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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2022
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 April 29, 2022, 1,800 million 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 Ended
March 31,
2022
March 31,
2021
Revenue:
Service revenue$29,344 $23,086 
Subscriber equipment sales3,428 3,843 
Total revenue32,772 26,929 
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)10,794 9,077 
Cost of subscriber equipment sales2,566 2,899 
Marketing, general and administrative9,341 10,097 
Depreciation, amortization and accretion23,783 24,116 
Total operating expenses46,484 46,189 
Loss from operations(13,712)(19,260)
Other (expense) income:
Interest income and expense, net of amounts capitalized(9,530)(11,574)
Derivative loss(486)(1,129)
Foreign currency gain (loss)3,232 (4,315)
Other117 22 
Total other (expense) income(6,667)(16,996)
Loss before income taxes(20,379)(36,256)
Income tax expense83 77 
Net loss$(20,462)$(36,333)
Other comprehensive (loss) income:
Foreign currency translation adjustments(679)3,242 
Comprehensive loss$(21,141)$(33,091)
Net loss per common share:
Basic$(0.01)$(0.02)
Diluted(0.01)(0.02)
Weighted-average shares outstanding:
Basic1,797,671 1,679,754 
Diluted1,797,671 1,679,754 
 
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) 
 March 31, 2022December 31, 2021
ASSETS
Current assets:  
Cash and cash equivalents$11,519 $14,304 
Accounts receivable, net of allowance for credit losses of $3,182 and $2,962, respectively
25,249 21,182 
Inventory14,271 13,829 
Prepaid expenses and other current assets20,154 19,558 
Total current assets71,193 68,873 
Property and equipment, net680,167 672,156 
Operating lease right of use assets, net31,172 32,041 
Prepaid satellite construction costs and related customer receivable27,526  
Intangible and other assets, net of accumulated amortization of $11,570 and $11,189, respectively
40,368 41,036 
Total assets$850,426 $814,106 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$7,987 $6,247 
Vendor financing32,700  
Accrued expenses25,537 28,947 
Payables to affiliates266 444 
Deferred revenue37,192 25,927 
Total current liabilities103,682 61,565 
Long-term debt246,756 237,932 
Operating lease liabilities28,538 29,237 
Deferred revenue, net115,173 112,054 
Other non-current liabilities7,045 7,887 
Total non-current liabilities397,512 387,110 
Commitments and contingencies (Note 8)
Stockholders’ equity:  
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at March 31, 2022 and December 31, 2021, respectively
  
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at March 31, 2022 and December 31, 2021, respectively
  
Voting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,799,484,939 and 1,796,528,871 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
180 180 
Nonvoting Common Stock of $0.0001 par value; no shares authorized and none issued and outstanding at March 31, 2022 and December 31, 2021, respectively
  
Additional paid-in capital2,151,652 2,146,710 
Accumulated other comprehensive income1,211 1,890 
Retained deficit(1,803,811)(1,783,349)
Total stockholders’ equity349,232 365,431 
Total liabilities and stockholders’ equity$850,426 $814,106 
 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, 20221,796,529 $180 $2,146,710 $1,890 $(1,783,349)$365,431 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation703 — 2,230 — — 2,230 
Contribution of services— — 47 47 
Recognition of stock-based compensation of employee stock purchase plan— — 117 — — 117 
Common stock issued in connection with conversion of 2013 8.00% Notes
2,253 — 2,548 — — 2,548 
Other comprehensive loss(679)(679)
Net loss(20,462)(20,462)
Balances – March 31, 20221,799,485 $180 $2,151,652 $1,211 $(1,803,811)$349,232 

Common
Shares
Common
Stock
Amount
Additional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Deficit
Total
Balances – January 1, 20211,674,669 $167 $2,096,566 $(2,944)$(1,670,724)$423,065 
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation1,998 — 1,932 — — 1,932 
Contribution of services— — 47 — — 47 
Recognition of stock-based compensation of employee stock purchase plan— — 79 — — 79 
Issuance of stock for warrant exercises115,036 12 43,666 — — 43,678 
Other comprehensive income— — — 3,242 — 3,242 
Net loss— — — — (36,333)(36,333)
Balances – March 31, 20211,791,703 $179 $2,142,290 $298 $(1,707,057)$435,710 

See accompanying notes to unaudited interim condensed consolidated financial statements.
3


