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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-02-29 · 211 added, 211 removed, 139 unchanged (75% of the section changed)

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Risk Factors.

The following information contains forward-looking statements, which are subject to risks and uncertainties.

The following information contains forward-looking statements, which are not guarantees of future performance and are not necessarily indicative of future results and are subject to risks and uncertainties.

Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements.

See “ Forward-Looking Statements ” at the beginning of this Report.

This Item generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.

Discussion of our results of operations for the years ended December 31, 2023 and 2022 can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Globalstar’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024.

Reverse Stock Split and Listing on the Nasdaq Stock Market LLC

On December 17, 2024, by written consent, following the approval and recommendation of the board of directors and its Strategic Review Committee, Thermo, which collectively owns a majority of our issued and outstanding shares of common stock, approved proposals to amend our certificate of incorporation to (i) conduct a reverse stock split of our issued and outstanding shares of common stock at a ratio between 1 for 10 and 1 for 25, and (ii) reduce the authorized number of shares of common stock that we can issue in proportion to the reverse stock split.

Effective following the close of trading on February 10, 2025, we voluntarily withdrew the listing of our common stock from the NYSE American, effected the reverse stock split at a ratio of 1 to 15 shares of common stock and amended our certificate of incorporation to reduce the number of authorized shares of common stock that we may issue from 2,150,000,000 shares to 143,333,334 shares of common stock.

Effective at the start of trading on February 11, 2025, our common stock began trading on a post-split basis under the symbol “GSAT” on the Nasdaq Stock Market LLC.

No fractional shares were issued as a result of the reverse stock split and it did not impact the par value of our common stock.

Any fractional shares that would otherwise have resulted from the reverse stock split were rounded up to the next whole share, except that any fractional shares resulting from the reverse stock split for any outstanding awards adjustments pursuant to the terms and conditions of our 2006 Equity Incentive Plan and the award or agreement governing such awards were rounded down to the next whole share.

Neither the reverse stock split nor the related amendments to our certificate of incorporation had any impact on the number of shares of preferred stock we are authorized to issue under our certificate of incorporation or the number of issued and outstanding shares of our Series A Preferred Stock.

All shares of common stock, warrants, stock-based compensation awards and per share amounts included in the Consolidated Financial Statements and applicable notes thereto in Part II, Item 8 of this Report and elsewhere in this Report have been retrospectively restated to reflect the effect of the reverse stock split and related amendments to our certificate of incorporation.

Performance Indicators

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• average monthly revenue per user, or ARPU, which is an indicator of our pricing and ability to obtain effectively long-term, high-value customers.

We calculate ARPU separately for each type of our subscriber-driven revenue, including Duplex, Commercial IoT and SPOT;

We calculate ARPU separately for each type of our subscriber-driven revenue, including Commercial IoT, SPOT and Duplex;

• operating income and adjusted EBITDA, both of which are indicators of our financial performance;

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Our revenue is categorized as service revenue and equipment revenue.

We provide services to customers using technology from our satellite and ground network.

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

During the twelve months ended December 31, 2023, total revenue increased $75.3 million, or 51%, to $223.8 million from $148.5 million in 2022.

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

We provide MSS to customers using technology from the Globalstar System.

Equipment revenue is generated from the sale of MSS devices that work over the Globalstar System.

We also generate service and equipment revenue from the sale of XCOM RAN systems and associated services that support such systems.

For the twelve months ended December 31, 2024, total revenue increased $26.5 million, or 12%, to $250.3 million from $223.8 million in 2023, which primarily relate to an increase in wholesale capacity services revenue, partially offset by a decline in subscriber services revenue and equipment sales revenue.

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

The following table sets forth amounts and percentages of our revenue by type of service (dollars in thousands).

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Service revenue:

Wholesale capacity services $ 145,299 58 % $ 109,067 49 %

Subscriber services

Duplex $ 25,932 12 % $ 29,222 20 %

SPOT 44,184 20 % 45,670 31 %

Commercial IoT 26,245 11 % 22,867 10 %

Wholesale capacity services 109,067 49 % 34,913 24 %

Engineering and other services 2,146 1 % 2,747 1 %

Total Service Revenue $ 204,196 92 % $ 132,068 89 %

The following table sets forth amounts and percentages of our revenue generated from equipment sales (dollars in thousands).

December 31, 2023 Year Ended

December 31, 2022

Revenue % of Total

Revenue Revenue % of Total

Equipment Revenue:

SPOT 41,140 16 % 44,184 20 %

Commercial IoT 11,866 5 % 10,132 7 %

Other 22 — % 416 — %

Total Equipment Revenue $ 19,612 8 % $ 16,436 11 %

Duplex 20,156 8 % 25,932 12 %

Government and other services

4,849 2 % 2,146 1 %

Total service revenue

$ 237,689 95 % $ 204,196 92 %

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

Average number of subscribers for the year ended:

Duplex 33,884 40,913

SPOT 260,141 272,088

Commercial IoT 509,452 481,859

SPOT 241,980 260,141

Duplex 27,033 33,884

Other 288 364

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ARPU (monthly):

Duplex $ 63.78 $ 59.52

SPOT 14.15 13.99

Commercial IoT $ 4.29 $ 3.95

The numbers reported in the above table are subject to immaterial rounding inherent in calculating averages.

SPOT 14.17 14.15

Duplex 62.14 63.78

We count "subscribers" based on the number of devices that are subject to agreements that entitle them to use our voice or data communications services rather than the number of persons or entities who own or lease those devices.

Wholesale capacity service revenue includes revenue generated from satellite network access and related services under the Service Agreements.

Engineering and other service revenue includes revenue generated primarily from certain governmental and engineering service contracts;

neither of these service revenue items is subscriber driven.

Accordingly, we do not present ARPU for wholesale capacity service revenue and engineering and other service revenue in the table above.

In response to Russia's invasion of Ukraine, during the first quarter of 2022, we disconnected satellite services to gateways in Russia that were operated by an independent gateway operator.

