Globalstar, Inc. 10-Q

Item 1. Financial Statements. GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Revenue: Service revenue $ 57,635 $ 48,648 $ 111,100 $ 101,602 Subscriber equipment sales 2,750 6,424 5,765 12,114 Total revenue 60,385 55,072 116,865 113,716 Operating expenses: Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 18,114 12,246 34,873 24,066 Cost of subscriber equipment sales 2,066 5,662 4,224 9,971 Marketing, general and administrative 10,353 10,122 20,999 19,753 Stock-based compensation 9,164 2,532 18,391 6,292 Reduction in the value of long-lived assets — — 305 — Depreciation, amortization and accretion 22,110 21,890 44,207 43,823 Total operating expenses 61,807 52,452 122,999 103,905 (Loss) income from operations ( 1,422 ) 2,620 ( 6,134 ) 9,811 Other (expense) income: Loss on extinguishment of debt — — — ( 10,403 ) Interest income and expense, net of amounts capitalized ( 3,644 ) ( 5,070 ) ( 7,429 ) ( 7,102 ) Foreign currency (loss) gain ( 4,493 ) 2,038 ( 8,335 ) 3,945 Other 58 447 ( 791 ) 348 Total other expense ( 8,079 ) ( 2,585 ) ( 16,555 ) ( 13,212 ) (Loss) income before income taxes ( 9,501 ) 35 ( 22,689 ) ( 3,401 ) Income tax expense 182 26 190 70 Net (loss) income $ ( 9,683 ) $ 9 $ ( 22,879 ) $ ( 3,471 ) Other comprehensive loss: Foreign currency translation adjustments 1,864 ( 1,307 ) 4,257 ( 2,736 ) Comprehensive loss $ ( 7,819 ) $ ( 1,298 ) $ ( 18,622 ) $ ( 6,207 ) Net loss attributable to common shareholders (Note 7:) ( 12,327 ) ( 2,635 ) ( 28,167 ) ( 8,730 ) Net loss per common share: Basic $ ( 0.01 ) $ 0.00 $ ( 0.01 ) $ 0.00 Diluted ( 0.01 ) 0.00 ( 0.01 ) 0.00 Weighted-average shares outstanding: Basic 1,884,208 1,813,393 1,883,406 1,812,617 Diluted 1,884,208 1,813,393 1,883,406 1,812,617 See accompanying notes to unaudited interim condensed consolidated financial statements. 1 GLOBALSTAR, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) (Unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 64,334 $ 56,744 Accounts receivable, net of allowance for credit losses of $ 1,461 and $ 2,312 , respectively 43,148 48,743 Inventory 13,107 14,582 Prepaid expenses and other current assets 23,421 22,584 Total current assets 144,010 142,653 Property and equipment, net 620,553 624,002 Operating lease right of use assets, net 34,424 34,164 Intangible and other assets, net of accumulated amortization of $ 13,634 and $ 12,385 , respectively 127,259 123,490 Total assets $ 926,246 $ 924,309 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 34,600 $ 34,600 Accounts payable and accrued expenses 25,643 28,985 Accrued satellite construction costs 19,866 58,187 Payables to affiliates 522 459 Deferred revenue, net 57,712 53,677 Total current liabilities 138,343 175,908 Long-term debt 358,525 325,700 Operating lease liabilities 28,752 29,244 Other non-current liabilities 17,651 14,478 Total non-current liabilities 404,928 369,422 Commitments and contingencies (Note 5) Stockholders’ equity: Preferred Stock of $ 0.0001 par value; 99,700,000 shares authorized and none issued and outstanding at June 30, 2024 and December 31, 2023, respectively — — Series A Perpetual Preferred Stock of $ 0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at June 30, 2024 and December 31, 2023, respectively — — Voting Common Stock of $ 0.0001 par value; 2,150,000,000 shares authorized; 1,892,156,225 and 1,881,194,682 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively 189 188 Additional paid-in capital 2,461,320 2,438,703 Accumulated other comprehensive income 9,327 5,070 Retained deficit ( 2,087,861 ) ( 2,064,982 ) Total stockholders’ equity 382,975 378,979 Total liabilities and stockholders’ equity $ 926,246 $ 924,309 See accompanying notes to unaudited interim condensed consolidated financial statements. 2 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) (Unaudited) Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Retained Deficit Total Shares Amount Shares Amount Balances – January 1, 2024 149 $ — 1,881,195 $ 188 $ 2,438,703 $ 5,070 $ ( 2,064,982 ) $ 378,979 Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation — — 2,739 — 11,794 — — 11,794 Series A Preferred Stock Dividends — — — — ( 2,644 ) — — ( 2,644 ) Other — — — — ( 272 ) — — ( 272 ) Other comprehensive income — — — — — 2,393 — 2,393 Net loss — — — — — — ( 13,196 ) ( 13,196 ) Balances – March 31, 2024 149 $ — 1,883,934 $ 188 $ 2,447,581 $ 7,463 $ ( 2,078,178 ) $ 377,054 Net issuance of restricted stock awards, stock for employee stock options and stock for employee stock purchase plan and recognition of stock-based compensation — — 568 — 8,844 — — 8,844 Other — — — — 39 — — 39 Series A Preferred Stock Dividends — — — — ( 2,644 ) — — ( 2,644 ) Issuance of stock in connection with License Agreement with XCOM — — 7,654 1 7,500 — — 7,501 Other comprehensive income — — — — — 1,864 — 1,864 Net loss — — — — — — ( 9,683 ) ( 9,683 ) Balances – June 30, 2024 149 $ — 1,892,156 $ 189 $ 2,461,320 $ 9,327 $ ( 2,087,861 ) $ 382,975 3 Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Deficit Total Shares Amount Shares Amount Balances – January 1, 2023 149 $ — 1,811,075 $ 181 $ 2,345,612 $ 9,242 $ ( 2,040,264 ) $ 314,771 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation — — 2,037 — 3,897 — — 3,897 Series A Preferred Stock Dividends — — — — ( 3,952 ) — — ( 3,952 ) Other — — — — 47 — — 47 Other comprehensive loss — — — — — ( 1,429 ) — ( 1,429 ) Net loss — — — — — — ( 3,480 ) ( 3,480 ) Balances – March 31, 2023 149 $ — 1,813,112 $ 181 $ 2,345,604 $ 7,813 $ ( 2,043,744 ) $ 309,854 Net issuance of restricted stock awards, stock for employee stock options and stock for employee stock purchase plan and recognition of stock-based compensation — — 860 — 2,510 — — 2,510 Other — — — — 47 — — 47 Series A Preferred Stock Dividends — — — — ( 2,644 ) — — ( 2,644 ) Fair value of Thermo guarantee associated with the 2023 Funding Agreement — — — — 6,897 — — 6,897 Other comprehensive loss — — — — — ( 1,307 ) — ( 1,307 ) Net income — — — — — — 9 9 Balances – June 30, 2023 149 $ — 1,813,972 $ 181 $ 2,352,414 $ 6,506 $ ( 2,043,735 ) $ 315,366 See accompanying notes to unaudited interim condensed consolidated financial statements. 4 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2024 June 30, 2023 Cash flows provided by operating activities: Net loss $ ( 22,879 ) $ ( 3,471 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 44,207 43,823 Stock-based compensation expense 18,391 6,292 Noncash interest and accretion expense 4,646 9,760 Unrealized foreign currency loss (gain) 8,361 ( 4,008 ) Write off of debt discount and deferred financing costs upon extinguishment of debt — 10,194 Other, net 2,259 ( 1,690 ) Changes in operating assets and liabilities: Accounts receivable 8,195 ( 2,100 ) Inventory 1,148 12 Prepaid expenses and other current assets ( 88 ) ( 1,151 ) Other assets 1,261 42 Accounts payable and accrued expenses ( 2,685 ) ( 3,445 ) Payables to affiliates 63 ( 42 ) Other non-current liabilities 1,843 21 Deferred revenue 1,764 ( 11,244 ) Net cash provided by operating activities 66,486 42,993 Cash flows used in investing activities: Payments under the satellite procurement agreement ( 45,214 ) ( 108,664 ) Payments under the launch services agreement ( 16,000 ) — Payments for other network upgrades to support the Service Agreements ( 3,845 ) ( 6,898 ) Payments of capitalized interest ( 3,954 ) ( 5,263 ) Payments for network upgrades to support product development ( 4,777 ) ( 3,422 ) Purchase of intangible assets ( 668 ) ( 389 ) Net cash used in investing activities ( 74,458 ) ( 124,636 ) Cash flows provided by financing activities: Principal and interest payments of the 2019 Facility Agreement — ( 148,281 ) Proceeds from 2023 13 % Notes — 190,000 Proceeds from 2023 Funding Agreement 37,747 87,730 Principal payment of 2021 Funding Agreement ( 17,300 ) — Dividends paid on Series A Preferred Stock ( 5,288 ) ( 6,595 ) Payments for debt issuance costs — ( 8,530 ) Proceeds from issuance of common stock and exercise of options 1,085 498 Net cash provided by financing activities 16,244 114,822 Effect of exchange rate changes on cash and cash equivalents ( 682 ) 73 Net increase in cash and cash equivalents 7,590 33,252 Cash and cash equivalents, beginning of period 56,744 32,082 Cash and cash equivalents, end of period (1) $ 64,334 $ 65,334 Six Months Ended June 30, 2024 June 30, 2023 Supplemental disclosure of cash flow information: Cash paid for interest $ 6,694 $ 7,554 Supplemental disclosure of non-cash financing and investing activities: Increase in capitalized accrued interest for network upgrades $ 4,398 $ 1,609 Capitalized accretion of debt discount and amortization of prepaid financing costs 4,034 1,772 Accrued satellite construction assets 19,866 54,228 Re-characterization of 2021 Funding Agreement to debt — 87,950 Fair value of common stock issued for XCOM SSA 7,500 — Construction in progress assets acquired through XCOM SSA 2,754 — (1) Cash and cash equivalents on the consolidated balance sheet is equal to cash and cash equivalents on the statement of cash flows See accompanying notes to unaudited interim condensed consolidated financial statements. 5 GLOBALSTAR, INC. NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications and wholesale capacity services through its global satellite network. The Company’s only reportable segment is its MSS business. Thermo Companies, through commonly controlled affiliates, (collectively, “Thermo”) is the principal owner and largest stockholder of Globalstar. The Company’s Executive Chairman of the Board controls Thermo. The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); however, management believes the disclosures made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024 (the “2023 Annual Report”). The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. The Company evaluates estimates on an ongoing basis. The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation. These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year or any future period. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which updates qualitative and quantitative disclosures for the rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company will adopt this standard when it becomes effective on January 1, 2025. The Company is evaluating the impact this ASU may have on its financial statement disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. This ASU also explicitly requires public entities with a single reportable segment to provide all segment disclosures under ASC 280, including the new disclosures in this ASU. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. The Company is evaluating the impact this ASU may have on its financial statement disclosures. 6 2. REVENUE Disaggregation of Revenue The following table discloses revenue disaggregated by type of product and service (amounts in thousands): Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Service revenue: Subscriber services Duplex $ 4,965 $ 6,359 $ 9,720 $ 12,110 SPOT 10,379 11,039 20,622 22,353 Commercial IoT 6,716 5,356 13,153 10,534 Wholesale capacity services 34,700 25,478 66,329 55,889 Engineering and other services 875 416 1,276 716 Total service revenue 57,635 48,648 111,100 101,602 Subscriber equipment sales 2,750 6,424 5,765 12,114 Total revenue $ 60,385 $ 55,072 $ 116,865 $ 113,716 The Company is the operator for certain satellite-enabled services offered by Apple ("Partner") (the "Services") pursuant to the agreement (the “Service Agreement”) and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Service Agreements generally require Globalstar to allocate network capacity to support the Services, which launched in November 2022. Revenue associated with the Service Agreements is included in "Wholesale capacity services" in the table above. As consideration for the services provided by Globalstar under the Service Agreements, payments include a fixed service fee, payments relating to certain service-related operating expenses and capital expenditures, additional fees related to enhanced services, and potential bonus payments subject to satisfaction of certain licensing, service and other related criteria. The Company also has an agreement with a government services company to utilize the Company's satellite network for a mission critical service for government applications. Revenue associated with this agreement is included in "Wholesale capacity services" in the table above. Accounts Receivable The Company records trade accounts receivable from its customers, including MSS subscribers and its wholesale capacity customers, when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future. 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: June 30, 2024 December 31, 2023 Accounts receivable, net of allowance for credit losses Subscriber accounts receivable $ 14,093 $ 14,474 Wholesale capacity accounts receivable 29,055 34,269 Total accounts receivable, net of allowance for credit losses $ 43,148 $ 48,743 As discussed in Note 5: Commitments and Contingencies, the Company entered into a satellite procurement agreement and a launch services agreement. The new satellites purchased under the satellite procurement agreement will replenish the Company's HIBLEO-4 U.S.-licensed system. Pursuant to the Service Agreements, payments are expected to be paid to the Company on a straight-line basis commencing with the launch of these new satellites through their estimated useful life ("Phase 2 Service Period"). Based on construction in progress incurred by Globalstar, amounts expected to be billed by the Company associated with this phase of the Service A greements were $ 219.0 million a s of June 30, 2024 . 7 Contract Liabilities Contract liabilities, which are included in deferred revenue and other non-current liabilities on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. Contract liabilities reflect balances from its customers, including MSS subscribers and its wholesale capacity customers. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands). As of: June 30, 2024 December 31, 2023 Short-term contract liabilities Subscriber contract liabilities $ 22,547 $ 22,816 Wholesale capacity contract liabilities, net of contract asset 35,165 30,861 Total short-term contract liabilities $ 57,712 $ 53,677 Long-term contract liabilities Subscriber contract liabilities $ 1,533 $ 1,632 Wholesale capacity contract liabilities, net of contract asset — 1,581 Total long-term contract liabilities $ 1,533 $ 3,213 Total contract liabilities $ 59,245 $ 56,890 For subscriber contract liabilities, the amount of revenue recognized during the six months ended June 30, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 12.8 million and $ 14.0 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the six months ended June 30, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 25.9 million and $ 33.5 million, respectively. The duration of the Company’s contracts with subscribers is generally one year or less. 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. The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands). As of: June 30, 2024 December 31, 2023 Wholesale capacity contract liabilities, net: Additional consideration associated with the 2021 and 2023 Funding Agreements (2) $ 14,461 $ 16,104 Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 during Phases 1 and 2 22,793 23,673 Advanced payments contractually owed for services expected to be performed with the next-generation satellite constellation prior to the Phase 2 Service Period 12,698 14,204 Advanced payments for the Phase 1 service fee, service-related operating and capital expenditures and other services 27,770 19,907 Other advanced payments associated with future performance obligations 5,063 5,219 Contract asset (1) ( 47,620 ) ( 46,665 ) Wholesale capacity contract liabilities, net $ 35,165 $ 32,442 (1) Primarily includes warrants with an initial fair value at the time of issuance of $ 48.3 million which was 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 performs its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided. (2) Includes debt discounts associated with the amended 2021 and 2023 Funding Agreements. The offset was recorded to deferred revenue and is being recognized into revenue over the Phase 1 and 2 Service Periods. 8 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): As of: June 30, 2024 December 31, 2023 Globalstar System: Space component $ 1,230,975 $ 1,230,975 Ground component 104,657 106,757 Construction in progress: Space component 281,030 240,732 Ground component 6,014 6,814 Other 8,327 9,574 Total Globalstar System 1,631,003 1,594,852 Internally developed and purchased software 24,484 23,310 Equipment 13,758 11,905 Land and buildings 2,817 2,677 Leasehold improvements 2,174 2,147 Total property and equipment 1,674,236 1,634,891 Accumulated depreciation ( 1,053,683 ) ( 1,010,889 ) Total property and equipment, net $ 620,553 $ 624,002 In 2022, the Company entered into an agreement with MDA for the purchase of new satellites that will replenish the Company's HIBLEO-4 U.S.-licensed system . In 2023, the Company entered into an agreement with SpaceX providing for the launch of the first set of satellites under the agreement with MDA. Refer to Note 5: Commitments and Contingencies for further discussion of these agreements. As of June 30, 2024, the Company has incurred $ 208.9 million and $ 19.5 million for milestones completed under the agreements with MDA and SpaceX, respectively. These costs, as well as associated personnel costs and capitalized interest, are reflected in the "space component" of construction in progress in the table above. 9 4. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS Long-term debt and vendor financing consists of the following (in thousands): As of: June 30, 2024 December 31, 2023 Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value 2023 Funding Agreement $ 155,000 $ 13,602 $ 141,398 $ 117,253 $ 15,433 $ 101,820 2021 Funding Agreement 58,150 4,231 53,919 75,450 6,888 68,562 2023 13 % Notes 212,652 14,844 197,808 205,958 16,040 189,918 Total debt $ 425,802 $ 32,677 $ 393,125 $ 398,661 $ 38,361 $ 360,300 Less: current portion 34,600 — 34,600 34,600 — 34,600 Long-term debt $ 391,202 $ 32,677 $ 358,525 $ 364,061 $ 38,361 $ 325,700 The principal amounts shown above include payment of in-kind interest, as applicable. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion. As of June 30, 2024, the current portion of long-term debt is associated with the 2021 Funding Agreement and represents the amounts to be paid under the Service Agreements during the next twelve months. 2023 Funding Agreement In 2023, the Service Agreements were amended to provide for, among other things, payment of up to $ 252 million to the Company (the “2023 Funding Agreement”), which the Company intends to use to fund 50 % of the amounts due under its agreement with MDA, as well as launch, insurance and ancillary costs incurred in connection with the construction and launch of these satellites. The total amount paid to the Company under the 2023 Funding Agreement, including fees, is expected to be recouped from amounts payable under the Service Agreements beginning no later than the third quarter of 2025. For as long as any amount funded under the 2023 Funding Agreement is outstanding, the Company will be subject to certain covenants. The Company’s obligations under the 2023 Funding Agreement are secured by a first-priority lien over substantially all of the assets of the Company and its domestic subsidiaries. Thermo guaranteed certain of the Company’s obligations under the 2023 Funding Agreement and Service Agreements. See further discussion regarding Thermo's guarantee in Note 6: Related Party Transactions. As the Company makes draws under the 2023 Funding Agreement, the amount of each draw is recorded at fair value using a discounted cash flow model. The Company records a debt discount for the difference between the fair value of the debt and the proceeds received and accretes this debt discount to interest expense through the maturity date using an effective interest rate method. There has been one draw this year in February 2024 for total proceeds of $ 37.7 million with a fair value of $ 37.2 million. This difference was attributed to the economic benefit received due to the existing customer relationship. 2021 Funding Agreement During 2021, the Company received payments under the amended 2021 Funding Agreement, totaling $ 94.2 million. The Company's obligations under the 2021 Funding Agreement are secured by a first-priority lien in substantially all of the assets of the Company and its domestic subsidiaries. This funding is being recouped as services are performed by the Company over the estimated Phase 1 Service Period with the last recoupment to be made in the first quarter of 2026. During the six months ended June 30, 2024, a total of $ 17.3 million has been recouped pursuant to the terms of the 2021 Funding Agreement. 10 2023 13 % Notes In 2023, the Company 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, have a stated maturity of September 15, 2029 and bear interest initially at a rate of 13.00 % per annum payable semi-annually in arrears. Pursuant to the Service Agreements, the Company has agreed to pay cash interest on the 2023 13 % Notes at a rate of 6.5 % per annum and PIK interest at a rate of 6.5 % per annum. In March 2024, the Company made an interest payment totaling $ 13.4 million, of which $ 6.7 million was paid in cash and $ 6.7 million was paid-in-kind, increasing the principal balance outstanding under the 2023 13 % Notes. Series A Preferred Stock In 2022, the Company issued 149,425 shares of its 7.0 % Perpetual Preferred Stock, Series A, liquidation preference $ 1,000 per share (the “Series A Preferred Stock”) with a fair value of $ 105.3 million. 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 are entitled to receive, when, as and if declared by the Company's 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. Through June 30, 2024, the Company paid dividends approved by the Company's Board of Directors totaling $ 5.3 million. Fair Value of Debt and Other Financing Arrangements The Company believes it is not practicable to determine the fair value of its debt agreements on a recurring basis 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. 5. COMMITMENTS AND CONTINGENCIES Service Agreements The Service Agreements set forth the primary terms for the Company to provide services to Partner and incur costs related primarily to new gateways and upgrades at existing gateways as well as satellite construction and launch services. 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. Satellite Procurement Agreement and Launch Services Agreement The Company has a satellite procurement agreement with MDA pursuant to which the Company will acquire at least 17 satellites (and up to 26 satellites) with an amended contract price of $ 329.5 million, with initial delivery expected to occur in 2025. In addition, MDA will procure a satellite operations control center for $ 4.9 million as well as other equipment for $ 3.7 million. As more fully described in the Company's Current Report on Form 8-K filed with the Commission on August 31, 2023, Globalstar entered into a Launch Services Agreement with SpaceX and certain related ancillary agreements (the “Launch Services Agreements”), providing for the launch of the first set of the satellites the Company is acquiring pursuant to the satellite procurement agreement with MDA. The Launch Services Agreements provide a launch window from April to September 2025. The Service Agreements provide for the Company to receive service payments equal to 95 % of the approved capital expenditures under each contract. 11 6. RELATED PARTY TRANSACTIONS Transactions with Thermo 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 related to normal purchase transactions were $ 0.5 million as of June 30, 2024 and December 31, 2023. Certain general and administrative expenses are incurred by Thermo on behalf of the Company. These expenses include: (i) non-cash expenses, such as stock compensation costs as well as costs recorded as a contribution to capital and (ii) expenses incurred by Thermo on behalf of the Company that are charged to the Company; these charges are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time. Lease Agreement The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments increase at a rate of 2.5 % per year. 2024 lease payments will be $ 1.6 million. The lease term is ten years and will expire in January 2029. During each of the six months ended June 30, 2024 and 2023, the Company incurred lease expense of $ 0.8 million under this lease agreement. Perpetual Preferred Stock Thermo's ownership portion in the Company's Series A Preferred Stock is $ 136.7 million. 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. During 2024, the Company made dividend payments to Thermo, which were approved by the Company's Board of Directors, totaling $ 4.8 million. Service Agreements 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 launch of Services in November 2022. Guarantee with 2023 Funding Agreement Amounts payable by the Company in connection with the 2023 Funding Agreement and certain other obligations under the Service Agreements are guaranteed by Thermo. As consideration for Thermo's guarantee, the Company issued to Thermo warrants to purchase 10.0 million shares of the Company’s common stock at an exercise price equal to $ 2.00 per share (as calculated pursuant to the agreement). 5.0 million of these warrants vested immediately upon effectiveness of Thermo's guarantee, which occurred in December 2023, and the remaining 5.0 million warrants vest if and when Thermo advances aggregate funds of $ 25.0 million or more to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. These warrants expire five years after the date of issuance. To the extent Thermo is required to advance amounts under the guarantee, the Company is required to issue shares of Common Stock of the Company in respect of such advance in an amount equal to the amount of such payment divided by the average of the volume weighted average price of the Company’s common stock for the five trading days immediately preceding such payment. Governance The Company has a Strategic Review Committee that is required to remain in existence for as long as Thermo and its affiliates beneficially own forty-five percent ( 45 %) or more of Globalstar’s outstanding common stock. To the extent permitted by applicable law, the Strategic Review Committee has exclusive responsibility for the oversight, review and approval of, among other things and subject to certain exceptions, any acquisition by Thermo and its affiliates of additional newly-issued securities of the Company and any transaction between the Company and Thermo and its affiliates with a value in excess of $ 250,000 . 12 Agreements with XCOM Labs, Inc. Dr. Paul E. Jacobs is the Chief Executive Officer of Globalstar and also serves as the Executive Chairman of Virewirx (formerly XCOM Labs) and is the controlling stockholder of Virewirx. In connection with the August 2023 License Agreement, Globalstar issued 60.6 million shares of its common stock, representing a transaction value of approximately $ 68.7 million, to XCOM. Of the consideration paid for the License Agreement, 16.7 million shares were issued to Dr. Jacobs. Dr. Jacobs does not have any family relationships with any director or executive officer of the Company and has not been directly or indirectly involved in any related party transactions with the Company, except for transactions related to the License Agreement and the SSA. The Company and XCOM also executed a Support Services Agreement ("SSA") pursuant to which XCOM is required to provide certain services to the Company. Fees payable by Globalstar pursuant to the SSA are based on costs incurred. The first payment of $ 11.9 million was paid in August 2023 for an initial service period of approximately nine months under the SSA. In June 2024, the Company issued Virewirx 7.7 million shares of Globalstar common stock, representing a transaction value of $ 8.1 million. This issuance included $ 7.5 million for costs incurred under the SSA, as well as the release of holdback shares under the License Agreement. The SSA payment covers a period of approximately six months of service costs and was recorded as a prepaid asset upon issuance on the Company's consolidated balance sheet. In June 2024, Virewirx sold 4.5 million of the total 7.7 million shares in a private placement transaction to an affiliate of the Thermo Companies. 7. NET LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per common share during each of the three and six months ended June 30, 2024 and 2023 (amounts in thousands, except per share data): Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Numerator: Net (loss) income $ ( 9,683 ) $ 9 $ ( 22,879 ) $ ( 3,471 ) Effect of Series A Preferred Stock dividends ( 2,644 ) ( 2,644 ) ( 5,288 ) ( 5,259 ) Adjusted net loss attributable to common shareholders $ ( 12,327 ) $ ( 2,635 ) $ ( 28,167 ) $ ( 8,730 ) Denominator: Weighted average shares outstanding - basic and diluted 1,884,208 1,813,393 1,883,406 1,812,617 Net loss per common share - basic and diluted $ ( 0.01 ) $ 0.00 $ ( 0.01 ) $ 0.00 For the three months ended June 30, 2024 and 2023, 17.5 million and 18.2 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of such securities would be anti-dilutive. For the six months ended June 30, 2024 and 2023, 19.2 million and 19.0 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of such securities would be anti-dilutive. Included in these shares for all periods presented is a portion of the 49.1 million Warrants issued under the Service Agreements in 2022 based on the treasury stock method. During 2023, 5.0 million of the warrants that were issued to Thermo for its guarantee of the 2023 Funding Agreement vested; none of these warrants are included in the potentially dilutive securities for the periods presented due to the exercise price of the warrants relative to the average market price of Globalstar common stock during the periods. Also excluded from the amounts above are 5.0 million unvested warrants associated with Thermo's guarantee of the 2023 Funding Agreement; these warrants vest only if Thermo advances aggregate funds of $ 25.0 million or more to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. As discussed in Note 4: Long-Term Debt and Other Financing Arrangements and as reflected in table above, the Company's Board of Directors approved the payment of dividends for each of the three and six months ended June 30, 2024 and 2023, respectively, on its Series A Preferred Stock. This amount adjusts the numerator used to calculate loss per share. 13