Globalstar, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Audited Consolidated Financial Statements of Globalstar, Inc. 45 Report of Ernst & Young LLP, independent registered public accounting firm (PCAOB ID 42 ) 45 Consolidated balance sheets at December 31, 2024 and 2023 48 Consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022 49 Consolidated statements of comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022 50 Consolidated statements of stockholders’ equity for the years ended December 31, 2024, 2023 and 2022 51 Consolidated statements of cash flows for the years ended December 31, 2024, 2023 and 2022 52 Notes to Consolidated Financial Statements 53 44 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Globalstar, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Globalstar, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2025, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Useful life of Space component assets Description of the Matter At December 31, 2024, the Company had $1.2 billion of Space component assets recorded as property and equipment. As discussed in Note 1 to the consolidated financial statements, the Company’s Space component assets are depreciated on a straight-line basis over their estimated useful life, which currently is 15 years. Management’s estimate of the useful life of its Space component assets was based on estimated design life, information from the Company’s strategy for the use of the assets and its engineering department. Auditing the Company’s estimate of the useful life of its Space component assets involved a high degree of subjectivity due to the application of management’s judgment when evaluating the available information and whether to adjust the useful life. Management’s assessment has a significant effect on the timing of recognition of depreciation expense given the magnitude of the carrying amount of the Space component assets. 45 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to assess the useful life of its Space component assets, including controls over management’s evaluation of the available information used in the assessment. Our testing of the Company's useful life of the Space component assets included, among other procedures, evaluating the application of available information. We compared management’s useful life to the manufacturer’s estimated design life, publicly available information on the estimated useful life of similar assets, operation and performance of the assets as evaluated by the Company’s engineering department, and the life of its first-generation satellite constellation. Additionally, we evaluated the effect of changes, if any, in the Company’s long-term strategy for use of the assets on the useful life estimate as well as certain activities implemented by the Company that indirectly monitor satellite performance. Assessment of the Updated Services Agreement Description of the Matter As described in Note 2, in November 2024, the Company entered into the Updated Services Agreements with its Customer. We identified the assessment of the Updated Services Agreements as a critical audit matter, primarily due to significant judgments by management related to the determination of the accounting for (i) the Globalstar SPE including the interest in the Globalstar SPE purchased by the Customer, (ii) the advances under the Updated Services Agreements, and (iii) a contingent fee feature in the Updated Services Agreement as an embedded derivative. In addition, the fair value of the embedded derivative, which was determined using a discounted cash flow method, was dependent on significant assumptions such as the discount rate. Auditing of these classification and valuation considerations involved challenging and complex auditor judgment, including the need to involve valuation specialists. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s assessment of the Updated Services Agreements, including controls related to classification and valuation. We evaluated the Company’s accounting analysis for the Updated Services Agreements, including the determination that the Globalstar SPE should be consolidated, the interest purchased by the Customer should be accounted for as a liability, classification of certain advances as deferred revenue or debt and the identification of an embedded derivative. We evaluated the Company’s estimate of the fair value of the embedded derivative by involving valuation specialists to assess the reasonableness of the (i) valuation methodology and (ii) valuation assumptions applied including the discount rate by developing a range of independent estimates and comparing our estimates to those used by management. We tested the source information underlying the significant assumptions and estimates and the mathematical accuracy of the calculation. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. New Orleans, Louisiana February 28, 2025 46 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Globalstar, Inc. Opinion on Internal Control Over Financial Reporting We have audited Globalstar, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Globalstar, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 28, 2025, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP New Orleans, Louisiana February 28, 2025 47 GLOBALSTAR, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value and share data) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 391,164 $ 56,744 Accounts receivable, net of allowance for credit losses of $ 1,504 and $ 2,312 , respectively 26,952 48,743 Inventory 10,741 14,582 Prepaid expenses and other current assets 18,714 22,584 Total current assets 447,571 142,653 Property and equipment, net 673,632 624,002 Operating lease right of use assets, net 31,835 34,164 Prepaid network costs 312,342 12,443 Derivative asset 108,799 1,295 Intangible and other assets, net of accumulated amortization of $ 7,625 and $ 12,385 , respectively 136,058 109,752 Total assets $ 1,710,237 $ 924,309 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 34,600 $ 34,600 Accounts payable and accrued expenses 29,677 28,985 Accrued network construction costs 15,613 58,187 Payables to affiliates 394 459 Deferred revenue, net 61,201 53,677 Total current liabilities 141,485 175,908 Long-term debt 476,822 325,700 Operating lease liabilities 26,256 29,244 Deferred revenue, net 288,171 3,213 Other non-current liabilities 418,620 11,265 Total non-current liabilities 1,209,869 369,422 Total liabilities 1,351,354 545,330 Commitments and contingencies (Note 10) Stockholders’ equity: Series A Perpetual Preferred Stock of $ 0.0001 par value; 300,000 shares authorized and 149,425 issued and outstanding at December 31, 2024 and 2023, respectively — — Voting Common Stock of $ 0.0001 par value; 143,333,334 shares authorized; 126,424,799 and 125,412,979 shares issued and outstanding at December 31, 2024 and 2023, respectively (1) 13 13 Additional paid-in capital (1) 2,473,564 2,438,878 Accumulated other comprehensive income 13,452 5,070 Retained deficit ( 2,128,146 ) ( 2,064,982 ) Total stockholders’ equity 358,883 378,979 Total liabilities and stockholders’ equity $ 1,710,237 $ 924,309 (1) The number of shares have been restated to reflect the 1:15 reverse stock split effectuated on February 10, 2025. All historical share and per share amounts reflected in this Report have been adjusted to reflect the reverse stock split. Refer to Note 17: Common Stock. See accompanying notes to Consolidated Financial Statements. 48 (GLOBALSTAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2024 2023 2022 Revenue: Service revenue $ 237,689 $ 204,196 $ 132,068 Subscriber equipment sales 12,660 19,612 16,436 Total revenue 250,349 223,808 148,504 Operating expenses: Cost of services (exclusive of depreciation, amortization and accretion shown separately below) 73,160 53,499 43,370 Cost of subscriber equipment sales 9,287 15,973 13,097 Cost of subscriber equipment sales - reduction in the value of inventory 327 — 8,553 Marketing, general and administrative 43,434 43,458 33,349 Stock-based compensation 35,548 22,489 10,754 Reduction in the value of long-lived assets 556 363 166,526 Depreciation, amortization and accretion 88,986 88,191 93,884 Total operating expenses 251,298 223,973 369,533 Loss from operations ( 949 ) ( 165 ) ( 221,029 ) Other (expense) income: (Loss) gain on extinguishment of debt ( 27,378 ) ( 10,403 ) 2,790 Loss on equity issuance — ( 5,010 ) — Interest income and expense, net of amounts capitalized ( 13,562 ) ( 14,609 ) ( 30,168 ) Foreign currency (loss) gain ( 16,609 ) 4,862 ( 6,592 ) Other ( 2,531 ) 1,730 ( 1,843 ) Total other expense ( 60,080 ) ( 23,430 ) ( 35,813 ) Loss before income taxes ( 61,029 ) ( 23,595 ) ( 256,842 ) Income tax expense 2,135 1,123 73 Net loss $ ( 63,164 ) $ ( 24,718 ) $ ( 256,915 ) Net loss attributable to common shareholders (Note 14) $ ( 73,798 ) $ ( 35,323 ) $ ( 258,252 ) Net loss per common share: Basic (1) $ ( 0.59 ) $ ( 0.29 ) $ ( 2.15 ) Diluted (1) ( 0.59 ) ( 0.29 ) ( 2.15 ) Weighted-average shares outstanding: Basic (1) 125,877 122,334 120,055 Diluted (1) 125,877 122,334 120,055 (1) The number of shares have been restated to reflect the 1:15 reverse stock split effectuated on February 10, 2025. All historical share and per share amounts reflected in this Report have been adjusted to reflect the reverse stock split. Refer to Note 17: Common Stock. See accompanying notes to Consolidated Financial Statements. 49 GLOBALSTAR, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Year Ended December 31, 2024 2023 2022 Net loss $ ( 63,164 ) $ ( 24,718 ) $ ( 256,915 ) Other comprehensive income (loss): Defined benefit pension plan liability adjustment — — 2,073 Net foreign currency translation adjustment 8,382 ( 4,172 ) 5,279 Total other comprehensive income (loss) 8,382 ( 4,172 ) 7,352 Total comprehensive loss $ ( 54,782 ) $ ( 28,890 ) $ ( 249,563 ) See accompanying notes to Consolidated Financial Statements. 50 GLOBALSTAR, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Preferred Stock Common Stock (1) Additional Paid-In (1) Accumulated Other Comprehensive Income (Loss) Retained Deficit Total Shares Amount Shares Amount Balances – December 31, 2021 — $ — 119,769 $ 12 $ 2,146,878 $ 1,890 $ ( 1,783,349 ) $ 365,431 Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation — — 771 — 10,589 — — 10,589 Contribution of services — — — — 188 — — 188 Issuance and recognition of employee stock-based compensation — — 48 — 1,135 — — 1,135 Common stock issued with conversion of 2013 8.00 % Notes — — 150 — 2,548 — — 2,548 Fair value of Warrants issued in connection with the Updated Services Agreements — — — — 48,337 — — 48,337 Issuance of Series A Preferred Stock 149 — — — 105,342 — — 105,342 Gain on extinguishment of 2019 Facility Agreement with Thermo — — — — 30,764 — — 30,764 Other comprehensive income — — — — — 7,352 — 7,352 Net loss — — — — — — ( 256,915 ) ( 256,915 ) Balances – December 31, 2022 149 $ — 120,738 $ 12 $ 2,345,781 $ 9,242 $ ( 2,040,264 ) $ 314,771 Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation — — 618 — 19,287 — — 19,287 Contribution of services — — — — 188 — — 188 Issuance and recognition of employee stock-based compensation — — 59 — 1,270 — — 1,270 Series A Preferred Dividends — — — — ( 11,942 ) — — ( 11,942 ) Fair value of Thermo guarantees associated with 2023 Funding Agreement — — — — 8,864 — — 8,864 Issuance of the warrant to Thermo for its guarantee associated with the 2023 Funding Agreement — — — — 5,010 — — 5,010 Issuance of stock in connection with XCOM License Agreement — — 3,998 1 70,420 — — 70,421 Other comprehensive loss — — — — — ( 4,172 ) — ( 4,172 ) Net loss — — — — — — ( 24,718 ) ( 24,718 ) Balances – December 31, 2023 149 $ — 125,413 $ 13 $ 2,438,878 $ 5,070 $ ( 2,064,982 ) $ 378,979 Net issuance of restricted stock awards and employee stock options and recognition of stock-based compensation — — 436 — 36,643 — — 36,643 Contribution of services — — — — 157 — — 157 Issuance and recognition of employee stock-based compensation — — 66 1,368 — — 1,368 Series A Preferred Dividends — — — — ( 10,634 ) — — ( 10,634 ) Issuance of stock in connection with XCOM License Agreement — — 510 — 7,501 — — 7,501 Other — — ( 349 ) ( 349 ) Other comprehensive income — — — — — 8,382 — 8,382 Net loss — — — — — — ( 63,164 ) ( 63,164 ) Balances – December 31, 2024 149 $ — 126,425 $ 13 $ 2,473,564 $ 13,452 $ ( 2,128,146 ) $ 358,883 (1) The number of shares have been restated to reflect the 1:15 reverse stock split effectuated on February 10, 2025. All historical share and per share amounts reflected in this Report have been adjusted to reflect the reverse stock split. Refer to Note 17: Common Stock. See accompanying notes to Consolidated Financial Statements. 51 GLOBALSTAR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Cash flows provided by operating activities: Net loss $ ( 63,164 ) $ ( 24,718 ) $ ( 256,915 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and accretion 88,986 88,191 93,884 Stock-based compensation expense 35,548 22,489 10,754 Reduction in the value of long-lived assets and inventory 883 363 175,079 Noncash interest and accretion expense 6,468 14,739 30,231 Noncash portion of loss (gain) on extinguishment of debt 14,008 10,194 ( 2,790 ) Loss on equity issuance — 5,010 — Noncash expenses associated with SSA, net of amortization 7,671 3,070 — Unrealized foreign currency loss (gain) 16,663 ( 4,972 ) 6,615 Other, net ( 657 ) ( 4,026 ) 470 Changes in operating assets and liabilities: Accounts receivable 26,661 12,693 ( 1,009 ) Inventory 2,796 ( 4,154 ) ( 2,380 ) Prepaid expenses and other current assets ( 856 ) ( 3,235 ) 952 Other assets 294 610 ( 183 ) Accounts payable and accrued expenses ( 1,378 ) ( 3,408 ) ( 11,371 ) Payables to affiliates ( 65 ) 133 ( 118 ) Other non-current liabilities 3,561 ( 53 ) ( 2,561 ) Deferred revenue 301,773 ( 38,585 ) 23,142 Net cash provided by operating activities 439,192 74,341 63,800 Cash flows used in investing activities: Payments for network upgrades to support the Phase 2 Service Period ( 105,315 ) ( 158,798 ) ( 32,233 ) Payments for network upgrades to support the Extended MSS Network ( 131,683 ) — — Payments of capitalized interest ( 9,981 ) ( 8,810 ) — Payments for network upgrades to support product development ( 6,823 ) ( 6,907 ) ( 7,076 ) Purchase of intangible assets ( 6,768 ) ( 1,097 ) ( 643 ) Net cash used in investing activities ( 260,570 ) ( 175,612 ) ( 39,952 ) Cash flows provided by (used in) financing activities: Proceeds from issuance of Customer Class B units 176,189 — — Proceeds from issuance of Current Debt Repayment 221,625 — — Principal and make-whole payment of 2023 13 % Notes ( 234,927 ) — — Proceeds from 2023 Funding Agreement 37,747 117,253 — Principal payments of 2021 Funding Agreement ( 34,600 ) ( 12,500 ) — Dividends paid on Series A Preferred Stock ( 10,634 ) ( 11,942 ) — Principal and interest payments of the 2019 Facility Agreement — ( 148,281 ) ( 6,341 ) Proceeds from 2023 13 % Notes — 190,000 — Payments for debt and equity issuance costs — ( 8,556 ) ( 626 ) Proceeds from issuance of common stock and exercise of options 1,781 ( 181 ) 919 Net cash provided by (used in) financing activities 157,181 125,793 ( 6,048 ) Effect of exchange rate changes on cash and cash equivalents ( 1,383 ) 140 ( 22 ) Net increase in cash and cash equivalents 334,420 24,662 17,778 Cash and cash equivalents, beginning of period 56,744 32,082 14,304 Cash and cash equivalents, end of period (1) $ 391,164 $ 56,744 $ 32,082 Year Ended December 31, 2024 2023 2022 Supplemental disclosure of cash flow information: Cash paid for: Interest $ 15,666 $ 13,512 $ — Income taxes 1,936 333 197 Supplemental disclosure of non-cash financing and investing activities: Increase in capitalized accrued interest for network upgrades $ 8,113 $ 5,603 $ 12,164 Capitalized accretion of debt discount and amortization of prepaid financing costs 6,415 5,429 1,830 Accrued satellite construction assets 15,613 58,187 36,139 Fair value of common stock issued for XCOM SSA 7,500 11,887 — Construction in progress assets acquired through XCOM SSA 6,065 2,776 — Extended MSS Network assets acquired through Globalstar SPE 223,811 — — Re-characterization of 2021 Funding Agreement to debt due to 2023 amendment — 87,950 — Fair value of common stock issued for XCOM License Agreement — 58,534 — Fair value of the warrant issued to Thermo for the guarantee associated with the 2023 Funding Agreement — 5,010 — Satellite construction assets acquired through vendor financing arrangement — — 59,822 Principal amount of 2019 Facility Agreement converted into preferred equity — — 149,425 (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 Consolidated Financial Statements. 