derivative liability on its consolidated balance sheets with a corresponding debt discount that was netted against the face value of the 2013 8.00 % Notes.

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

The Company classifies this derivative liability consistent with the classification of the 2013 8.00 % Notes on the Company's consolidated balance sheet.

The Company classified this derivative liability consistent with the classification of the 2013 8.00 % Notes on the Company's consolidated balance sheet.

During the first quarter of 2022, the compound embedded derivative with the 2013 8.00 % Notes was extinguished.

Compound Embedded Derivative with the Loan Agreement with Thermo

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During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was extinguished.

Compound Embedded Derivative with the 2019 Facility Agreement

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

FAIR VALUE MEASUREMENTS

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Compound embedded derivative with the 2019 Facility Agreement $ — $ — $ ( 122 ) $ ( 122 )

Total assets measured at fair value $ — $ — $ 484 $ 484

Compound embedded derivative with the 2013 8.00 % Notes

$ — $ — $ ( 1,364 ) $ ( 1,364 )

Total liabilities measured at fair value $ — $ — $ ( 122 ) $ ( 122 )

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December 31, 2021:

Volatility Risk-Free Interest Rate Note Conversion Price Discount

Rate Market Price of Common Stock

Compound embedded derivative with the 2013 8.00 % Notes

0.5 % $ 0.69 18 % $ 1.16

December 31, 2020:

Volatility Risk-Free Interest Rate Note Conversion

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0.5 % $ 0.69 18 % $ 1.16

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 consolidated balance sheet.

The Company's stock price increased over 200 % from December 31, 2020 to December 31, 2021, driving a significant increase in the liability at December 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.

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

As of December 31, 2021, 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 most significant observable input used in the fair value measurement is the discount yield, which was 21 % and 13 % at December 31, 2022 and 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 2022, the Company's expected probability of refinancing the 2019 Facility Agreement increased and therefore the fair value of the embedded derivative reduced.

Long-Term Debt and Other Financing Arrangements for further discussion.

Rollforward of Recurring Level 3 Assets and Liabilities

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Balances at beginning of period $ ( 880 ) $ 163

Derivative adjustment related to conversions — 1,058

Unrealized (loss) gain, included in derivative (loss) gain ( 1,043 ) 2,897

Derivative adjustment related to debt conversions and extinguishments 1,563 —

Unrealized loss, included in derivative (loss) gain ( 805 ) ( 1,043 )

Balances at end of period $ ( 122 ) $ ( 880 )

Fair Value of Debt Instruments

The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement, the 2009 Facility Agreement and the PPP Loan without incurring significant additional costs.

Unlike typical long-term debt, certain 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, which is classified as Level 3 financial instruments (in thousands):

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 December 31, 2022.

The following table sets forth the carrying value and estimated fair value of the Company's Level 3 financial instruments (in thousands):

December 31, 2022 December 31, 2021

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Nonrecurring Fair Value Measurements

Long-Lived Assets

Long-lived assets and intangible and other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

During the third quarter of 2021, the Company wrote off approximately $ 0.2 million of construction in progress related to unsatisfactory work that did not meet internal testing requirements and could not be used for its intended purpose.

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

Derivative Liabilities

During 2022, the remaining principal balance of the 2013 8.00 % Notes was converted into shares of Globalstar common stock, eliminating the principal balance outstanding.

As a result of the conversions, the Company wrote off the proportionate fair value of the compound embedded derivative liability within 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 within 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).

Prepaid and other current assets

Prepaid licenses and royalties (1)

Intangible and other assets, net

Prepaid licenses and royalties (1)

Internally developed technology and software (2)

Spectrum intangible assets (3)

Property and equipment, net (2)

Grand Total $ 166,526

(1) While developing its second-generation Duplex technology that supported the Sat-Fi2® device, the Company signed various licensing and royalty agreements necessary for the manufacture and distribution of such products and services.

Prepayments associated with these agreements 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 consolidated statements of operations for the amount shown in the table above during the third quarter of 2022.

(2) During 2018 and 2019, the Company placed into service second-generation ground Duplex assets (including associated developed technology and software upgrades) 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.

Note that our first-generation Duplex assets (i.e.

handsets and related ground infrastructure) were not impacted.

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 consolidated statements of operations for this amount during 2022.

(3) During 2022, the Company wrote off approximately $ 0.7 million 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 2022, the Company determined that it would not continue pursing such authorities in these countries.

During 2021, the Company wrote off approximately $ 0.2 million of construction in progress related to unsatisfactory work that did not meet internal testing requirements and could not be used for its intended purpose.

