What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-05 · 129 added, 98 removed, 213 unchanged (52% of the section changed)

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For our subscriber driven revenue, the specialized needs of our global customers span many industries.

As of March 31, 2023, we had approximately 761,000 subscribers worldwide, principally within the following markets:

As of June 30, 2023, we had approximately 766,000 subscribers worldwide, principally within the following markets:

recreation and personal;

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Our FCC license allows us to provide service over our network to up to 250 million users in the United States.

For the three months ended March 31, 2023 and March 31, 2022, our Partner under the Service Agreements was responsible for 52% and 21%, respectively.

of our revenue;

For the six months ended June 30, 2023 and 2022, our Partner under the Service Agreements was responsible for 49% and 22%, respectively, of our revenue;

no other customer was responsible for more than 10%.

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• capital expenditures, which are an indicator of future revenue growth potential and cash requirements.

Comparison of the Results of Operations for the three months ended March 31, 2023 and 2022

Comparison of the Results of Operations for the three and six months ended June 30, 2023 and 2022

Our revenue is categorized as service revenue and equipment revenue.

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Equipment revenue is generated from the sale of devices that work over our network.

For the three months ended March 31, 2023, total revenue increased 79% to $58.6 million from $32.8 million for the same period in 2022.

For the three months ended June 30, 2023, total revenue increased 50% to $55.1 million from $36.8 million for the same period in 2022.

For the six months ended June 30, 2023, total revenue increased 63% to $113.7 million from $69.6 million for the same period in 2022.

See below for a further discussion of the fluctuations in revenue.

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Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

June 30, 2023 Three Months Ended

June 30, 2022 Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Revenue % of Total

Revenue Revenue % of Total

Service Revenue:

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Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

June 30, 2023 Three Months Ended

June 30, 2022 Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Revenue % of Total

Revenue Revenue % of Total

Equipment Revenue:

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The following table sets forth our average number of subscribers and ARPU by type of revenue.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Average number of subscribers for the period:

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Service Revenue

Duplex service revenue decreased $0.4 million for the three month period ended March 31, 2023 due primarily to a decrease in average subscribers, offset partially by higher ARPU.

Duplex service revenue decreased $0.6 million, or 8%, and $1.0 million, or 7%, respectively, for the three and six month periods ended June 30, 2023, compared to the same periods in 2022.

For both periods, the decrease in revenue was due primarily to a decrease in average subscribers, offset partially by higher ARPU.

The decrease in average subscribers is due to churn exceeding gross activations over the last twelve months as we no longer manufacture and sell Duplex devices, and instead focus our investments on IoT-enabled devices and wholesale capacity services.

SPOT service revenue increased 1% for the three months ended March 31, 2023 due to offsetting variances in ARPU and average subscribers.

ARPU increased 5% due to the mix of subscribers on various rate plans compared to the prior period.

Average subscribers were impacted by lower equipment sales, and therefore gross subscriber activations, over the last twelve months due to supply chain issues that lowered the number of devices available in the sales channel.

Commercial IoT service revenue increased 11% for the three months ended March 31, 2023 due to positive variances in both average subscribers and ARPU, which increased 9% and 2%, respectively.

Gross subscriber activations have increased 74% when comparing the preceding twelve month periods.

Our average subscriber base has grown and we have fulfilled the back orders that accumulated in 2022 following production delays for certain of our Commercial IoT products (discussed further below).

Wholesale capacity service revenue increased $23.6 million for the three months ended March 31, 2023 compared to the same period in 2022.

Fluctuations in wholesale capacity service revenue are due primarily to the timing and amount of revenue recognized associated with the Service Agreements.

The increase in revenue recognized during 2023 is due primarily to consideration received for service fees under the Service Agreement which commenced after service launch in November 2022.

Additionally, in connection with the amendment of the Service Agreements in February 2023, Partner agreed to pay us

$6.5 million as consideration related to performance obligations completed in prior periods.

SPOT service revenue decreased 4% and 2%, respectively, for the three and six months ended June 30, 2023, compared to the same periods in 2022.