52 GLOBALSTAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Through its global satellite network, Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including wholesale capacity services through its global satellite network and voice and data communications services to retail, business and governmental customers. 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. Globalstar currently provides wholesale capacity services, communications products and services, terrestrial spectrum and network solutions and government services. Wholesale capacity services include satellite network access and related services using the Company's network of in-orbit satellites and ground stations ("gateways") pursuant to the Company's spectrum licenses, which the Company refers to collectively as the Globalstar System. The Company provides communications products and services to its subscribers, including voice communication and data transmissions (Commercial IoT, SPOT and Duplex). The Company also utilizes the Globalstar System for terrestrial spectrum and network solutions. Government services include strategic partnerships as well as hardware and software designs to develop specific applications operating over the Globalstar System. Use of Estimates in Preparation of Financial Statements The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America ("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. Certain reclassifications have been made to prior year Consolidated Financial Statements to conform to current year presentation. The Company evaluates estimates on an ongoing basis. Principles of Consolidation The Consolidated Financial Statements include the accounts of Globalstar and all its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidation. In connection with the Updated Services Agreements, the Company performed an analysis to determine if its special purpose entity ("SPE") is a variable interest entity ("VIE"). The Company concluded that its SPE is a variable interest entity and Globalstar is the primary beneficiary of the entity. Amounts for the Globalstar SPE are consolidated. Amounts pertaining to the non-controlling interest of the Globalstar SPE are reported as a non-current liability in the Company's consolidated balance sheet. Refer to Note 2: Special Purpose Entity for further discussion. Reverse Stock Split On November 7, 2024. the Company's Strategic Review Committee of the Board of Directors approved a reverse stock split of the Company's issued and outstanding common stock. The reverse stock split was effectuated on February 10, 2025 at a 1-for-15 ratio. All issued and outstanding common stock, options and warrants to purchase common stock and per share amounts contained in this Report have been adjusted retroactively to reflect the change in capital structure for all periods presented. Refer to Note 17: Common Stock for further discussion. 53 Business Combinations The Company accounts for business combinations in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”), which requires most identifiable assets, liabilities, and goodwill acquired in a business combination to be recorded at fair value at the acquisition date. Additionally, ASC 805 requires transaction-related costs to be expensed in the period incurred. The determination of fair value of assets acquired and liabilities assumed requires estimates and assumptions that can change as a result of new information obtained about facts and circumstances that existed as of the acquisition date. As such, the Company will make any necessary adjustments to goodwill in the period identified within one year of the acquisition date. Adjustments outside of that range are recognized currently in earnings. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. Cash deposited in institutional money market funds, regular interest-bearing depository accounts and non-interest-bearing depository accounts are classified as cash and cash equivalents on the accompanying consolidated balance sheet. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. Cash and cash equivalents consists primarily of highly liquid short-term investments deposited with financial institutions that are of high credit quality. The Company performs credit evaluations of its customers’ financial condition and records reserves to provide for estimated credit losses . For the year ended December 31, 2024, the Company's wholesale capacity customer under the Updated Services Agreements was responsible for 58 % of the Company's revenue and 40 % of the Company's total receivable balance. Additionally, one of the Company's value added resellers was responsible for 21 % of the Company's total receivable balance; however, this customer was responsible for less than 10% of the Company's revenue. No other customers were responsible for more than 10% of the Company's revenue or accounts receivable balance. 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. Receivables are recorded when the right to consideration from the customer becomes unconditional, which is generally upon billing or upon satisfaction of a performance obligation, whichever is earlier. Accounts receivable are uncollateralized, without interest, and consist of receivables from the sale of services and equipment. The Company also may act as an agent to procure goods and perform services under the Updated Services Agreements. Payment is generally due within 45 days of the invoice date for this customer. For service, payment is generally due from subscribers within thirty days of the invoice date and for equipment customers, payment is generally due within thirty to sixty days of the invoice date, or, for some customers, may be made in advance of shipment. The Company performs ongoing credit evaluations of its customers and impairs receivable balances by recording specific allowances for credit losses based on factors such as customer credit ratings, supportable and reasonable current trends, the length of time the receivables are past due and historical collection experience. The Company believes that historical collection experience is the most reasonable basis for predicting future performance. One type of the Company’s contract assets is customer receivables and, as such, historical delinquency percentages are generally consistent over time. The estimate of the allowance for subscriber credit losses is computed using aging schedules by type of revenue (service and subscriber equipment), by product (Commercial IoT, SPOT, Duplex and XCOM RAN) and by country. As discussed above, accounts receivable are considered past due in accordance with the contractual terms of the applicable arrangements. The Company applies a loss rate to its portfolio of subscriber trade receivables based on past-due status and records an allowance for credit losses, which represents the expected losses of those trade receivables over their estimated contractual life. The estimated life varies by service and product type. Allowances are generally recorded for all aging categories of outstanding receivables, including those in the current category. Accounts receivable balances that are determined likely to be uncollectible are included in the allowance for credit losses. After attempts to collect a receivable have failed, the receivable is written off against the allowance. The estimate of the allowance for credit losses on wholesale capacity receivables is based primarily on customer payment history and credit rating. The Company believes that the risk of loss is extremely remote for this category of outstanding receivables. 54 The following is a summary of the activity in the allowance for credit losses (in thousands): Year Ended December 31, 2024 2023 2022 Balance at beginning of period $ 2,312 $ 2,892 $ 2,962 Provision, net of recoveries ( 419 ) 519 1,087 Write-offs and other adjustments ( 389 ) ( 1,099 ) ( 1,157 ) Balance at end of period $ 1,504 $ 2,312 $ 2,892 Inventory Inventory consists primarily of purchased products, including subscriber equipment devices, which work on the Company’s network, as well as component parts and other chips used in the manufacture of subscriber equipment devices. Inventory is stated at the lower of cost or net realizable value. Cost is computed using the first-in, first-out (FIFO) method. Inventory write downs are evaluated at the product level and measured as the difference between the cost of inventory and the net realizable value. Write downs are recorded as a "cost of subscriber equipment sales - reduction in the value of inventory" in the Company’s Consolidated Financial Statements. Product sales and returns from the previous 12 months and future demand forecasts are reviewed and excess and obsolete inventory is written off, as applicable. The Company wrote down the value of inventory by $ 0.3 million for the year ended December 31, 2024 primarily resulting from obsolete inventory for component parts that can no longer be used in production of current devices. The Company did no t record any significant write downs of inventory for the year ended December 31, 2023. For the year ended December 31, 2022, the Company wrote down the value of inventory by $ 8.6 million after adjusting for changes in net realizable value resulting from the decision to no longer sell second-generation Duplex devices. The following is a summary of the components of the Company's inventory balance (in thousands): As of December 31, 2024 2023 Finished goods $ 7,254 $ 11,120 Raw materials 3,785 3,548 Inventory reserve ( 298 ) ( 86 ) Total $ 10,741 $ 14,582 Property and Equipment The Globalstar System includes costs for the design, manufacture, test and launch of a constellation of low earth orbit satellites (the “Space Component”), primary and backup control centers, gateways (the “Ground Component”) and spectrum licenses. Property and equipment is stated at cost, net of accumulated depreciation. Costs associated with the design, manufacture, test and launch of the Company’s Space and Ground Components are capitalized and include direct costs of third party suppliers and contractors, internal personnel as well as equipment and materials. Capitalized costs associated with the Company’s Space Component, Ground Component, and other assets are tracked by fixed asset category and are allocated to each asset as it comes into service. Generally, when a satellite is incorporated into the constellation, the Company begins depreciation on the date the satellite is placed into service, which typically is the point that the satellite reaches its orbital altitude, over its estimated depreciable life. In June 2022, the Company launched an on-ground spare satellite. The costs associated with the construction and launch of this spare satellite were placed into service after its successful launch since this satellite is expected to remain as an in-orbit spare and will only be raised to its operational orbit at a future date if needed. The Company capitalizes interest costs associated with the costs of assets in progress. Capitalized interest is added to the cost of the underlying asset and is amortized over the depreciable life of the asset after it is placed into service. As the Company’s construction in progress increases, the Company capitalizes more interest, resulting in a lower amount of net interest expense recognized under U.S. GAAP. 55 In general, depreciation is provided using the straight-line method over the estimated useful lives of the respective assets as follows: Space Component (Second-Generation Satellites) - 15 years from the commencement of service Ground Component - 7 to 15 years from commencement of service Software, Facilities & Equipment - 3 to 10 years Buildings - 25 years Leasehold Improvements - Shorter of lease term or the estimated useful lives of the improvements The estimated useful lives of the Company's Space and Ground Components were based on estimated design life, information from the Company's engineering department and overall Company strategy for the use of these assets. The Company evaluates and revises the estimated depreciable lives assigned to property and equipment based on changes in facts and circumstances. When changes are made to estimated useful lives, the remaining carrying amounts are depreciated prospectively over the remaining useful lives. For assets that are sold or retired, including satellites that are de-orbited and no longer providing services, the estimated cost and accumulated depreciation is removed from property and equipment. The Company assesses the impairment of property and equipment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If the asset is not recoverable, its carrying value would be adjusted down to fair value and an impairment loss would be recorded. Additionally, the Company routinely performs profitability analyses to determine if investments in certain products and/or services remain viable. In the event the Company decides not to support a product or service, or determines that an asset is not expected to generate future benefit, the asset may be abandoned and an impairment loss may be recorded on the associated assets. Leases The Company has operating and finance leases for facilities and equipment around the world, including corporate offices, satellite control centers, ground control centers, gateways and certain equipment. Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases include both a right-of-use asset and a lease liability. The right-of-use asset represents the Company’s right to use the underlying asset in the lease. Certain initial direct costs associated with consummating a lease are included in the initial measurement of the right-of-use asset. The right-of-use asset also includes prepaid lease payments and lease incentives. The lease liability represents the present value of the remaining lease payments discounted using the implicit rate in the lease on the lease commencement date. For leases in which the implicit rate is not readily determinable, an estimated incremental borrowing rate is used, which represents a rate of interest that the Company would pay to borrow on a collateralized basis over a similar term. The Company has elected to combine lease and non-lease components, if applicable. For operating leases, the Company records lease expense on a straight-line basis over the lease term in either marketing, general and administrative expense or cost of services, depending on the nature of the underlying asset. For finance leases, the Company records the amortization of the right-of-use asset through depreciation, amortization and accretion expense and records the interest expense on the lease liability through interest expense, net, using the effective interest method. Variable lease payments are payments made to a lessor due to changes in circumstances occurring after the commencement date. Variable lease payments dependent upon an index or rate are included in the measurement of the lease liability; all other variable lease payments are not included in the measurement of the lease liability and recognized when incurred. Variable lease payments excluded from the measurement of the lease liability are uncommon and, when incurred, are immaterial for the Company. The Company’s existing leases have remaining lease terms of less than 1 year to 17 years. Lease terms include renewal or termination options that the Company is reasonably certain to exercise. For leases with a term of twelve months or less, the Company does not record a right-of-use asset and associated lease liability on its consolidated balance sheet. The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the 56 carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If a right-of-use asset is not recoverable, its carrying value would be adjusted down to fair value and an impairment loss would be recorded. Derivative Instruments Upon inception of a contract, the Company evaluates if the contract contains a derivative instrument. The Company has financing arrangements that are hybrid instruments that contain embedded derivative features. Derivative instruments are recognized as either assets or liabilities in the consolidated balance sheet and are measured at fair value with gains or losses recognized in earnings. The Company determines the fair value of derivative instruments based on available market data and assumptions developed by management using appropriate valuation models. Deferred Financing Costs Deferred financing costs are those costs directly incurred in issuing long-term debt or equity financing. Costs associated with obtaining long-term debt are amortized as additional interest expense over the expected term of the corresponding instrument and are recorded on the Company's consolidated balance sheet as a reduction in the carrying amount of the related debt liability. The Company classifies deferred financing costs consistent with the classification of the related debt outstanding at the end of the reporting period. Fair Value of Financial Instruments The Company believes it is not practicable to determine the fair value of certain of its debt agreements on a recurring basis without incurring significant additional costs. Unlike typical long-term debt, certain terms for its debt agreements cannot readily be compared to other debt instruments and their valuation generally involves a variety of factors, including due diligence by the debt holders. The 2024 Current Debt Repayment is recorded at fair value as the debt was issued at rates consistent with the market rates upon issuance. Litigation, Commitments and Contingencies The Company is subject to various claims and lawsuits that arise in the ordinary course of business. Estimating liabilities and costs associated with these matters requires judgment and assessment based on professional knowledge and experience of our management and legal counsel. When a loss is considered probable and reasonably estimable, a liability is recorded for the Company's best estimate. If there is a range of loss, the Company will record a reserve based on the low end of the range, unless facts and circumstances can support a different point in the range. When a loss is probable, but not reasonably estimable, disclosure is provided, as considered necessary. Reserves for potential claims or lawsuits may be relieved if the loss is no longer considered probable. Gain/Loss on Extinguishment of Debt Gain or loss on extinguishment of debt generally is recorded upon an extinguishment of a debt instrument or early payment of debt. Gain or loss on extinguishment of debt is calculated as the difference between the reacquisition price and net carrying amount of the debt, which includes unamortized debt financing costs, debt discount and any derivative instruments, and is recorded as an extinguishment gain or loss in the Company’s consolidated statement of operations. Revenue Recognition and Deferred Revenue Revenue consists primarily of revenue generated from providing satellite network access and related services utilizing the Globalstar System, satellite voice and data service revenue, revenue generated from the sale of fixed and mobile devices, and revenue from providing engineering and other communication services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Each type of revenue has a separate performance obligation with distinct deliverables and is therefore accounted for discretely. Revenue is measured based on the consideration specified in a contract with a customer, adjusted for credits and discounts, as applicable, and is recognized when the Company satisfies a performance obligation by transferring control over a product or service to a customer. Generally, service revenue is recognized over a period of time and revenue from the sale of subscriber equipment is recognized at a point in time. The recognition of revenue for service is over time as the customer simultaneously receives and consumes the benefits of the Company’s performance over the contract term. The recognition of revenue for subscriber equipment is at a point in time as the risks and rewards of ownership of the hardware transfer to the customer generally upon shipment, which is when legal title of the product transfers to the customer, among other things (as discussed further below). 57 The Company does not record sales taxes, telecommunication taxes or other governmental fees collected from customers in revenue. The Company excludes these taxes from the measurement of contract transaction prices. The Company receives payment from customers in accordance with billing statements or invoices for customer contracts; these payments may be in advance or arrears of services provided to the customer by the Company. Customer payments received in advance of the corresponding service period are recorded as deferred revenue. Upon activation of a Globalstar device, subscribers are generally charged an activation fee, which is recognized over the term of the expected customer life. Credits granted to customers are expensed or charged against revenue or accounts receivable over the remaining term of the contract. The Company issued warrants to the Customer (the "Warrants") to purchase shares of Globalstar common stock which are exercisable in accordance with the amended terms in the Updated Services Agreements; the Warrants were recorded at the estimated fair value of the consideration granted based on a Black-Scholes pricing model. The fair value of the Warrants is noncash consideration payable to a customer which represents a reduction of the transaction price and, therefore, of revenue. As of December 31, 2024 and 2023, this contract asset was $ 43.7 million and $ 46.7 million, respectively, and is netted against the associated contract liability, which is recorded in short-term and long-term deferred revenue on the Company's consolidated balance sheet. The value of the contract asset is amortized as a reduction to revenue over the period in which the Company commences its performance obligations through the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided. For the year ended December 31, 2024 and 2023, the Company reduced revenue by $ 2.4 million and $ 2.6 million, respectively, associated with the amortization of the fair value of the noncash consideration. Estimates related to earned but unbilled service revenue are calculated primarily using current subscriber data, including plan subscriptions and usage between the end of the billing cycle and the end of the period, or in accordance with the terms of the customer contract for satellite network access services. The recognition of service revenue related to amounts allocated to performance obligations that were satisfied (or partially satisfied) in a previous period is not material to the Company’s financial statements. Amounts related to earned but unbilled revenue from the sale of subscriber equipment are recognized if hardware is shipped prior to the invoice being generated. This situation may result from multi-deliverable contracts, whereby equipment and service revenue are bundled and billed over time to a single customer. Provisions for estimated future warranty costs, returns and rebates are recorded as a cost of sale, or a reduction to revenue, as applicable. These costs are based on historical trends and the provision is reviewed regularly and periodically adjusted to reflect changes in estimates. Certain contracts with customers may contain a financing component. Under ASC 606, an entity should adjust the promised amount of the consideration for the effects of time value of money if the timing of the payments agreed upon by the parties to the contract provides the customer or the entity with a significant benefit of financing for the transfer of goods or services to the customer. For certain payments associated with services provided under the Updated Services Agreements, the length of time between receipt of payment by the Customer and transfer of services by the Company was greater than one year. Accordingly, payments made by the Customer included a significant financing component. The Company accreted interest expense using the effective interest rate method over the period in which these advance payments were outstanding. The rate in which interest is computed is based on rates implicit in the Updated Services Agreements. For the Company's subscriber contracts, transactions with a significant financing component are infrequent as the time between cash collection and performance is generally less than one year. The following describes the principal activities from which the Company generates its revenue. Wholesale Capacity Service Revenue. The Company provides wholesale capacity services. The Company allocates the transaction price under the Updated Services Agreements to each performance obligation generally in proportion to their relative stand-alone selling prices. Revenue is recognized when the performance obligations are performed, the timing of which may involve complex judgements by management. For certain performance obligations, the Company recognizes revenue using the percentage of completion method, measured as the percentage of costs incurred to total estimated costs for such performance obligation. Although the Updated Services Agreements have no expiration date, the Company estimated its contract term based on the useful life of its existing satellite network and the expected useful life of the new satellite network under construction. 58 Commercial IoT Service Revenue. The Company sells Commercial IoT services as monthly or annual plans and recognizes revenue ratably over the service term or as service is used, beginning when the service is activated by the customer. SPOT Service Revenue. The Company sells SPOT services as monthly or annual plans and recognizes revenue on a straight-line basis over the service term, beginning when the service is activated by the customer. Duplex Service Revenue. The Company recognizes revenue for monthly access fees in the period services are rendered. The Company offers certain annual plans whereby a customer prepays for a predetermined amount of minutes and data. In these cases, revenue is recognized consistent with a customer's expected pattern of usage based on historical experience because the Company believes that this method most accurately depicts the satisfaction of the Company's obligation to the customer. This usage pattern is typically seasonal and highest in the second and third calendar quarters of the year. The Company offers other annual plans whereby the customer is charged an annual fee to access the Company’s system with an unlimited amount of usage. Annual fees for unlimited plans are recognized on a straight-line basis over the contract term. Equipment Revenue. Equipment revenue represents subscriber device sales, Commercial IoT and SPOT products and accessories as well as fixed and mobile user terminals. The Company recognizes revenue upon shipment provided control has transferred to the customer. Indicators of transfer of control include, but are not limited to; 1) the Company’s right to payment, 2) the customer has legal title of the equipment, 3) the Company has transferred physical possession of the equipment to the customer or carrier, and 4) the customer has significant risks and rewards of ownership of the equipment. The Company sells equipment designed to work on its network through various channels, including through partners as well as direct to consumers or other businesses by its global sales team and through its e-commerce website. The sales channel depends primarily on the type of equipment and geographic region. Promotional rebates are offered from time to time. A reduction to revenue is recorded to reflect the lower transaction price based on an estimate of the customer take rate at the time of the sale using primarily historical data. This estimate is adjusted periodically to reflect actual rebates given to the Company’s customers. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of subscriber equipment sales. Government and Other Service Revenue. Government and other service revenue includes revenue generated primarily from terrestrial spectrum and network solutions as well as certain governmental and engineering service contracts. The revenue associated with these engineering services is generally recorded over time as the services are rendered, and the Company's obligation to the customer is satisfied. Multiple-Element Arrangement Contracts. At times, the Company will sell subscriber equipment through multiple-element arrangement contracts with services. When the Company sells subscriber equipment and services in bundled arrangements and determines that it has separate performance obligations, the Company allocates the bundled contract price among the various performance obligations based on relative stand-alone selling prices at contract inception of the distinct goods or services underlying each performance obligation and recognizes revenue when, or as, each performance obligation is satisfied. Stock-Based Compensation The Company recognizes compensation expense in the financial statements for both employee and non-employee share-based awards based on the grant date fair value of those awards and accounts for forfeitures as they occur. Restricted stock awards and units are valued using the stock price on the grant date. Market-based awards are valued using a Monte-Carlo simulation model on the grant date. Compensation cost associated with awards with market-based vesting conditions is recognized on a straight-line basis over the requisite service period for each stock price target within the grant, which is the lesser of the derived service period or the explicit service period if one is present. If the market condition is satisfied prior to the end of the requisite service period, the Company will accelerate all remaining expense to be recognized. Compensation cost associated with share-based awards with a performance condition that affects vesting is recorded if and when the performance condition is probable of achievement. 59 Foreign Currency The functional currency of the Company’s foreign consolidated subsidiaries is generally their local currency, except in certain scenarios, including when the subsidiary operates in a hyperinflationary economy, such as Argentina. Assets and liabilities of its foreign subsidiaries are translated into United States dollars based on exchange rates at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during the reporting period. Translation adjustments are accumulated in a separate component of stockholders’ equity. For 2024, 2023 and 2022, the foreign currency translation adjustments were net gains of $ 8.4 million, net losses of $ 4.2 million and net gains of $ 5.3 million, respectively. Foreign currency transaction gains/losses were approximately net losses of $ 16.6 million, net gains of $ 4.9 million and net losses of $ 6.6 million for each of 2024, 2023, and 2022, respectively. Asset Retirement Obligation Liabilities arising from legal obligations associated with the retirement of the Company's gateway long-lived assets are measured at fair value and recorded as a liability. As of December 31, 2024 and 2023, the Company had accrued approximately $ 2.9 million and $ 3.0 million, respectively, for asset retirement obligations. There were no new asset retirement obligations established and no significant settlements during 2024. The Company believes this estimate will be sufficient to satisfy the Company’s obligation under site leases to remove its gateway equipment and restore the lease sites to their original condition. Warranty Expense Warranty terms extend from 90 days on equipment accessories to one year for fixed and mobile user terminals. A provision for estimated future warranty costs is recorded as cost of sales when products are shipped. Warranty costs are based on historical trends in warranty charges as a percentage of gross product shipments. Research and Development Expenses Research and development costs were $ 6.5 million, $ 1.4 million and $ 0.5 million for 2024, 2023 and 2022, respectively. During 2024 and 2023, research and development costs increased resulting from costs incurred pursuant to the SSA under the License Agreement. Research and development costs are expensed as incurred as cost of services and include primarily the cost of new product development, chip set design and other engineering work. Income Taxes The Company is taxed as a C corporation for U.S. tax purposes. The Company recognizes deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. The Company measures deferred tax assets and liabilities using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date; however, as the Company has a full valuation allowance on its deferred tax assets, there is no impact to the consolidated statements of operations and balance sheets. The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, management considers: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in prior carry-back year(s) if carry-back is permitted under applicable tax law; and (iv) tax planning strategies. Comprehensive Income (Loss) All components of comprehensive income (loss), including the foreign currency translation adjustment, are reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. For each of the years ended December 31, 2024 and 2023, the change in "Accumulated other comprehensive income" resulted from foreign currency translation adjustments; no amounts were reclassified out of "Accumulated other comprehensive income" during these periods. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. In periods of net income, the numerator used to 60 calculate diluted EPS includes the effect of dividends attributable to preferred shareholders. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. Generally, for all other potentially dilutive common shares, the effect is calculated using the treasury stock method. Goodwill Goodwill represents the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired. Goodwill is not amortized in accordance with the requirements of ASC 350. Goodwill is required to be allocated amongst reporting units and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. All of the Company's goodwill is assigned to Globalstar's MSS business, its only reportable segment. Goodwill is tested for impairment on an annual basis and whenever events or circumstances indicate that the asset may be impaired. The Company completed its annual goodwill impairment test on November 30, 2024 and determined there was no impairment as of that date. Additionally, the Company is not aware of any triggering events. The Company's goodwill impairment test is prepared using a qualitative assessment and, if necessary, a quantitative goodwill impairment test. The Company considers significant unfavorable industry or economic trends as factors in deciding when to perform an impairment test. If the qualitative assessment indicates that it is more-likely-than-not that the estimated fair value of the reporting unit exceeds its carrying value, it is not necessary to measure and record an impairment loss. If a goodwill impairment test is necessary, the fair value of the reporting unit, which is determined using an income approach based on the present value of discounted cash flows, is compared to its carrying value, which includes goodwill. If the carrying value of the reporting unit exceeds its fair value, the difference is recognized as an impairment loss. Intangible and Other Assets Intangible Assets Not Subject to Amortization A significant portion of the Company's intangible assets are licenses that provide the Company the exclusive right to provide MSS services over the Globalstar System or to utilize designated radio frequency spectrum to provide terrestrial wireless communication services in a particular region of the world. While licenses are issued for only a fixed time, such licenses are subject to renewal by the Federal Communications Commission ("FCC") or equivalent international regulatory authorities. These license renewals are expected to occur routinely and at nominal cost. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of its wireless licenses. As a result, the Company treats the wireless licenses as an indefinite-lived intangible asset. The Company re-evaluates the useful life determination for wireless licenses annually, or more frequently if needed, to determine whether events and circumstances continue to support an indefinite useful life. The Company assesses these intangible assets for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In assessing whether it is more likely than not that such an asset is impaired, the Company assesses relevant events and circumstances that could affect the significant inputs used to determine the fair value of the asset. If the Company determines that an impairment exists, any related loss is estimated based on fair values. Intangible Assets Subject to Amortization The Company's intangible assets that do not have indefinite lives are amortized over their estimated useful lives. For information related to each major class of intangible assets, including accumulated amortization and estimated average useful lives, see Note 6: Intangible and Other Assets to the Consolidated Financials. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an indicator is present, the Company would measure recoverability by comparing the carrying amount to the future undiscounted cash flows the asset is expected to generate. If the asset is not recoverable, the undiscounted cash flows do not exceed the carrying amount and the carrying amount would be adjusted down to its fair value. Assets Recognized from the Costs to Obtain and Fulfill Contracts The Company capitalizes incremental costs to obtain and/or fulfill a contract to the extent it expects to recover them. For subscriber-driven contracts, these capitalized contract acquisition costs primarily include deferred subscriber acquisition costs and are amortized consistently with the pattern of transfer of the good or delivery of the service to which the asset relates. For wholesale capacity services, the Company capitalizes certain costs incurred by the Company prior to the customer benefiting from the service. If a contract terminates prior to the end of its expected life, the remaining capitalized contract costs associated with it becomes impaired and the amount is expensed. 61 For subscriber-driven revenue, total contract acquisition costs were $ 0.9 million and $ 1.2 million as of December 31, 2024 and 2023, respectively, and are recorded in "Intangible and other assets" on the Company's consolidated balance sheet. These costs are amortized to marketing, general and administrative expenses over the estimated completion of the contract term, which is three years and considers anticipated contract renewals. For the years ended December 31, 2024, 2023 and 2022, the amount of amortization related to contract acquisition costs was $ 0.6 million, $ 0.7 million and $ 1.2 million, respectively. For wholesale capacity services, total costs to fulfill the customer contract associated with the Updated Services Agreements were $ 5.3 million and $ 5.7 million as of December 31, 2024 and 2023, respectively, and are recorded in "Intangible and other assets" on the Company's consolidated balance sheet. These costs are amortized to cost of services and marketing, general and administrative expenses over the estimated completion of the contract term, consistent with the period in which the customer benefits from the services provided. For the years ended December 31, 2024, 2023 and 2022, the amount of amortization related to costs to fulfill a contract was $ 0.3 million, $ 0.4 million and $ 0.1 million, respectively. Advertising Expenses Advertising costs were $ 3.0 million, $ 2.8 million and $ 2.0 million for 2024, 2023, and 2022, respectively. These costs are expensed as incurred as marketing, general and administrative expenses. 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 adopted this standard when it became effective on January 1, 2025. The Company is evaluating the impact this ASU may have on its financial statement disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures . This ASU requires public business entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items. 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, 2027. The Company is evaluating the impact this ASU may have on its financial statement disclosures. Recently Adopted Accounting Pronouncements 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. The Company adopted this ASU for its fiscal year end December 31, 2024 disclosures. For further discussion, refer to Note 16: Segment Reporting. 2. SPECIAL PURPOSE ENTITY The Company is the operator for certain satellite-enabled services (the "Services") offered by Apple Inc. (the "Customer") pursuant to a service agreement (the “Service Agreement”) and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”) for the Phase 1 Service Period and Phase 2 Service Period (as defined below). The Service Agreements generally require Globalstar to allocate network capacity to support the Services, which launched in November 2022. As more fully described in the Company's Current Report on Form 8-K filed with the Commission on November 1, 2024, the Company and the 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 the Customer over a new MSS network, including a new satellite constellation, expanded ground infrastructure, and increased global MSS licensing (the “Extended MSS Network”) for the Services provided over the Extended MSS Network. The Extended MSS Network will be (i) owned by Globalstar Licensee, LLC, together with its subsidiaries (collectively, the “Globalstar SPE”), a VIE, and (ii) operated by the Company. The Updated Services Agreements were effective upon the closing on November 5, 2024 (the "Closing Date"). The Customer has prepaid, and is required, subject to certain conditions, to continue to prepay for, 62 certain services to be delivered by the Company to the Customer’s end users who will utilize the Extended MSS Network under the Updated Services Agreements and is a passive equity holder in Globalstar SPE. The Company's allocated capacity supports the following phases of the Services: 1) current Services provided over the existing Globalstar System ("Phase 1 Service Period"), 2) future Services provided over new satellites ("Phase 2 Service Period"), of which such Services are expected to commence following the launch of such satellites in 2025, and 3) future Services provided over the Extended MSS Network. The table below includes the assets of the Globalstar SPE as of December 31, 2024 (amounts in thousands): As of December 31, 2024 Assets Cash and cash equivalents $ 45,776 Property and equipment, net 58,917 Prepaid network costs 289,639 Intangibles and other asset, net 11,674 Total Assets $ 406,006 Customer Class B Units The 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. The Globalstar SPE holds and administers, or will administer in the future, certain spectrum licenses, satellites, ground stations and other network assets for use by the Company and to enable and provide services to the Customer pursuant to the Updated Services Agreements. The Globalstar SPE will not have commercial operations. The Company has an 80 % equity ownership in the Globalstar SPE, representing 1,600,000 Class A Units. The Company's 80 % ownership in the Globalstar SPE exposes it to residual profit or loss of the Globalstar SPE and Globalstar will absorb any expense variability of the entity. The Company has power over the most significant activity of the Globalstar SPE and is exposed to losses and benefits of the Globalstar SPE through its equity interest. The Company assessed the accounting considerations pursuant to ASC 810: Consolidation , and concluded that it is the primary beneficiary of the VIE and consolidated the Globalstar SPE into the financial statements appearing in this Report. Based on the redemption provision and other characteristics of the arrangement, the Company recorded the total equity contributions from the