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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2020 
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                

Commission file number 001-33117 
GLOBALSTAR, INC.
(Exact Name of Registrant as Specified in Its Charter) 
Delaware 41-2116508
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)  
 
1351 Holiday Square Blvd.
Covington, Louisiana 70433
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (985) 335-1500
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, par value $0.0001 per shareGSATNYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company) Emerging growth company
 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
 
As of October 30, 2020, 1,670,405,275 shares of voting common stock were outstanding, and no shares of nonvoting common stock were authorized or outstanding. Unless the context otherwise requires, references to common stock in this Report mean the Registrant’s voting common stock. 



FORM 10-Q

GLOBALSTAR, INC.
TABLE OF CONTENTS
 
 Page
PART I - FINANCIAL INFORMATION
   
Item 1.
   
Item 2.
   
Item 3.
   
Item 4.
   
PART II - OTHER INFORMATION
   
Item 1.
Item 1A. 
   
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
   
 




PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
GLOBALSTAR, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(Unaudited) 
 Three Months EndedNine Months Ended
September 30,
2020
September 30,
2019
September 30,
2020
September 30,
2019
Revenue:  
Service revenue$28,385 $34,152 $84,410 $86,971 
Subscriber equipment sales4,372 4,462 10,905 12,912 
Total revenue32,757 38,614 95,315 99,883 
Operating expenses:  
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)8,580 9,216 25,955 28,464 
Cost of subscriber equipment sales4,032 4,482 9,615 11,209 
Marketing, general and administrative10,063 12,895 31,407 35,523 
Depreciation, amortization and accretion24,717 24,026 72,437 71,679 
Total operating expenses47,392 50,619 139,414 146,875 
Loss from operations(14,635)(12,005)(44,099)(46,992)
Other income (expense):  
Interest income and expense, net of amounts capitalized(11,398)(14,471)(36,916)(40,149)
Derivative gain1,225 50,156 1,564 142,280 
Foreign currency gain (loss)266 (2,194)(7,373)(1,228)
Other(346)(335)(912)(716)
Total other (expense) income(10,253)33,156 (43,637)100,187 
(Loss) income before income taxes(24,888)21,151 (87,736)53,195 
Income tax expense58 40 169 124 
Net (loss) income$(24,946)$21,111 $(87,905)$53,071 
Other comprehensive (loss) income:
Foreign currency translation adjustments(91)1,022 3,844 254 
Comprehensive (loss) income$(25,037)$22,133 $(84,061)$53,325 
Net (loss) income per common share:  
Basic$(0.01)$0.01 $(0.05)$0.04 
Diluted(0.01)(0.01)(0.05)(0.05)
Weighted-average shares outstanding:  
Basic1,670,315 1,451,703 1,632,554 1,450,146 
Diluted1,670,315 1,647,734 1,632,554 1,647,267 
 
See accompanying notes to unaudited interim condensed consolidated financial statements. 
1


GLOBALSTAR, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)  
(Unaudited) 
 September 30, 2020December 31, 2019
ASSETS  
Current assets:  
Cash and cash equivalents$19,477 $7,606 
Restricted cash3,625 622 
Accounts receivable, net of allowance of $4,539 and $2,952, respectively
21,418 21,760 
Inventory15,362 16,341 
Prepaid expenses and other current assets13,429 16,931 
Total current assets73,311 63,260 
Property and equipment, net734,208 799,914 
Restricted cash51,234 50,900 
Operating lease right of use assets, net14,493 15,871 
Intangible and other assets, net of accumulated amortization of $9,712 and $9,009, respectively
37,267 35,645 
Total assets$910,513 $965,590 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$45,526 $ 
Accounts payable4,842 8,015 
Accrued expenses28,082 24,874 
Payables to affiliates471 261 
Deferred revenue28,256 29,910 
Total current liabilities107,177 63,060 
Long-term debt, less current portion330,069 464,176 
Operating lease liabilities13,763 14,747 
Employee benefit obligations3,755 4,128 
Derivative liabilities1,170 3,792 
Deferred revenue4,995 5,273 
Other non-current liabilities3,029 3,071 
Total non-current liabilities356,781 495,187 
Commitments and contingencies
Stockholders’ equity:  
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively
  