For both the three and six month periods, the decrease in SPOT service revenue was due primarily to fewer average subscribers.

Average subscribers were impacted by lower equipment sales, and therefore gross subscriber activations, during 2022 due to supply chain issues that lowered the number of devices available in the sales channel.

Commercial IoT service revenue increased 6% and 9%, respectively, for the three and six months ended June 30, 2023, compared to the same periods in 2022.

The increases for both periods were due primarily to an increase in average subscribers driven by a 21% increase in gross subscriber activations when compared to the preceding twelve month periods.

Wholesale capacity service revenue increased $16.7 million and $40.2 million, respectively, for the three and six months ended June 30, 2023 compared to the same periods in 2022.

The increase in revenue recognized during the three and six months ended June 30, 2023 is due primarily to consideration received for service fees under the Service Agreement which commenced after service launch in November 2022.

Revenue for both periods also increased due to the amount of revenue recognized for our performance associated with the construction of additional satellites for Partner.

Additionally, in connection with the

amendment of the Service Agreements in February 2023, Partner agreed to pay us $6.5 million as consideration related to performance obligations completed in prior periods.

The Company recognized this revenue during the first quarter of 2023.

Subscriber Equipment Sales

Revenue from Duplex equipment sales decreased $0.1 million for the three months ended March 31, 2023 compared to the same period in 2022.

These decreases were driven primarily by a lower sales volume of phones and accessories due to a lack of available inventory since these devices are no longer being manufactured.

Revenue from SPOT equipment sales increased $0.5 million for the three months ended March 31, 2023 compared to the same period in 2022.

This increase is primarily attributable to sales of our SPOT Trace ® device due to an over 80% increase in units sold quarter over quarter.

Revenue from Commercial IoT equipment sales increased $2.0 million for the three months ended March 31, 2023 compared to the same period in 2022.

The volume of our SmartOne Solar device sales increased over 180% from the first quarter of 2022 and revenue from this product increased over $1.8 million during the same period.

Devices sales have improved significantly in 2023 as we have largely resolved the supply chain disruptions that negatively impacted sales during 2022.

Revenue from Duplex equipment sales decreased $0.1 million and $0.2 million, respectively, for the three and six months ended June 30, 2023 compared to the same periods in 2022.

These decreases were due to a lower sales volume of phones and accessories we discontinued from our product offerings.

Revenue from SPOT equipment sales increased $0.8 million, or 50%, and $1.3 million, or 41%, respectively, for the three and six months ended June 30, 2023 compared to the same periods in 2022.

During 2022, due to component part shortages, we experienced production delays resulting in a back order position for most of the year.

Starting in the second quarter of 2023, all SPOT products returned to ordinary production levels;

therefore, we expect equipment sales to continue to increase year-over-year as we move through 2023.

Revenue from Commercial IoT equipment sales increased $2.0 million and $4.0 million, respectively, for the three and six months ended June 30, 2023 compared to the same periods in 2022.

During 2022, due to component part shortages, we experienced production delays resulting in a back order position for most of the year.

These issues have been resolved and all products are being manufactured in the ordinary course of business;

therefore, we expect equipment sales to continue to increase year-over-year as we move through 2023.

Operating Expenses

Total operating expenses increased to $51.5 million from $46.5 million for the three months ended March 31, 2023 compared to the same period in 2022.

Higher cost of services, management, general and administrative ("MG&A") costs, and subscriber equipment sales were partially offset by lower depreciation, amortization, and accretion expense.

Total operating expenses increased to $52.5 million from $48.2 million and to $103.9 million from $94.6 million for the three and six months ended June 30, 2023 compared to the same periods in 2022, respectively.

Higher cost of services, management, general and administrative ("MG&A") costs, and subscriber equipment sales were offset partially by lower depreciation, amortization and accretion expense.

The main contributors to the variance in operating expenses are explained in further detail below.

Cost of Services

Cost of services increased $1.0 million for the three months ended March 31, 2023 compared to the same period in 2022 due primarily to higher lease expense associated with new gateway sites, which contributed $0.8 million to the total increase.