Accordingly, approximately 25,000 subscribers that previously received satellite services through these gateways were removed from our subscriber count;

these subscribers were included in "Other" in the table above.

Other providers of comparable services may count their subscribers differently.

Wholesale capacity services include revenue generated from satellite network access and related services.

Government and other services include revenue generated primarily from terrestrial spectrum and network solutions as well as governmental and engineering service contracts.

None of these service revenue items are subscriber driven.

Accordingly, we do not present ARPU for wholesale capacity services revenue or government and other services revenue reflected in the table above.

Service Revenue

Duplex service revenue decreased 11% in 2023 due primarily to fewer 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 in favor of other use cases for our network assets, including wholesale capacity services.

SPOT service revenue decreased 3% in 2023 due primarily to fewer subscribers, offset slightly by higher ARPU.

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

Production resumed fully during the first half of 2023 and, notably, we experienced an increase in activations during the fourth quarter of 2023 compared to the prior year's quarter.

Wholesale capacity service revenue increased 33% in 2024.

This category includes revenue from the Customer under the Updated Services Agreements.

The majority of the increase during 2024 is due to fees related to expanded services that began in 2024.

Revenue also increased due to performance bonuses received during 2024 as well as higher network costs, which are both drivers of the consideration earned under this agreement.

Commercial IoT service revenue increased 15% in 2024 due to higher average subscribers and ARPU.

The increase in average subscribers was due to an 8% increase in gross subscriber activations over the last twelve months when compared to the preceding twelve-month period.

Higher ARPU was due to higher usage on the network as well as the mix of subscribers on various rate plans.

Wholesale capacity service revenue increased $74.2 million to $109.1 million during 2023 from $34.9 million during 2022.

The increase in revenue during 2023 is due to consideration earned under the Service Agreements following the commencement of service in November 2022.

During 2023, revenue under this arrangement included recurring service fees, which accounted for 94% of total wholesale capacity revenue.

Average subscribers are up 6% year over year due to gross activation momentum experienced over the last year.

Importantly, gross subscriber activations are up over 30% on a consecutive quarter basis, with the fourth quarter producing the highest gross subscriber activations of any quarter during 2024.

The increase in ARPU was due to higher usage on the network as well as an improvement in the mix of subscribers on various rate plans.

SPOT service revenue decreased 7% in 2024 due to fewer subscribers resulting from competitive pressure.

Product engineering efforts are underway to develop a new consumer SPOT device, which we expect to stabilize or increase demand for such services from our subscribers.

Duplex service revenue decreased 22% in 2024 due primarily to fewer average subscribers resulting from churn exceeding gross activations over the last twelve months as we no longer manufacture and sell Duplex devices in favor of other use cases for the Globalstar System, including wholesale capacity services.

Government and other services revenue increased 126% in 2024.

This category includes fees earned from various governmental service contracts as well as services associated with XCOM RAN sales.

We signed an agreement in the first quarter of 2024 with Parsons Corporation, a leading technology provider in the national security and global infrastructure markets, to utilize the Globalstar System for a mission critical service for government applications.

The $2.5 million proof of concept phase commenced in February 2024 and is progressing as planned with completion expected in mid-2025.

This agreement has a five-year term, if the project is implemented, and contains annual minimum revenue commitments escalating annually to $20 million during the fifth year, with potential for further upside through the agreement's revenue share arrangement.

Subscriber Equipment Sales

Revenue from SPOT equipment sales increased $1.8 million, or 31%, in 2023.

This improvement was due to an almost 80.0% increase in the volume of products sold during 2023.

Two of our core SPOT products were on back order for the vast majority of 2022 and starting in the second quarter of 2023, all SPOT products returned to ordinary production levels.

Revenue from Commercial IoT equipment sales increased $1.7 million, or 17%, in 2023.

During 2022, we experienced intermittent production delays due to component part shortages for certain of our products.

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

A nearly 40% increase in volume of both our SmartOne Solar and SmartOne C devices contributed to the increase in revenue year over year.

Revenue generated from subscriber equipment sales decreased $7.0 million due primarily to the timing of Commercial IoT and SPOT device sales.

During 2023, we recovered from inventory shortages that impacted both device categories and experienced higher sales as a result of improved product availability.

Additionally, during 2023 we shipped a large volume of SmartOne Solar devices to a single value added reseller ("VAR"), roughly half of the decrease in Commercial IoT device revenue year over was due to this one customer.

We are currently developing new MSS subscriber devices, which we expect will increase equipment sales in the future.

Operating Expenses :

Total operating expenses decreased 39% to $224.0 million in 2023 from $369.5 million in 2022.

This decrease was due primarily to non-recurring reductions in the value of inventory and long-lived assets that occurred in 2022.

These and other contributors to the variance in operating expenses are explained in detail below.

Total operating expenses increased 12% to $251.3 million in 2024 from $224.0 million in 2023, which is primarily related to an increase in cost of services and stock-based compensation, partially offset by reduced cost of subscriber equipment sales.

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

In February 2025, we were notified that we will receive an employee retention credit as a result of our eligibility under the provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") for the second quarter of 2021.

We expect to receive this refund, totaling $2.0 million, in the near future.

When received, this refund will reduce operating expenses and will be allocated between Cost of Services and MG&A (defined below), based on the employee costs incurred during the eligible period.

Cost of Services

Cost of services increased $19.7 million, or 37%, to $73.2 million in 2024 from $53.5 million in 2023.

This increase is due to network expansion and upgrade work completed in connection with services provided under the Service Agreements;

a substantial portion of network-related costs are reimbursed thereunder and this consideration is recognized as revenue in accordance with the terms of the contract.

In line with our new and upgraded ground infrastructure, lease, maintenance and other occupancy costs increased $2.9 million, IT costs increased $1.1 million and personnel costs increased $3.4 million during 2023.

As discussed in Note 2:

License Agreement to our Consolidated Financial Statements, in connection with the License Agreement with XCOM, we entered into a Support Services Agreement (the “SSA”) in 2023.

Pursuant to the SSA, XCOM is required to provide services to assist us with certain operations of the business.