Customer of $ 400 million as equity on the Globalstar SPE financial statements and a non-current liability on the Company's consolidated balance sheet. The initial minority investment in the Globalstar SPE included $ 224 million of in-kind contributions from the Customer and $ 176 million in cash contributions. The in-kind contributions included $ 177 million of long-lead items (recorded to "Prepaid network costs"), $ 24 million of satellite construction in progress assets (recorded to "Property and equipment, net"), $ 11 million of ground network construction in progress assets (recorded to "Property and equipment, net"), and $ 12 million of intangible licensing work in progress assets (recorded to "Intangible and other assets, net"). Extended MSS Network Prepayments The Updated Services Agreements provide that the Customer will make cash prepayments to the Company for 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 quarterly over the construction period of the satellites to be used in the Extended MSS Network, 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 the Company to fully retire its 2023 13 % Notes (the "Current Debt Repayment"). The 2023 13 % Notes were repaid 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 Company expects to fully payoff the 2024 Prepayment Agreement and to redeem the Customer Class B Units within the design useful life of the new satellites. The Company expects that such amounts payable to the Customer will be fully set off with amounts payable by the Customer. Infrastructure Prepayment 63 During 2024, the Company received $ 278 million from the Customer pursuant to the Infrastructure Prepayment. The Company recorded these prepayments as deferred revenue as they represent the Company’s obligation to transfer future services to Customer. The deferred revenue associated with the Infrastructure Prepayment will be earned as revenue as services are performed. A portion of the Infrastructure Prepayment accrues fees that will be reduced or eliminated entirely if the Company meets certain defined milestones associated with the completion of the Extended MSS Network. Current Debt Repayment On the Closing Date, the Company received $ 235 million from the Customer pursuant to the Current Debt Repayment, representing the amount necessary to retire the Company's outstanding 2023 13 % Notes. Refer to Note 7: Long-Term Debt and Other Financing Arrangements for further discussion. Service Fees As consideration for the satellite services provided for in the Updated Services Agreements, the incremental service fees due from the 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. Payment of a portion of these fees is subject to the satisfaction of certain licensing, service levels and milestone achievements. Additionally, the Updated Services Agreements also provide for other service fees of $ 30 million annually to be accelerated, such accelerated payments are expected to begin in the first quarter of 2025. Other In connection with the Updated Services Agreements, the Company entered into a launch services agreement with SpaceX for the new satellites that will be procured for the Extended MSS Network. Refer to Note 10: Commitments and Contingencies for further discussion. 3. REVENUE Disaggregation of Revenue The following table discloses revenue disaggregated by type of product and service (amounts in thousands): Year Ended December 31, 2024 2023 2022 Service revenue: Wholesale capacity services $ 145,299 $ 109,067 $ 34,913 Subscriber services Commercial IoT 26,245 22,867 19,516 SPOT 41,140 44,184 45,670 Duplex 20,156 25,932 29,222 Government and other services 4,849 2,146 2,747 Total service revenue 237,689 204,196 132,068 Total subscriber equipment sales 12,660 19,612 16,436 Total revenue $ 250,349 $ 223,808 $ 148,504 Wholesale capacity services revenue includes revenue associated with the Updated Services Agreements. As consideration for the services to be provided by Globalstar under the Updated Services 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. Government and other services revenue includes 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. 64 The Company attributes equipment revenue to various countries based on the location where equipment is sold. Service revenue is generally attributed to the various countries based on the Globalstar entity that holds the customer contract. Revenue does not reflect our intercompany transactions; such intercompany transactions reflect globally accepted transfer pricing principles and align profits with the business operations and functions of the various legal entities in our international business. The following table discloses revenue disaggregated by geographical market (amounts in thousands): Year Ended December 31, 2024 2023 2022 Service revenue: United States $ 206,402 $ 170,621 $ 99,735 Canada 12,873 16,058 17,421 Europe 6,529 6,856 6,428 Central and South America 11,329 9,978 7,961 Others 556 683 523 Total service revenue 237,689 204,196 132,068 Subscriber equipment sales: United States $ 6,654 $ 8,599 $ 7,981 Canada 1,077 5,153 4,740 Europe 3,292 2,985 1,870 Central and South America 1,633 2,863 1,793 Others 4 12 52 Total subscriber equipment sales 12,660 19,612 16,436 Total revenue $ 250,349 $ 223,808 $ 148,504 Accounts Receivable The Company's receivable balances by type and classification are presented in the table below net of allowance for credit losses and may include amounts related to earned but unbilled receivables (amounts in thousands): As of December 31, 2024 2023 Accounts receivable, net of allowance for credit losses Subscriber and other accounts receivable $ 14,829 $ 14,474 Wholesale capacity accounts receivable 12,123 34,269 Total accounts receivable, net of allowance for credit losses $ 26,952 $ 48,743 The Company entered into a satellite procurement agreement and a launch services agreement to support the Phase 2 Service Period. The new satellites purchased under the satellite procurement agreement are intended to replenish the Company's HIBLEO-4 U.S.-licensed system. Pursuant to the Services Agreements, payments are expected to be made to the Company by the Customer on a straight-line basis once the satellites are successfully utilized to provide services for the 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 Agreements were $ 236.9 million as of December 31, 2024 related to Phase 2. Contract Liabilities Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands). 65 As of December 31, 2024 2023 Short-term contract liabilities Subscriber and other contract liabilities $ 19,710 $ 22,816 Wholesale capacity contract liabilities, net of contract asset 41,491 30,861 Total short-term contract liabilities $ 61,201 $ 53,677 Long-term contract liabilities Subscriber and other contract liabilities $ 1,431 $ 1,632 Wholesale capacity contract liabilities, net of contract asset 286,740 1,581 Total long-term contract liabilities $ 288,171 $ 3,213 Total contract liabilities $ 349,372 $ 56,890 For subscriber contract liabilities, the amount of revenue recognized during the years ended December 31, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 17.4 million and $ 19.6 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the years ended December 31, 2024 and 2023 from performance obligations included in the contract liability balance at the beginning of these periods was $ 34.1 million and $ 44.1 million, respectively. The duration of the Company’s contracts with subscribers is generally one year or less. The Updated Services 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 obligation. The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands). As of December 31, 2024 2023 Wholesale capacity contract liabilities, net: Additional consideration associated with the 2021 and 2023 Funding Agreements (1) $ 12,247 $ 16,104 Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 21,914 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 8,950 14,204 Advanced payments for the Phase 1 Service Period fee, service-related operating expenses and capital expenditures and other services 27,664 19,907 Advance payments made for the Extended MSS Network (See Note 2: Special Purpose Entity) 278,043 — Additional consideration associated with the Updated Services Agreements (2) 7,288 — Other advanced payments associated with future performance obligations 15,795 5,219 Contract asset (3) ( 43,670 ) ( 46,665 ) Wholesale capacity contract liabilities, net $ 328,231 $ 32,442 (1) Includes additional consideration associated with the below-market interest rates within the 2021 and 2023 Funding Agreements. This consideration will be recognized over the estimated Phase 1 and Phase 2 Service Periods. (2) Includes additional consideration totaling $ 4.4 million associated with the fee reduction mechanism embedded in the Current Debt Repayment and a portion of the 2024 Prepayment Agreement, as well as an estimate of the significant financing component totaling $ 2.9 million within these agreements. It is anticipated that this consideration will be recognized over the estimated term of the Current Debt Repayment and services provided over the Extended MSS Network. (3) 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 sheet. The fair value of the warrants is recorded as a reduction to revenue over time. 66 4. LEASES The following tables disclose the components of the Company’s operating leases (amounts in thousands): As of December 31, 2024 2023 Operating leases: Right-of-use asset, net $ 31,835 $ 34,164 Short-term lease liability (recorded in accrued expenses) 4,251 3,004 Long-term lease liability 26,256 29,244 Total operating lease liabilities $ 30,507 $ 32,248 Finance leases are not significant to the Company's financial statements as of December 31, 2024 and 2023. Lease Cost The components of lease cost are reflected in the table below (amounts in thousands): Year Ended December 31, 2024 2023 2022 Operating lease cost (1) $ 6,360 $ 5,576 $ 4,306 Short-term lease cost 315 862 498 Total lease cost $ 6,675 $ 6,438 $ 4,804 (1) Includes sublease income. Amortization and interest associated with finance leases were less than $ 0.1 million in total for the years ended December 31, 2024, 2023 and 2022; accordingly, these amounts are not shown in the table above. Weighted-Average Remaining Lease Term and Discount Rate The following table discloses the weighted-average remaining lease term and discount rate for finance and operating leases: As of December 31, 2024 2023 Weighted-average lease term Finance leases 3.4 years 3.7 years Operating Leases 8.3 years 9.8 years Weighted-average discount rate Finance leases 9.5 % 10.2 % Operating leases 8.7 % 8.6 % 67 Supplemental Cash Flow Information The below table discloses supplemental cash flow information for operating leases (in thousands): Year Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 6,388 $ 5,853 $ 5,299 Operating and financing cash flows from finance leases were each less than $ 0.1 million for each of the years ended December 31, 2024, 2023 and 2022; accordingly, these cash flows are not shown in the table above. Maturity Analysis The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of December 31, 2024 (amounts in thousands): Operating Leases Finance Leases 2025 $ 6,696 $ 39 2026 6,214 39 2027 5,645 32 2028 5,577 17 2029 3,856 1 Thereafter 15,217 — Total lease payments $ 43,205 $ 128 Imputed interest ( 12,698 ) ( 18 ) Discounted lease liability $ 30,507 $ 110 In connection with the Extended MSS Network, the Company will likely enter into additional operating leases in the future, the amount and timing of such leases is unknown and excluded from the table above. 68 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): As of December 31, 2024 2023 Globalstar System: Space component $ 1,167,332 $ 1,230,975 Ground component 102,717 106,757 Construction in progress: Space component 357,825 240,732 Ground component 20,545 6,814 Other 8,727 9,574 Total Globalstar System 1,657,146 1,594,852 Internally developed and purchased software 24,309 23,310 Equipment 14,904 11,905 Land and buildings 3,222 2,677 Leasehold improvements 2,180 2,147 Total property and equipment 1,701,761 1,634,891 Accumulated depreciation ( 1,028,129 ) ( 1,010,889 ) Total property and equipment, net $ 673,632 $ 624,002 The Company has an agreement with MDA for the purchase of new satellites that are intended to replenish the Company's HIBLEO-4 U.S.-licensed system. The Company also has an agreement with SpaceX providing for the launch of the first set of satellites under the agreement with MDA. The Company also has agreements with MDA and SpaceX to support the Extended MSS Network. Refer to Note 10: Commitments and Contingencies for further discussion of these agreements. As of December 31, 2024, for the HIBLEO-4 replacement satellites, the Company has incurred $ 224.3 million and $ 23.6 million for milestones completed under these agreements with MDA and SpaceX, respectively. As of December 31, 2024, for the Extended MSS Network, the Company has incurred $ 17.3 million for milestones completed under the agreement with SpaceX.These costs, as well as the associated personnel costs and capitalized interest, are reflected in the "space component" of construction in progress in the table above. As discussed in Note 2: Special Purpose Entity, the Customer contributed certain assets to the Globalstar SPE, which are included in the table above. Capitalized Interest and Depreciation Expense The following table summarizes capitalized interest for the periods indicated below (in thousands): Year Ended December 31, 2024 2023 2022 Interest costs eligible to be capitalized $ 46,527 $ 39,143 $ 45,609 Interest costs recorded in interest income (expense), net ( 14,388 ) ( 15,271 ) ( 29,836 ) Net interest capitalized $ 32,139 $ 23,872 $ 15,773 The following table summarizes depreciation expense for the periods indicated below (in thousands): Year Ended December 31, 2024 2023 2022 Depreciation Expense $ 87,917 $ 87,213 $ 85,475 69 The following table summarizes amortization expense for the periods indicated below (in thousands): Year Ended December 31, 2024 2023 2022 Amortization Expense $ 1,068 $ 978 $ 8,409 During 2022, the Company wrote down the value of certain second-generation ground assets, including intangible assets. Accordingly, the amortization expense decreased after 2022 associated with these assets. Geographic Location of Property and Equipment Long-lived assets consist primarily of property and equipment and are attributed to various countries based on the physical location of the asset, except for the Company’s satellites which are included in the long-lived assets of the United States. The Company’s information by geographic area is as follows (in thousands): Year Ended December 31, 2024 2023 Property and equipment: North America $ 636,816 $ 581,535 Central and South America 13,629 16,122 Africa 10,736 12,379 Asia Pacific 10,468 11,411 Europe 1,983 2,555 Total property and equipment $ 673,632 $ 624,002 6. INTANGIBLE AND OTHER ASSETS Intangible Assets The Company has intangible assets not subject to amortization, which include certain costs to obtain or defend regulatory authorizations. These costs include primarily efforts related to the enhancement