GLOBALSTAR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended
 March 31,
2022
March 31,
2021
Cash flows provided by operating activities:  
Net loss$(20,462)$(36,333)
Adjustments to reconcile net loss to net cash provided by operating activities:  
Depreciation, amortization and accretion23,783 24,116 
Change in fair value of derivatives486 1,129 
Stock-based compensation expense1,233 1,090 
Amortization of deferred financing costs166 1,166 
Provision for credit losses332 420 
Noncash interest and accretion expense9,406 8,275 
Unrealized foreign currency (gain) loss(3,084)4,270 
Other, net186 (96)
Changes in operating assets and liabilities:  
Accounts receivable(213)(6,930)
Inventory(441)453 
Prepaid expenses and other current assets(265)(77)
Other assets460 531 
Accounts payable and accrued expenses(1,643)4,326 
Payables to affiliates(178)(277)
Other non-current liabilities(64)(83)
Deferred revenue(2,133)2,532 
Net cash provided by operating activities7,569 4,512 
Cash flows used in investing activities:  
Network upgrades (including capitalized interest)(8,712)(3,093)
Property and equipment additions(1,301)(1,212)
Purchase of intangible assets(438)(669)
Net cash used in investing activities(10,451)(4,974)
Cash flows provided by financing activities:  
Principal payments of the 2009 Facility Agreement (4,357)
Proceeds from exercise of warrants 43,678 
Payments for debt and equity issuance costs (133)
Proceeds from issuance of common stock and exercise of options8 57 
Net cash provided by financing activities8 39,245 
Effect of exchange rate changes on cash, cash equivalents and restricted cash89 (66)
Net (decrease) increase in cash, cash equivalents and restricted cash(2,785)38,717 
Cash, cash equivalents and restricted cash, beginning of period14,304 68,023 
Cash, cash equivalents and restricted cash, end of period$11,519 $106,740 

As of:
March 31,
2022
December 31,
2021
Reconciliation of cash and cash equivalents
Cash and cash equivalents$11,519 $14,304 
Total cash and cash equivalents cash shown in the statement of cash flows$11,519 $14,304 
 Three Months Ended
 March 31,
2022
March 31,
2021
Supplemental disclosure of cash flow information:  
Cash paid for interest$ $40 
Supplemental disclosure of non-cash financing and investing activities:  
Increase in capitalized accrued interest for network upgrades$1,301 $447 
Capitalized accretion of debt discount and amortization of prepaid financing costs194 122 
Satellite construction assets acquired through vendor financing arrangement32,700  

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


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. 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. 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, 2021, as filed with the SEC on February 25, 2022 (the “2021 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.

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, 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 months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year or any future period.


5


2. REVENUE

Disaggregation of Revenue

The following table discloses revenue disaggregated by type of product and service (amounts in thousands):
Three Months Ended
March 31, 2022March 31, 2021
Service revenue:
Duplex$6,146 $6,655 
SPOT11,255 10,984 
Commercial IoT4,670 4,481 
Engineering and other7,273 966 
Total service revenue29,344 23,086 
Subscriber equipment sales:
Duplex$130 $293 
SPOT1,475 1,915 
Commercial IoT1,806 1,521 
Other17 114 
Total subscriber equipment sales3,428 3,843 
Total revenue$32,772 $26,929 

The Company is reimbursed by the customer under the Terms Agreement for certain costs incurred by the Company as it completes its performance obligations under the contract. During the first quarter of 2022, the Company recognized revenue of $6.8 million associated with these services; this revenue is included in Engineering and other service revenue in the table above.

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 Ended
March 31, 2022March 31, 2021
Service revenue:
United States$22,288 $16,443 
Canada3,689 3,830 
Europe1,483 1,711 
Central and South America1,736 781 
Others148 321 
Total service revenue29,344 23,086 
Subscriber equipment sales:
United States$1,556 $2,172 
Canada798 749 
Europe636 479 
Central and South America429 421 
Others9 22 
Total subscriber equipment sales3,428 3,843 
Total revenue$32,772 $26,929 

Accounts Receivable

6


The Company has agreements with certain customers whereby the parties net settle outstanding payables and receivables between the respective entities on a periodic basis. As of March 31, 2022 and December 31, 2021, $1.1 million and $0.7 million, respectively, related to these agreements was included in accounts receivable on the Company’s condensed consolidated balance sheet. The Company also has agreements whereby it acts as an agent to procure goods and perform services on behalf of the customer under the Terms Agreement. As of March 31, 2022 and December 31, 2021, the Company recorded $7.0 million and $6.5 million, respectively, in accounts receivable related to these arrangements.

In connection with the Company's performance under the Terms Agreement, the Company recorded receivables totaling $15.6 million, which represents amounts owed by the customer for the Company's completion of performance obligations under the contract. As of March 31, 2022, $5.3 million and $10.3 million were recorded as current and non-current receivables, respectively.

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 three months ended March 31, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was $9.9 million and $10.5 million, respectively.

In general, the duration of the Company’s contracts with subscribers is one year or less. As of March 31, 2022, the Company expects to recognize $37.2 million, or approximately 24%, of its remaining performance obligations during the next twelve months.