We prepaid for the initial SSA service period (covering nine months from the License Agreement effective date) in shares of Globalstar common stock.

During 2023, we recognized $2.5 million in expense associated with these SSA and other ancillary costs.

In December 2022, we received an employee retention credit totaling $1.8 million as a result of our eligibility for the employee retention credit under the provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") for the first quarter of 2021.

The refund was recorded as a reduction to operating expenses during the 2022 and was allocated between Cost of Services and MG&A (defined below) totaling $1.3 million and $0.5 million, respectively, based on the employee costs incurred during the eligible period.

Similar activity did not recur in 2023.

This increase was due primarily to network expansion in connection with services provided under the Service Agreements;

a substantial portion of network-related costs are reimbursed thereunder and this consideration is recognized as revenue in accordance with the terms of the Updated Services Agreements.

As expected with our new and upgraded ground infrastructure, gateway operating costs, such as maintenance and personnel costs, increased $11.0 million.

We do not expect the operating costs that support existing services under the Updated Services Agreements during the Phase 1 Service Period to increase meaningfully beyond current levels.

We expect that over the next few years in anticipation of the Services provided over the Extended MSS Network, costs to support the Updated Services Agreements will increase substantially.

Special Purpose Entity to our Consolidated Financial Statements for a description of the different phases of services under the Updated Services Agreements.

In connection with the August 2023 License Agreement with XCOM, we entered into a Support Services Agreement (the “SSA”).

During 2024, we recognized $3.1 million in expense associated with the SSA and other ancillary costs, of which the majority were noncash.

Costs to support new product development totaling $2.5 million also contributed to the increase in operating expenses during 2024.

Cost of Subscriber Equipment Sales

Cost of subscriber equipment sales increased by $2.9 million, or 22%, to $16.0 million in 2023 from $13.1 million in 2022.

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

Margin percentages on subscriber equipment narrowed slightly due to the mix of products sold in each year.

Cost of Subscriber Equipment Sales - Reduction in the Value of Inventory

In September 2022, in connection with the launch of Phase 1 services under the Service Agreements, our strategy relative to second-generation Duplex assets shifted.

Due to this shift in strategy, we concluded that there was no remaining net realizable value of our second-generation Duplex inventory, resulting in an $8.5 million reduction in value of inventory.

Similar activity did not recur in 2023.

Marketing, General and Administrative

Marketing, general and administrative expenses ("MG&A") increased $10.2 million, or 31%, to $43.5 million in 2023 from $33.3 million in 2022.

In connection with the License Agreement, during 2023, we incurred $2.9 million in non-recurring transaction fees, including legal, accounting and other professional fees.

We also incurred $1.0 million in MG&A costs associated with the SSA discussed above in Cost of Services.

Other legal and professional fees totaling $2.6 million for various efforts, including increased regulatory work, government relations and negotiations of new commercial arrangements, also contributed to the increase in MG&A during 2023.

These costs were in part due to our preparation for, and participation in, the November 2023 World Radio Conference to protect our licensed spectrum rights globally from interference.

Higher personnel costs due to merit and headcount increases also contributed to the increase in MG&A.

Cost of subscriber equipment sales decreased 42% in 2024.

This cost decrease is generally consistent with the decrease in revenue generated from subscriber equipment sales during the year;

however, it is also related to margin improvement due to the mix of products sold in each period as well as the cost improvement from moving our manufacturing from China to Vietnam, which reduced tariffs incurred for U.S.

imports during a portion of 2024.

Stock-Based Compensation

Stock-based compensation expense increased $13.0 million to $35.5 million in 2024 from $22.5 million in 2023.

The increase was due primarily to restricted stock units granted in connection with the License Agreement to certain executives.

To a lesser extent, certain performance awards were modified during 2023, which also contributed to the increase in expense.

Additionally, we have an annual bonus plan, which is generally paid in the form of Globalstar common stock, designed to reward key employees' efforts to meet and exceed Globalstar's financial performance target for the designated calendar year.

Our projected financial performance compared to our target drove the remaining increase in stock-based compensation expense.

Reduction in Value of Long-Lived Assets

During 2023, we impaired approximately $0.4 million of construction in progress primarily related to efforts associated with a terminated software development contract.

During 2022, we recorded an impairment of our long-lived assets totaling $166.0 million.

In September 2022, in connection with the launch of Phase 1 services under the Service Agreements, 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.

These second-generation Duplex assets no longer provided future cash flows to us and had a net book value of approximately $161.2 million prior to their impairment in September 2022.

Our first-generation Duplex assets (i.e., handsets and related ground infrastructure) were not impacted.

Also reflected in the reduction in the value of long-lived assets were certain prepaid licenses and royalties necessary for the manufacture and distribution of second-generation Duplex products and services.

These prepaid items were no longer considered recoverable as there are no longer separately identifiable cash flows for such assets - these assets totaled approximately $4.7 million prior to their write down in September 2022.

Depreciation, Amortization and Accretion

Depreciation, amortization and accretion expense decreased $5.7 million, or 6%, to $88.2 million in 2023 from $93.9 million in 2022, following a net reduction in total property and equipment due to the factors discussed in the "Reduction in Value of Long-Lived Assets" section above.

Partially offsetting this decrease is depreciation expense from the on-ground spare satellite that was launched and placed into service in June 2022.

The increase was due primarily to restricted stock units ("RSUs") granted to certain executives in connection with the License Agreement in August 2023, the majority of the cost of which was recognized in 2024.

During 2023, we granted 44.5 million RSUs, which are earned over a four-year performance period and vest upon Globalstar common stock trading at various price levels throughout the performance period.

The total fair value of the RSUs was $39.5 million and is being recognized over the derived service period of 2.6 years;

with nearly 60% of the compensation cost for these RSUs is being recognized during 2024.

Other (Expense) Income:

(Loss) gain on extinguishment of debt

We recorded a loss on extinguishment of debt of $10.4 million during 2023 following the full pay-off of the 2019 Facility Agreement in March 2023.