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively
  
Voting Common Stock of $0.0001 par value; 1,900,000,000 shares authorized; 1,670,355,013 and 1,464,544,144 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
167 146 
Nonvoting Common Stock of $0.0001 par value; no shares authorized and none issued and outstanding at September 30, 2020 and December 31, 2019, respectively
  
Additional paid-in capital2,094,983 1,970,047 
Accumulated other comprehensive income (loss)395 (3,449)
Retained deficit(1,648,990)(1,559,401)
Total stockholders’ equity446,555 407,343 
Total liabilities and stockholders’ equity$910,513 $965,590 
 See accompanying notes to unaudited interim condensed consolidated financial statements.  
2


GLOBALSTAR, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)  
(Unaudited) 
 Common
Shares
Common
Stock
Amount
Additional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Deficit
Total
Balances – January 1, 20201,464,544 $146 $1,970,047 $(3,449)$(1,559,401)$407,343 
Net issuance of restricted stock awards and recognition of stock-based compensation3,020 1 1,729 — — 1,730 
Contribution of services— — 91 — — 91 
Recognition of stock-based compensation of employee stock purchase plan— — 102 — — 102 
Common stock issued in connection with conversion of Loan Agreement with Thermo200,140 20 120,441 — — 120,461 
Impact of adoption of Credit Loss Standard— — — — (1,684)(1,684)
Other comprehensive income— — — 5,303 — 5,303 
Net loss— — — — (38,223)(38,223)
Balances – March 31, 20201,667,704 $167 $2,092,410 $1,854 $(1,599,308)$495,123 
Net issuance of restricted stock awards and recognition of stock-based compensation1,354 — 922 — — 922 
Contribution of services— — 47 — — 47 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation1,188 — 482 — — 482 
Common stock issued in connection with conversion of 2013 8.00% Notes
44 — 16 — — 16 
Other comprehensive loss— — — (1,368)— (1,368)
Net loss— — — (24,736)(24,736)
Balances – June 30, 20201,670,290 $167 $2,093,877 $486 $(1,624,044)$470,486 
Net issuance of restricted stock awards and recognition of stock-based compensation14 — 945 945 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 99 99 
Common stock issued in connection with conversion of 2013 8.00% Notes
51 — 15 — — 15 
Other comprehensive loss— — — (91)— (91)
Net loss— — — — (24,946)(24,946)
Balances – September 30, 20201,670,355 $167 $2,094,983 $395 $(1,648,990)$446,555 

3


Common
Shares
Common
Stock
Amount
Additional
Paid-In
Capital
Accumulated Other Comprehensive LossRetained
Deficit
Total
Balances – January 1, 20191,446,784 $145 $1,937,364 $(3,839)$(1,574,725)$358,945 
Net issuance of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation3,285 — 1,000 — — 1,000 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 77 — — 77 
Stock offering issuance costs— — (195)(195)
Other comprehensive loss— — — (270)— (270)
Net income— — — — 25,771 25,771 
Balances – March 31, 20191,450,069 $145 $1,938,293 $(4,109)$(1,548,954)$385,375 
Net issuance of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation232 — 968 — — 968 
Contribution of services— — 197 — — 197 
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation1,437 — 500 — — 500 
Investment in business— — 155 — — 155 
Other comprehensive loss— — — (498)— (498)
Net income— — — — 6,189 6,189 
Balances – June 30, 20191,451,738 $145 $1,940,113 $(4,607)$(1,542,765)$392,886 
Issuances (forfeitures) of restricted stock awards, stock for employee stock option exercises and recognition of stock-based compensation(102)— 966 — — 966 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 110 — — 110 
Other comprehensive income— — — 1,022 — 1,022 
Net income— — — — 21,111 21,111 
Balances – September 30, 20191,451,636 $145 $1,941,236 $(3,585)$(1,521,654)$416,142 

See accompanying notes to unaudited interim condensed consolidated financial statements.
4