Contract liabilities also includes advance payments from a customer pursuant to an agreement related to the Terms Agreement. The Company received two advance payments of $37.5 million each from this customer in June and September 2021. These advance payments are recorded in deferred revenue and classified as either short-term or long-term deferred revenue consistent with the expected timing of the Company's obligation to provide services to the customer over the recoupment period defined in the Terms Agreement. As of March 31, 2022, the Company has recorded $13.1 million and $115.9 million as short-term and long-term deferred revenue, respectively, which reflects the advance payments previously described, as well as additional deferred revenue in connection with ongoing network upgrades and the satellite procurement agreement. Reflected in the deferred revenue balance is $2.9 million of imputed interest associated with the significant financing component related to these advance payments. The total amount of deferred revenue associated with this customer is also reflected net of a contract asset of $2.4 million in the Company's condensed consolidated balance sheet as of March 31, 2022.

7


3. LEASES

The following tables disclose the components of the Company’s finance and operating leases (amounts in thousands):
As of:As of:
March 31, 2022December 31, 2021
Operating leases:
Right-of-use asset, net$31,172 $32,041 
Short-term lease liability (recorded in accrued expenses)2,420 2,501 
Long-term lease liability28,538 29,237 
Total operating lease liabilities$30,958 $31,738 
Finance leases:
Right-of-use asset, net (recorded in intangible and other current assets, net)$6 $8 
Short-term lease liability (recorded in accrued expenses)5 6 
Long-term lease liability (recorded in non-current liabilities)2 3 
Total finance lease liabilities$7 $9 

Lease Cost

The components of lease cost are reflected in the table below (amounts in thousands):
Three Months Ended
March 31, 2022March 31, 2021
Operating lease cost:
Amortization of right-of-use assets$733 $488 
Interest on lease liabilities660 317 
Capitalized lease cost(536) 
Finance lease cost:
Amortization of right-of-use assets1 7 
Short-term lease cost80 23 
Total lease cost$938 $835 

In accordance with the Terms Agreement, the Company began capitalization of certain costs to fulfill this contract starting in the second quarter of 2021, including lease expense, as shown in the table above. These capitalized lease costs will be amortized over the expected term of the related performance obligation. Interest on lease liabilities was less than $0.1 million for each of the three months ended March 31, 2022 and 2021; accordingly, this interest is not shown in the table above.

8


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:As of:
March 31, 2022December 31, 2021
Weighted-average lease term
Finance leases1.4 years1.6 years
Operating Leases10.4 years10.6 years
Weighted-average discount rate
Finance leases7.3 %7.0 %
Operating leases8.4 %8.4 %

Supplemental Cash Flow Information

The below table discloses supplemental cash flow information for finance and operating leases (in thousands):
Three Months Ended
March 31, 2022March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$1,357 $788 
Financing cash flows for finance leases2 6 

Operating cash flows from finance leases were less than $0.1 million for each of the three months ended March 31, 2022 and 2021; 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 March 31, 2022 (amounts in thousands):
Operating LeasesFinance Leases
2022 (remaining)$3,706 $5 
20234,985 2 
20244,858  
20254,887  
20264,934  
Thereafter23,112  
Total lease payments$46,482 $7 
Imputed interest(15,524) 
Discounted lease liability$30,958 $7 

As of March 31, 2022, the Company executed additional operating leases for new gateway locations. These leases have not yet commenced as of March 31, 2022 since the lessors are continuing to ready the sites for use. Accordingly, these leases are not included on the balance sheet as of March 31, 2022 or in the maturity table above. The Company is in the process of evaluating these lease obligations and expects both leases to be approximately $4.7 million.

9


4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands): 
March 31,
2022
December 31,
2021
Globalstar System:  
Space component  
First and second-generation satellites in service$1,195,509 $1,195,509 
Second-generation satellite, on-ground spare32,442 32,442 
Ground component300,452 282,268 
Construction in progress:  
Space component38,149 16,394 
Ground component22,897 33,998 
Other5,930 4,123 
Total Globalstar System1,595,379 1,564,734 
Internally developed and purchased software21,266 20,823 
Equipment8,698 8,590 
Land and buildings1,752 1,149 
Leasehold improvements2,146 2,088 
Total property and equipment1,629,241 1,597,384 
Accumulated depreciation(949,074)(925,228)
Total property and equipment, net$680,167 $672,156 

Amounts included in the Company’s second-generation satellite, on-ground spare in the table above consist of costs related to a spare second-generation satellite that has not been placed in orbit. The Company has entered into certain contracts for the preparation and launch of this spare satellite, which is expected to occur in 2022. Costs to support these efforts are included in the space component of construction in progress in the table above; the vast majority of these costs are being reimbursed by the customer under the Terms Agreement. These reimbursements are recorded in deferred revenue on the Company's consolidated balance sheet as of March 31, 2022 and are discussed in Note 2: Revenue.

In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constellation. As of March 31, 2022, the Company recorded $17.2 million as prepaid satellite construction costs and $15.5 million in construction in progress on its balance sheet reflecting the milestone work completed under this agreement. The customer under the Terms Agreement will reimburse 95% of these capital expenditures. Accordingly, as of March 31, 2022, the Company recorded $14.7 million in receivables on its condensed consolidated balance sheet. In accordance with the expected timing of reimbursement, $4.4 million is recorded in Accounts receivable and $10.3 million is recorded as a non-current receivable in Prepaid satellite construction costs and related customer receivable. The satellite construction assets acquired through this vendor financing arrangement are included in the supplemental section of the Company's condensed consolidated statement of cash flows as non-cash financing and investing activity. See further discussion in Note 2: Revenue, Note 5: Long-Term Debt and Other Financing Arrangements and Note 8: Commitments and Contingencies.