We recorded a loss on extinguishment of debt of $27.4 million during 2024.

In November 2024, we refinanced the 2023 13% Notes, resulting in a loss on extinguishment of debt due to the unamortized debt discount and deferred financing costs remaining prior to extinguishment as well as the make-whole fees at pay down.

In 2023, w e recorded a loss on extinguishment of debt of $10.4 million following the full pay-off of the 2019 Facility Agreement.

The extinguishment loss was recognized due to the remaining deferred financing costs and debt discount associated with the instrument at the time of repayment.

We recorded a gain on extinguishment of debt totaling $2.8 million during 2022 related to the November 2022 exchange of a portion of the 2019 Facility Agreement principal balance into Series A Preferred Stock.

This gain was recorded for the portion exchanged for unaffiliated lenders only.

The gain represents the difference between the net carrying amount prior to extinguishment (including unamortized deferred financing costs, debt discounts, and related derivative) and the reacquisition price of the debt.

Interest Income and Expense

Interest income and expense, net, decreased $15.6 million to $14.6 million for 2023 compared to $30.2 million for 2022.

This decrease was driven primarily by lower gross interest costs totaling $5.7 million and higher capitalized interest (which decreases interest expense) of $8.1 million due to a higher construction in progress balance.

Gross interest costs were lower due to $34.6 million 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 were increases of $21.5 million in interest associated with the 2023 13% Notes, 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 $10.5 million.

Other less significant items contributed to the remaining difference.

Loss on equity issuance

Loss on equity issuance was $5.0 million for 2023.

In connection with Thermo's guaranty of the 2023 Funding Agreement, we issued warrants to Thermo, which vested upon the effectiveness of the guaranty and occurred in December 2023.

In connection with Thermo's guarantee of the 2023 Funding Agreement, we issued a warrant to purchase shares of our common stock to Thermo, a portion of which vested upon the effectiveness of the guarantee and occurred in December 2023.

The portion of the fair value associated with the credit enhancement, as recorded pursuant to applicable accounting guidance, was recorded as a loss on equity issuance.

Similar activity did not occur in 2024.

Foreign currency gain (loss)

Interest Income and Expense

Interest income and expense, net, decreased $1.0 million to $13.6 million for 2024 compared to $14.6 million for 2023 due to higher capitalized interest (which decreases interest expense) of $8.3 million.

As we continue to capitalize costs associated with upgrades to our network, our average CIP balance increases, which results in higher interest capitalized.

Higher interest income of $2.1 million also decreased "interest income and expense, net" during 2024.

These factors were offset partially by higher gross interest costs of $9.3 million due primarily to the average balance outstanding under the 2023 Funding Agreement

and the Current Debt Repayment during the respective periods, as well as interest expense associated with a significant financing component related to proceeds funded under the 2024 Prepayment Agreement.

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.

We recorded foreign currency gains of $4.9 million in 2023.

We recorded foreign currency losses of $16.6 million in 2024.

Foreign currency gains result with other currencies strengthen relative to the U.S.

inversely, foreign currency losses result with the U.S.

dollar strengthens relative to other currencies.

We recorded foreign currency gains of $4.9 million in 2023.

Many of our foreign subsidiaries have USD-denominated intercompany payable balances, which impact the foreign currency gains and losses recorded each reporting period.

In these instances, foreign currency gains result from other currencies strengthening relative to the U.S.

inversely, foreign currency losses result from the U.S.

dollar strengthening relative to other currencies.

Income Tax Expense (Benefit)

Income tax expense (benefit) fluctuated by $1.0 million to an expense of $2.1 million in 2024 from an expense of $1.1 million in 2023.

The income tax recorded during 2023 was due to withholding tax expense associated with our global transfer pricing allocations in certain foreign jurisdictions.

Comparison of the Results of Operations for the years ended December 31, 2022 and 2021

Discussion of the results of operations for the years ended December 31, 2022 and 2021 can be found in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023.

The increase during 2024 was due primarily to $1.0 million in expense for uncertain tax positions associated with interest on withholding tax related to the Canadian tax audit.

In both periods, income tax was recorded due to withholding tax expense associated with our global transfer pricing allocations in certain foreign jurisdictions.

Taxes to our Consolidated Financial Statements for further information on the Canadian tax audit.

Liquidity and Capital Resources

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds from the Funding 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.

A longer-term source of liquidity may be the exercise of warrants issued under the Service Agreements as well as the warrants issued to Thermo associated with its guaranty of the 2023 Funding Agreement (defined below).

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds from the 2023 Funding Agreement and 2024 Prepayment Agreement (each term defined below).

These liquidity sources are expected to meet our short-term and long-term liquidity needs for funding our operating costs, capital expenditures, including related to the Extended MSS Network and other growth opportunities, and financing obligations, including scheduled recoupments under the 2021 and 2023 Funding Agreements and 2024 Prepayment Agreement as well as dividends on our perpetual preferred stock.

In addition, we have issued warrants to the Customer exercisable in accordance with the Updated Services Agreements and to Thermo in connection with its guarantee of the 2023 Funding Agreement.

These warrants would become a source of liquidity if exercised.

As of December 31, 2024 and December 31, 2023, we held cash and cash equivalents of $391.2 million and $56.7 million, respectively.

The principal amount of our debt and vendor financing outstanding was $398.7 million at December 31, 2023, compared to $202.8 million at December 31, 2022.

This increase was due to the following:

• Issuance of 2023 13% Notes with an aggregate principal amount of $206.0 million (including initial sale of $200.0 million plus PIK interest payment of $6.0 million);

• The 2023 Funding Agreement amendments to the 2021 Funding Agreement resulted in debt with an outstanding principal balance as of December 31, 2023 of $75.5 million, and the derecognition of deferred revenue for a corresponding amount;

• Entry into the 2023 Funding Agreement with an increase of debt $117.3 million;

• Payoff of the remaining balance of $148.3 million due under the 2019 Facility Agreement, inclusive of $5.1 million of PIK interest accrued during 2023 prior to its payoff;

• Payment of $59.6 million due under the vendor financing arrangement.