GLOBALSTAR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 September 30,
2020
September 30,
2019
Cash flows provided by (used in) operating activities:  
Net (loss) income$(87,905)$53,071 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating
activities:
  
Depreciation, amortization and accretion72,437 71,679 
Change in fair value of derivative assets and liabilities(1,564)(142,280)
Stock-based compensation expense3,925 4,140 
Amortization of deferred financing costs3,173 9,136 
Provision for bad debts1,496 1,436 
Noncash interest and accretion expense25,694 13,932 
Change to estimated impact upon adoption of ASC 606  (3,885)
Unrealized foreign currency loss7,850 1,213 
Other, net(104)344 
Changes in operating assets and liabilities:  
Accounts receivable(3,185)(3,249)
Inventory880 (4,267)
Prepaid expenses and other current assets3,161 (3,151)
Other assets(514)(211)
Accounts payable and accrued expenses261 9,042 
Payables to affiliates210 (304)
Other non-current liabilities(173)57 
Deferred revenue(1,955)(659)
Net cash provided by operating activities23,687 6,044 
Cash flows used in investing activities:  
Second-generation network costs (including interest)(4,307)(1,350)
Property and equipment additions(3,555)(3,480)
Purchase of intangible assets(1,433)(2,795)
Net cash used in investing activities(9,295)(7,625)
Cash flows provided by (used in) financing activities:  
Principal payments of the Facility Agreement(3,373)(47,435)
Payments for debt and equity issuance costs(1,074)(1,401)
Proceeds from PPP Loan4,973  
Proceeds from Subordinated Loan Agreement 62,000 
Proceeds from issuance of common stock and exercise of options and warrants346 402 
Net cash provided by financing activities872 13,566 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(56)(26)
Net increase in cash, cash equivalents and restricted cash15,208 11,959 
Cash, cash equivalents and restricted cash, beginning of period59,128 75,490 
Cash, cash equivalents and restricted cash, end of period$74,336 $87,449 
As of:
September 30,
2020
December 31,
2019
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$19,477 $7,606 
Restricted cash (See Note 4 for further discussion on restrictions)54,859 51,522 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$74,336 $59,128 
 Nine Months Ended
 September 30,
2020
September 30,
2019
Supplemental disclosure of cash flow information:  
Cash paid for interest$6,011 $12,922 
Supplemental disclosure of non-cash financing and investing activities:  
Increase in capitalized accrued interest for second-generation network costs$1,176 $364 
Capitalized accretion of debt discount and amortization of prepaid financing costs325 280 
Principal amount of Loan Agreement with Thermo converted into common stock137,366  
Reduction of debt discount and issuance costs due to conversion of Loan Agreement with Thermo17,963  
Fair value of common stock issued upon conversion of Loan Agreement with Thermo84,059  
Reduction in derivative liability due to conversion of Loan Agreement with Thermo1,058  
See accompanying notes to unaudited interim condensed consolidated financial statements.
5


GLOBALSTAR, INC.  
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION

Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications services through its global satellite network. 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. Two other members of the Company's Board of Directors are also directors, officers or minority equity owners of various Thermo entities.

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”); however, management believes the disclosures made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 28, 2020 (the “2019 Annual Report”). 

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. The Company evaluates estimates on an ongoing basis. Significant estimates include the value of derivative instruments, the allowance for doubtful accounts, the net realizable value of inventory, the useful life and value of property and equipment, the value of stock-based compensation and income taxes. The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation.

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, condensed consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recent Developments: COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic. Various levels of governmental agencies and authorities have taken measures to reduce the spread of COVID-19, including “stay at home” orders, social distancing and closures of non-essential businesses. These measures, as well as the pandemic itself, have significantly impacted economic conditions around the world and created uncertainties in the economy. In recent months, some governmental agencies have partially lifted restrictions, but significant economic uncertainties remain.