Cost of services increased $1.6 million and $2.6 million for the three and six months ended June 30, 2023 compared to the same periods in 2022, respectively.

For these periods, higher lease expense associated with new gateway sites contributed $0.6 million and $1.5 million, respectively, to the total increases.

These leases were executed in connection with the gateway expansion project associated with the Service Agreements;

these lease and related costs are being reimbursed to us, and this consideration is being recognized as revenue (as further discussed above in "Wholesale Capacity Service Revenue").

Higher information technology maintenance also contributed to the total increase.

Personnel costs were flat year-over-year due to the offsetting impact of merit and headcount increases in 2023, offset by non-recurring personnel costs from the first quarter of 2022 related to annual cash bonuses and separation pay.

Higher information technology maintenance totaling $0.4 million and $0.6 million, respectively, also contributed to the total increases for both periods.

Personnel costs were also up for both periods due to the impact of merit and headcount increases in 2023 offset partially by non-recurring personnel costs from the first quarter of 2022 related to annual cash bonuses and separation pay.

Cost of Subscriber Equipment Sales

Cost of subscriber equipment sales increased $1.7 million for the three months ended March 31, 2023 from the same period in 2022.

This increase is generally consistent with the increase in total revenue from subscriber equipment sales.

Cost of subscriber equipment sales increased $2.5 million and $4.3 million for the three and six months ended June 30, 2023 from the same periods in 2022, respectively.

This increase is consistent with the increase in total revenue from subscriber equipment sales.

Margin percentages on subscriber equipment narrowed slightly for both the three and six month periods due to the mix of products sold in each respective period.

Marketing, General and Administrative

MG&A expenses increased $4.1 million for the three months ended March 31, 2023 compared to the same period in 2022.

This increase was partially driven by a $1.0 million accrual reversal in the first quarter of 2022 to professional services associated with the 2018 shareholder litigation.

MG&A expenses increased $3.0 million and $7.0 million for the three and six months ended June 30, 2023 compared to the same periods in 2022, respectively.

Higher personnel costs of $1.7 million and $3.8 million, respectively, contributed to the increase in MG&A expense, due primarily to stock-based compensation and, to a lesser extent, merit and headcount increases.

Also contributing to the MG&A increase for both periods were higher legal and professional fees of $0.9 million and $1.6 million, respectively, for various efforts, including increased regulatory work, government relations and negotiations of new commercial arrangements.

These increased costs are in part due to the upcoming World Radio Conference and our ongoing efforts to remove interference into the Globalstar System being received from China.

For the year to date period, the increase was also impacted by a $1.0 million accrual reversal in the first quarter of 2022 to professional services associated with the 2018 shareholder litigation.

Based on our assessment and considering the passage of time, we concluded it was appropriate to release the accrual, which resulted in a decrease in MG&A expense in the first quarter of 2022.

An increase in net personnel costs of $2.1 million included non-recurring stock based compensation.

Also contributing to the MG&A increase were higher legal fees of $0.6 million for various efforts, including defense of our spectrum assets and negotiation of new commercial arrangements, An increase in advertising costs of $0.4 million also contributed to the increase.

Other smaller items contributed to the remaining increase for the year to date period.

Depreciation, Amortization and Accretion

Depreciation, amortization, and accretion expenses decreased $1.9 million for the three months ended March 31, 2023, compared to the same period in 2022 due to a net reduction in total property and equipment.

Depreciation, amortization and accretion expenses decreased $2.2 million and $4.1 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 due to a net reduction in total property and equipment.

In connection with Partner's announcement concerning the Services in September 2022, our strategy relative to our second-generation Duplex assets shifted.

Due to this shift in strategy, we re-assessed our asset grouping for long-lived assets and determined that the second-generation Duplex assets (including the gateways and related technology capable of providing commercial traffic to support Sat-Fi2®) were no longer part of our overall satellite and ground network.