The fair value of the assets included internal and external direct costs associated with the construction in progress balance.

As of December 31, 2020, the Company's former gateway location in Nicaragua was classified as held for sale.

During the fourth quarter of 2020, the Company signed a contract for the sale of this property and the Company wrote down the value of the asset by $ 0.2 million, bringing the value to be the final selling price (net of estimated cost to sell).

Additionally, during the fourth quarter of 2020, the Company wrote down $ 0.2 million related to of the ground portion of construction in progress for one of its gateways resulting from an analysis made over these balances.

Series A Preferred Stock

As discussed further in Note 6:

Long-Term Debt and Other Financing Arrangements, on November 15, 2022, the Company issued 149,425 shares of Series A Preferred Stock.

The total fair value of the Series A Preferred Stock on the issuance date was $ 105.3 million, which was determined using a discounted cash flow model and a perpetuity formula for various scenarios.

The most significant observable input used in the fair value measurement is the discount yield, which was 32 % on the valuation date.

The most significant unobservable inputs used in the fair value measurement include the probability of redemption of the preferred stock by the Company as well as the assumed method of payment (cash or accrual) of dividends.

COMMITMENTS AND CONTINGENCIES

Terms Agreement

The Terms Agreement sets forth the primary terms for the Company to provide services to the customer and incur costs related primarily to new gateways and upgrades at existing gateways, satellite launch costs and lease costs.

Under this agreement, the customer has made advance payments to the Company for the services expected to be delivered under the Terms Agreement.

To the extent the Company does not provide such services, it will be required to refund the amounts to the customer.

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 an indefinite term but provide that either party may terminate subject to certain notice requirements and, in some cases, other 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;

• Maintain minimum liquidity of $ 10.0 million;

• 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;

• Provide the Resource Protections as defined in the Service Agreements.

The Service Agreements also 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) to refinance all loans outstanding under the 2019 Facility Agreement that are held by persons other than Thermo by March 13, 2023 (as amended).

The required refinancing of the Thermo portion of the 2019 Facility Agreement was complete in November 2022.

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:

Summary of Significant Accounting Policies, Note 2:

Revenue, Note 3:

Leases and Note 4:

Property and Equipment for further discussion.

Leases, Note 4:

Property and Equipment, Note 6:

Long-Term Debt and Other Financing Arrangements and Note 15:

Stock Compensation for further discussion.

Satellite Procurement Agreement

In February 2022, the Company entered into a satellite procurement agreement (the "Procurement Agreement") with Macdonald, Dettwiler and Associates Corporation 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 the potential customer under the Terms Agreement, as well as services to Globalstar’s current and future customers.

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;

The initial contract price for 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 Terms Agreement, subject to certain conditions, the counterparty is required to reimburse 95 % of the capital expenditures and certain other costs incurred for this contract.

The satellites are expected to be launched in 2025.

In addition, MDA will procure a satellite operations control center for $ 4.9 million.

Refer to Note 6:

Long-Term Debt and Other Financing Arrangements for further discussion of the vendor financing arrangement with MDA.

Network Obligations

The Company has purchase commitments with certain vendors related to the procurement, deployment and maintenance of the Company's network.

As of December 31, 2021, the Company's remaining purchase obligations under certain of these noncancelable commitments are approximately $ 6.8 million;

the timing of payments is driven by work performed under the contracts over the remaining contract periods, which range from approximately one to two years .

The Company has purchase commitments with certain vendors related to the procurement, deployment and maintenance of the Company's network (beyond the satellite procurement agreement with MDA discussed above).

As of December 31, 2022, the Company's remaining purchase obligations under these noncancelable commitments are approximately $ 4.1 million;

the timing of payments is driven by work performed under the contracts over the remaining contract periods, which is expected to be complete during 2023.

Inventory Purchase Commitments

The Company has inventory purchase commitments with its third party product manufacturers in the normal course of business.

These commitments are generally noncancelable and are based on sales forecasts.

These commitments are generally noncancelable and the order quantities are based on sales forecasts.

The Company estimates that its open inventory purchase commitments as of December 31, 2022 were approximately $ 14.0 million.

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The balance at December 31, 2022 was $ 5.0 million and is recorded in prepaid expenses and other current assets on the Company's consolidated balance sheet as the required reserve is held with the credit card processor.

Other Litigation

Due to the nature of the Company's business, the Company is involved, from time to time, in various litigation matters or subject to disputes or routine claims regarding its business activities.

