SEC Filing - Globalstar, Inc.

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gsat-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			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 class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.0001 per share

GSAT

NYSE 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 October 28, 2022, 1,801 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.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	35

Item 4.	Controls and Procedures.	35

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	36

Item 1A.	Risk Factors.	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	37

Item 3.	Defaults Upon Senior Securities.	37

Item 4.	Mine Safety Disclosures.	37

Item 5.	Other Information.	37

Item 6.	Exhibits.	37

Signatures		38

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				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenue:
Service revenue	$	33,301	$	27,848	$	95,693	$	76,551
Subscriber equipment sales	4,325		4,766		11,505		13,271
Total revenue	37,626		32,614		107,198		89,822
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	11,294		9,648		32,783		27,848
Cost of subscriber equipment sales	3,490		4,099		9,153		9,856
Cost of subscriber equipment sales - reduction in the value of inventory	8,537		71		8,553		853
Marketing, general and administrative	10,707		9,196		29,741		28,974
Reduction in value of long-lived assets	166,001		242		166,526		242
Depreciation, amortization and accretion	24,238		24,072		72,151		72,031
Total operating expenses	224,267		47,328		318,907		139,804
Loss from operations	(186,641)		(14,714)		(211,709)		(49,982)
Other (expense) income:
(Loss) gain on extinguishment of debt	—		(829)		—		1,835
Interest income and expense, net of amounts capitalized	(7,583)		(11,406)		(24,300)		(33,758)
Derivative gain (loss)	662		229		(1,066)		(2,210)
Foreign currency loss	(9,406)		(4,752)		(13,297)		(4,642)
Pension settlement loss	(1,501)		—		(1,501)		—
Other	(45)		473		344		407
Total other (expense) income	(17,873)		(16,285)		(39,820)		(38,368)
Loss before income taxes	(204,514)		(30,999)		(251,529)		(88,350)
Income tax (benefit) expense	(153)		(114)		51		317
Net loss	$	(204,361)	$	(30,885)	$	(251,580)	$	(88,667)

Other comprehensive loss:
Foreign currency translation adjustments	6,613		3,185		11,249		3,269
Defined benefit pension plan liability adjustment	2,073		$	—	$	2,073	$	—
Comprehensive loss	$	(195,675)	$	(27,700)	$	(238,258)	$	(85,398)

Net loss per common share:
Basic	$	(0.11)	$	(0.02)	$	(0.14)	$	(0.05)
Diluted	(0.11)		(0.02)		(0.14)		(0.05)
Weighted-average shares outstanding:
Basic	1,800,504		1,793,144		1,799,364		1,755,362
Diluted	1,800,504		1,793,144		1,799,364		1,755,362

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

(Unaudited)


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	14,749	$	14,304
Accounts receivable, net of allowance for credit losses of $2,923 and $2,962, respectively	29,594		21,182
Inventory	8,563		13,829
Prepaid expenses and other current assets	13,085		19,558
Total current assets	65,991		68,873
Property and equipment, net	532,680		672,156
Operating lease right of use assets, net	28,396		32,041
Prepaid satellite construction costs and related customer receivable	83,178		—
Intangible and other assets, net of accumulated amortization of $10,633 and $11,189, respectively	36,293		41,036
Total assets	$	746,538	$	814,106
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,867	$	6,247
Vendor financing	63,765		—
Accrued expenses	28,048		28,947
Payables to affiliates	142		444
Deferred revenue	53,121		25,927
Total current liabilities	146,943		61,565
Long-term debt	262,175		237,932
Operating lease liabilities	25,796		29,237
Deferred revenue, net	171,651		112,054
Other non-current liabilities	4,393		7,887
Total non-current liabilities	464,015		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 September 30, 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 September 30, 2022 and December 31, 2021, respectively	—		—
Voting Common Stock of $0.0001 par value; 2,150,000,000 shares authorized; 1,800,523,430 and 1,796,528,871 shares issued and outstanding at September 30, 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 September 30, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	2,155,117		2,146,710
Accumulated other comprehensive income	15,212		1,890
Retained deficit	(2,034,929)		(1,783,349)
Total stockholders’ equity	135,580		365,431
Total liabilities and stockholders’ equity	$	746,538	$	814,106

See accompanying notes to unaudited interim condensed consolidated financial statements.