The Company performed a detailed analysis of its financial statements, liquidity position and business operations to assess the impact caused by COVID-19 for the period ended September 30, 2020 and through the release date of these condensed consolidated financial statements. Among other effects, the Company has accommodated certain pricing concessions requested by customers and experienced lower demand for its products and services, particularly from its customers that operate in the oil and gas market. While the full extent and duration of the impact is unknown, the Company expects a continuation of this lower demand at least until this industry fully recovers. While the Company also initially experienced a reduction in demand from its customers that operate in the retail industry, this demand has recovered, due in part to the re-opening of most retailer store locations. Additionally, the Company began and expects to continue to operate with a remote workforce, manage a supply chain sourcing predominantly from China, and engage with international regulators remotely to advance the terrestrial spectrum authorization process. There are a number of uncertainties that could impact the Company's future results of operations, including the effectiveness of COVID-19 mitigation measures; the duration of the pandemic; global economic conditions; changes to the Company's operations; changes in consumer confidence, behaviors and spending; work from home trends; and the sustainability of supply chains.

6


In accordance with the Company's accounting policies disclosed in its 2019 Annual Report, the Company reviews the carrying value of long-lived assets, intangible assets and inventory when circumstances warrant an assessment in order to evaluate whether indicators of impairment exist. The Company updated its internal projections as part of this assessment to reflect the reduction in cash flows from operations that it currently expects will result from COVID-19. The Company expects these reductions to be temporary; therefore, no indicator of impairment was identified. For inventory, the carrying value of inventory on hand was lower than its expected net realizable value; accordingly, no impairment was necessary. For accounts receivable, the Company increased its loss rate for certain receivables as discussed in more detail in Note 3: Credit Losses.

Revised internal projections have also been evaluated in light of financial covenant requirements in the Company's facility agreements. The Company continues to monitor its ability to remain in compliance with financial covenants over the next twelve months. See Note 4: Long-Term Debt and Other Financing Arrangements and Risk Factors: "The effect of an epidemic or pandemic, including the current COVID-19 pandemic, could have an adverse impact on our operations and the operations of our customers and may have a material adverse impact on our financial condition and results of operations" for further discussion. If the Company is able to remain in compliance, its sources of liquidity are expected to be sufficient to cover its obligations over the next twelve months.

This liquidity assessment considers relief granted to the Company under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act), including a $5.0 million loan the Company received in April 2020 under the payroll protection program, which the Company expects to be forgiven, and the deferral of the payment of certain payroll taxes. Additionally, the Company evaluated tax law changes pursuant to the CARES Act and revised its net operating loss carryforwards and other estimates, as necessary.

As previously stated, the full impact of COVID-19 on the Company's condensed consolidated financial statements is uncertain at this time and the Company will continue to reassess the impact at each reporting period.

Recently Issued Accounting Pronouncements 

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. As part of the FASB's disclosure framework project, it has changed the disclosure requirements for defined pension and other post-retirement benefit plans as outlined in ASU No. 2018-14. This ASU is effective for public entities for annual periods beginning after December 15, 2020. This ASU adds certain narrative disclosures and removes other disclosures as outlined in ASU No. 2018-14 related to the defined benefit plan.

In December 2019, the FASB issued ASU No. 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU No. 2019-12 amends the accounting treatment for income taxes by simplifying and clarifying certain aspects of the existing guidance. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2020. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the impact this standard will have on its condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06: Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Among other things, ASU No. 2020-06 simplifies the guidance in ASC 470 by eliminating two of the three models that require separating embedded conversion features from convertible instruments. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2021. Early adoption is permitted as of the beginning of any interim or annual reporting period, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For existing debt instruments, the Company does not expect this standard will have a material impact to its condensed consolidated financial statements or related disclosures.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13, as amended, significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaced the incurred loss approach with an expected loss model for instruments measured at amortized cost. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This ASU became effective for public entities for annual and interim periods beginning after December 15, 2019. The Company adopted this standard when it became effective on January 1, 2020. See Note 3: Credit Losses for a discussion of the impact to the Company's condensed consolidated financial statements and required disclosures.
7



In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. As part of the FASB's disclosure framework project, it has eliminated, amended and added disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Public companies are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. The Company adopted this standard when it became effective on January 1, 2020. The adoption of this standard impacted certain of the Company's disclosures included in Note 6: Fair Value Measurements.