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Accrued telecommunications expenses 657 705

Accrued inventory and tariffs 1,474 2,294

Accrued inventory 874 1,474

Short-term lease liability 2,747 2,501

Accrued interest 1,291 33

Other accrued expenses 1,694 1,250

Total accrued expenses $ 58,446 $ 28,947

Accrued satellite and ground costs in the table above includes $ 36.1 million of milestone work partially incurred, but not yet accepted, under the Company's satellite agreement with MDA.

Accrued compensation and benefits include primarily accrued vacation, payroll, benefits and taxes.

Accrued inventory and tariffs includes amounts payable to U.S Customs and Border Protection for a ruling issued in September 2019 related to the classification of certain of the Company's core products imported from China.

During 2021, pursuant to regulatory developments, the Company reversed a portion of this accrual for potential tariffs owed on imports from China made prior to a ruling by the U.S Customs and Border Protection in September 2019 that are no longer due.

Other accrued expenses include primarily vendor services, warranty reserve and occupancy costs.

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Compound embedded derivative with the 2013 8.00 % Notes (Note 7 and Note 8)

Compound embedded derivative with the 2019 Facility Agreement (Note 7 and Note 8) 122 —

Deferred tax liability (Note 13) 322 296

Foreign tax contingencies 530 474

Deferred payroll taxes under CARES Act — 423

Total other non-current liabilities $ 3,995 $ 7,887

Deferred payroll taxes under the CARES Act reflect the Company's employer share of social security taxes that were originally due during a portion of 2020.

The first installment was repaid in December 2021 and the remaining installment will be paid in December 2022 and classified as a current liability on the Company's consolidated balance sheet at December 31, 2021.

Foreign tax contingencies reflect primarily amounts owed by the Company's Brazilian subsidiary pursuant to refinancing programs in country.

RELATED PARTY TRANSACTIONS

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.

Payables to Thermo and other affiliates related to normal purchase transactions were $ 0.3 million and $ 0.4 million as of December 31, 2022 and 2021, respectively.

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The expenses charged are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time.

In February 2019, the Company entered into a lease agreement with Thermo Covington, LLC for the Company's headquarters office.

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, increasing at a rate of 2.5 % per year, for a lease term of ten years .

During the twelve months ended December 31, 2021 and 2020, the Company incurred lease expense of $ 1.6 million, respectively, associated with this lease agreement.

During each of the twelve months ended December 31, 2022 and 2021, the Company incurred lease expense of $ 1.6 million, respectively, associated with this lease agreement.

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 $ 29.7 million, of which $ 15.2 million was accrued during the twelve months ended December 31, 2021.

In connection with the issuance of the 2019 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.

No warrants were outstanding as of December 31, 2021.

Additionally, the 2019 Facility Agreement requires Thermo to maintain minimum and maximum ownership levels in the

Company's common stock.

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

To fulfill its obligations under the Service Agreements, in November 2022, the Company entered into an exchange agreement with affiliates of Thermo and certain other Exchanging Lenders providing for the exchange of all the outstanding principal amount of, and accrued and unpaid interest on, the Exchanging Lenders’ loans under the 2019 Facility Agreement for shares of the Company's Series A Preferred Stock.

The terms of the exchange agreement were reviewed and approved by the Company's Board of Directors and Audit Committee.

Prior to the exchange, interest accrued since inception with respect to Thermo's portion of the debt outstanding on the 2019 Facility Agreement was approximately $ 44.6 million, of which $ 14.9 million was accrued during the twelve months ended December 31, 2022.

Also in connection with the Service Agreements, 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 five years from the Service Launch in November 2022.

Amounts payable by the Company in connection with the 2023 Prepayment with Partner will be guaranteed by Thermo, subject to applicable shareholder approval.

The Company has a Strategic Review Committee that is required to remain in existence for as long as Thermo and its affiliates beneficially own forty-five percent ( 45 %) or more of Globalstar’s outstanding common stock.

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Defined Benefit Plan

Until June 1, 2004, substantially all Old and New Globalstar employees and retirees who participated and/or met the vesting criteria for the plan were participants in the Retirement Plan of Space Systems/Loral (the "Loral Plan"), a defined benefit pension plan.

The accrual of benefits in the Old Globalstar segment of the Loral Plan was curtailed, or frozen, by the administrator of the Loral Plan in 2003.

Prior to 2003, benefits for the Loral Plan were generally based upon contributions, length of service with the Company and age of the participant.