This increase was due primarily to amounts funded under the Updated Services Agreements, including $278 million under the Infrastructure Prepayment and $176 million from the sale of Customer Class B Units;

a portion of these proceeds was used to fund capital expenditures for the Extended MSS Network;

the remaining portion was held in cash and cash equivalents as of December 31, 2024 and will be used to fund capital expenditures in 2025.

Refer to Note 2:

Special Purpose Entity to our Consolidated Financial Statements for further discussion.

The principal amount of our debt outstanding was $417.5 million at December 31, 2024, compared to $398.7 million at December 31, 2023.

This increase was due to the following (more detailed discussion and defined terms are below):

• PIK interest payments made during 2024 to the lenders of the 2023 13% Notes prior to their payoff of $13.6 million;

• Issuance of debt under the 2023 Funding Agreement totaling $37.7 million;

• Issuance of debt under the Current Debt Repayment totaling $221.6 million;

• Recoupment under the 2021 Funding Agreement totaling $34.6 million;

• Payoff of the remaining balance of $219.6 million outstanding under the 2023 13% Notes.

Cash Flows for the years ended December 31, 2024, 2023 and 2022

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(1,383) 140 (22)

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

$ 334,420 $ 24,662 $ 17,778

Cash Flows Provided by Operating Activities

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.

Net cash provided by operations includes primarily cash received from our customers from the sale of products and services, including 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 was $439.2 million during 2024 compared to $74.3 million during 2023.

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.

This activity was offset partially by an unfavorable change in working capital due primarily to the timing of recognition of deferred revenue under the Service Agreements.

The unfavorable change in deferred revenue was due primarily to the timing of receipt of the wholesale capacity service quarterly fees.

To a lesser extent, the first recoupment under the 2021 Funding Agreement also decreased deferred revenue during 2023.

This improvement was due to favorable working capital changes resulting primarily from cash received for the Infrastructure Prepayment of $278 million during 2024;

when cash is received pursuant to this agreement, it is recorded as deferred revenue (refer to Note 2:

Special Purpose Entity to our Consolidated Financial Statements for further discussion on this arrangement).

Cash received for the Infrastructure Prepayment will be used to fund capital expenditures to support the Extended MSS Network.

Other favorable changes in working capital reflect the timing of accounts receivable under the Updated Services Agreements.

An improvement in net income, after adjusting for noncash items, also contributed to the increase in cash flows provided by operating activities.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $260.6 million during 2024 compared to $175.6 million during 2023.

An increase in payments made to MDA pursuant to our satellite procurement agreement of $121.9 million was the primary driver of the increase in cash used during 2023.

Additionally, payments of capitalized interest during 2023 totaled $8.8 million and did not occur in 2022.

Cash Flows Provided by (Used in) Financing Activities

Net cash provided by financing activities was $125.8 million in 2023 compared to net cash used in financing activities of $6.0 million in 2022.

This fluctuation was due to proceeds from the 2023 13% Notes of $190.0 million, before commissions and other related expenses, and the 2023 Funding Agreement of $117.3 million (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 $8.6 million.

The payment of cash dividends in respect to our Series A Preferred Stock totaling $11.9 million was also a use of cash during 2023 that did not occur during the comparable period in 2022.

Finally, pursuant to the terms of the 2021 Funding Agreement, a total of $12.5 million was recouped during 2023.

During 2022, we made an unscheduled principal repayment of the 2019 Facility Agreement in August 2022 of $6.3 million.

Discussion of our cash flows from operating, investing and financing activities for the years ended December 31, 2022 and 2021 can be found in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023.

For further discussion on all of our debt and other financing arrangements, see Note 6:

Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements.

Funding Agreements

Our previously disclosed Service Agreements provide for, among other things, payment of up to $252 million to us (the “2023 Funding Agreement”) which we will use to fund 50% of amounts due under the 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 will be funded on a quarterly basis, as needed and subject to certain conditions therein.

Net cash used in investing activities during both periods primarily included network upgrades associated with the Updated Services Agreements and payments of capitalized interest.

The increase from 2023 to 2024 was due primarily to the timing of payments made to MDA and SpaceX, including particularly amounts paid pursuant to the agreement entered into with SpaceX in October 2024 as discussed below in "Contractual Obligations and Commitments".

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was $157.2 million in 2024 compared to net cash provided by financing activities of $125.8 million in 2023.

During 2024, we received cash to fund the paydown of the outstanding principal balance (including a make-whole payment at paydown) due under the 2023 13% Notes of $234.9 million.

We also received cash of $176 million for the sale of the Customer Class B Units in the Globalstar SPE;

a portion of these funds was used (and the remaining amount will be used) to fund capital expenditures for the Extended MSS Network.

During 2023, we received proceeds from the sale of the 2023 13% Notes, which were used to pay the remaining principal amount due under the 2019 Facility Agreement and financing costs.

During 2024 and 2023, we received proceeds from the 2023 Funding Agreement totaling $37.7 million and $117.3 million, respectively, which were used to pay amounts owed to MDA.

Pursuant to the terms of the 2021 Funding Agreement, scheduled recoupment payments began in the third quarter of 2023 and totaled $34.6 million and $12.5 million during 2024 and 2023, respectively.

We also paid cash dividends in respect to our Series A Preferred Stock totaling $10.6 million and $11.9 million during 2024 and 2023, respectively.

Below is a summary description of our debt and other financing arrangements as of December 31, 2024.

For more information, see Note 7:

Long-Term Debt and Other Financing Arrangements to our Consolidated Financial Statements.

2024 Prepayment Agreement (including Current Debt Repayment)

The Updated Services Agreements provide that the Customer will make cash prepayments to us, including for approved capital expenditures in connection with the Extended MSS Network.

These prepayments consist of:

(1) an 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) the amount necessary for us to retire our 2023 13% Notes (the "Current Debt Repayment").

The 2023 13% Notes were repurchased in full on the Closing Date.

The terms of the Infrastructure Prepayment and the Current Debt Repayment are contained within one prepayment agreement (the “2024 Prepayment Agreement”).