The ground component of construction in progress includes costs (including capitalized interest) incurred for assets to upgrade the Company's ground infrastructure, including costs associated with the procurement of new gateway antennas. During the first quarter of 2022, the Company placed $16.6 million of costs into service associated with these antennas, which are included in ground component in the table above. These capital expenditures relate primarily to gateway upgrade work in connection with the Terms Agreement.


10


5. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS 
Long-term debt consists of the following (in thousands): 
 March 31, 2022December 31, 2021
 Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
Principal
Amount
Unamortized Discount and Deferred Financing CostsCarrying
Value
2019 Facility Agreement272,716 25,960 246,756 263,812 27,287 236,525 
8.00% Convertible Senior Notes Issued in 2013
   1,407  1,407 
Total Debt272,716 25,960 246,756 265,219 27,287 237,932 

The principal amounts shown above include payment of in-kind interest. The carrying value is net of deferred financing costs and any discounts to the loan amounts at issuance, including accretion. Excluded from the table are obligations related to a vendor financing arrangement discussed below.
 
2019 Facility Agreement

In November 2019, the Company entered into a $199.0 million facility agreement with Thermo, an affiliate of EchoStar Corporation and certain other unaffiliated lenders (the "2019 Facility Agreement"). The 2019 Facility Agreement is scheduled to mature in November 2025. The loans under the 2019 Facility Agreement 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). As of March 31, 2022, the Company was in compliance with the covenants of the 2019 Facility Agreement.

The 2019 Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and calculated in the 2019 Facility Agreement) on a semi-annual basis. If the Company generates Excess Cash Flow in 2022, it will be required to make such prepayments. These payments would reduce future principal payment obligations.

Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2019 Facility Agreement.

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 Interest was paid in cash at a rate of 5.75% and in additional notes at a rate of 2.25%. In February 2022, the Company notified the holders of the 8.00% Notes of its intention to redeem all of the outstanding amount of principal and interest in March 2022. Prior to the Company's intended redemption of the 8.00% Notes, the holders converted the remaining principal amount outstanding of $1.4 million into 2.3 million shares of Globalstar common stock in February and March 2022. The 2013 8.00% Notes were converted into shares of common stock at a conversion price of $0.69 per share of common stock.

As a result of the conversions during the first quarter of 2022, the Company recorded gains and losses on extinguishment of debt resulting from the difference between the fair value of shares of Globalstar common stock issued to the holders and the principal amount of the notes that converted as well as the write-offs of the embedded derivative associated with the 2013 8.00% Notes. The net impact to the Company's condensed consolidated statement of operations for the first quarter of 2022 was a gain of less than $0.1 million.

Refer to Note 6: Derivatives and Note 7: Fair Value Measurements for further discussion on the compound embedded derivative bifurcated from the 2013 8.00% Notes.
11



Vendor Financing

In February 2022, the Company entered into a satellite procurement agreement (see Note 8: Commitments and Contingencies for further discussion). This agreement provides for payment deferrals of milestone payments through August 2022 at a 0% interest rate. As of March 31, 2022, the Company recorded $32.7 million in short-term vendor financing on its condensed consolidated balance sheet associated with this agreement. In August 2022, all deferred payments will become due by which time the Company intends to complete a senior secured financing. This financing is intended to provide sufficient proceeds for the construction and launch of the satellites.

2009 Facility Agreement 

In 2009, the Company entered into a 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 "2009 Facility Agreement"). The 2009 Facility Agreement was fully repaid in November 2021.

6. DERIVATIVES 

The Company has identified various embedded derivatives resulting from certain features in the Company’s existing borrowing arrangements, requiring recognition 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):

 March 31, 2022December 31, 2021
Derivative (liabilities) assets:  
Compound embedded derivative with the 2019 Facility Agreement$(218)$484 
Compound embedded derivative with the 2013 8.00% Notes
$ (1,364)

As of March 31, 2022 and December 31, 2021, the derivative (liability) asset recorded for the Compound embedded derivative with the 2019 Facility Agreement was reflected in Other non-current liabilities and Intangible and other assets, net, respectively, on the Company's condensed consolidated balance sheets. During the first quarter of 2022, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding.

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

 Three Months Ended
 March 31, 2022March 31, 2021
Compound embedded derivative with the 2013 8.00% Notes
$216 $(1,744)
Compound embedded derivative with the 2019 Facility Agreement(702)615 
Total derivative loss$(486)$(1,129)

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 its condensed consolidated statements of operations and its condensed consolidated statements of cash flows as an operating activity. The Company classifies its derivatives consistent with the classification of the underlying debt on the Company's condensed consolidated balance sheet. See Note 7: Fair Value Measurements for further discussion.