of the Company's licensed MSS spectrum to provide terrestrial wireless services as well as costs with international regulatory agencies to obtain similar terrestrial authorizations outside of the United States. The Company also has intangible assets subject to amortization, which primarily include developed technology and definite lived MSS licenses. The gross carrying amount and accumulated amortization of the Company's intangible assets consist of the following (in thousands): December 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intangible Assets Not Subject to Amortization $ 17,070 $ — $ 17,070 $ 16,929 $ — $ 16,929 Intangible Assets Subject to Amortization: Developed technology $ 35,798 $ ( 5,552 ) $ 30,246 $ 12,170 $ ( 8,235 ) $ 3,935 Regulatory authorizations 9,384 ( 2,073 ) 7,311 5,370 ( 1,850 ) 3,520 Intellectual property assets in progress 7,406 — 7,406 25,980 — 25,980 Other intangible assets in progress 23,172 — 23,172 10,289 — 10,289 $ 75,760 $ ( 7,625 ) $ 68,135 $ 53,809 $ ( 10,085 ) $ 43,724 Total $ 92,830 $ ( 7,625 ) $ 85,205 $ 70,738 $ ( 10,085 ) $ 60,653 For the year ended December 31, 2024, the Company recorded amortization expense on these intangible assets of $ 3.6 million. Amortization expense is recorded in operating expenses in the Company’s consolidated statements of operations. During 2024, additions to intangible assets included primarily efforts associated with the development of XCOM technology as 70 well as efforts to obtain regulatory authorizations for Globalstar and licensing work associated with the Globalstar SPE. During 2024, the Company wrote off certain of its fully amortized assets, which reduced the gross carrying amount and accumulated amortization reflected in the table above. Excluding the effects of any acquisitions, dispositions or write-downs subsequent to December 31, 2024, total estimated annual amortization of intangible assets is as follows (in thousands): 2025 $ 4,614 2026 4,565 2027 4,500 2028 3,995 2029 3,744 Thereafter 16,139 Total $ 37,557 Goodwill As of December 31, 2024, the carrying amount of goodwill was $ 30.6 million and is associated with the Company's only operating segment, its MSS business. Goodwill is deductible for tax purposes. This goodwill was recorded during 2023 in connection with entering into the intellectual property license agreement with XCOM Labs, Inc. and represented the excess of the purchase price of the net identifiable assets acquired. The Company's annual goodwill impairment test during 2024 indicated that it was more likely-than-not that the estimated fair value of the reporting unit exceeded the carrying value of goodwill. Other Assets Other assets consist of the following (in thousands): December 31, 2024 2023 Costs to obtain and fulfill a contract (Note 1) $ 6,271 $ 6,886 Long-term accounts receivable 3,517 5,094 International tax receivables (Note 13) 6,666 2,791 Other long-term assets 3,774 3,703 Total other assets $ 20,228 $ 18,474 Long-term accounts receivable represents an unconditional right to consideration for equipment delivered to one customer that will be billed over the next five years ; the long-term portion represents the amount that will be billed beyond the next twelve months. Other long-term assets include primarily ERP implementation costs, recoverable tariffs and long-term deposits. 71 7. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS Long-term debt consists of the following (in thousands): December 31, 2024 December 31, 2023 Principal Amount Unamortized Debt Premium (Discount) and Deferred Financing Costs Carrying Value Principal Amount Unamortized Discount and Deferred Financing Costs Carrying Value Current Debt Repayment $ 221,625 $ 107,176 $ 328,801 $ — $ — $ — 2023 Funding Agreement 155,000 ( 11,031 ) 143,969 117,253 ( 15,433 ) 101,820 2021 Funding Agreement 40,850 ( 2,198 ) 38,652 75,450 ( 6,888 ) 68,562 2023 13 % Notes — — — 205,958 ( 16,040 ) 189,918 Total debt 417,475 93,947 511,422 398,661 ( 38,361 ) 360,300 Less: current portion 34,600 — 34,600 34,600 — 34,600 Long-term debt $ 382,875 $ 93,947 $ 476,822 $ 364,061 $ ( 38,361 ) $ 325,700 The principal amounts shown above included payment of in-kind interest for the 2023 13 % Notes. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion. As of December 31, 2024, the current portion of long-term debt relates to the 2021 Funding Agreement and represents the amounts to be paid under the Updated Services Agreements (as previously defined) through fee offsets from the Customer during the next twelve months. Current Debt Repayment As discussed in Note 2: Special Purpose Entity, pursuant to the Updated Services Agreements, the Customer funded $ 235 million for the Company to retire its outstanding 2023 13 % Notes. The Current Debt Repayment is expected to be recouped against amounts payable by the Customer to the Company on a quarterly basis over a period of 32 quarters commencing on a fixed repayment date in the future that is not tied to the launch of services. The Current Debt Repayment is classified as debt because the Company's repayment obligations will commence on such date regardless of when services are provided under the Updated Services Agreements. The Current Debt Repayment accrues annual fees, which may be reduced or eliminated entirely if the Company meets certain defined milestones associated with the completion of the Extended MSS Network, at which time prior accruals will be reduced or eliminated. The balance accrued for these fees is included in long-term deferred revenue on the Company's balance sheet (refer to Note 3: Revenue for further discussion). On the issuance date, the Company recorded the Current Debt Repayment at fair value of $ 331.2 million. The difference between the principal amount of the Current Debt Repayment and the fair value was $ 109.6 million and was recorded as a debt premium. Additionally, the Company was required to bifurcate the fair value of the interest reduction mechanism and record a derivative liability upon issuance equal to the debt premium. The Company will amortize the premium as an offset to interest expense over the loan term using the effective interest rate method. Refer to Note 8: Derivatives and Note 9: Fair Value Measurements for further discussion on the embedded derivative bifurcated from the Current Debt Repayment. 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 2022 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. As of December 31, 2024, payments under the 2023 Funding Agreement totaled $ 155.0 million, of which $ 37.7 million was received during 2024. 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) and continuing for no longer than 16 consecutive quarters. Compounded fees are accrued at a fixed rate based on the average outstanding balance of the 2023 Funding Agreement. The balance accrued for these fees is included in "Other non-current liabilities" on the Company's balance sheet (refer to Note 11: Accrued Expenses and Other Non-Current Liabilities for further discussion). 72 For as long as any amount funded under the 2023 Funding Agreement is outstanding, the Company will be subject to certain covenants, including (i) maintenance of a minimum cash balance of $ 30 million, (ii) interest coverage and leverage ratios, and (iii) other customary negative covenants, including limitations on certain asset transfers, expenditures and investments. 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 Updated Services Agreements. See further discussion regarding Thermo's guarantee in Note 12: 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, which is netted against the face value of the 2023 Funding Agreement, 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. Prior to the amendment in October 2024, prepayment features were included in the 2023 Funding Agreement and required bifurcation from the debt and were valued separately. Refer to Note 8: Derivatives and Note 9: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2023 Funding Agreement. The table below outlines the components of the draws made under the 2023 Funding Agreement at funding (amounts in thousands): April 2023 November 2023 February 2024 Principal $ 87,730 $ 29,523 $ 37,747 Debt Discount - Thermo Guarantee ( 6,897 ) ( 1,967 ) — Debt Discount - Customer Relationship ( 4,509 ) ( 3,290 ) ( 572 ) Debt (Discount) Premium - Embedded Derivative ( 341 ) 49 — Fair Value at Issuance $ 75,983 $ 24,315 $ 37,175 After the effectiveness of the Thermo Guarantee in December 2023, no debt discount was attributed to the allocation of the fair value of the draw. Additionally, there was no significant discount for the February 2024 draw and, therefore, no embedded derivative required bifurcation. 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. The debt discount associated with the 2021 Funding Agreement is accreting to interest expense through the maturity date using an effective interest rate method. No interest accrues on amounts outstanding under the 2021 Funding Agreement. During 2024, $ 34.6 million was recouped pursuant to the terms of the 2021 Funding Agreement. 2023 13 % Notes In 2023, the Company sold $ 200.0 million in aggregate principal amount of non-convertible 13 % Senior Notes due 2029 (the “2023 13 % Notes”). Pursuant to the Updated Services Agreements, the Company paid off the outstanding principal balance of the 2023 13 % Notes in November 2024 with cash from the 2024 Prepayment Agreement. The payoff of the 2023 13 % Notes included the aggregate principal amount outstanding of $ 219.6 million, accrued interest of $ 4.1 million and make-whole fees of $ 13.3 million. The principal and accrued interest amount of $ 223.7 million included the accrual of PIK interest added to the principal amount outstanding prior to pay down totaling $ 21.6 million. The Company recorded a loss on extinguishment of debt of $ 27.4 million on its consolidated statements of operations, resulting from the unamortized debt discount and deferred financing costs of the 2023 13 % Note prior to extinguishment as well as the make-whole fees at pay down. Prior to being paid off, the 2023 13 % Notes bore interest at a rate of 13.00 % per annum payable semi-annually in arrears. Pursuant to the Service Agreements, the Company paid 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 73 $ 6.7 million and $ 6.9 million, respectively, was paid-in-kind, which increased 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 2024, the Company paid dividends approved by the Company's Board of Directors totaling $ 10.6 million. Series A Preferred Stock may be redeemed by the Company, in whole or in part, at any time. The holders of the Series A Preferred Stock do not have any rights to convert or require the Company to redeem such stock. The holders of the Series A Preferred stock have customary liquidation preferences. Debt maturities Annual debt maturities for each of the five years following December 31, 2024 and thereafter are as follows (in thousands): 2025 $ 34,600 2026 19,790 2027 57,176 2028 77,953 2029 68,663 Thereafter 159,293 Total $ 417,475 Amounts in the above table are calculated based on amounts outstanding at December 31, 2024, and therefore exclude future draws pursuant to the 2023 Funding Agreement and assume recoupments as scheduled under the 2021 and 2023 Funding Agreements and the Current Debt Repayment. 74 8. DERIVATIVES The Company has identified various embedded derivatives resulting from certain features in the Company’s borrowing arrangements, requiring recognition on its consolidated balance sheet. None of these derivative instruments are designated as a hedge. Derivative liabilities are recorded in "Other non-current liabilities" or "Intangible and other assets" on the Company's consolidated balance sheet. The fair value of each embedded derivative is marked-to-market at the end of each reporting period, or more frequently as deemed necessary, with any changes in value reported in the consolidated statements of operations and consolidated statements of cash flows as a non-cash operating activity. The instruments and related features embedded in the debt instruments that are required to be accounted for as derivatives are described below. See Note 9: Fair Value Measurements to the Consolidated Financial Statements for further discussion. Embedded Derivative within the Current Debt Repayment The terms of the Current Debt Repayment contains an interest reduction mechanism that is required to be bifurcated and recorded as an embedded derivative on the Company's consolidated balance sheet with a corresponding debt premium that is added to the principal amount of the Current Debt Repayment. The Company determined the fair value of the embedded derivatives using a discounted cash flow model. As the discount yield and the effective interest rate of the loan fluctuate based on projected cash flows, the derivative value is adjusted. Upon issuance, the Company recorded the fair value of the embedded derivative, totaling $ 109.6 million, as a derivative asset. As of December 31, 2024, the fair value of the embedded derivative was $ 108.8 million. During the fourth quarter of 2024, the Company recorded an offset to derivative gain (loss) resulting from this mark-to-market adjustment, which was reflected in "Other" in the Company’s consolidated statement of operations. Embedded Derivatives within the 2023 Funding Agreement Prior to its amendment in October 2024, the 2023 Funding Agreement contained certain prepayment features that are required to be bifurcated and recorded as an embedded derivative on the Company's consolidated balance sheet with a corresponding debt discount or premium that was netted against the principal amount of the draws under the 2023 Funding Agreement. As the Company made draws on the 2023 Funding Agreement, an associated embedded derivative was bifurcated and recorded. The Company determined the fair value of the embedded derivatives using a discounted cash flow model. As the discount yield and the effective interest rate of the loan fluctuated based on projected cash flows, the derivative value would be adjusted as either a liability or an asset of the Company. During the years ended December 31, 2024 and 2023, the Company recorded a derivative loss of $ 1.3 million and a derivative gain of $ 1.6 million, respectively, which were reflected in "Other" in the Company’s consolidated statement of operations. In connection with the amendment of the 2023 Funding Agreement in October 2024, the prepayment feature was removed and therefore no value was assigned to the previously identified embedded derivative associated with this instrument as of December 31, 2024 and the fair value of the embedded derivatives within the 2023 Funding Agreement was reduced to zero . 