The outstanding balance of the Current Debt Repayment was $222 million as of December 31, 2024.

Additionally, through December 31, 2024, we have received $278 million under the Infrastructure Prepayment.

As we receive proceeds from the Infrastructure Prepayment, we record a contract liability on our balance sheet for our obligation to perform future services to the Customer.

As we provide these services, we will receive additional service fees and use these fees to fully reduce the Infrastructure Prepayment liability as well as to repurchase or redeem all Customer Class B Units.

This period is expected to begin at the commencement of the Services provided over the Extended MSS Network and be completed within the design useful life of the new satellites.

The Current Debt Repayment and $225 million of the Infrastructure Prepayment may accrue fees (while the remaining amount of the Infrastructure Prepayment does not accrue fees).

Such fees payable to the Customer will be reduced or eliminated entirely if we meet certain defined milestones, at which time prior accruals will be reduced or eliminated.

Special Purpose Entity to our Consolidated Financial Statements for discussion of the different phases of services under the Updated Services Agreements, and Note 7:

Long-Term Debt and Other Financing Arrangements and Note 11:

Accrued Expenses and Other Non-Current Liabilities for discussion of the accrual of fees.

2021 and 2023 Funding Agreements

The Updated Services Agreements provide for, among other things, payment of up to $252 million to us (the “2023 Funding Agreement”) which we have used and intend to use in the future to fund 50% of amounts due under the 2022 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 remaining amount of the satellite costs is expected to be funded from our operating cash flows.

Through December 31, 2023, payments under the 2023 Funding Agreement totaled $117.3 million.

In February 2024, we received $37.7 million under the 2023 Funding Agreement.

The amount of the Funding Agreement and fees payable thereon are expected to be recouped from amounts payable for services provided by us under the Service Agreements in installments for a period of 16 quarters beginning no later than the third quarter of 2025.

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.

During 2021, we received payments 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.

Our previously disclosed amendment to this agreement resulted in re-characterizing the previously recorded deferred revenue balance to debt in 2023.

During 2023, $12.5 million has been recouped.

During 2024, payments received under the 2023 Funding Agreement totaled $37.7 million.

The outstanding balance under the 2023 Funding Agreement was $155.0 million as of December 31, 2024.

Long-Term Debt and Other Financing Arrangements and Note 11:

Accrued Expenses and Other Non-Current Liabilities for discussion of the accrual of the fees

The amount of the 2023 Funding Agreement and related fees are expected to be recouped from amounts payable for services provided by us under the Updated Services Agreements in installments for a period of 16 quarters beginning in the third quarter of 2026 (as amended).

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

During 2021, we received payments totaling $94.2 million (the "2021 Funding Agreement"), which are being recouped as services are performed by us over the Phase 1 Service Period with the last recoupment to be made in the first quarter of 2026.

During 2024, a total of $34.6 million was recouped.

The outstanding balance under the 2021 Funding Agreement was $40.9 million as of December 31, 2024.

No interest accrues on amounts outstanding under the 2021 Funding Agreement.

Our repayment obligations under the Funding Agreements are secured by a first-priority lien on substantially all of our assets.

Thermo has agreed to provide support of certain of our obligations under the Funding Agreements and certain other amounts under the Service Agreements.

Entry into this guarantee agreement received shareholder approval in June 2023 and became effective in December 2023.

As consideration for Thermo's guarantee, we have issued to Thermo warrants to purchase 10.0 million shares of Globalstar 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 upon effectiveness of Thermo's guarantee 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 us or a permitted third party pursuant to the terms of Thermo's guarantee.

These warrants expire five years after the date of issuance.

In the event Thermo is required to advance amounts under the guarantee, we will be required to issue shares of our stock in respect of such

payments equal the amount of the payment advanced by Thermo divided by the average volume-weighted average price for our common stock for the five trading days immediately preceding the date of such payment.

Thermo has agreed to provide support for certain of our obligations under the 2023 Funding Agreement and the Updated Services Agreements.

As consideration for Thermo's guarantee, we issued to Thermo a warrant to purchase 667,000 shares (10.0 million shares prior to the reverse stock split) of Globalstar common stock at an exercise price equal to $30.00 per share (as calculated pursuant to the agreement) ($2.00 per share prior to the reverse stock split).

The right to purchase 333,000 shares under the warrant (5.0 million shares prior to the reverse stock split) vested upon effectiveness of Thermo's guarantee in December 2023, and the remaining 333,000 shares (5.0 million shares prior to the reverse stock split) may vest if and when Thermo advances aggregate funds of $25.0 million or more.

The warrant expires in December 2028.

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")”), which were issued pursuant to an indenture with Wilmington Trust, National Association, as trustee (the “Indenture”).

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

The 2023 13% Notes were sold at an issue price of 95% of the principal amount and bear interest at a rate of 13.00% per annum payable semi-annually in arrears.

We agreed under the Service Agreements to pay cash interest on the 2023 13% Notes at a rate of 6.5% per annum and paid-in-kind ("PIK") interest at a rate of 6.5% per annum.

The 2023 13% Notes may be redeemed at our option at any time, subject to the conditions of the Indenture.

In the event of a Change of Control (as such term is defined in the Indenture) or certain other events, holders of the 2023 13% Notes have the right to require us to repurchase all or a portion of their 2023 13% Notes at a price (as calculated by us) in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and certain tax payments.

The Indenture includes customary terms and covenants, including restrictions on our ability to incur indebtedness, make guarantees, sell equity interests, and customary events of default.

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.

The loans under the 2019 Facility Agreement bore interest at a rate of 13.5% per annum paid-in-kind.

The Service Agreements required us to refinance all loans outstanding under the 2019 Facility Agreement.

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 2023 13% Notes, we repaid all of our outstanding obligations under the 2019 Facility Agreement of approximately $148 million.

Vendor Financing

In February 2022, we entered into a satellite procurement agreement with MDA.

This agreement (as amended) provided for deferrals of milestone payments through March 15, 2023.