12


7. 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).

All of the Company's derivatives are classified as Level 3. The Company marks-to-market these derivatives at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s condensed consolidated statements of operations. During the first quarter of 2022, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding See Note 5: Long-Term Debt and Other Financing Arrangements and Note 6: Derivatives for further discussion.

Recurring Fair Value Measurements 

The following tables provide a summary of the assets and liabilities measured at fair value on a recurring basis (in thousands): 
 March 31, 2022
(Level 1)(Level 2)(Level 3)Total
 Balance
Liabilities:    
Compound embedded derivative with the 2019 Facility Agreement$ $ $(218)$(218)
Total liabilities measured at fair value$ $ $(218)$(218)
 
 December 31, 2021
(Level 1)(Level 2)(Level 3)Total
 Balance
Assets:    
Compound embedded derivative with the 2019 Facility Agreement$ $ $484 $484 
Total assets measured at fair value$ $ $484 $484 
Liabilities:    
Compound embedded derivative with the 2013 8.00% Notes
$ $ $(1,364)$(1,364)
Total liabilities measured at fair value$ $ $(1,364)$(1,364)

2013 8.00% Notes
13



The significant quantitative Level 3 inputs utilized in the valuation models are shown in the tables below:

 December 31, 2021
 Stock Price
Volatility
Risk-Free
Interest
Rate
Note
Conversion
Price
Discount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
120% - 139%
0.5 %$0.6918 %$1.16

Fluctuation in the Company’s stock price was a significant driver of the changes in the compound embedded derivative with the 2013 8.00% Notes during each reporting period. As the stock price increased, the value to the holder of the instrument generally increased, thereby increasing the liability on the Company’s condensed consolidated balance sheet. Stock price volatility was also a significant input used in the fair value measurement of the compound embedded derivative with the 2013 8.00% Notes. The simulated fair value of this liability was sensitive to changes in the expected volatility of the Company's stock price. Increases in expected volatility generally resulted in a higher fair value measurement.

2019 Facility Agreement

 The compound embedded derivative with the 2019 Facility Agreement is valued using a probability weighted discounted cash flow model. The most significant observable input used in the fair value measurement is the discount yield, which was 15% and 13% at March 31, 2022 and December 31, 2021, respectively. When the discount yield utilized in the valuation is higher than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in a liability for the Company. Conversely, when the discount yield is lower than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in an asset for the Company. The unobservable inputs used in the fair value measurement include the probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement.

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):
Balance at beginning of period, January 1, 2022 and 2021, respectively$(880)$163 
Derivative adjustment related to conversions1,148  
Unrealized loss, included in derivative loss(486)(1,043)
Balance at end of period, March 31, 2022 and December 31, 2021, respectively
$(218)$(880)
Fair Value of Debt Instruments
The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement without incurring significant additional costs. Unlike typical long-term debt, certain terms for this instrument are not readily available and generally involve a variety of factors, including due diligence by the debt holders. As previously disclosed, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock during the first quarter of 2022; accordingly, there is no value in the table below as of March 31, 2022. The following table sets forth the carrying value and estimated fair value of the Company's Level 3 financial instrument (in thousands):
 March 31, 2022December 31, 2021
Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
2013 8.00% Notes
$ $ $1,407 $1,265 
See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt instruments.
14



Nonrecurring Fair Value Measurements

The Company follows the authoritative guidance regarding non-financial assets and non-financial liabilities that are remeasured at fair value on a nonrecurring basis. On February 17, 2022 and March 9, 2022, the remaining principal balance of the 2013 8.00% Notes was converted into shares of Globalstar common stock, eliminating the entire principal balance outstanding. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements. As a result of the conversion, the Company wrote off the proportionate fair value of the compound embedded derivative liability with the 2013 8.00% Notes based on the value of the derivative on each conversion date. As of each conversion date, the fair value of the compound embedded derivative liability with the 2013 8.00% Notes was $0.8 million. The significant quantitative Level 3 inputs utilized in the valuation models as of the conversion date are shown in the table below:
 February 17, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
0.06 %$0.6918 %$1.00
 March 9, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
0.18 %$0.6919 %$1.21

8. COMMITMENTS AND CONTINGENCIES

Terms Agreement

The Terms Agreement sets forth the primary terms for the Company to provide services to the customer and incur costs related primarily to new gateways and upgrades at existing gateways, satellite launch costs and lease costs. Under this agreement, the customer has made advance payments to the Company for the services expected to be delivered under the Terms Agreement. To the extent the Company does not provide such services, it will be required to refund the amounts to the customer. Refer to Note 2: Revenue, Note 3: Leases and Note 4: Property and Equipment for further discussion.