Due to this shift in strategy, we re-assessed our asset grouping for long-lived assets and determined that the second-generation Duplex assets were no longer part of our overall satellite and ground network.

These assets totaled approximately $161.2 million prior to their write down in September 2022.

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Interest Income and Expense

Interest income and expense, net, decreased $7.5 million during the three months ended March 31, 2023, compared to the same period in 2022.

The decrease was driven by higher capitalized interest (which decreases interest expense) of $4.3 million and lower gross interest costs totaling $3.2 million.

Gross interest costs were lower due to $4.4 million less in interest under the 2019 Facility Agreement due to the partial paydown in November 2022, offset partly by interest of $1.2 million due to MDA under the vendor financing arrangement that was not in place during the first quarter of 2022.

Derivative Loss

We recorded a derivative loss of $0.5 million for the three months ended March 31, 2022.

Interest income and expense, net, decreased $2.1 million and $9.6 million during the three and six months ended June 30, 2023, compared to the same periods in 2022, respectively.

For these periods, these decreases were due primarily to lower gross interest costs totaling $1.9 million and $5.1 million, respectively.

For the six month period, higher capitalized interest (which decreases interest expense) of $4.2 million, due to higher construction in progress, also reduced expense.

For the three and six month periods, gross interest costs were lower due to $10.7 million and $15.1 million, respectively, less interest under the 2019 Facility Agreement (as defined below) due to the partial paydown in November 2022 and the final paydown in March 2023.

Offsetting this decrease was a $7.1 million increase in interest associated with the 2023 13% Notes (as defined below), which commenced in the second quarter of 2023, as well as interest and the accretion of debt discount associated with the 2023 and 2021 Funding Agreements (as defined below), which also commenced in the second quarter of 2023, and totaled $2.8 million.

Finally, we incurred interest of $1.2 million due to MDA under the vendor financing arrangement during the first quarter of 2023 that was not in place during the first half of 2022.

This vendor financing arrangement was fully repaid during the first quarter of 2023.

Derivative Gain (Loss)

We recognize gains or losses due to the change in the value of certain embedded features within our debt instruments that require standalone derivative accounting.

The loss recorded during the three months ended March 31, 2022 was impacted primarily by an increase in the discount rate used in the valuation of the derivative associated with our 2019 Facility Agreement.

Partially offsetting this loss was a gain on the valuation adjustment of the embedded derivative associated with our 2013 8.00% Notes.

There were no derivatives outstanding as of March 31, 2023.

For the three and six months ended June 30, 2023, we recorded derivative gains of $0.3 million, respectively.

For the three and six months ended June 30, 2022, we recorded derivative losses of $1.2 million and $1.7 million, respectively.

The gains recorded during 2023 were impacted by a decrease in the discount rate and the timing of cash flow utilized in the valuation of the embedded derivative within the 2023 Funding Agreement.

The losses recorded during 2022 were impacted primarily by an increase in the discount rate used in the valuation of the derivative associated with our 2019 Facility Agreement.

For the six month period, the loss was offset partially by a gain on the valuation adjustment of the embedded derivative associated with our 2013 8.00% Notes.

Fair Value Measurements to our condensed consolidated financial statements for further discussion of the computation of the fair value of our derivatives.

Foreign Currency Gain

Foreign currency gain decreased $1.3 million for the three months ended March 31, 2023, compared to the same period in 2022.

Foreign Currency (Loss) Gain

Changes in foreign currency gains and losses are driven by the remeasurement of financial statement items, which are denominated in various currencies, at the end of each reporting period.

For both periods presented, the foreign currency gains were due to the weakening of the U.S.

We recorded foreign currency gains of $2.0 million and $3.9 million, respectively, during the three and six months ended June 30, 2023.

We recorded foreign currency losses of $7.1 million and $3.9 million, respectively, during the three and six months ended June 30, 2022.

During 2023, the foreign currency gains were due to the weakening of the U.S.

dollar relative to other currencies.

During 2022, the foreign currency losses were due to the strengthening of the U.S.

dollar relative to other currencies.