9. FAIR VALUE MEASUREMENTS The Company follows the authoritative guidance for fair value measurements relating to financial and non-financial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 75 Recurring Fair Value Measurements The Company marks-to-market its derivatives at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s consolidated statements of operations. See Note 8: Derivatives to the Consolidated Financial Statements for further discussion. Embedded Derivative within the Current Debt Repayment The embedded derivative relating to the Current Debt Repayment is valued using a discounted cash flow model. The most significant observable input used in the fair value measurement was the discount yield, which was 7.28 % and 7.58 % at issuance and December 31, 2024, respectively. As the discount yield used in the valuation process increases, the fair value of the embedded derivative decreases The significant unobservable input used in the fair value measurement included estimated timing of completing certain project milestones associated with the interest fee reduction mechanism. As the probability of reaching the relevant milestones decreases, the fair value of the embedded derivative would also decrease. Embedded Derivatives within the 2023 Funding Agreement Prior to October 2024, the embedded derivatives within the 2023 Funding Agreement were valued using a discounted cash flow model. The most significant observable input used in the fair value measurement was the discount yield. The significant unobservable input used in the fair value measurement included estimated timing and amounts of cash flows associated with the prepayment features within the debt agreement. As projected cash flows increased, the fair value of the embedded derivative increased. As a result of the amendment of the 2023 Funding Agreement in October 2024, this prepayment feature was removed and consequently the embedded derivative was eliminated. Rollforward of Recurring Level 3 Assets and Liabilities The following table presents a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands): Year Ended December 31, 2024 2023 Balances at beginning of period $ 1,295 $ ( 122 ) Issuance of embedded derivatives within the Current Debt Repayment 109,601 — Issuance of embedded derivatives within the 2023 Funding Agreement — ( 292 ) Derivative adjustment related to extinguishment of debt — 122 Unrealized gain (loss), included in other ( 2,097 ) 1,587 Balances at end of period $ 108,799 $ 1,295 Fair Value of Debt Instruments 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. 76 Nonrecurring Fair Value Measurements The Company follows the authoritative guidance regarding non-financial assets and liabilities that are remeasured at fair value on a nonrecurring basis. Current Debt Repayment As previously discussed, the Company received the Current Debt Repayment in October 2024. Significant quantitative Level 3 inputs were utilized in the valuation model as of the issuance date in November 2024 for both the fair value of the debt as well as the fair value of the embedded derivative. At issuance, the fair value of the Current Debt Repayment was $ 331.2 million and the fair value of the embedded derivative within the Current Debt Repayment was $ 109.6 million. The fair value of the derivative was calculated using projected future cash flows discounted using the prevailing market rate of interest and discount yield. The cash flows were calculated based on the estimated timing of completing certain project milestones associated with the fee reduction mechanism. 2023 Funding Agreement The Company's February 2024 draw on the 2023 Funding Agreement had a fair value of $ 37.2 million and was calculated using projected future cash flows discounted using the prevailing market rate of interest for a similar transaction. The discount yield used for this calculation was 6.46 %. 10. COMMITMENTS AND CONTINGENCIES Updated Services Agreements The Updated Services Agreements set forth the primary terms for the Company to provide expanded services to the Customer and incur costs related to the Extended MSS Network, which is primarily the construction of new gateways and upgrade of existing gateways as well as new satellite construction and launch services. These agreements have an indefinite term but provide that either party may terminate subject to certain notice requirements and, in some cases, other conditions. These agreements also provide for various commitments with which the Company must comply. Satellite Procurement 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 $ 329.3 million for the initial 17 satellites, with delivery expected to occur in 2025. In addition, MDA will procure a satellite operations control center for $ 5.0 million as well as other equipment for $ 4.2 million. In February 2025, the Company entered into another agreement with MDA pursuant to which the Company will acquire more than 50 satellites related to the Extended MSS Network. The total contract price for these satellites is $ 775.0 million. Launch Services Agreement 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. In October 2024, the Company entered into another agreement with SpaceX for the launch of satellites pursuant to the Extended MSS Network. Funding for Phase 2 Service Period Asset Procurement 77 Under the Service Agreements, subject to certain terms and conditions, the Company expects 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, 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, the Company has outstanding purchase orders for this project totaling $ 290 million to vendors for various satellite and ground components of the Extended MSS Network, which are expected to be paid with funds from the Infrastructure Prepayment and sale of the Customer Class B Units. These costs will continue until the construction period is complete and the commencement of Services provided over the Extended MSS Network. Inventory Purchase Commitments The Company has inventory purchase commitments with its third party product manufacturers in the normal course of business. These commitments are generally noncancellable and the order quantities are based on sales forecasts. The Company estimates that its open inventory purchase commitments as of December 31, 2024 were approximately $ 4.7 million. Litigation Due to the nature of the Company's business, the Company is involved, from time to time, in various litigation matters or subject to disputes or routine claims regarding its business activities. Legal costs related to these matters are expensed as incurred. In management's opinion, there is no pending litigation, dispute or claim, which could be expected to have a material adverse effect on the Company's financial condition, results of operations or liquidity. 11. ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES Accrued expenses consist of the following (in thousands): December 31, 2024 2023 Accrued compensation and benefits $ 5,203 $ 4,307 Accrued property and other taxes 7,550 5,586 Accrued customer liabilities and deposits 3,600 4,284 Short-term lease liability 4,251 3,004 Accrued interest — 3,942 Other accrued expenses 4,096 5,835 Total accrued expenses $ 24,700 $ 26,958 Accrued interest as of December 31, 2023 included interest associated with the cash portion of the 13 % Notes, which was refinanced in November 2024. Other accrued expenses include primarily vendor services, warranty reserve and occupancy costs. 78 Other non-current liabilities consist of the following (in thousands): December 31, 2024 2023 Asset retirement obligations (Note 1) $ 2,903 $ 2,951 Accrued interest (Note 7) 13,079 7,429 Deferred tax liability (Note 13) 711 329 Foreign tax contingencies 1,847 503 Customer Class B Units Redemption (Note 2) 400,000 — Other 80 53 Total other non-current liabilities $ 418,620 $ 11,265 As of December 31, 2024, accrued interest includes fees on the outstanding balance under the 2023 Funding Agreement. As of December 31, 2023, accrued interest included primarily interest associated with the PIK portion of the 13 % Notes, which was fully repaid in November 2024. Foreign tax contingencies include primarily uncertain tax position liabilities associated with the Company's Canadian subsidiary. 12. 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 $ 0.4 million and $ 0.5 million as of December 31, 2024 and 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. Lease payments made to Thermo were $ 1.6 million during 2024. The lease term is ten years and is scheduled to expire in January 2029. During each of the twelve months ended December 31, 2024, 2023 and 2022, the Company incurred lease expense of $ 1.6 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. 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 2024, the Company made dividend payments to Thermo which were approved by the Company's Board of Directors totaling $ 9.7 million. Service Agreements In connection with the Service Agreements, the 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 the Customer before transferring them to any other Person other than affiliates of Thermo and (ii) prohibits Thermo from transferring shares of 79 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. Certain amounts payable by the Company in connection with the 2023 Funding Agreement and certain other obligations under the Updated Services Agreements are guaranteed by Thermo. As consideration for Thermo's guarantee, the Company issued to Thermo a warrant to purchase 667,000 shares ( 10 million shares prior to the reverse stock split) of the Company’s 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 immediately upon effectiveness of Thermo's guarantee, which occurred in December 2023, and the right to purchase the remaining 333,000 shares under the warrant ( 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 to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. The warrant expires in December 2028. Upon effectiveness of Thermo's guarantee, the Company recorded the fair value of the right to purchase shares of our common stock pursuant to the warrant, which was accounted for as a credit enhancement for the guarantee and totaled $ 5.0 million at issuance, to additional paid-in-capital on the Company's consolidated balance sheet with an offset to "Loss on equity issuance" on the Company's consolidated statement of operations. The right to purchase the remaining 333,000 shares under the warrant, which may vest if and when Thermo advances aggregate funds of $ 25.0 million, was assigned a fair value of zero based on the Company's future cash flows and the low probability of the need for funding from Thermo as required under the 2023 Funding Agreement. The Company will reassess the probability of vesting at each reporting period and, if the probability of vesting increases, it will record the fair value as a liability pursuant to applicable accounting guidance. 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 4.0 million shares ( 60.6 million shares prior to the reverse stock split) of its common stock, representing a transaction value of approximately $ 68.7 million, to XCOM. Of the consideration paid for the License Agreement, 1.1 million shares ( 16.7 million shares prior to the reverse stock split) were issued to Dr. Jacobs. The Company and XCOM have 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. In August 2023 and June 2024, Globalstar issued 0.7 million shares ( 10.5 million shares prior to the reverse stock split) and 0.5 million shares ( 7.7 million shares prior to the reverse stock split), respectively, to Virewirx as payment for costs incurred under the SSA and the release of holdback shares under the License Agreement. In June 2024, Virewirx sold 0.3 million shares ( 4.5 million prior to the reverse stock split) of the total shares issued in June 2024 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. 80 13. TAXES The components of income tax expense (benefit) were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal tax $ — $ — $ — State tax 60 240 82 Foreign tax 1,693 850 ( 9 ) Total 1,753 1,090 73 Deferred: Federal and state tax 316 33 — Foreign tax 66 — — Total 382 33 — Income tax expense (benefit) $ 2,135 $ 1,123 $ 73 U.S. and foreign components of income (loss) before income taxes are presented below (in thousands): Year Ended December 31, 2024 2023 2022 U.S. loss $ ( 46,851 ) $ ( 30,086 ) $ ( 232,148 ) Foreign income (loss) ( 14,178 ) 6,491 ( 24,694 ) Total loss before income taxes $ ( 61,029 ) $ ( 23,595 ) $ ( 256,842 ) As of December 31, 2024 and 2023, the Company had cumulative U.S., state and foreign net operating loss ("NOL") carryforwards for income tax reporting purposes of approximately $ 1.8 billion and $ 1.9 billion, respectively. The vast majority of these NOL carryforwards were generated prior to 2018 and expire through 2041 (with less than 1 % expiring prior to 2028) and the remaining NOL carryforwards do not expire. 81 The components of net deferred income tax assets (liabilities) were as follows (in thousands): December 31, 2024 2023 Deferred tax assets Operating loss and credit carryforwards $ 436,670 $ 464,522 Deferred revenue 17,242 28,147 Accruals and reserves 1,721 1,298 Stock-based compensation expense 3,502 2,760 Lease liabilities 5,408 3,588 Interest and interest carryforwards 4,972 1,363 Other deferred tax assets 1,064 — Deferred tax assets before valuation allowance 470,579 501,678 Valuation allowance ( 421,883 ) ( 438,142 ) Total deferred tax assets 48,696 63,536 Deferred tax liabilities Property and equipment ( 42,913 ) ( 62,373 ) Right-of-use assets ( 5,768 ) ( 754 ) Intangibles ( 606 ) ( 738 ) Other deferred tax liabilities ( 120 ) — Total deferred tax liabilities ( 49,407 ) ( 63,865 ) Deferred income tax liability $ ( 711 ) $ ( 329 ) The deferred revenue tax asset in the table above is related to a portion of the prepayments made under the Updated Services Agreements (see Note 3: Revenue to our Consolidated Financial Statements for further discussion). In an effort to provide additional detail and transparency of the deferred tax assets and liabilities, the Company reclassified certain deferred items for the prior period. The change in the valuation allowance during 2024 of $ 16.3 million was due primarily to uncertain tax positions, which reduced deferred tax assets related to NOL carryforwards, the current year NOL utilization, and changes in foreign currency exchange rates. The Company recorded deferred tax liabilities of $ 0.7 million as of December 31, 2024 and $ 0.3 million as of December 31, 2023 related to the limitation on utilization of state NOLs and federal deferred tax assets surrounding the Company’s indefinite lived intangible assets. The actual provision for income taxes differs from the statutory U.S. federal income tax rate as follows (in thousands): Year Ended December 31, 2024 2023 2022 Provision at U.S. statutory rate of 21% $ ( 12,816 ) $ ( 4,967 ) $ ( 53,951 ) State income taxes, net of federal benefit ( 1,142 ) ( 771 ) ( 4,065 ) Change in valuation allowance ( 9,740 ) ( 969 ) 43,500 Effect of foreign income tax at various rates 185 ( 131 ) ( 133 ) Permanent differences 2,408 5,923 8,229 Net change in permanent items due to provision to tax return ( 13 ) ( 731 ) 1,855 Adjustment to reserved deferred assets 6,204 2,104 4,607 Adjustment to state deferred rate 4,049 170 136 Withholding tax 421 502 — Uncertain tax positions 12,527 — — Other 52 ( 7 ) ( 105 ) Total $ 2,135 $ 1,123 $ 73 82 Uncertain Income Tax Positions The Company is subject to income taxes in U.S. and foreign jurisdictions and it may recognize uncertain income tax positions if it is more likely than not that the position would be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. The following table presents a reconciliation of the Company’s beginning and ending balances of unrecognized tax benefits for the periods indicated (in thousands): Gross unrecognized tax benefits at January 1, 2024 $ — Increases related to tax positions of prior years 14,067 Gross unrecognized tax benefits at December 31, 2024 $ 14,067 The table above does not include accrued interest and penalties of $ 1.2 million as of December 31, 2024. As of December 31, 2023 and 2022, there were no unrecognized uncertain income tax positions. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is zero for the years ended December 31, 2024, 2023 and 2022. Further discussion is below regarding the Company's uncertain income tax positions associated with the Company's Canadian subsidiary. Tax Audits The Company operates in various U.S. and foreign tax jurisdictions. The process of determining its anticipated tax liabilities involves many calculations and estimates which are inherently complex. The Company believes that it has complied in all material respects with its obligations to pay taxes in these jurisdictions. However, its position is subject to review and possible challenge by the taxing authorities of these jurisdictions. If the applicable taxing authorities were to challenge successfully its current tax positions, or if there were changes in the manner in which the Company conducts its activities, the Company could become subject to material unanticipated tax liabilities. It may also become subject to additional tax liabilities as a result of changes in tax laws, which could in certain circumstances have a retroactive effect. The Company nor any of its subsidiaries are currently under audit by the IRS. The Company's corporate U.S. tax returns for 2021 and subsequent years remain subject to examination by tax authorities. The Company is currently under income tax audits in various U.S. states. State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. In the Company's international tax jurisdictions, numerous tax years remain subject to examination by tax authorities, including tax returns for 2015 and subsequent years in most of the Company's international tax jurisdictions. Canadian Tax Audits The Canada Revenue Agency ("CRA") is conducting audits of the Company's Canadian subsidiary for several tax years. The Company is working with the Canada Revenue Agency ("CRA") to complete the audits. The CRA has completed its audit for the tax years 2016 through 2018 and assessed the Company for additional tax liabilities and audit adjustments, which the Company is appealing. The tax years 2019 through 2022 remain under examination. The Company's 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 2024, the Company recorded $ 1.0 million of expense for uncertain tax positions associated with interest on withholding tax. As of December 31, 2024, the Company recorded $ 4.5 million in long-term tax receivables, $ 2.3 million in current uncertain tax position liabilities and $ 1.5 million in long-term uncertain tax position liabilities on its consolidated balance sheet associated with potential taxes, penalties and interest. Other 83 As of December 31, 2024, the Company had not provided foreign withholding taxes on approximately $ 5.3 million of undistributed earnings from certain foreign subsidiaries indefinitely invested outside the U.S. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company elected to account for GILTI tax in the period in which it is incurred and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2024 and 2023. As of December 31, 2024 and 2023, the Company recorded a value added tax ("VAT") recoverable, of which the short term portion is included in prepaid and other current assets on its consolidated balance sheet totaling $ 2.5 million and $ 2.2 million, respectively, and the long-term portion is included in intangible and other assets, net, on its consolidated balance sheet totaling $ 1.8 million and $ 2.3 million, respectively. This VAT recoverable is related primarily to certain payments for the purchase and importation of gateway equipment in various international jurisdictions in connection with the Company's network upgrade work. 14. LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per common share for the periods indicated (in thousands). The number of shares have been restated to reflect the 1:15 reverse stock split effectuated on February 10, 2025. All historical share and per share amounts reflected in this Report have been adjusted to reflect the reverse stock split. Refer to Note 17: Common Stock for further discussion. Year ended December 31, 2024 2023 2022 Numerator: Net loss $ ( 63,164 ) $ ( 24,718 ) $ ( 256,915 ) Effect of Series A Preferred Stock dividends ( 10,634 ) ( 10,605 ) ( 1,337 ) Adjusted net loss attributable to common shareholders $ ( 73,798 ) $ ( 35,323 ) $ ( 258,252 ) Denominator: Weighted average common shares outstanding 125,877 122,334 120,055 Net loss per common share: Basic $ ( 0.59 ) $ ( 0.29 ) $ ( 2.15 ) Diluted $ ( 0.59 ) $ ( 0.29 ) $ ( 2.15 ) For the years ended December 31, 2024, 2023 and 2022, 1.3 million shares, 1.3 million shares and 0.5 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 3.3 million shares ( 49.1 million shares prior to the reverse stock split) that may be purchased by the Customer pursuant to the warrants issued under the Updated Services Agreements in 2022 based on the treasury stock method. During 2023, the right to purchase 0.3 million shares of common stock vested pursuant to the warrant ( 5.0 million shares prior to the reverse stock split) issued to Thermo for its guarantee of the 2023 Funding Agreement; none of these shares are included in the potentially dilutive securities for the applicable periods presented due to the exercise price relative to the average market price of Globalstar common stock during the periods. Also excluded from the amounts above are 0.3 million shares ( 5.0 million shares prior to the reverse stock split) that may be purchased by Thermo pursuant to the warrant issued in connection with its guarantee of the 2023 Funding Agreement; the right to purchase these shares vests 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. 84 15. STOCK COMPENSATION Share-Based Payment Arrangements with Employees The Company’s Equity Incentive Plan (“Equity Plan”) provides long-term incentives to the Company’s key employees, including officers, directors, consultants and advisers (“Eligible Participants”), and is designed to align stockholder and employee interests. Under the Equity Plan, the Company may grant incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, and other stock based awards or any combination thereof to Eligible Participants. The Compensation Committee of the Company’s Board of Directors establishes the terms and conditions of any awards granted under the plans. At the time of grant, the Company takes into consideration the timing of the stock based award and evaluates for conditions that could result in the award to be considered spring loaded. The number of shares have been restated to reflect the 1:15 reverse stock split effectuated on February 10, 2025. All historical share and per share amounts reflected in this Report have been adjusted to reflect the reverse stock split. Refer to Note 17: Common Stock for further discussion. As of December 31, 2024 and 2023, the number of shares of common stock that was authorized and remained available for issuance under the Equity Plan was 3.4 million and 1.4 million, respectively ( 51.7 million and 20.6 million, respectively prior to the reverse stock split). During 2024, the Company's Board of Directors approved an increase to the Equity Plan reserve totaling 2.5 million shares ( 37.6 million shares prior to the reverse stock split). Restricted Stock Grants of restricted stock have varying vesting criteria, including immediate, one year from the grant date, in equal annual installments over three years or based on performance criteria. Non-vested shares are generally forfeited upon the termination of employment. Holders of restricted stock awards are entitled to all rights of a stockholder of the Company with respect to the restricted stock, including the right to vote the shares and receive any dividends or other distributions. Compensation expense associated with restricted stock is measured based on the grant date fair value of the common stock and is recognized on a straight line basis over the vesting period. The table below summarizes the weighted average grant date fair value of restricted stock for the indicated periods: Year Ended December 31, 2024 2023 2022 Weighted average grant date fair value $ 24.11 $ 20.40 $ 25.95 The following is a rollforward of the activity in restricted stock for the year ended December 31, 2024: Shares Weighted Average Grant Date Fair Value Nonvested at January 1, 2024 589,072 $ 23.39 Granted 400,352 24.11 Vested ( 504,737 ) 22.77 Forfeited ( 46,586 ) 21.46 Nonvested at December 31, 2024 438,101 $ 24.96 For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 11.6 million, $ 13.1 million and $ 10.4 million, respectively, of compensation expense related to restricted stock awards. The total fair value, as calculated on the day of vesting, of restricted stock awards that vested during 2024, 2023 and 2022 was $ 13.1 million, $ 11.6 million, and $ 14.6 million, respectively. As of December 31, 2024, unrecognized compensation expense related to unvested restricted stock outstanding was approximately $ 7.2 million to be recognized over a weighted-average period of 1.4 years. Market-Based Restricted Stock Units During 2024 and 2023, the Company granted restricted stock units ("RSUs") totaling 62.9 thousand and 3.0 million, respectively, which may be earned over a four-year performance period. All of the market-based RSUs vest upon the Company's common stock trading at various price levels throughout the performance period. Market-based RSUs are valued using a Monte Carlo simulation model. The 2024 market-based RSUs were granted in October 2024 with a fair value of 85 $ 0.6 million, which will be recognized over the derived service period, estimated to be 2.5 years. The Monte Carlo simulation was computed using the following assumptions: Risk-Free Interest Rate Stock Price Volatility Market Price of Common Stock Fair Value of RSUs 4.04 % 65.00 % $ 15.90 For the year ended December 31, 2024 and 2023, the Company recognized $ 23.4 million and $ 6.7 million, respectively, of compensation cost related to these awards. As of December 31, 2024, unrecognized compensation expense related to unvested market-based RSUs was approximately $ 10.0 million to be recognized over a weighted-average derived service period of 0.8 years. No market-based RSUs vested, expired or were forfeited during 2024. Performance-Based Restricted Stock Units During 2024, the Company granted 94.3 thousand performance-based RSUs, which are earned over a four-year period. The total fair value of the performance-based RSUs were valued using the stock price on the grant date, totaling $ 1.5 million. For the year ended December 31, 2024, the Company recognized $ 0.1 million of compensation cost related to these awards. As of December 31, 2024, unrecognized compensation expense related to unvested performance-based RSUs was approximately $ 1.4 million to be recognized over a weighted-average period of 3.5 years. No performance-based RSUs vested, expired or were forfeited during 2024. Key Employee Bonus Plan The Company has an annual bonus plan designed to reward designated key employees' efforts to exceed the Company's financial performance goals for the designated calendar year ("Plan Year"). The bonus pool available for distribution is determined based on the Company's adjusted EBITDA performance during the Plan Year. The bonus may be paid in cash or the Company's common stock, subject to certain approvals. For the 2024 Plan Year, the Company's adjusted EBITDA performance was within the bonus payout threshold according to the plan document. As of December 31, 2024, $ 2.7 million was accrued on the Company's consolidated balance sheet related to this bonus payment, which is expected to be paid in a mix of cash and common stock during the first quarter of 2025. 16. SEGMENT REPORTING An operating segment is defined as a component of an enterprise which has discrete financial information that is evaluated regularly by the Company’s Chief Operating Decision Maker ("CODM") to decide how to allocate resources and assess performance. In accordance with ASC 280, Segment Reporting , the Company’s only reportable segment is its MSS business. The Company's Chief Executive Officer, Dr. Paul E. Jacobs, is the Company's CODM. Dr. Jacobs manages the consolidated entity and uses net income (loss) as the measure of profit or loss to assess segment performance and allocate resources. Dr. Jacobs does not review total assets. Dr. Jacobs reviews revenue and certain operating expenses to determine resource allocations. Revenue is reviewed at a disaggregated level, consistent with the Company’s disclosures in Note 3: Revenue. Expenses are reviewed by the nature of the cost (Cost of Services, Marketing, General and Administrative and Cost of Subscriber Equipment Sales), consistent with the Company’s presentation on its Consolidated Statements of Operations. Other operating segment expenses primarily include stock-based compensation, depreciation, amortization and accretion, the reduction in the value of assets and inventory, interest income and expense, foreign currency gains and losses, gains and losses on extinguishment of debt as well as other smaller items. 17. COMMON STOCK 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 the Company's issued and outstanding shares of common stock, approved proposals to amend the Company's certificate of incorporation to (i) conduct a reverse stock split of its 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 the Company can issue in proportion to the reverse stock split. Effective following the close of trading on February 10, 2025, the Company voluntarily withdrew the listing of its common stock from the NYSE American, effected the reverse stock split at a ratio of 1 to 15 shares of common stock and amended its certificate of incorporation to reduce the number of authorized shares of common stock that it 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, the Company's common 86 stock began trading on a post-split basis under the symbol “GSAT” on the Nasdaq Stock Market LLC. The number of shares of common stock outstanding was reduced from 1,896,635,805 to 126,442,583 . No fractional shares were issued as a result of the reverse stock split and it did not impact the par value of the Company's 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 the Company's 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 the Company's certificate of incorporation had any impact on the number of shares of preferred stock it is authorized to issue under its certificate of incorporation or the number of issued and outstanding shares of its 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. 87 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.