We paid the remaining outstanding balance during the first quarter of 2023.

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

In November 2024, the outstanding principal balance of the 2023 13% Notes was paid off with cash from the 2024 Prepayment Agreement and no amounts remain outstanding as of December 31, 2024 following such refinancing transactions.

For additional information, see Note 7:

Long-Term Debt and Other Financing Arrangements to our Consolidated Financial Statements

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”).

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

In 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”) and a total fair value of $105.3 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.

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Contractual Obligations and Commitments

Contractual obligations arising in the normal course of business consist primarily of debt and financing obligations (as discussed above), purchase commitments with vendors related to the procurement, deployment and maintenance of our network (discussed below), obligations for non-cancellable purchase orders for inventory ($14.2 million of which we expect to be fulfilled in line with current forecasted equipment sales) and operating lease obligations (see Note 4:

Contractual obligations arising in the normal course of business consist primarily of debt and financing obligations (as discussed above), purchase commitments with vendors related to the procurement, deployment and maintenance of the Globalstar System (discussed below), obligations for non-cancellable purchase orders for inventory ($4.7 million, which we expect to be fulfilled in line with current forecasted equipment sales) and operating lease obligations (see Note 4:

Leases to our Consolidated Financial Statements for further discussion).

Satellite Procurement Agreement

We have a satellite procurement agreement with MDA pursuant to which we expect to acquire at least 17 and up to 26 satellites that will replenish our HIBLEO-4 U.S.-licensed system and ensure long-term continuity of our MSS.

The satellite procurement agreement requires delivery of the 17 new satellites by 2025.

The amended contract price for these new satellites is $329.5 million, and we have the option to purchase up to nine additional satellites at a lower per unit cost, subject to certain conditions.

Satellite Procurement Agreements

We have a satellite procurement agreement with MDA pursuant to which we expect to acquire at least 17 satellites (and up to 26 satellites) that are intended to replenish our HIBLEO-4 U.S.-licensed system and ensure long-term continuity of our MSS.

The satellite procurement agreement requires delivery of the initial 17 satellites during 2025.

The amended contract price for these satellites is $329.3 million, and we have the option to purchase up to nine additional satellites at a lower per unit cost, subject to certain conditions.

In addition, MDA will procure equipment to be incorporated into a satellite operations control center ("SOCC") totaling $5.0 million as well as other equipment for $4.2 million.

To date, the parties have accepted milestones totaling $190.4 million associated with the new satellites and related infrastructure, and we have paid $14.0 million during 2022 and $135.9 million during 2023.

Amounts accrued as of December 31, 2023 associated with this contract totaled $55.6 million, of which $44.7 million was paid in February 2024.

To date, the parties have accepted milestones totaling $224.3 million associated with the new satellites and related infrastructure.

We paid to MDA $14.0 million, $135.9 million and $67.1 million during 2022, 2023 and 2024, respectively.

We expect to continue to fund a portion of the future milestone payments using the 2023 Funding Agreement.

The satellite procurement agreement with MDA contains customary termination provisions including our right to terminate the contract for convenience at any time, subject to certain conditions.

Under the Service Agreements, subject to certain terms and conditions, we will receive Approved Capital Expenditure Payments.

Launch Services Agreement

As more fully described in our Current Report on Form 8-K filed with the Commission on August 31, 2023, we have a Launch Services Agreement with Space Exploration Technologies Corp.

(“SpaceX”) and certain related ancillary agreements (the “Launch Services Agreements”), providing for the launch of the first set of these satellites.

In February 2025, we entered into another agreement with MDA pursuant to which we expect to acquire more than 50 satellites related to the Extended MSS Network.

The total contract price for these satellites is $775.0 million.

The satellite procurement agreements with MDA contains customary termination provisions including our right to terminate the contract for convenience at any time, subject to certain conditions and payment obligations.

Launch Services Agreements

As more fully described in our Current Report on Form 8-K filed with the SEC on August 31, 2023, we have a Launch Services Agreement and certain related ancillary agreements with SpaceX, providing for the launch of the first set of the satellites we are acquiring pursuant to the satellite procurement agreement with MDA.

The Launch Services Agreements provide a launch window from April to September 2025.

The launch services agreement with SpaceX contains customary termination provisions including our right to terminate the contract for convenience at any time, subject to certain conditions including SpaceX retaining certain amounts of the contract value.

Under the Service Agreements, subject to certain terms and conditions, we will receive Approved Capital Expenditure Payments.

To date, the parties have accepted milestones totaling $23.6 million associated with this agreement.

We paid to SpaceX $9.6 million and $29.7 million during 2023 and 2024, respectively.

In October 2024, we entered into another agreement with SpaceX for the launch of satellites related to the Extended MSS Network.

To date, the parties have accepted milestones totaling $17.3 million associated with this agreement.

During 2024, we paid $129.6 million to SpaceX under this agreement, including $112 million as a long-term prepaid for future milestones.

The Launch Services Agreements with SpaceX contains customary termination provisions including our right to terminate the contract for convenience at any time, subject to certain conditions, including SpaceX retaining certain amounts of the contract value.

Funding for Phase 2 Service Period Asset Procurement

Under the Service Agreements, subject to certain terms and conditions, we expect to receive payments equal to 95% of the approved capital expenditures under the satellite procurement agreement for the HIBLEO-4 satellites and Launch Services Agreements for such satellites (to be paid on a straight-line basis over the design life of the satellites) beginning with the commencement of the Phase 2 Service Period.

The Phase 2 Service Period is expected to begin when the new satellites are successfully utilized to provide Services.

Funding for Extended MSS Network Asset Procurement

As discussed in more detail in Note 2:

Special Purpose Entity to our Consolidated Financial Statements, the Updated Services Agreements provide for prepayments from the Customer for approved capital expenditures associated with the Extended MSS Network.

As of December 31, 2024, we have outstanding purchase orders for this project totaling $290 million to vendors for various satellite and ground components of the Extended MSS Network.

These costs will continue until the construction period is complete.