Liquidity and Capital Resources

Our principal near-term liquidity requirements include funding our operating costs and capital expenditures.

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds under the prepayment agreement with our Partner under the Service Agreements.

Beyond the next twelve months, our liquidity requirements also include paying our debt service obligations.

As of March 31, 2023 and December 31, 2022, we held cash and cash equivalents of $20.5 million and $32.1 million, respectively, on our consolidated balance sheet.

The total carrying amount of our debt and vendor financing outstanding was $182.2 million at March 31, 2023, compared to $191.7 million at December 31, 2022.

The $9.5 million decrease was driven by the payoff of the remaining balances due under the 2019 Facility Agreement and the vendor financing arrangement of $132.1 million and $59.6 million, respectively, offset partially by the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the “Notes”), which were issued net of a 5% OID of $10 million and $7.8 million in financing costs.

Cash Flows for the three months ended March 31, 2023 and 2022

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds from the funding agreement with our Partner under the Service Agreements.

These liquidity sources are expected to meet our short-term and long-term liquidity needs for funding our operating costs, capital expenditures and financing obligations, including scheduled recoupments under the 2021 Funding Agreement (defined below), interest on our 13% Notes (defined below), and dividends on our perpetual preferred stock.

As of June 30, 2023 and December 31, 2022, we held cash and cash equivalents of $65.3 million and $32.1 million, respectively, on our consolidated balance sheet.

The total carrying amount of our debt and vendor financing outstanding was $336.6 million at June 30, 2023, compared to $191.7 million at December 31, 2022.

The $144.9 million increase was driven by the sale of $200.0 million in aggregate principal amount of 2023 13% Notes (as defined below), which were issued net of a 5% OID of $10 million and $7.2 million in financing costs, net of accretion since issuance.

Also contributing to this increase was the recognition of the 2021 and 2023 Funding Agreements (as defined below), $87.7 million and $88.0 million, respectively, of principal amount, net of debt discounts and accretion totaling $10.0 million and $11.9 million, respectively.

Offsetting these increases was the payoff of the remaining balances due under the 2019 Facility Agreement (defined below) and the vendor financing arrangement of $132.1 million and $59.6 million, respectively.

Cash Flows for the six months ended June 30, 2023 and 2022

The following table shows our cash flows from operating, investing and financing activities (in thousands):

Three Months Ended

2023 March 31,

Six Months Ended

2023 June 30,

Net cash provided by operating activities $ 42,993 $ 20,771

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Effect of exchange rate changes on cash and cash equivalents 73 9

Net decrease in cash, cash equivalents and restricted cash $ (11,595) $ (2,785)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 33,252 $ (1,163)

Cash Flows Provided by Operating Activities

Net cash provided by operations includes primarily cash receipts from subscribers related to the purchase of equipment and satellite voice and data services as well as cash received from the performance of wholesale capacity services.

We use cash in operating activities primarily for network expenditures, personnel costs, inventory purchases and other general corporate expenditures.

Net cash provided by operating activities during the three months ended March 31, 2023 was $22.8 million compared to $7.6 million during the same period in 2022.

The primary driver for the increase was higher net income after adjusting for noncash items due primarily to wholesale capacity service fees under the Service Agreement which commenced after service launch in November 2022.

Revenue to our condensed consolidated financial statements for further discussion).

This activity was offset partially by an unfavorable change in working capital due primarily to a larger decrease in deferred revenue during the first quarter 2023 related to the timing and amount of customer payments in each period.

Net cash provided by operations includes primarily cash received from the performance of wholesale capacity services as well as cash received from subscribers related to the purchase of equipment and satellite voice and data services.

We use cash in operating activities primarily for network costs, personnel costs, inventory purchases and other general corporate expenditures.

Net cash provided by operating activities during the six months ended June 30, 2023 was $43.0 million compared to $20.8 million during the same period in 2022.

The primary driver for the increase was higher net income after adjusting for noncash items due primarily to higher wholesale capacity service fees under the Service Agreements following service launch in November 2022.