2. REVENUE

Disaggregation of Revenue

The following table discloses revenue disaggregated by type of product and service (amounts in thousands):
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Service revenue:
Duplex$9,956 $16,589 $26,175 $34,265 
SPOT11,396 12,482 35,098 38,196 
Commercial IoT4,420 4,526 13,028 12,577 
IGO95 139 295 484 
Engineering and other2,518 416 9,814 1,449 
Total service revenue28,385 34,152 84,410 86,971 
Subscriber equipment sales:
Duplex$510 $349 $1,539 $906 
SPOT2,602 1,880 5,704 5,657 
Commercial IoT1,256 2,182 3,608 6,226 
Other4 51 54 123 
Total subscriber equipment sales4,372 4,462 10,905 12,912 
Total revenue$32,757 $38,614 $95,315 $99,883 

Engineering and other service revenue includes revenue generated primarily from certain governmental and engineering service contracts. During the three and nine months ended September 30, 2020, the Company recognized $2.0 million and $8.0 million, respectively, in revenue related to the completion of certain milestones for non-recurring engineering services under the Terms Agreement described in its 2019 Annual Report.

8


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. The following table discloses revenue disaggregated by geographical market (amounts in thousands):
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Service revenue:
United States$19,958 $23,155 $62,663 $61,859 
Canada5,522 7,914 13,885 16,057 
Europe2,057 2,251 5,209 6,585 
Central and South America623 680 2,002 1,814 
Others225 152 651 656 
Total service revenue28,385 34,152 84,410 86,971 
Subscriber equipment sales:
United States$2,657 $2,435 $5,821 $7,195 
Canada906 1,290 2,848 3,236 
Europe326 371 1,196 1,388 
Central and South America465 345 1,037 1,006 
Others18 21 3 87 
Total subscriber equipment sales4,372 4,462 10,905 12,912 
Total revenue$32,757 $38,614 $95,315 $99,883 

As disclosed in the Company's 2019 Annual Report, during the third quarter of 2019, the Company changed its calculation of the estimated impact from the initial adoption of ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") on January 1, 2018. The Company recorded a cumulative adjustment to service revenue during the third quarter of 2019; this adjustment included an out-of-period amount of $3.9 million.

Accounts Receivable

The Company has agreements with certain of its independent gateway operators ("IGOs") whereby the parties net settle outstanding payables and receivables between the respective entities on a periodic basis. As of September 30, 2020 and December 31, 2019, $6.4 million and $6.5 million, respectively, related to these agreements was included in accounts receivable on the Company’s condensed consolidated balance sheet.

Contract Liabilities

Contract liabilities, which are included in deferred revenue on the Company’s condensed consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. The amount of revenue recognized during the nine months ended September 30, 2020 and 2019 from performance obligations included in the contract liability balance at the beginning of each of the periods was $27.5 million and $29.5 million, respectively.

In general, the duration of the Company’s contracts is one year or less; however, from time to time, the Company offers multi-year contracts. As of September 30, 2020, the Company expects to recognize $28.3 million, or approximately 85%, of its remaining performance obligations during the next twelve months. Additionally, approximately $2.9 million, which is classified as non-current deferred revenue as of September 30, 2020, is related to a contract executed in 2007 for the construction of a gateway in Nigeria. Subsequent to the quarter end, the Company took steps to terminate this contract due to a lack of performance by the partner. If this contract is terminated under the terms of the agreement, the deferred revenue balance may be recognized into revenue.

9


3. CREDIT LOSSES
Adoption of ASU No. 2016-13 "Credit Losses"

On January 1, 2020, the Company adopted the provisions of ASU No. 2016-13Credit Losses, Measurement of Credit Losses on Financial Instruments, and recognized the cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained deficit. As a result of adopting ASU No. 2016-13, the Company recorded a net decrease to stockholders' equity of $1.7 million, which resulted in an increase to the opening retained deficit balance as of January 1, 2020. The most significant driver of this adjustment was the Company’s change in accounting policy related to expected losses (rather than incurred losses) from trade receivables applied to its portfolio based on historical and future performance.
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 primarily of receivables from the sale of Globalstar services and equipment. For service customers, payment is generally due 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.