Satellite Procurement Agreement

In February 2022, the Company entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation pursuant to which Globalstar will acquire 17 satellites that will replenish Globalstar's existing constellation of satellites and ensure long-term continuity of its mobile satellite services. Globalstar is acquiring the satellites to provide continuous satellite services to the potential customer under the Terms Agreement, as well as services to Globalstar’s current and future customers. Globalstar maintains the option to acquire additional satellites under the contract. Globalstar plans to contract separately for launch services and launch insurance for the new satellites. The total contract price for the initial 17 satellites is $327.0 million; Globalstar has the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The satellites are expected to be manufactured during the next three years. Under the Terms Agreement, subject to certain conditions, the counterparty is required to reimburse 95% of the capital expenditures and certain other costs incurred for this contract.

This agreement provides for payment deferrals of milestone payments through August 2022, at which time all deferred payments estimated to be approximately $74.0 million will become due, by which time the Company intends to complete a senior secured financing. This financing is intended to provide sufficient proceeds for the construction and launch of the satellites. The Company also expects to refinance its current 2019 Facility Agreement in the coming months.

15


9. RELATED PARTY TRANSACTIONS  

Payables to Thermo and other affiliates related to normal purchase transactions were $0.3 million and $0.4 million as of March 31, 2022 and December 31, 2021, respectively.

Transactions with Thermo 

Certain general and administrative expenses are incurred by Thermo on behalf of the Company. These expenses, which include non-cash expenses that the Company accounts for as a contribution to capital, related to services provided by certain executive officers of Thermo, and expenses incurred by Thermo on behalf of the Company that are charged to the Company. The expenses charged are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time. 

The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments started at $1.4 million per year in 2019 and increase at a rate of 2.5% per year, for a lease term of ten years. During each of the three months ended March 31, 2022 and 2021, the Company incurred lease expense of $0.4 million under this lease agreement.

In November 2019, the Company entered into the 2019 Facility Agreement. Thermo's participation in the 2019 Facility Agreement was $95.1 million. This principal balance earns paid-in-kind interest at a rate of 13% per annum. Interest accrued since inception with respect to Thermo's portion of the debt outstanding on the 2019 Facility Agreement was approximately $33.8 million, of which $4.1 million was accrued during the three months ended March 31, 2022.

See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt and financing transactions with Thermo.

10. LOSS PER SHARE 

Loss per share is computed by dividing 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 calculate diluted EPS includes the effect of dilutive securities, including interest expense, net, and derivative gains or losses reflected in net income. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. When outstanding, the effect of potentially dilutive common shares for the Company's convertible notes is calculated using the if-converted method. Generally, for all other potentially dilutive common shares, the effect is calculated using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per common share during each of the three months ended March 31, 2022 and 2021 (amounts in thousands, except per share data):
Three Months Ended
March 31, 2022March 31, 2021
Net loss$(20,462)$(36,333)
Weighted average shares outstanding1,797,671 1,679,754 
Net loss per common share - basic and diluted$(0.01)$(0.02)

For the three months ended March 31, 2022 and 2021, 7.4 million and 5.5 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be anti-dilutive.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 

Certain statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q (this "Report"), other than purely historical information, including, but not limited to, estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements, such as the statements regarding our ability to develop and expand our business (including our ability to monetize our spectrum rights), our anticipated capital spending, our ability to manage costs, our ability to exploit and respond to technological innovation, the effects of laws and regulations (including tax laws and regulations) and legal and regulatory changes (including regulation related to the use of our spectrum), the opportunities for strategic business combinations and the effects of consolidation in our industry on us and our competitors, our anticipated future revenues, our anticipated financial resources, our expectations about the future operational performance of our satellites (including their projected operational lives), the expected strength of and growth prospects for our existing customers and the markets that we serve, commercial acceptance of new products, problems relating to the ground-based facilities operated by us or by independent gateway operators, worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis, business interruptions due to natural disasters, unexpected events or public health crises, including viral pandemics such as the COVID-19 coronavirus, and other statements contained in this Report regarding matters that are not historical facts, involve predictions. Risks and uncertainties that could cause or contribute to such differences include, without limitation, those in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (the "SEC") on February 25, 2022 (the "2021 Annual Report"). We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this Report to reflect actual results or future events or circumstances. 

New risk factors emerge from time to time, and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. 

This "Management's Discussion and Analysis of Financial Condition" should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition" and information included in our 2021 Annual Report. 

Overview 

Mobile Satellite Services Business

Globalstar, Inc. ("we", "us" or the "Company") provides Mobile Satellite Services (“MSS”) including voice and data communications services globally via satellite. We offer these services over our network of in-orbit satellites and our active ground stations (“gateways”), which we refer to collectively as the Globalstar System. In addition to supporting Internet of Things ("IoT") data transmissions in a variety of applications, we provide reliable connectivity in areas not served or underserved by terrestrial wireless and wireline networks and in circumstances where terrestrial networks are not operational due to natural or man-made disasters. By providing wireless communications services across the globe, we meet our customers' increasing desire for connectivity.