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, 2022	1,796,529	$	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 compensation	703	—		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, 2022	1,799,485	$	180	$	2,151,652	$	1,211	$	(1,803,811)	$	349,232
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation	546	—		879		—		—		879
Contribution of services	—	—		47		—		—		47
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation	446	—		617		—		—		617
Other comprehensive income	—	—		—		5,315		—		5,315
Net loss	—	—		—		—		(26,757)		(26,757)
Balances – June 30, 2022	1,800,477	$	180	$	2,153,195	$	6,526	$	(1,830,568)	$	329,333
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation	46	—		1,815		—		—		1,815
Contribution of services	—	—		47		—		—		47
Recognition of stock-based compensation of employee stock purchase plan	—	—		60		—		—		60
Other comprehensive income	—	—		—		8,686		—		8,686
Net loss	—	—		—		—		(204,361)		(204,361)
Balances – September 30, 2022	1,800,523	$	180	$	2,155,117	$	15,212	$	(2,034,929)	$	135,580


	Common Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Deficit		Total
Balances – January 1, 2021	1,674,669	$	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 compensation	1,998	—		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 exercises	115,036	12		43,666		—		—		43,678
Other comprehensive income	—	—		—		3,242		—		3,242
Net loss	—	—		—		—		(36,333)		(36,333)
Balances – March 31, 2021	1,791,703	$	179	$	2,142,290	$	298	$	(1,707,057)	$	435,710
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation	173	—		576		—		—		576
Contribution of services	—	—		47		—		—		47
Net issuance of stock through employee stock purchase plan and recognition of stock-based compensation	1,187	—		406		—		—		406
Other comprehensive loss	—	—		—		(3,158)		—		(3,158)
Net loss	—	—		—		—		(21,449)		(21,449)
Balances – June 30, 2021	1,793,063	$	179	$	2,143,319	$	(2,860)	$	(1,728,506)	$	412,132
Net issuance of restricted stock awards and stock for employee stock options and recognition of stock-based compensation	244	—		544		—		—		544
Contribution of services	—	—		47		—		—		47
Recognition of stock-based compensation of employee stock purchase plan	—	—		102		—		—		102
Other comprehensive income	—	—		—		3,185		—		3,185
Net loss	—	—		—		—		(30,885)		(30,885)
Balances – September 30, 2021	1,793,307	$	179	$	2,144,012	$	325	$	(1,759,391)	$	385,125

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash flows provided by operating activities:
Net loss	$	(251,580)	$	(88,667)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion	72,151		72,031
Change in fair value of derivatives	1,066		2,210
Stock-based compensation expense	4,433		3,044
Amortization of deferred financing costs	419		2,341
Reduction in value of long-lived assets and inventory	175,079		1,095
Provision for credit losses	754		1,029
Noncash interest and accretion expense	23,788		26,537
Unrealized foreign currency loss	13,399		4,639
Loss on pension settlement	1,501		—
Gain on extinguishment of debt	—		(1,835)
Noncash reversal of tariff accrual	—		(912)
Other, net	(3,002)		(625)
Changes in operating assets and liabilities:
Accounts receivable	(952)		(7,013)
Inventory	(1,295)		276
Prepaid expenses and other current assets	1,788		(1,595)
Other assets	352		(1,883)
Accounts payable and accrued expenses	(10,272)		15,197
Payables to affiliates	(303)		(309)
Other non-current liabilities	(2,602)		(259)
Deferred revenue	6,981		81,865
Net cash provided by operating activities	31,705		107,166
Cash flows used in investing activities:
Network upgrades (including capitalized interest)	(18,604)		(24,766)
Property and equipment additions	(5,839)		(4,209)
Sale of property and equipment	—		350
Purchase of intangible assets	(863)		(1,408)
Net cash used in investing activities	(25,306)		(30,033)
Cash flows used in financing activities:
Principal payments of the 2019 Facility Agreement	(6,341)		—
Principal payments of the 2009 Facility Agreement	—		(126,664)
Proceeds from exercise of warrants	—		43,678
Payments for debt and equity issuance costs	—		(133)
Proceeds from issuance of common stock and exercise of options	455		394
Net cash used in financing activities	(5,886)		(82,725)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(68)		(57)
Net increase (decrease) in cash, cash equivalents and restricted cash	445		(5,649)
Cash, cash equivalents and restricted cash, beginning of period	14,304		68,023
Cash, cash equivalents and restricted cash, end of period	$	14,749	$	62,374