Credit Losses

The Company performs ongoing credit evaluations of its customers and impairs receivable balances by recording specific allowances for bad debts based on factors such as 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. The Company’s major portfolio of contract assets are customer receivables and, as such, historical delinquency percentages are generally consistent over time. The estimate of the allowance for credit losses is computed using aging schedules by type of revenue (service and subscriber equipment), by product (Duplex, SPOT and Commercial IoT) 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 trade receivables based on past-due status and records an allowance for doubtful accounts, which represents the expected losses of those trade receivables over their estimated contractual life. The estimated life may vary by service and product type, but is generally less than one year. Allowances are generally recorded for all aging categories of outstanding receivables, including those in the current category (which is a change from legacy GAAP). Accounts receivable balances that are determined likely to be uncollectible are included in the allowance for doubtful accounts. After attempts to collect a receivable have failed, the receivable is written off against the allowance.
In March 2020, after the Company adopted ASU No. 2016-13, the World Health Organization declared the outbreak COVID-19 a global pandemic. COVID-19 has resulted in some disruption to the Company, primarily as it relates to the volume of equipment sales and uncertainties impacting the collection of certain outstanding receivables. Although the Company expects this disruption to be temporary, it has considered the potential impact of COVID-19 on its portfolio of trade receivables and has increased its loss rate for such receivables for the nine-month period ending September 30, 2020, in limited circumstances. The Company will continue to reassess its sales and collections of receivables each reporting period to support its allowance across its portfolio.
The following is a summary of the activity in the allowance for doubtful accounts as of September 30, 2020 (in thousands):
Balance at beginning of period, December 31, 2019$2,952 
Impact of adoption of ASU 2016-131,684 
Provision, net of recoveries1,496 
Write-offs and other adjustments(1,593)
Balance at end of period, September 30, 2020$4,539 

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4. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS 
Long-term debt consists of the following (in thousands): 
 September 30, 2020December 31, 2019
 Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
Facility Agreement$186,988 $7,331 $179,657 $190,361 $10,185 $180,176 
Second Lien Term Loan Facility222,908 33,267 189,641 201,495 35,448 166,047 
Loan Agreement with Thermo   135,105 18,562 116,543 
8.00% Convertible Senior Notes Issued in 2013
1,361  1,361 1,410  1,410 
Payroll Protection Program Loan4,973 37 4,936    
Total Debt416,230 40,635 375,595 528,371 64,195 464,176 
Less: Current Portion45,526  45,526    
Long-Term Debt$370,704 $40,635 $330,069 $528,371 $64,195 $464,176 

The principal amounts shown above include payment of in-kind interest, as applicable. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion, as further described below. The current portion of long-term debt represents the scheduled principal repayments under the Facility Agreement and the PPP Loan due within one year of the balance sheet date.
 
First Lien Facility Agreement 

In 2009, the Company entered into the Facility Agreement with a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Crédit Agricole Corporate and Investment Bank and Crédit Industriel et Commercial, as arrangers, and BNP Paribas, as the security agent. The Facility Agreement was amended and restated in July 2013, August 2015, June 2017 and November 2019.

The Facility Agreement is scheduled to mature in December 2022. Indebtedness under the Facility Agreement bears interest at a floating rate of LIBOR plus a margin that increases by 0.5% each year to a maximum rate of LIBOR plus 5.75%. The current interest rate is LIBOR plus 4.75%. Interest on the Facility Agreement is payable semi-annually in arrears on June 30 and December 31 of each calendar year.

As previously discussed, the Company received a loan under the CARES Act in April 2020. Due to restrictions limiting the Company's ability to incur indebtedness, the execution of this loan required a waiver under the Facility Agreement, which was approved by the Company's senior lenders.

In calculating compliance with the financial covenants of the Facility Agreement, the Company may include certain cash funds contributed to the Company from the issuance of the Company's common stock and/or subordinated indebtedness. These funds are referred to as “Equity Cure Contributions” and may be used to achieve compliance with financial covenants through maturity. If the Company violates any financial covenants and is unable to obtain a sufficient Equity Cure Contribution or obtain a waiver, it would be in default under the Facility Agreement and payment of the indebtedness could be accelerated. The acceleration of the Company's indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-acceleration provisions. As of September 30, 2020, the Company was in compliance with respect to the covenants of the Facility Agreement. The Company continues to monitor the impact of COVID-19 on its results of operations and liquidity relative to compliance with financial covenants over the next twelve months.

The Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the Facility Agreement) on a semi-annual basis. During 2020, the Company was required to pay $0.3 million and $3.1 million to its first lien lenders resulting from the Excess Cash Flow calculations as of December 31, 2019 and June 30, 2020, respectively. These payments reduce future principal payment obligations.

The Facility Agreement also requires the Company to maintain a debt service reserve account, which is pledged to secure all of the Company's obligations under the Facility Agreement. The required balance in the debt service reserve account is fixed
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and must equal at least $50.9 million. As of September 30, 2020, the balance in the debt service reserve account was $51.2 million and is classified as non-current restricted cash on the Company's condensed consolidated balance sheet as it will be used towards the final scheduled payment due upon maturity of the Facility Agreement in December 2022.

The amended and restated Facility Agreement includes a requirement that the Company raise no less than $45.0 million of equity prior to March 31, 2021 via the cash exercise of outstanding warrants or the sale of other equity, the proceeds of which are required to be applied towards the principal payment due on June 30, 2021 and then, if applicable, to the next scheduled principal payments. The Company currently expects to fulfill this requirement with proceeds from the exercise of all the remaining warrants issued to the Second Lien Term Loan Facility lenders in November 2019; however, it may be required to find alternative sources of equity capital if the Company's share price does not exceed the warrants' exercise price of $0.38 per share. In December 2019, the Company received proceeds of $3.6 million from the exercise of a portion of warrants issued to the Second Lien Term Loan Facility Agreement lenders, which is retained in the equity proceeds account under the Facility Agreement and recorded in current restricted cash on the Company's condensed consolidated balance sheet as of September 30, 2020 and may be used to fulfill a portion of the $45.0 million requirement discussed above.

Second Lien Facility Agreement

In November 2019, the Company entered into a $199.0 million Second Lien Term Loan Facility with Thermo, EchoStar Corporation and certain other unaffiliated lenders. The Second Lien Term Loan Facility is scheduled to mature in November 2025. The loans under the Second Lien Term Loan Facility bear interest at a blended rate of 13.5% per annum to be paid in kind (or in cash at the option of the Company, subject to restrictions in the Facility Agreement).

As additional consideration for the loan, the Company issued the lenders warrants to purchase 124.5 million shares of voting common stock at an exercise price of $0.38 per share. These warrants expire on March 31, 2021. As of September 30, 2020, approximately 115.0 million warrants remain outstanding.

As previously discussed, the Company received a loan under the CARES Act in April 2020. Due to restrictions limiting the Company's ability to incur indebtedness, the execution of this loan required a waiver under the Second Lien Term Loan Facility, which was approved by the Company's second lien lenders. As of September 30, 2020, the Company was in compliance with the covenants of the Second Lien Term Loan Facility.

Refer to Note 5: Derivatives and Note 6: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the Second Lien Term Loan Facility Agreement.

Thermo Loan Agreement 

In connection with the amendment and restatement of the Facility Agreement in July 2013, the Company amended and restated its loan agreement with Thermo (the “Loan Agreement”). All obligations of the Company to Thermo under the Loan Agreement were subordinated to the Company’s obligations under the Facility Agreement and the Second Lien Term Loan Facility. The Loan Agreement was convertible into shares of common stock at a conversion price of $0.69 (as adjusted) per share of common stock and accrued interest at 12% per annum, which was capitalized and added to the outstanding principal in lieu of cash payments.

On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement, which totaled $137.4 million and included accrued interest since inception of $93.9 million. This conversion resulted in the issuance of 200.1 million shares of common stock. In accordance with applicable accounting guidance for debt extinguishment with related parties, upon conversion, the remaining debt discount was written off and recorded as a contribution to capital though equity and the associated derivative liability was marked to market at the conversion date and then extinguished through equity as a contribution to capital.

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Refer to Note 5: Derivatives and Note 6: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the Loan Agreement with Thermo.

8.00% Convertible Senior Notes Issued in 2013
 
In May 2013, the Company issued $54.6 million aggregate principal amount of its 2013 8.00% Notes. The 2013 8.00% Notes are convertible into shares of common stock at a conversion price of $0.69 per share of common stock, as adjusted pursuant to the terms of the Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee (the “Indenture”). The 2013 8.00% Notes are senior unsecured debt obligations that will mature on April 1, 2028, subject to various call and put features, and bear interest at a rate of 8.00% per annum. Interest is paid in cash at a rate of 5.75% and in additional notes at a rate of 2.25%. Since issuance, $55.5 million of principal amount of the 2013 8.00% Notes have been converted resulting in the issuance of 98.6 million shares of Globalstar common stock.

The Company may redeem the 2013 8.00% Notes, with the prior approval of the majority lenders under the Facility Agreement and the Second Lien Term Loan Facility, in whole or in part at a price equal to the principal amount of the 2013 8.00% Notes to be redeemed plus all accrued and unpaid interest thereon. A holder of the 2013 8.00% Notes has the right to require the Company to purchase some or all of the 2013 8.00% Notes held by it on April 1, 2023, or at any time if there is a Fundamental Change (as defined in the Indenture), at a price equal to the principal amount of the 2013 8.00% Notes to be purchased plus accrued and unpaid interest. A holder may convert its 2013 8.00% Notes at its option at any time prior to April 1, 2028, into shares of common stock (or cash, at the option of the Company and subject to the consent of its lenders under the Facility Agreement and Second Lien Term Loan Facility).

The Indenture provides for customary events of default. As of September 30, 2020, the Company was in compliance with respect to the terms of the 2013 8.00% Notes and the Indenture.

Refer to Note 5: Derivatives and Note 6: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00% Notes.

Payroll Protection Program Loan

In April 2020, the Company sought relief under the CARES Act and received a $5.0 million loan under the Payroll Protection Program ("PPP"). This loan (the "PPP Loan") is an unsecured debt obligation and is scheduled to mature in April 2022. As permitted under the CARES Act, the Company expects to apply for loan forgiveness, inclusive of both principal and accrued interest, in accordance with the terms of the CARES Act, based on payroll and other allowable costs incurred since disbursement of the PPP Loan. Any amount not forgiven by the Small Business Administration (the "SBA") is subject to an interest rate of 1.00% per annum commencing on the date of the PPP Loan. Uncertainties exist around if and when the PPP Loan will be repaid. Principal and interest payments due under the PPP Loan are generally deferred until the review and approval of any forgiveness is made by the SBA, subject to the PPP rules. Furthermore, the Company's first and second lien lenders would require the Company to accelerate the repayment of any portion of the loan amount that is not forgiven.

The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the PPP Loan as debt under ASC 470. As previously discussed, the Company expects the PPP Loan to be forgiven, but cannot provide assurance of such forgiveness until it has been approved by the Company's lender and the SBA. Any portion of the PPP Loan that is forgiven will be recorded in the Company's condensed consolidated statement of operations as a gain on extinguishment of debt in the period of forgiveness.

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5. DERIVATIVES 

In connection with certain existing borrowing arrangements, the Company was required to record derivative instruments on its condensed consolidated balance sheets. None of these derivative instruments are designated as a hedge. The following table discloses the fair values of the derivative instruments on the Company’s condensed consolidated balance sheets (in thousands):

 September 30, 2020December 31, 2019
Derivative liabilities:  
Compound embedded derivative with the 2013 8.00% Notes
$(158)$(522)
Compound embedded derivative with the Loan Agreement with Thermo (1,270)
Compound embedded derivative with the Second Lien Term Loan Facility(1,012)(2,000)
Total derivative liabilities$(1,170)$(3,792)

 The following table discloses the changes in value recorded as derivative gain in the Company’s condensed consolidated statement of operations (in thousands): 

 Three Months EndedNine Months Ended
 September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Compound embedded derivative with the 2013 8.00% Notes
$97 $159 $364 $628 
Compound embedded derivative with the Loan Agreement with Thermo