On June 1, 2004, the assets and frozen pension obligations of the Globalstar Segment of the Loral Plan were transferred into a new Globalstar Retirement Plan (the "Globalstar Plan").

The Globalstar Plan remains frozen and participants are not currently accruing benefits beyond those accrued as of October 23, 2003.

The Company's funding policy is to fund the Globalstar Plan in accordance with the Internal Revenue Code and regulations.

In January 2022, the Company received consent from its senior lenders to terminate the Globalstar Plan.

The Company has not yet initiated the process to terminate the Globalstar Plan, but expects to do so during 2022.

In August 2022, the Company terminated its defined benefit pension plan, which had been frozen since 2003.

As such, there are no remaining pension plan obligations as of December 31, 2022.

The total settlement of $ 7.7 million was paid out through assets held in the Globalstar Plan and cash on hand, totaling $ 5.0 million and $ 2.7 million, respectively.

Defined Benefit Pension Obligation and Funded Status

The Company's funding policy was to fund its defined benefit pension plan in accordance with the Internal Revenue Code and regulations.

Below is a reconciliation of projected benefit obligation, plan assets and the funded status of the Company’s defined benefit plan (in thousands):

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Funded status, end of year-net liability $ — $ ( 3,289 )

In December 2020, the Company settled a portion of the pension liability related to retirees and terminated vested employees in the Globalstar Plan as a de-risking strategy.

The total settlement for 2020 was $ 7.7 million and was paid out

through the assets held in the Globalstar Plan.

The settlement resulted in a reduction to the projected benefit obligation and a corresponding decrease to plan assets as of December 31, 2020.

Net Benefit Cost and Amounts Recognized

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Total net periodic benefit cost $ 1,661 $ 279 $ 2,279

In December 2020 and 2019, the Company settled a portion of the pension liability.

In accordance with ASC 715 Compensation — Retirement Benefits , the Company recognized losses totaling $ 2.1 million and $ 0.5 million, respectively, and these losses are included in other income (expense) in its consolidated statement of operations during the twelve-month periods ended December 31, 2020 and 2019 associated with these settlements.

In December 2020, the Company settled a portion of the pension liability.

In August 2022, the remaining obligations were fully settled.

In accordance with ASC 715 Compensation — Retirement Benefits , the Company recognized losses totaling $ 1.5 million and $ 2.1 million, respectively.

These losses are included in other (expense) income in its consolidated statement of operations during the periods associated with these settlements.

The losses represent the pro rata portion of actuarial losses that were previously deferred in other comprehensive income.

Components of net periodic benefit cost other than the service cost component are recorded in other income (expense) in the consolidated statement of operations.

Components of net periodic benefit cost other than the service cost component are recorded in other (expense) income in the consolidated statement of operations.

Amounts recognized in the consolidated balance sheet were as follows (in thousands):

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The weighted-average assumptions used to determine the benefit obligation and net periodic benefit cost were as follows:

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

Benefit obligation assumptions:

Discount rate 2.84 % 2.50 % 3.28 %

Discount rate N/A 2.84 % 2.50 %

Rate of compensation increase N/A N/A N/A

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Rate of compensation increase N/A N/A N/A

The assumptions, investment policies and strategies for the Globalstar Plan are determined by the Globalstar Plan Committee.

The Globalstar Plan Committee is responsible for ensuring the investments of the plans are managed in a prudent and effective manner.

Amounts related to the pension plan are derived from actuarial and other assumptions, including discount rates, mortality, expected rate of return, participant data and termination.

The Company reviews assumptions on an annual basis and makes adjustments as considered necessary.

The expected long-term rate of return on pension plan assets is selected by taking into account the expected duration of the projected benefit obligation for the plan, the asset mix of the plan and the fact that the plan assets are actively managed to mitigate risk.

Discount rates are determined annually based on the Plan administrator’s yield curve index, which considers expected benefit payments and is discounted with rates from the yield curve to determine a single equivalent discount rate.

The assumptions, investment policies and strategies for the Globalstar Plan were determined by the Globalstar Plan Committee.

The Globalstar Plan Committee was responsible for ensuring the investments of the plans were managed in a prudent and effective manner.

Amounts related to the pension plan were derived from actuarial and other assumptions, including discount rates, mortality, expected rate of return, participant data and termination.

The Company reviewed assumptions on an annual basis and made adjustments as considered necessary.

The expected rate of return on pension plan assets was selected by taking into account the expected duration of the projected benefit obligation for the plan, the asset mix of the plan and the fact that the plan assets were actively managed to mitigate risk.

Discount rates were determined annually based on the Plan administrator’s yield curve index, which considered expected benefit payments and was discounted with rates from the yield curve to determine a single equivalent discount rate.

Plan Assets and Investment Policies and Strategies

The plan assets are invested in various mutual funds which have quoted prices.

The plan has a target allocation.

On a weighted-average basis, target allocations for equity securities range from 50 % to 60 %, for debt securities 25 % to 50 % and for other investments 0 % to 15 %.

The plan assets were invested in various mutual funds which had quoted prices.

The plan had a target allocation.

On a weighted-average basis, target allocations for equity securities ranged from 50 % to 60 %, for debt securities 25 % to 50 % and for other investments 0 % to 15 %.

The defined benefit pension plan asset allocations as of the measurement date presented as a percentage of total plan assets were as follows:

Equity securities 55 % 55 %

Debt securities 45 45

Total 100 % 100 %

Equity securities N/A 55 %

Debt securities N/A 45

Total N/A 100 %

The fair values of the Company’s pension plan assets by asset category were as follows (in thousands):

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Total $ 5,762 $ — $ 5,762 $ —

December 31, 2020

Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

United States equity securities $ 2,426 $ — $ 2,426 $ —

International equity securities 619 — 619 —

Fixed income securities 1,553 — 1,553 —

Other 931 — 931 —

Total $ 5,529 $ — $ 5,529 $ —

Accumulated Benefit Obligation

The accumulated benefit obligation of the defined benefit pension plan was $ 9.1 million and $ 9.2 million at December 31, 2021 and 2020, respectively.

The accumulated benefit obligation of the defined benefit pension plan was zero and $ 9.1 million at December 31, 2022 and 2021, respectively.

Benefits Payments and Contributions

The benefit payments to retirees over the next ten years are expected to be paid as follows (in thousands):

2027 - 2031 2,657

For 2021 and 2020, the Company contributed $ 0.2 million and $ 0.7 million, respectively, to the Globalstar Plan.

For 2022, the Company's expected contributions to the Globalstar Plan will be $ 0.3 million.

During 2021, the Company sought relief under the American Rescue Plan Act of 2021.

The Company elected to apply all available prefunding balances to the 2021 plan year and deferred payments for the July 15, 2021, October 15, 2021 and January 15, 2022 contributions.

For 2022 and 2021, the Company contributed $ 2.9 million and $ 0.2 million, respectively, to its defined benefit pension plan.

The Company has a defined contribution employee savings plan, or “401(k),” which provides that the Company may match the contributions of participating employees up to a designated level.

Under this plan, the matching contributions were approximately $ 0.6 million for each of 2021, 2020, and 2019.

Under this plan, the matching contributions were approximately $ 0.5 million for 2022 and $ 0.6 million for each of 2021 and 2020.

The components of income tax (benefit) expense were as follows (in thousands):

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Income tax (benefit) expense $ 73 $ ( 299 ) $ 662

and foreign components of (loss) income before income taxes are presented below (in thousands):

and foreign components of loss before income taxes are presented below (in thousands):

Year Ended December 31,

2022 2021 2020

(loss) income $ ( 79,452 ) $ ( 82,740 ) $ 47,545

loss $ ( 232,148 ) $ ( 79,452 ) $ ( 82,740 )

Foreign loss ( 24,694 ) ( 33,472 ) ( 26,237 )

Total (loss) income before income taxes $ ( 112,924 ) $ ( 108,977 ) $ 15,869

As of December 31, 2021 and 2020, the Company had cumulative U.S., state and foreign net operating loss ("NOL") carryforwards for income tax reporting purposes of approximately $ 1.8 billion, $ 1.1 billion and $ 0.2 billion, respectively.

The vast majority of these NOL carryforwards were generated prior to 2018 and expire from 2022 through 2040, with less than 1 % expiring prior to 2025, and the remaining NOL carryforwards do not expire.

Total loss before income taxes $ ( 256,842 ) $ ( 112,924 ) $ ( 108,977 )

As of December 31, 2022 and 2021, the Company had cumulative U.S., state and foreign net operating loss ("NOL") carryforwards for income tax reporting purposes of approximately $ 2.0 billion and $ 1.8 billion, respectively.

The vast majority

of these NOL carryforwards were generated prior to 2018 and expire through 2042 (with less than 1 % expiring prior to 2026) and the remaining NOL carryforwards do not expire.

The components of net deferred income tax assets (liabilities) were as follows (in thousands):

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Property and equipment and other long-term assets ( 77,925 ) ( 114,722 )

Deferred Revenue 25,774 —

Reserves and disallowed interest 8,919 10,195

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Net deferred income tax liability $ ( 296 ) $ ( 296 )

The change in the valuation allowance during 2021 of $ 13.5 million was due to changes in property and equipment and long-term assets driven primarily by depreciation due to the difference between tax and book depreciable lives.

Due to the limitation on utilization of state NOLs, the Company recorded deferred tax liabilities of $ 0.3 million and $ 0.8 million as of December 31, 2021 and 2020, respectively.

The deferred revenue tax asset in the table above is related to a portion of the prepayments made by Partner under the Service Agreements, which were recorded as deferred revenue on the Company’s balance sheet as of December 31, 2022 (see Note 2:

Revenue to our Consolidated Financial Statements for further discussion).

The change in the valuation allowance during 2022 of $ 42.3 million was due to a net decrease in property and equipment and other long-term assets driven primarily by an impairment of these assets (refer to Note 8:

Fair Value Measurements for further information), offset partially by depreciation due to the difference between tax and book depreciable lives.

Due to the limitation on utilization of state NOLs, the Company recorded deferred tax liabilities of $ 0.3 million as of both December 31, 2022 and 2021.

The actual provision for income taxes differs from the statutory U.S.

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The Company has provided all requested information to the Canada Revenue Agency ("CRA") and is working with the CRA to complete the audit.

The CRA has completed its audit for the year ended October 31, 2016 and assessed the Company for an additional tax liability, which the Company is appealing.

The Company's

NOL in Canada would largely offset this tax liability to the extent that the Company is unsuccessful in its appeal.

The years ended October 31, 2017 and 2018 remain under examination.

Except for the audit noted above, neither the Company nor any of its subsidiaries is currently under audit by the IRS or by any state income tax jurisdiction in the United States.

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The Company elected to account for GILTI tax in the period in which it is incurred and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2022 and 2021.

As of December 31, 2021 and 2020, the Company recorded a value added tax ("VAT") recoverable, which is included in Prepaid and other current assets on its consolidated balance sheet totaling $ 5.6 million and $ 2.3 million, respectively.

As of December 31, 2022 and 2021, the Company recorded a value added tax ("VAT") recoverable, of which the short term portion is included in prepaid and other current assets on its consolidated balance sheet totaling $ 1.7 million and $ 5.6 million, respectively, and the long-term portion is included in intangible and other assets, net, on its consolidated balance sheet totaling $ 3.1 million and $ 0.3 million, respectively.

This VAT recoverable is related primarily to certain payments for the purchase and importation of gateway equipment in various international jurisdictions in connection with the Company's network upgrade work.

(LOSS) EARNINGS PER SHARE

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

In December 2022, the Company received a refund check totaling $ 1.8 million as a result of its eligibility for the employee retention credit under the provisions of the Coronavirus Aid, Relief and Economic Security Act for the first quarter of 2021.

The Company evaluated this refund as well as its eligibility for future refunds under ASC 450 and accounts for the gain in the period in which the payment was received.

Consistent with the classification of the employment taxes on qualified wages for which this credit relates, the refund was recorded as a reduction to operating expenses during the fourth quarter of 2022 on its consolidated statements of operations.

LOSS PER SHARE

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

Year ended December 31,

2022 2021 2020

Net (loss) income $ ( 112,625 ) $ ( 109,639 ) $ 15,324

Effect of dilutive securities:

2013 8.00 % Notes

Loan Agreement with Thermo — — ( 125,880 )

Loss to common stockholders plus assumed conversions $ ( 112,625 ) $ ( 109,639 ) $ ( 110,683 )

Net loss $ ( 256,915 ) $ ( 112,625 ) $ ( 109,639 )

Effect of Series A Preferred Stock dividends ( 1,337 ) — —

Adjusted net loss attributable to common shareholders $ ( 258,252 ) $ ( 112,625 ) $ ( 109,639 )

Weighted average common shares outstanding 1,800,825 1,765,139 1,642,359

Basic shares outstanding 1,765,139 1,642,359 1,450,768

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

Stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan — — 4,743

2013 8.00 % Notes

Loan Agreement with Thermo — — 195,805

Warrants issued in connection with 2019 Facility Agreement — — 1,831

Diluted shares outstanding 1,765,139 1,642,359 1,655,191

Net (loss) income per common share:

Net loss per common share:

Basic $ ( 0.14 ) $ ( 0.06 ) $ ( 0.07 )

Diluted $ ( 0.14 ) $ ( 0.06 ) $ ( 0.07 )

For the year ended December 31, 2021 and 2020, 10.1 million shares and 4.2 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

Additionally, as of December 31, 2020, 115.0 million warrants issued to the lenders of the 2019 Facility Agreement were outstanding and not reflected in the 4.2 million potentially dilutive security amount above as they were out of the money as of December 31, 2020.

For further discussion on (loss) earnings per share, refer to Note 1:

Summary of Significant Accounting Policies.

For the years ended December 31, 2022, 2021 and 2020, 7.7 million shares, 10.1 million shares and 4.2 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

Included in the potential common stock excluded from diluted shares outstanding as of December 31, 2022 are a portion of the 49.1 million Warrants issued to Partner under the Service Agreements, which was determined after considering the exercise price of each Warrant tranch relative to the average market price during the period and weighting for the period outstanding during 2022 (see Note 15:

Stock Compensation for further discussion).

As discussed in Note 6:

Long-Term Debt and Other Financing Arrangements, the Company's Board of Directors approved the payment of dividends totaling $ 1.3 million for the period November 15, 2022 through December 31, 2022 on its Series A Preferred Stock.

This amount adjusts the numerator used to calculate loss per share.

STOCK COMPENSATION

Share-Based Payment Arrangements with Employees

The Company’s Equity Incentive Plan (“Equity Plan”) provides long-term incentives to the Company’s key employees, including officers, directors, consultants and advisers (“Eligible Participants”), and is designed to align stockholder and employee interests.

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The Compensation Committee of the Company’s Board of Directors establishes the terms and conditions of any awards granted under the plans.

At the time of grant, the Company takes into consideration the timing of the stock based award and evaluates for conditions that could result in the award to be considered spring loaded.

As of December 31, 2022 and 2021, the number of shares of common stock that was authorized and remained available for issuance under the Equity Plan was 9.8 million and 21.4 million, respectively.

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Non-vested options are generally forfeited upon termination of employment.

The Company recognizes compensation expense for stock option grants over the employee's requisite service period, which is generally based on the vesting period, based on the fair value at the date of grant using the Black-Scholes option pricing model.

The Company recognizes compensation expense for stock option grants over the employee's requisite service period, which is generally based on the vesting period and the fair value at the date of grant using the Black-Scholes option pricing model.

The Company uses historical data, among other factors, to estimate the expected stock price volatility, the expected option life and the expected forfeiture rate.

The market price of the Company's common stock has been volatile at times.

The Company makes judgmental adjustments to project volatility during the expected term of the options, considering, among other things, historical volatility of the share prices of its peer group and expectations with regard to business conditions that may impact stock price fluctuations or stability.

The Company makes judgmental adjustments to projected volatility during the expected term of the options, considering, among other things, historical volatility of the share prices of its peer group and expectations with regard to business conditions that may impact stock price fluctuations or stability.

The Company estimates the expected term considering factors such as historical exercise patterns and the recipients of the options granted.

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The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

For the years ended December 31, 2021 and 2019, the total intrinsic value of all stock options exercised was $ 0.7 million and less than $ 0.1 million, respectively, There were no options exercised during 2020.

For the years ended December 31, 2022 and 2021, the total intrinsic value of all stock options exercised was $ 0.4 million and $ 0.7 million, respectively.

There were no options exercised during 2020.

The aggregate intrinsic value of all outstanding stock options at December 31, 2022 was $ 2.9 million with a remaining contractual life of 5.5 years.

The aggregate intrinsic value of all vested stock options that were exercisable at December 31, 2021 was $ 1.4 million with a remaining contractual life of 5.7 years.

The aggregate intrinsic value of all vested stock options that were exercisable at December 31, 2022 was $ 2.2 million based on a per grant calculation with a remaining contractual life of 4.9 years.

Net cash proceeds during the year ended December 31, 2022 from the exercise of stock options was $ 0.2 million.

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For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 10.4 million, $ 5.6 million and $ 4.5 million, respectively, of compensation expense related to restricted stock.

The increase in compensation expense during 2022 was driven by performance grants to certain employees associated with their efforts under the Service Agreements.

The total fair value, as calculated on the day of vesting, of restricted stock awards that vested during 2022, 2021 and 2020 was $ 14.6 million, $ 8.6 million, and $ 3.3 million, respectively.

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The bonus pool available for distribution is determined based on the Company's adjusted EBITDA performance during the Plan Year.

The bonus may be paid in cash or the Company's common stock, as determined by the Compensation Committee and with the consent of our Lenders if paid cash.

The bonus may be paid in cash or the Company's common stock, subject to certain approvals.

For the 2022 Plan Year, the Company's adjusted EBITDA performance was within the bonus payout threshold according to the plan document.

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The maximum aggregate number of shares of common stock that may be purchased through the Plan was 20.0 million shares as of December 31, 2022;

In February 2022, the Company's Board of Directors approved an increase to the number of shares for the Plan of 6.0 million.

this total includes an increase approved by the Company's Board of Directors in February 2022 totaling 6.0 million shares.

The number of shares that may be purchased through the Plan will be subject to proportionate adjustments to reflect stock splits, stock dividends, or other changes in the Company’s capital stock.

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Fair market value is equal to the lesser of the closing price of a share of common stock on either the first day or the last day of the Offering Period.

For each of 2021 and 2020, the Company received $ 0.6 million in proceeds related to shares issued under this plan.

For the years ended December 31, 2021, 2020 and 2019, the Company recorded compensation expense of approximately $ 0.4 million, $ 0.4 million and $ 0.5 million, respectively, which is reflected in marketing, general and administrative expenses.

For 2022 and 2021, the Company received $ 0.7 million and $ 0.6 million, respectively, in proceeds related to shares issued under the Plan.

For each of the years ended December 31, 2022, 2021 and 2020, the Company recorded compensation expense of approximately $ 0.4 million, which is reflected in marketing, general and administrative expenses.

Additionally, the Company has issued approximately 12.7 million shares through December 31, 2022 related to the Plan.

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Weighted average grant-date fair value per share $ 0.58 $ 0.23

Share-Based Payment Arrangements with Customers

The Company may issue noncash consideration to customers.

The only share-based payment arrangement currently outstanding is the warrants under the Service Agreements (the "Warrants") to purchase up to 2.64 % of the Company’s outstanding common stock.

The Warrants are subdivided into two tranches.

Each tranche represents one half of the total

number of Warrants issued, with the primary difference between the tranches being the exercise price (and therefore the grant dates).

The Company evaluated the issuance of the Warrants under ASC 606 and ASC 718 and determined that the Warrants are not a payment for a distinct good or service and, accordingly, are accounted for as a reduction to the transaction price under ASC 606.

The classification and measurement of the consideration paid to Partner was evaluated under ASC 718.

The Company determined that the Warrants contained a performance condition upon issuance, which was contingent upon commencement of service under the Service Agreements.

As Service Launch was November 15, 2022, the performance condition was met and the Warrants vested.

On November 15, 2022, the Company recorded the total fair value of the Warrants totaling $ 48.3 million in accumulated paid-in-capital on its consolidated balance sheet with a corresponding offset to a contract asset, which was netted against the deferred revenue balance associated with Partner.

As of December 31, 2022, no warrants have been exercised by Partner.

The fair value of the Warrants issued to Partner was estimated using the Black-Scholes option pricing model with the following assumptions on the valuation date of November 15, 2022.

Tranche 1 Tranche 2

Number of Warrants (in millions) 24.6 24.6

Grant date 2/24/2020 5/28/2021

Exercise price $ 0.43 $ 1.60

Expected term (years) 17.73 16.47

Risk-free interest rate 1.63 % 1.92 %

Volatility 97.29 % 97.29 %

Black-Scholes fair value per share $ 0.42 $ 1.54

Total fair value $ 10,429,763 $ 37,907,181

The expected term of the Warrants is consistent with the expected term of the Company's performance obligations under the Service Agreements measured as the period beginning with Phase 1 service launch through the design life of the satellites that will support Phase 2 service.

The Company allocated the fair value of the Warrants amongst the stand alone selling price for each phase of service under the Service Agreements and records a reduction to revenue over the estimated term of the Service Agreements.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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Accumulated net foreign currency translation adjustment 9,242 3,963

Total accumulated other comprehensive income (loss) $ 1,890 $ ( 2,944 )

For the year ended December 31, 2020, the minimum pension liability adjustment in the table above includes a settlement loss of $ 2.1 million.

Total accumulated other comprehensive income $ 9,242 $ 1,890

During 2022, the Company settled the remaining obligations under the pension plan;

accordingly, no amounts are reflected in the table above.

See further discussion in Note 12:

Pensions and Other Employee Benefits.

No amounts were reclassified out of accumulated other comprehensive income (loss) for the periods shown above.

No amounts were reclassified out of accumulated other comprehensive loss for the periods shown above.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data