Recently Issued Accounting Pronouncements

For a discussion of recent accounting guidance and the expected impact that the guidance could have on our Consolidated Financial Statements, see Note 1:

Summary of Significant Accounting Policies in our Consolidated Financial Statements.

Summary of Significant Accounting Policies to our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes.

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We define a critical accounting policy or estimate as one that is both important to our financial condition and results of operations and requires us to make difficult, subjective or complex judgments or estimates about matters that are uncertain.

believe that the following are the critical accounting policies and estimates used in the preparation of our Consolidated Financial Statements.

We believe that the following are the critical accounting policies and estimates used in the preparation of our Consolidated Financial Statements.

In addition, there are other items within our Consolidated Financial Statements that require estimates but are not deemed critical as defined in this paragraph.

Revenue Recognition

Our primary types of revenue include (i) service revenue from two-way voice communication, and one-way and two-way data transmissions between a mobile or fixed device, (ii) subscriber equipment revenue from the sale of fixed and mobile devices as well as other products and accessories, (iii) wholesale capacity service revenue from providing satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways and (iv) service revenue from providing engineering and communication services using our MSS and terrestrial spectrum licenses.

Our primary types of revenue include (i) wholesale capacity service revenue from providing satellite network access and related services over the Globalstar System, (ii) service revenue from MSS voice communications and data transmissions, (iii) subscriber equipment revenue from the sale of devices as well as other products and accessories and (iv) service revenue from providing engineering and communication services using our MSS and terrestrial spectrum licenses.

The complexities or judgements involved in revenue recognition are discussed below.

If a contract includes more than one performance obligation, such as under the Service Agreements or when subscriber equipment is bundled with services in a multiple-element arrangement, we allocate the transaction price to each performance obligation in proportion to their standalone selling prices at contract inception and recognize them when, or as, each performance obligation is satisfied.

If a contract includes more than one performance obligation, such as under the Updated Services Agreements or when subscriber equipment is bundled with services in a multiple-element arrangement, we allocate the transaction price to each performance obligation in proportion to their standalone selling prices at contract inception and recognize them when, or as, each performance obligation is satisfied.

Determination of the relative stand-alone selling prices is complex and involves judgement, as prices may vary based on many factors, such as promotions, customer, volume and/or type of equipment sold.

Service revenue is generally recognized over a period of time (consistent with the customer's receipt and consumption of the benefits of our performance) and revenue from the sale of subscriber equipment is recognized at a point in time (consistent with the transfer of risks and rewards of ownership of the hardware).

We record customer payments received in advance of the corresponding service period as deferred revenue.

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In general, our subscriber-driven contracts are paid monthly or annually and the time between cash collection and performance is less than one year.

For certain payments made under the Service Agreements, the length of time between receipt of payment and the transfer of services by us was greater than twelve months.

Accordingly, these payments included a significant financing component.

For certain payments made under the Updated Services Agreements, the length of time between receipt of payment and the transfer of services by us is greater than twelve months.

Accordingly, these payments include a significant financing component.

For Duplex service revenue, we recognize revenue for monthly access fees in the period services are rendered.

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For annual plans where the customer is charged an annual fee to access our system, we recognize revenue on a straight-line basis over the term of the plan.

For our subscriber-driven contracts, subscriber acquisition costs primarily include internal sales commissions and initial activation commissions as well as certain other costs, including but not limited to, promotional costs, cooperative marketing credits and shipping and fulfillment costs.

For our subscriber-driven contracts, subscriber acquisition costs primarily include internal sales commissions and certain other costs, including but not limited to, promotional costs, cooperative marketing credits and shipping and fulfillment costs.

We capitalize incremental costs to obtain a contract to the extent we expect to recover such costs.

All other subscriber acquisitions costs are expensed at the time of the related sale.

For wholesale capacity services, we capitalize costs to fulfill a contract to the extent we expect to recover them and we also capitalize noncash consideration issued under the Service Agreements.

For wholesale capacity services, we capitalize costs to fulfill a contract to the extent we expect to recover them and we also capitalize noncash consideration issued under the Updated Services Agreements.

Costs to fulfill a contract may include certain expenses incurred by us prior to the customer benefiting from the service, such as personnel and contractor costs and other operating expenses.

Under the Service Agreements, we issued warrants to purchase shares of Globalstar common stock, which were recorded at the estimated fair value of the consideration granted based on a Black-Scholes pricing model.

The fair value of the warrants was capitalized as a contract asset and is being recognized as a reduction of the transaction price over the estimated term of the Service Agreements.

Under the Updated Services Agreements, we issued warrants to purchase shares of Globalstar common

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

The fair value of the warrants was capitalized as a contract asset and is being recognized as a reduction of the transaction price over the estimated term of the Updated Services Agreements.

Property and Equipment

The vast majority of our property and equipment costs are incurred related to the construction of our satellites, including an agreement executed in 2022 for the purchase of new satellites to replenish our existing satellite constellation, and ground station upgrades.

Accounting for these assets requires us to make complex judgments and estimates.

We capitalize costs associated with the design, manufacture, test and launch of our low earth orbit satellites.

We capitalize costs associated with the design, manufacture and test of our ground stations and other capital assets.

We track capitalized costs associated with our ground stations and other capital assets by fixed asset category and allocate them to each asset as it comes into service.

For assets that are sold or retired, including satellites that are de-orbited and no longer providing services, we remove the estimated cost and

accumulated depreciation.

The vast majority of our property and equipment costs are incurred related to the construction of our satellites and ground station upgrades.

We capitalize costs associated with the design, manufacture, test and launch of our LEO satellites.

We also capitalize costs associated with the design, manufacture and test of our gateways and other capital assets.

We track capitalized costs associated with our gateways and other capital assets by fixed asset category and allocate them to each asset as it comes into service.

For assets that are sold or retired, including satellites that are de-orbited and no longer providing services, we remove the estimated cost and accumulated depreciation.

We recognize a loss from an in-orbit failure of a satellite equal to its net book value, if any, in the period it is determined that the satellite is not recoverable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis