Globalstar, Inc. 10-Q

Item 1. Financial Statements. GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Revenue: Service revenue $ 68,908 $ 53,643 $ 180,008 $ 155,245 Subscriber equipment sales 3,399 4,040 9,164 16,154 Total revenue 72,307 57,683 189,172 171,399 Operating expenses: Cost of services (exclusive of depreciation, amortization, and accretion shown separately below) 19,185 13,872 54,058 37,938 Cost of subscriber equipment sales 2,515 3,458 6,739 13,429 Marketing, general and administrative 10,439 12,090 31,438 31,843 Stock-based compensation 8,254 4,346 26,645 10,638 Reduction in the value of long-lived assets 231 35 536 35 Depreciation, amortization and accretion 22,249 21,865 66,456 65,688 Total operating expenses 62,873 55,666 185,872 159,571 Income from operations 9,434 2,017 3,300 11,828 Other income (expense): Loss on extinguishment of debt — — — ( 10,403 ) Interest income and expense, net of amounts capitalized ( 2,872 ) ( 3,945 ) ( 10,301 ) ( 11,047 ) Foreign currency gain (loss) 4,918 ( 4,151 ) ( 3,417 ) ( 206 ) Other 186 25 ( 605 ) 373 Total other income (expense) 2,232 ( 8,071 ) ( 14,323 ) ( 21,283 ) Income (loss) before income taxes 11,666 ( 6,054 ) ( 11,023 ) ( 9,455 ) Income tax expense 1,732 115 1,922 185 Net income (loss) $ 9,934 $ ( 6,169 ) $ ( 12,945 ) $ ( 9,640 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 3,775 ) 2,503 482 ( 233 ) Comprehensive income (loss) $ 6,159 $ ( 3,666 ) $ ( 12,463 ) $ ( 9,873 ) Net income (loss) attributable to common shareholders (Note 7:) 7,261 ( 8,842 ) ( 20,906 ) ( 17,572 ) Net income (loss) per common share: Basic $ 0.00 $ 0.00 $ ( 0.01 ) $ ( 0.01 ) Diluted 0.00 0.00 ( 0.01 ) ( 0.01 ) Weighted-average shares outstanding: Basic 1,892,253 1,836,251 1,886,377 1,820,582 Diluted 1,910,061 1,836,251 1,886,377 1,820,582 See accompanying notes to unaudited interim condensed consolidated financial statements. 1 GLOBALSTAR, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) (Unaudited) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 51,916 $ 56,744 Accounts receivable, net of allowance for credit losses of $ 1,446 and $ 2,312 , respectively 43,021 48,743 Inventory 11,877 14,582 Prepaid expenses and other current assets 20,638 22,584 Total current assets 127,452 142,653 Property and equipment, net 617,064 624,002 Operating lease right of use assets, net 34,364 34,164 Intangible and other assets, net of accumulated amortization of $ 14,742 and $ 12,385 , respectively 138,681 123,490 Total assets $ 917,561 $ 924,309 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 34,600 $ 34,600 Accounts payable and accrued expenses 34,417 28,985 Accrued satellite construction costs 1,015 58,187 Payables to affiliates 274 459 Deferred revenue, net 46,548 53,677 Total current liabilities 116,854 175,908 Long-term debt 359,759 325,700 Operating lease liabilities 28,554 29,244 Other non-current liabilities 18,301 14,478 Total non-current liabilities 406,614 369,422 Commitments and contingencies (Note 5) Stockholders’ equity: Series A Perpetual Preferred Stock of $ 0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at September 30, 2024 and December 31, 2023, respectively — — Voting Common Stock of $ 0.0001 par value; 2,150,000,000 shares authorized; 1,892,348,276 and 1,881,194,682 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 189 188 Additional paid-in capital 2,466,279 2,438,703 Accumulated other comprehensive income 5,552 5,070 Retained deficit ( 2,077,927 ) ( 2,064,982 ) Total stockholders’ equity 394,093 378,979 Total liabilities and stockholders’ equity $ 917,561 $ 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 (Loss) 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 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 — — — — 39 — — 39 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 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation — — 192 7,566 — — 7,566 Series A Preferred Stock Dividends — — — — ( 2,673 ) — — ( 2,673 ) Other — — — — 66 — — 66 Other comprehensive loss — — — — — ( 3,775 ) — ( 3,775 ) Net income — — — — — — 9,934 9,934 Balances – September 30, 2024 149 — 1,892,348 $ 189 $ 2,466,279 $ 5,552 $ ( 2,077,927 ) $ 394,093 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 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 — — — — 47 — — 47 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 Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation — — 2,171 1 3,870 — — 3,871 Series A Preferred Stock Dividends — — — — ( 2,673 ) — — ( 2,673 ) Issuance of stock in connection with License Agreement with XCOM — — 59,977 6 70,415 — — 70,421 Other — — — — 47 — — 47 Other comprehensive income — — — — — 2,503 — 2,503 Net loss — — — — — — ( 6,169 ) ( 6,169 ) Balances – September 30, 2023 149 — 1,876,120 $ 188 $ 2,424,073 $ 9,009 $ ( 2,049,904 ) $ 383,366 See accompanying notes to unaudited interim condensed consolidated financial statements. 4 GLOBALSTAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2024 September 30, 2023 Cash flows provided by operating activities: Net loss $ ( 12,945 ) $ ( 9,640 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 66,456 65,688 Stock-based compensation expense 26,645 10,638 Noncash interest and accretion expense 6,422 12,304 Unrealized foreign currency loss 3,441 131 Write off of debt discount and deferred financing costs upon extinguishment of debt — 10,194 Other, net 3,712 ( 1,766 ) Changes in operating assets and liabilities: Accounts receivable 8,283 2,082 Inventory 2,008 ( 2,029 ) Prepaid expenses and other current assets 413 ( 145 ) Other assets 1,711 ( 515 ) Accounts payable and accrued expenses ( 1,703 ) ( 5,435 ) Payables to affiliates ( 185 ) ( 173 ) Other non-current liabilities 2,924 45 Deferred revenue ( 8,647 ) ( 12,823 ) Net cash provided by operating activities 98,535 68,556 Cash flows used in investing activities: Payments under the satellite procurement agreement ( 66,962 ) ( 110,215 ) Payments under the launch services agreement ( 18,050 ) ( 6,400 ) Payments for other network upgrades to support the Service Agreements ( 6,741 ) ( 11,685 ) Payments of capitalized interest ( 8,592 ) ( 8,810 ) Payments for network upgrades to support product development ( 5,648 ) ( 4,960 ) Purchase of intangible assets ( 1,726 ) ( 315 ) Net cash used in investing activities ( 107,719 ) ( 142,385 ) 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 ( 25,950 ) ( 6,250 ) Dividends paid on Series A Preferred Stock ( 7,961 ) ( 9,269 ) Payments for debt issuance costs — ( 8,556 ) Proceeds from issuance of common stock and exercise of options 1,078 528 Net cash provided by financing activities 4,914 105,902 Effect of exchange rate changes on cash and cash equivalents ( 558 ) ( 19 ) Net (decrease) increase in cash and cash equivalents ( 4,828 ) 32,054 Cash and cash equivalents, beginning of period 56,744 32,082 Cash and cash equivalents, end of period (1) $ 51,916 $ 64,136 Nine Months Ended September 30, 2024 September 30, 2023 Supplemental disclosure of cash flow information: Cash paid for interest $ 13,605 $ 13,512 Supplemental disclosure of non-cash financing and investing activities: Increase in capitalized accrued interest for network upgrades $ 6,911 $ 3,547 Capitalized accretion of debt discount and amortization of prepaid financing costs 6,194 3,620 Accrued satellite construction assets 1,015 65,744 Re-characterization of 2021 Funding Agreement to debt — 87,950 Fair value of common stock issued for License Agreement — 58,534 Fair value of common stock issued for XCOM SSA 7,500 11,887 Construction in progress assets acquired through XCOM SSA 4,250 624 (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 nine months ended September 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 plans to 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 plans to adopt this ASU for its fiscal year end December 31, 2024 disclosures. 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 Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Service revenue: Subscriber services Duplex $ 5,955 $ 7,978 $ 15,675 $ 20,088 SPOT 10,444 11,350 31,066 33,703 Commercial IoT 6,650 6,347 19,803 16,881 Wholesale capacity services 43,861 27,517 109,149 83,406 Government and other services 1,998 451 4,315 1,167 Total service revenue 68,908 53,643 180,008 155,245 Subscriber equipment sales 3,399 4,040 9,164 16,154 Total revenue $ 72,307 $ 57,683 $ 189,172 $ 171,399 The Company is the operator for certain satellite-enabled services offered by Apple ("Customer") (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 expanded services, and potential bonus payments subject to satisfaction of certain licensing, service and other related criteria. For a discussion of the Updated Services Agreements, see Note 8: Subsequent Events. "Government and other services" reflect revenue for engineering and other communication services, such as terrestrial spectrum and network services, government service contracts and teleport lease arrangements. The Company's largest network services agreement is with a government services company to utilize the Company's satellite network for a mission critical service for government applications. Accounts Receivable 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. 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: September 30, 2024 December 31, 2023 Accounts receivable, net of allowance for credit losses Subscriber and other accounts receivable $ 15,309 $ 14,474 Wholesale capacity accounts receivable 27,712 34,269 Total accounts receivable, net of allowance for credit losses $ 43,021 $ 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 $ 224.6 million as o f September 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. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands). As of: September 30, 2024 December 31, 2023 Short-term contract liabilities Subscriber and other contract liabilities $ 21,542 $ 22,816 Wholesale capacity contract liabilities, net of contract asset 25,006 30,861 Total short-term contract liabilities $ 46,548 $ 53,677 Long-term contract liabilities Subscriber and other contract liabilities $ 1,446 $ 1,632 Wholesale capacity contract liabilities, net of contract asset — 1,581 Total long-term contract liabilities $ 1,446 $ 3,213 Total contract liabilities $ 47,994 $ 56,890 For subscriber contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 16.4 million and $ 18.9 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 29.9 million and $ 41.6 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 when the customer is expected to benefit from the related performance obligation. The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands). As of: September 30, 2024 December 31, 2023 Wholesale capacity contract liabilities, net: Additional consideration associated with the 2021 and 2023 Funding Agreements (1) $ 13,354 $ 16,104 Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 22,354 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 10,867 14,204 Advanced payments for the Phase 1 Service Period fee, service-related operating and capital expenditures and other services 28,277 19,907 Other advanced payments associated with future performance obligations 3,195 5,219 Contract asset (2) ( 53,041 ) ( 46,665 ) Wholesale capacity contract liabilities, net $ 25,006 $ 32,442 (1) Includes debt discounts associated with the amended 2021 and 2023 Funding Agreements; the offset was recorded to deferred revenue. (2) 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 time as described above. 8 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): As of: September 30, 2024 December 31, 2023 Globalstar System: Space component $ 1,215,064 $ 1,230,975 Ground component 108,910 106,757 Construction in progress: Space component 296,237 240,732 Ground component 4,692 6,814 Other 7,626 9,574 Total Globalstar System 1,632,529 1,594,852 Internally developed and purchased software 24,839 23,310 Equipment 14,623 11,905 Land and buildings 3,409 2,677 Leasehold improvements 2,193 2,147 Total property and equipment 1,677,593 1,634,891 Accumulated depreciation ( 1,060,529 ) ( 1,010,889 ) Total property and equipment, net $ 617,064 $ 624,002 In 2022, the Company entered into an agreement with Macdonald, Dettwiler and Associates Corporation ("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 Space Exploration Technologies Corporation (“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 September 30, 2024, the Company has incurred $ 211.6 million and $ 22.6 million for miles tones 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: September 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 $ 12,317 $ 142,683 $ 117,253 $ 15,433 $ 101,820 2021 Funding Agreement 49,500 3,133 46,367 75,450 6,888 68,562 2023 13 % Notes 219,563 14,254 205,309 205,958 16,040 189,918 Total debt $ 424,063 $ 29,704 $ 394,359 $ 398,661 $ 38,361 $ 360,300 Less: current portion 34,600 — 34,600 34,600 — 34,600 Long-term debt $ 389,463 $ 29,704 $ 359,759 $ 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 September 30, 2024, the current portion of long-term debt relates to the 2021 Funding Agreement and represents the amounts to be paid under the Service Agreements (as defined above) during the next twelve months. As discussed in more detail in Note 8: Subsequent Events, on October 29, 2024, the Company and Customer entered into the Updated Services Agreements which amend certain terms of the 2023 Funding Agreement and provide funding to refinance the outstanding principal balance as well as pay the make-whole amount for the 2023 13 % Notes. 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 satellites purchased under such agreement. 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 in the third quarter of 2026 (as amended in the Updated Services Agreements). 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 be en one draw this year in Februa ry 2024 for total proceeds of $ 37.7 million with a fair value of $ 37.2 million. The Company attributed the $ 0.5 million difference 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 time period starting with the existing services through the launch of the new satellites ("Phase 1 Service Period"). The last recoupment is expected to be made in the first quarter of 2026. During the nine months ended September 30, 2024, a total of $ 26.0 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 and September 2024, the Company made interest payments totaling $ 13.4 million and $ 13.8 million, respectively, of which $ 6.7 million and $ 6.9 million, respectively, was paid in cash and $ 6.7 million and $ 6.9 million, respectively, 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 with respect to certain matters specifically affecting the rights and obligations of the Series A Preferred Stock. 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. During the nine months ended September 30, 2024, the Company paid dividends approved by the Company's Board of Directors totaling $ 8.0 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 cannot readily be compared to other debt instruments and their valuation 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 Customer and incur costs related primarily to constructing new gateways and upgrading 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. For a discussion of the Updated Services Agreements, see Note 8: Subsequent Events. 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 for the initial 17 satellites, with 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. Canadian Tax Audits 11 The Canada Revenue Agency ("CRA") is conducting audits of the Company's Canadian subsidiary for several tax years. The CRA has completed its audit for tax years 2016 - 2018 and assessed the Company additional tax liabilities and audit adjustments, which the Company is appealing. The tax years 2019 - 2022 remain under examination. The Company's net operating loss ("NOL") carryforwards for income tax reporting purposes in Canada would largely offset the expected final income tax settlement after appeal. Additionally, withholding tax, penalties and interest have been and are expected to be assessed for audit periods under examination. The Company expects that any assessed withholding tax and penalties will be refunded at the end of the audit process; however, interest assessed on the withholding tax is not recoverable. As a result of these audits, during the third quarter of 2024, the Company recorded $ 1.0 million of expense for uncertain tax positions associated with interest on withholding tax. As of September 30, 2024, the Company recorded $ 5.1 million in long-term tax receivables, $ 4.4 million in current uncertain tax position liabilities and $ 1.7 million in long-term uncertain tax position liabilities on its consolidated balance sheets associated with potential taxes, penalties and interest. 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 $ 0.3 million and $ 0.5 million as of September 30, 2024 and December 31, 2023, respectively. 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 and Land Purchase 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 is scheduled to expire in January 2029. During each of the nine months ended September 30, 2024 and 2023, the Company incurred lease expense of $ 1.2 million under this lease agreement. During the third quarter of 2024, the Company purchased land with a value of $ 0.5 million from Thermo Development, Inc. This land was purchased at cost and was recorded to "Property and equipment, net" on the Company's consolidated balance sheet as of September 30, 2024. The Company plans to use the land for a gateway location. Perpetual Preferred Stock Thermo's ownership portion in the Company's Series A Preferred Stock is $ 136.7 million (based upon the shares' liquidation preference). 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 the nine months ended September 30, 2024, the Company made dividend payments to Thermo, which were approved by the Company's Board of Directors, totaling $ 7.3 million. Service Agreements In connection with the Service Agreements, Customer 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 Customer 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 12 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 in December 2028. 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 . 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 Company's August 2023 License Agreement with Virewirx, 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. 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. 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. 13 7. NET INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted income (loss) per common share during each of the three and nine months ended September 30, 2024 and 2023 (amounts in thousands, except per share data): Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Numerator: Net income (loss) $ 9,934 $ ( 6,169 ) $ ( 12,945 ) $ ( 9,640 ) Effect of Series A Preferred Stock dividends ( 2,673 ) ( 2,673 ) ( 7,961 ) ( 7,932 ) Adjusted net income (loss) attributable to common shareholders $ 7,261 $ ( 8,842 ) $ ( 20,906 ) $ ( 17,572 ) Denominator: Weighted average shares outstanding - basic 1,892,253 1,836,251 1,886,377 1,820,582 Dilutive effect of stock-based compensation plans 1,814 — — — Dilutive effect of warrants issued under the Service Agreements 15,994 — — — Weighted average shares outstanding - diluted 1,910,061 1,836,251 1,886,377 1,820,582 Net income (loss) per common share - basic $ 0.00 $ 0.00 $ ( 0.01 ) $ ( 0.01 ) Net income (loss) per common share - diluted $ 0.00 $ 0.00 $ ( 0.01 ) $ ( 0.01 ) For the three months ended September 30, 2023, 17.8 million shares of potential common stock were excluded from diluted shares outstanding because the effects of such securities would be anti-dilutive. For the nine months ended September 30, 2024 and 2023, 18.7 million and 17.5 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 nine months ended September 30, 2024 and 2023, respectively, on its Series A Preferred Stock. This amount adjusts the numerator used to calculate loss per share. 8. SUBSEQUENT EVENTS As more fully described in the Company's Current Report on Form 8-K filed with the Commission on October 29, 2024, the Company and Customer agreed to make certain amendments to the Service Agreements and entered into other related agreements (collectively, the “Updated Services Agreements”) for Globalstar to deliver expanded services to Customer over a new MSS network, including a new satellite constellation, expanded ground infrastructure, and increased global MSS licensing (the “Extended MSS Network”). The Extended MSS Network will be owned by Globalstar Licensee, LLC, together with its subsidiaries (collectively, the “Globalstar SPE”), and operated by the Company. The Updated Services Agreements were effective upon the closing on November 5, 2024 (the "Closing Date"). Customer will prepay for certain services to be delivered by the Company to Customer’s end users utilizing the Extended MSS Network under the Updated Services Agreement and will be a passive equity holder in Globalstar SPE. Customer has purchased 400,000 Class B Units in the Globalstar SPE (the “Customer Class B Units”), representing a 20 % equity interest, for $ 400 million, which was paid on the Closing Date using cash and in-kind asset contributions. The Updated Services Agreements provide that Customer will make cash prepayments to the Company, including for approved capital expenditures in connection with the Extended MSS Network. These prepayments consist of: (1) an 14 infrastructure prepayment (the “Infrastructure Prepayment”) of up to $ 1.1 billion, which is to be funded over the construction period on a quarterly basis, the proceeds of which the Globalstar SPE will use, together with the proceeds from the sale of the Customer Class B Units to pay amounts due for the Extended MSS Network (including, but not limited to, construction and launch costs) and (2) an amount necessary for the Company to retire its outstanding 2023 13 % Notes (the "Current Debt Repayment"). The 2023 13 % Notes were repurchased in full on the Closing Date. The Infrastructure Prepayment and the funds used for the Current Debt Repayment are contained within one prepayment agreement (the “2024 Prepay Agreement”). In connection with the Updated Services Agreement, the Company entered into a launch services agreement with SpaceX for the new satellites that will be procured for the Extended MSS Network. As consideration for the Satellite Services as set forth in the Updated Services Agreements, the incremental service fees due from Customer to the Company include fees tied to the cost of the Extended MSS Network, fees for providing additional related services, fees tied to expenses incurred for the provision of such services, and performance bonuses. A portion of these payments is subject to the satisfaction of certain licensing, service levels and milestone achievements. Additionally, the Updated Services Agreements also provide for certain service fees of $ 30 million annually to be accelerated. The full paydown of the 2024 Prepay Agreement and the redemption of the Customer Class B Units are expected to be completed within the design useful life of the new satellites. The Company expects that such amounts payable to Customer will be set off with amounts payable by Customer. The Current Debt Repayment and a portion of the Infrastructure Prepayment may accrue annual fees, as provided in the 2024 Prepay Agreement. Such fees payable to Customer will be reduced or eliminated entirely if the Company meets certain defined milestones. In addition, the parties agreed to certain amendments to the 2023 Funding Agreement and certain related agreements, including: (1) elimination of cash sweeps; (2) relaxation of certain covenant levels; (3) a one-year deferral of the start of the repayment period from the third quarter of 2025 to the third quarter of 2026; and (4) an amendment to the existing security agreement to provide first lien security with respect to the Company’s obligations under the 2024 Prepay Agreement.