We currently provide the following communications services: 

two-way voice communication and data transmissions via our GSP-1600 and GSP-1700 phone ("Duplex");
one-way or two-way communication and data transmissions using mobile devices, including our SPOT family of products, such as SPOT X®, SPOT Gen4 and SPOT Trace®, that transmit messages and the location of the device ("SPOT");
one-way data transmissions using a mobile or fixed device that transmits its location and other information to a central monitoring station, including our commercial IoT products, such as our battery- and solar-powered SmartOne, STX-3 and ST100 ("Commercial IoT"); and
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engineering services to assist certain customers (including our customer under the Terms Agreement (discussed in Note 8: Commitments and Contingencies to our Condensed Consolidated Financial Statements)) in developing new applications to operate on our network, making enhancements to our ground network, and providing other communication services using our MSS and terrestrial spectrum licenses ("Engineering and Other").

Our constellation of Low Earth Orbit ("LEO") satellites includes second-generation satellites and certain first-generation satellites. We also have one on-ground spare second-generation satellite that we plan to launch in the near future. We designed our satellite network to maximize the probability that at least one satellite is visible from any point on the Earth's surface between the latitudes 70° north and 70° south. We designed our second-generation satellites to last twice as long in space, have 40% greater capacity and be built at a significantly lower cost compared to our first-generation satellites.

Our goal is to provide service levels and call or message success rates equal to or better than our MSS competitors so our products and services are attractive to potential customers. We believe that our system outperforms geostationary (“GEO”) satellites used by some of our competitors. GEO satellite signals must travel approximately 42,000 additional miles on average, which introduces considerable delay and signal degradation to GEO calls.

In February 2022, we entered into a satellite procurement agreement (the "Procurement Agreement") with Macdonald, Dettwiler and Associates Corporation (the "Vendor") pursuant to which we will acquire 17 satellites that will replenish our existing constellation and ensure long-term continuity of our mobile satellite services. We are acquiring the satellites to provide continuous satellite services to the potential customer under the Terms Agreement (defined below), as well as services to our current and future customers. We have committed to purchase these new satellites for a total contract price of $327.0 million and have the option to purchase additional satellites at a lower per unit cost, subject to certain conditions. The technical specifications and design of these new satellites are similar to our current second-generation satellites. Rocket Lab USA, Inc. is the Vendor’s satellite bus subcontractor under the Procurement Agreement. The agreement requires the Vendor to deliver the initial 17 new satellites by 2025, all of which are expected to be launched by the end of 2025. Under the Terms Agreement, the counterparty is required to reimburse 95% of the capital expenditures and certain other costs incurred for the new satellites.

Our ground network includes our ground equipment, which uses patented CDMA technology to permit communication to multiple satellites. Our system architecture provides full frequency re-use. This maximizes satellite diversity (which maximizes quality) and network capacity as we can reuse the assigned spectrum in every satellite beam in every satellite. In addition, we have developed a proprietary technology for our SPOT and Commercial IoT services.

We compete aggressively on price. We offer a range of price-competitive products to the industrial, governmental and consumer markets. We expect to retain our position as a cost-effective, high quality leader in the MSS industry.  

As technological advancements are made, we continue to explore opportunities to develop new products and provide new services over our network to meet the needs of our existing and prospective customers. We are currently pursuing initiatives that we expect will expand our satellite communications business and more effectively utilize the capacity of our network assets. These initiatives include evaluating our product and service offerings in light of the shift in demand across the MSS industry from full Duplex voice and data services to IoT-enabled devices. To align our business model with this evolution, we have temporarily ceased sales of and services to subscribers for certain Duplex devices, such as Sat-Fi2®. We are currently evaluating opportunities for these devices relative to other product and service offerings as well as the capacity required to support these devices relative to other possible uses for the capacity. Integrated with this assessment is the development of a two-way reference design module to expand our Commercial IoT offerings, which is among our other current initiatives.

Our Commercial IoT use cases continue to expand, including deployments that support environmentally friendly initiatives. Recent deployments include remote monitoring of fluid levels and tanks, which replaces the need for motor vehicles to access these assets, as well as asset monitoring solutions for solar lighting and other renewable energy sources.
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Customers
The specialized needs of our global customers span many industries. As of March 31, 2022, we had approximately 747,000 subscribers worldwide, principally within the following markets: recreation and personal; government; public safety and disaster relief; oil and gas; maritime and fishing; natural resources, mining and forestry; construction; utilities; animal tracking and transportation. In response to Russia's invasion of Ukraine, during the first quarter of 2022, we disconnected satellite services to gateways in Russia that were operated by an independent gateway operator. Accordingly, approximately 25,000 subscribers that previously received satellite services through these gateways were removed from our subscriber count. Our system is able to offer our customers cost-effective communications solutions completely independent of cellular coverage. Although traditional users of wireless telephony and broadband data services have access to these services in developed locations, our customers often operate, travel or live in remote regions or regions with under-developed telecommunications infrastructure where these services are not readily available or are not provided on a reliable basis.
Spectrum and Regulatory Structure
We benefit from a worldwide allocation of radio frequency spectrum in the international radio frequency tables administered by the International Telecommunications Union ("ITU"). Access to this globally harmonized spectrum enables us to design satellites, networks and terrestrial infrastructure enhancements more cost effectively because the products and services can be deployed and sold worldwide. In addition, this broad spectrum assignment enhances our ability to capitalize on existing and emerging wireless and broadband applications.

Terrestrial Authority for Globalstar's Licensed 2.4GHz Spectrum
 
In August 2017, the FCC modified our MSS licenses, granting us authority to provide terrestrial broadband services over the 11.5 MHz portion of our licensed MSS spectrum. Specifically, the FCC modified our space station authorization and our blanket mobile earth station license to permit a terrestrial network using 11.5 MHz of our licensed mobile-satellite service spectrum.

In December 2018, we successfully completed the Third Generation Partnership Project (“3GPP”) standardization process for the 11.5 MHz of our licensed MSS spectrum terrestrially authorized by the FCC. The 3GPP designated the band as Band 53. Additionally, in March 2020, we announced that the 3GPP approved the 5G variant of our Band 53, which is known as n53. This new band class provides a pathway for our terrestrial spectrum to be integrated into handset and infrastructure ecosystems. Additional follow-on 3GPP specifications and approvals are expected in the future. During 2019, we executed a spectrum manager lease agreement with Nokia in order to permit Nokia to utilize Band 53 within its equipment domestically and have such equipment type-certified for sale and deployment.

In February 2021, Qualcomm Technologies announced its new Snapdragon X65 modem-RF System, which includes support for Band n53. By having global 5G band support for n53 in Qualcomm Technologies’ 5G solutions, our potential device ecosystem expands significantly to include the most popular smartphones, laptops, tablets, automated equipment and other IoT modules.

We believe our MSS spectrum position provides potential for harmonized terrestrial authority across many international regulatory domains and have been seeking approvals in various international jurisdictions. To date, we have received additional terrestrial authorizations in various countries, including Brazil, Canada, and South Africa, among others. We expect this global effort to continue for the foreseeable future while we seek additional terrestrial approvals to internationally harmonize our S-band spectrum across the entire 16.5 MHz authority for terrestrial mobile broadband services.

We expect our terrestrial authority will allow future partners to develop high-density dedicated networks using the TD-LTE and 5G protocols for private networks as well as the densification of cellular networks. We believe that our offering has competitive advantages over other conventional commercial spectrum allocations. Such other allocations must meet minimum population coverage requirements, which effectively prohibit the exclusive use of most carrier spectrum for dedicated small cell deployments. In addition, low frequency carrier spectrum is not physically well suited to high-density small cell topologies, and mmWave spectrum is subject to range and attenuation limitations. We believe that our licensed 2.4 GHz band holds physical, regulatory and ecosystem qualities that distinguishes it from other current and anticipated allocations, and that it is well positioned to balance favorable range, capacity and attenuation characteristics.

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Performance Indicators 

Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality and potential variability of our earnings and cash flows. These key performance indicators include: 

total revenue, which is an indicator of our overall business growth;
subscriber growth and churn rate, which are both indicators of the satisfaction of our customers;
average monthly revenue per user, or ARPU, which is an indicator of our pricing and ability to obtain effectively long-term, high-value customers. We calculate ARPU separately for each type of our subscriber-driven revenue, including Duplex, Commercial IoT and SPOT;
operating income and adjusted EBITDA, both of which are indicators of our financial performance; and
capital expenditures, which are an indicator of future revenue growth potential and cash requirements.

Comparison of the Results of Operations for the three months ended March 31, 2022 and 2021  

Revenue

Our revenue is categorized as service revenue and equipment revenue. We provide services to customers using technology from our satellite and ground network. Equipment revenue is generated from the sale of devices that work over our network. For the three months ended March 31, 2022, total revenue increased 22% to $32.8 million from $26.9 million for the same period in 2021. See below for a further discussion of the fluctuations in revenue.

The following table sets forth amounts and percentages of our revenue by type of service (dollars in thousands).
 
 Three Months Ended 
March 31, 2022
Three Months Ended 
March 31, 2021
 Revenue% of Total
Revenue
Revenue% of Total
Revenue
Service Revenue:
Duplex$6,146 19 %$6,655 25 %
SPOT11,255 34 10,984 41 
Commercial IoT4,670 14 4,481 17 
Engineering and other7,273 22 966 
Total Service Revenue$29,344 89 %$23,086 86 %
 
The following table sets forth amounts and percentages of our revenue generated from equipment sales (dollars in thousands).
 Three Months Ended 
March 31, 2022
Three Months Ended 
March 31, 2021
 Revenue% of Total
Revenue
Revenue% of Total
Revenue
Equipment Revenue:
Duplex$130 — %$293 %
SPOT1,475 1,915 
Commercial IoT1,806 1,521 
Other17 — 114 — 
Total Equipment Revenue$3,428 11 %$3,843 14 %

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