Revenue to our condensed consolidated financial statements for further discussion.) This activity was offset partially by an unfavorable change in working capital due primarily to the recognition of deferred revenue under the Service Agreements.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $71.6 million for the three months ended March 31, 2023 compared to $10.5 million for the same period in 2022.

Net cash used in investing activities during both periods included network upgrades associated with the Service Agreements.

The increase is primarily due to payments to MDA during the first quarter of 2023 under the vendor financing arrangement totaling $59.6 million (excluding capitalized interest).

Net cash used in investing activities was $124.6 million for the six months ended June 30, 2023 compared to $22.4 million for the same period in 2022.

The increase is due primarily to payments to MDA during 2023 totaling $108.7 million during the first six months of 2023 (we did not make cash payments under this agreement during the same period in 2022).

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was $37.1 million during the three month period ended March 31, 2023.

This activity resulted from $190.0 million received in proceeds (net of OID) from the sale of our Notes, which were used to pay the remaining principal amount due under the 2019 Facility Agreement of $148.3 million and financing costs of $0.6 million (with additional amounts paid in April 2023 due to timing).

We also paid dividends of $4.0 million to our preferred stockholders during the first quarter of 2023.

Net cash provided by financing activities was $114.8 million during the six month period ended June 30, 2023 compared to $0.4 million for the same period in 2022.

This increase was due to proceeds from the 2023 13% Notes and the 2023 Funding Agreement (as discussed in more detail below).

The proceeds from the 2023 13% Notes were used to pay the remaining principal amount due under the 2019 Facility Agreement of $148.3 million and financing costs of $8.5 million).

The payment of cash dividends totaling $6.6 million was also a use of cash during 2023 that did not occur during the comparable period in 2022.

For further discussion on all of our debt and other financing arrangements, see Note 5:

Long-Term Debt and Other Financing Arrangements to our condensed consolidated financial statements.

13% Senior Notes

On March 31, 2023, we completed the sale of $200.0 million in aggregate principal amount of our Notes, non-convertible 13% Senior Notes due 2029.

2023 Funding Agreement

In February 2023, Globalstar and Partner agreed to amend the Service Agreements to provide for, among other things, Partner’s payment of up to $252 million to us (the “2023 Funding Agreement”) to fund 50% of amounts due under our previously disclosed Satellite Procurement Agreement with MDA, as well as launch, insurance and ancillary costs incurred in connection with the construction and launch of these satellites.

The 2023 Funding Agreement replaced our requirement to raise third-party financing for such costs as previously required under the Service Agreements and will be funded on a quarterly basis, subject to certain conditions therein.

The remaining amount of the satellite costs is expected to be funded from our operating cash flows.

Partner made the first payment under the 2023 Funding Agreement in April 2023 in an amount of $87.7 million.

These proceeds were used to pay amounts owed to MDA for milestones completed as of the payment date.

The amount of the Funding Agreement and fees payable thereon are expected to be recouped from amounts payable by our Partner for services provided by us under the Service Agreements.

The 2023 Funding Agreement is expected to be recouped in installments for a period of 16 quarters beginning no later than the third quarter of 2025.

The 2023 Funding Agreement may also be repaid over time through excess cash flow sweeps or voluntary prepayments, as provided under the terms of the 2023 Funding Agreement.

For as long as any portion of the 2023 Funding Agreement is outstanding, we will be subject to certain covenants including (i) minimum cash balance of $30 million, (ii) interest coverage and leverage ratios, and (iii) limitations on certain asset transfers, expenditures and investments.

Amounts payable by us in connection with the 2023 Funding Agreement are expected to be guaranteed by Thermo under a guarantee agreement among Thermo, Globalstar and Partner.

Thermo has agreed to provide support of certain of our obligations under the 2023 Funding Agreement.

Currently, this support agreement is directly between Thermo and Partner, and the parties have agreed to replace it with an agreement between Thermo, us and the Partner.

Entry into this guarantee agreement received shareholder approval in June 2023, and it is expected to be effective during the third quarter of 2023.