	As of:
	September 30, 2022		December 31, 2021
Reconciliation of cash and cash equivalents
Cash and cash equivalents	$	14,749	$	14,304
Total cash and cash equivalents cash shown in the statement of cash flows	$	14,749	$	14,304

	Nine Months Ended
	September 30, 2022		September 30, 2021
Supplemental disclosure of cash flow information:
Cash paid for interest	$	—	$	4,017

Supplemental disclosure of non-cash financing and investing activities:
Increase in capitalized accrued interest for network upgrades	$	8,615	$	1,703
Capitalized accretion of debt discount and amortization of prepaid financing costs	1,305		379
Satellite construction assets acquired through vendor financing arrangement	69,896		—
Forgiveness of principal and interest of Paycheck Protection Program loan	—		5,030

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications and wholesale capacity services through its global satellite network. The Company’s only reportable segment is its MSS business. Thermo Companies, through commonly controlled affiliates, (collectively, “Thermo”) is the principal owner and largest stockholder of Globalstar. The Company’s Executive Chairman of the Board controls Thermo. 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. The Company has made certain reclassifications to prior period condensed consolidated financial statements to conform to current period presentation.

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recent Developments

Service Agreements

On September 7, 2022, Apple Inc. (“Partner”) announced new satellite-enabled services for certain of its products (the “Services”). The Company will be the satellite operator for these Services pursuant to the agreement (the “Service Agreement”) first disclosed in the Company’s Form 10-K for the year ended December 31, 2019, and certain related ancillary agreements (such agreements, together with the Service Agreement, the “Service Agreements”). The Services constitute the potential service which was previously described and disclosed as the Terms Agreement.

Since execution of the Service Agreements in 2020, the parties have completed several milestones including (i) a feasibility phase, (ii) material upgrades to Globalstar’s ground network, (iii) construction of 10 new gateways around the world, (iv) the successful launch of the ground spare satellite, and (v) rigorous in-field system testing.

The Service Agreements generally require Globalstar to allocate network capacity (as described below) to support the Services and provide for the inclusion of Globalstar’s Band 53/n53 in Partner’s cellular-enabled devices that use the Services, for use by third parties, subject to certain terms and conditions.

It is currently expected that Partner will make the Services available to customers during the fourth quarter of 2022 (the “Service Launch”).

Discontinuation of Second-Generation Duplex Products and Services

The Company has been evaluating the continuation of second-generation Duplex services in light of other potential uses for the Company’s capacity, such as those within the Service Agreements. In early 2021, the Company terminated its second-generation Duplex services, which supported approximately 1,800 subscribers, to allow extended testing of the Services to Partner; however, such termination was considered temporary unless or until Partner announced its intent to proceed with

launch of the Services. Due to this shift in strategy triggered by Partner's September announcement, the Company evaluated the recoverability of its second-generation Duplex assets, including gateway property, prepaid licenses and royalties, and inventory during the third quarter of 2022. As a result of this shift in strategy, the Company recorded reductions in the value of equipment and long-lived assets totaling $174.3 million during the third quarter of 2022 (refer to Note 7: Fair Value Measurements for further discussion). The Company will continue to support first-generation Duplex services, including voice communications and data transmissions.

Refer to Note 2: Revenue, Note 3: Leases, Note 4: Property and Equipment and Note 8: Commitments and Contingencies for further discussion of the financial statement impact of the Service Agreements.

2. REVENUE

Disaggregation of Revenue

The following table discloses revenue disaggregated by type of product and service (amounts in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Service revenue:
Subscriber services
Duplex	$	9,021	$	9,632	$	22,103	$	23,530
SPOT	11,753		11,873		34,544		33,996
Commercial IoT	4,673		4,458		14,381		13,443
Wholesale capacity services (1)	6,972		1,301		22,640		3,999
Engineering and other services	882		584		2,025		1,583
Total service revenue	33,301		27,848		95,693		76,551

Subscriber equipment sales:
Duplex	$	15	$	265	$	288	$	889
SPOT	1,558		2,619		4,707		6,764
Commercial IoT	2,713		1,841		6,427		5,452
Other	39		41		83		166
Total subscriber equipment sales	4,325		4,766		11,505		13,271

Total revenue	$	37,626	$	32,614	$	107,198	$	89,822

(1) Prior to the third quarter of 2022, revenue from Wholesale capacity services was included in Engineering and other services in the table above. Wholesale capacity services include satellite network access and related services utilizing our satellite spectrum and network of satellites and gateways under the Service Agreements with Partner.

As consideration for the services to be provided by Globalstar after the Service Launch, Partner will make payments to Globalstar under the Service Agreements, including a recurring service fee, payments relating to certain service-related operating expenses and capital expenditures, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria. Additionally, following the launch of the next-generation satellites being constructed pursuant to the satellite procurement agreement, Partner has agreed to make additional service payments equal to (i) 95% of the approved capital expenditures under the satellite procurement agreement and related launch costs (to be paid on a straight-line basis over the useful life of the satellites); (ii) certain costs of the Company’s borrowings related to the new satellites; and (iii) other approved costs.

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				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Service revenue:
United States	$	24,250	$	19,677	$	71,413	$	54,348
Canada	5,288		5,236		13,105		13,442
Europe	1,737		2,039		4,891		5,607
Central and South America	1,898		996		5,882		2,592
Others	128		(100)		402		562
Total service revenue	$	33,301	$	27,848	$	95,693	$	76,551

Subscriber equipment sales:
United States	$	2,034	$	3,130	$	5,817	$	7,740
Canada	1,634		563		3,311		2,430
Europe	231		505		1,176		1,511
Central and South America	420		546		1,177		1,538
Others	6		22		24		52
Total subscriber equipment sales	$	4,325	$	4,766	$	11,505	$	13,271

Total revenue	$	37,626	$	32,614	$	107,198	$	89,822

Accounts Receivable

The Company records trade accounts receivable from its customers, including MSS subscribers and Partner under the Service Agreements, when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future. In addition to receivables arising from the sale of goods or services, the Company also has certain arrangements whereby it acts as an agent to procure goods and perform services on behalf of Partner under the Service Agreements.

Receivables are included in Accounts receivable, net of allowance for credit losses, on the Company's consolidated balance sheets except for the long-term portion of the wholesale capacity accounts receivable, which is included in Prepaid satellite construction costs and related customer receivable. The Company's receivable balances by type and classification are presented in the table below net of allowance for credit losses and may include amounts related to earned but unbilled revenue (amounts in thousands).


	As of:
	September 30, 2022		December 31, 2021
Accounts receivable, net of allowance for credit losses
Subscriber accounts receivable	$	13,954	$	12,825
Wholesale capacity accounts receivable	12,727		1,861
Agency agreement accounts receivable	2,913		6,496
Total accounts receivable, net of allowance for credit losses	$	29,594	$	21,182
Long-term wholesale capacity accounts receivable	69,646		—
Total accounts receivable (short-term and long-term), net of allowance for credit losses	$	99,240	$	21,182

In February 2022, the Company entered into an agreement for the purchase of new satellites that will replenish the Company's existing satellite constellation. Under the Service Agreements, subject to certain conditions, Partner is required to reimburse 95% of the capital expenditures and certain other costs incurred for this contract. In accordance with the expected timing of payment from Partner, $11.6 million is recorded in Wholesale capacity accounts receivable and $69.6 million is recorded as in Long-term wholesale capacity accounts receivable in the table above.

Contract Liabilities

Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. Contract liabilities reflect balances from its customers, including MSS subscribers and the Partner under the Service

Agreements. The Company's contract liabilities by type and classification are presented in the table below (amounts in thousands).


	As of:
	September 30, 2022		December 31, 2021
Short-term contract liabilities
Subscriber contract liabilities	$	23,212	$	24,940
Wholesale capacity contract liabilities	29,909		987
Total short-term contract liabilities	$	53,121	$	25,927
Long-term contract liabilities
Subscriber contract liabilities	$	1,669	$	1,783
Wholesale capacity contract liabilities, net of contract asset	169,982		110,271
Total long-term contract liabilities	$	171,651	$	112,054
Total contract liabilities	$	224,772	$	137,981

For subscriber contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was $22.8 million and $23.8 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the nine months ended September 30, 2022 and 2021 from performance obligations included in the contract liability balance at the beginning of these periods was less than $0.1 million and zero, respectively.

The duration of the Company’s contracts with subscribers is generally one year or less. As of September 30, 2022, the Company expects to recognize $23.2 million, or approximately 93%, of its remaining performance obligations during the next twelve months. The term of the Company's wholesale capacity contract with its Partner under the Service Agreements is indefinite; therefore, the related contract liabilities may be recognized into revenue over various periods driven by the expected related service or recoupment periods. As of September 30, 2022, the Company expects to recognize $29.9 million, or approximately 15%, of its remaining performance obligations during the next twelve months.

The components of wholesale capacity contract liabilities are presented in the table below (amounts in thousands).


	As of:
	September 30, 2022		December 31, 2021
Wholesale capacity contract liabilities, net:
Advanced payments for services expected to be performed with the second-generation satellite constellation during Phase 1 (1)	$	99,405	$	96,362
Advanced payments for services expected to be performed with the recently launched ground spare satellite during Phases 1 and 2	25,652		16,981
Advanced payments (both received and contractually owed) for services expected to be performed with the next-generation satellite constellation during Phase 2	78,151		—
Contract asset	(3,317)		(2,085)
Wholesale capacity contract liabilities, net	$	199,891	$	111,258

(1) In accordance with applicable accounting guidance, the Company records imputed interest associated with the significant financing component, totaling $4.9 million and $1.9 million as of September 30, 2022 and December 31, 2021, respectively, which is included in deferred revenue.

3. LEASES

The following tables disclose the components of the Company’s finance and operating leases (amounts in thousands):


	As of:
	September 30, 2022		December 31, 2021
Operating leases:
Right-of-use asset, net	$	28,396	$	32,041

Short-term lease liability (recorded in accrued expenses)	2,464		2,501
Long-term lease liability	25,796		29,237
Total operating lease liabilities	$	28,260	$	31,738

Finance leases:
Right-of-use asset, net (recorded in intangible and other current assets, net)	$	109	$	8

Short-term lease liability (recorded in accrued expenses)	17		6
Long-term lease liability (recorded in non-current liabilities)	75		3
Total finance lease liabilities	$	92	$	9

Lease Cost

The components of lease cost are reflected in the table below (amounts in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost:
Amortization of right-of-use assets	$	584	$	661	$	1,908	$	1,815
Interest on lease liabilities	571		545		1,848		1,256
Capitalized lease cost	(215)		—		(702)		—
Finance lease cost:
Amortization of right-of-use assets	4		1		7		9
Short-term lease cost	205		38		413		117
Total lease cost	$	1,149	$	1,245	$	3,474	$	3,197

In accordance with the Service Agreements, the Company began capitalizing certain costs to fulfill this contract during the fourth 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 finance lease liabilities was less than $0.1 million for the three and nine months ended September 30, 2022 and 2021; accordingly, these amounts are not shown in the table above.

Weighted-Average Remaining Lease Term and Discount Rate

The following table discloses the weighted-average remaining lease term and discount rate for finance and operating leases.

As of:

September 30, 2022

December 31, 2021

Weighted-average lease term

Finance leases

4.8 years

1.6 years

Operating Leases

9.9 years

10.6 years

Weighted-average discount rate

Finance leases

10.2

7.0

Operating leases

8.4

Supplemental Cash Flow Information

The below table discloses supplemental cash flow information for operating leases (in thousands):


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,675	$	3,420

Operating and financing cash flows from finance leases were each less than $0.1 million for each of the nine months ended September 30, 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 September 30, 2022 (amounts in thousands):


	Operating Leases		Finance Leases

2022 (remaining)	$	1,180	$	8
2023	4,775		25
2024