2021 Funding Agreement

During 2021, we received payments from Partner totaling $94.2 million (the "2021 Funding Agreement"), which were recorded as deferred revenue.

This funding is expected to be recouped as services are performed by us over the Phase 1 Service Period.

In connection with the February 2023 amendment of the Service Agreements, certain terms of the 2021 Funding Agreement were amended to align with the terms of the 2023 Funding Agreement, including granting Partner a first-priority lien in all of our assets to secure our repayment of amounts funded by Partner.

This amendment resulted in re-characterizing the previously recorded deferred revenue balance to debt.

2023 13% Notes

In March 2023, we completed the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the "2023 13% Notes").

The 2023 13% Notes are senior, unsecured obligations of the Company and have a stated maturity of September 15, 2029.

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2019 Facility Agreement

In 2019, we entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement").

In November 2019, we entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement").

The 2019 Facility Agreement was scheduled to mature in November 2025.

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A portion was refinanced in November 2022 and the remaining portion was refinanced in March 2023.

Using a portion of the proceeds from the sale of the 13% Senior Notes, we repaid all of our outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

We recorded a loss on extinguishment of debt of $10.4 million during the first quarter of 2023 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.

Using a portion of the proceeds from the sale of the 2023 13% Notes, we repaid all of our outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

Vendor Financing

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

We have made payments totaling $76.1 million to MDA under this vendor financing arrangement, of which $62.1 million (including $2.5 million of interest) was paid during the first quarter of 2023.

As of March 31, 2023, we fully repaid the outstanding vendor financing balance.

Prepayment Agreement

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

We plan to use the proceeds of the Prepayment to pay future amounts due under our previously disclosed Satellite Procurement Agreement with MDA, as well as launch, insurance and ancillary costs incurred in connection with the construction and launch of these satellites.

The Prepayment Agreement replaces our requirement to raise third-party financing for such costs as previously required under the Service Agreements and will be funded on a quarterly basis, subject to certain conditions in the agreement.

The remaining amount of the satellite costs is expected to be funded from our operating cash flows.

Partner made the first payment under the Prepayment Agreement in April 2023 in an amount of $87.7 million.

These proceeds were used to pay amounts owed to MDA for milestones completed as of the payment date, with $39.6 million reimbursing us for a payment made on March 31, 2023 and the remaining $48.1 million paid to MDA in April 2023.

The amount of the Prepayment and fees payable thereon will be recouped from amounts payable by our Partner for services provided by us 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, we will be subject to certain covenants including (i) minimum cash balance of $30 million, (ii) interest coverage and leverage ratios, and (iii) limitations on certain asset transfers, expenditures and investments.

Subject to applicable shareholder approval, amounts payable by us in connection with the Prepayment would be guaranteed by Thermo under a guaranty agreement among Thermo, Globalstar and Partner.

In addition, Thermo has agreed directly with Partner to provide support of certain of our obligations under the Service Agreements, the Satellite Procurement Agreement, and certain related contracts.

We have made payments totaling $76.1 million to MDA under this vendor financing arrangement, of which $62.1 million (including $2.5 million of interest) was paid during the first quarter of 2023 to fully repay the outstanding vendor financing balance.

Series A Preferred Stock

On November 15, 2022, we issued 149,425 shares of 7.0% Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”).

In November 2022, we issued 149,425 shares of 7.0% Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”).

The Company recorded the Series A Preferred Stock at fair value of the shares totaling $105.3 million on its consolidated balance sheet.

Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, 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.

In January and April 2023, our Board of Directors approved the payment of dividends totaling $1.3 million for the period November 15, 2022 through December 31, 2022 and $2.6 million for the first quarter of 2023;

these dividends have been paid.

The table below reflects the dividends approved by our Board of Directors (amounts in thousands):

Payment Period Payment Date Payment Amount

November 15, 2022 - December 31, 2022 January 2023 $ 1,337

January 1, 2023 - March 31, 2023 April 2023 2,615

April 1, 2023 - June 30, 2023 June 2023 2,644

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.

8 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis