1 3 5 1 H O L I D AY S Q U A R E B LV D .
C O V I N G T O N , L A 7 0 4 3 3
G L O B A L S T A R . C O M
2 0 2 0 A N N U A L
R E P O R T
April 2021
Dear Fellow Stockholders,
2020 was a year of unimaginable challenges, but also one where
we saw incredible resiliency and adaptability. As we write this letter,
there is a newfound sense of hope for recovery, thanks to heroic
efforts across the globe. We are proud of how our Company has driven
our strategy forward in the face of adversity. Meanwhile, we made
thoughtful adjustments to keep employees safe, customer relationships
strong, and shareholders informed. Effective communication with
these stakeholders has been essential to ensuring unity and
transparency as well as successfully managing through a crisis of this
magnitude and complexity.
Every crisis ends with lessons learned and opportunities for
reinvention. This letter is an appropriate platform to reflect on the
successes and shortfalls we experienced as a company in 2020.
We were forced to challenge our business plan relative to one core
revenue stream, Commercial IoT, while another, SPOT, experienced
record growth.
“2020 was a year
of unimaginable
challenges, but
also one where
we saw incredible
resiliency and
adaptability.
Entering the pandemic, we had reported year-over-year service revenue growth from Commercial IoT subscribers of 26%.
Subscribers and ARPU were both increasing at a significant pace. This momentum was in line with our strategic initiatives,
which were anchored in the belief that the untapped potential of our satellite network should be focused towards Commercial
IoT opportunities. While this belief has not wavered, the financial momentum driven by Commercial IoT sales was curtailed by
the effects of the pandemic and the oil and gas industry downturn. An important reminder of the downside of concentration
risk, we immediately knew we had to diversify into new verticals in order to reduce this impact. We also were presented with
an opportunity to be more innovative in the use cases we were targeting. The Commercial IoT market is expanding so rapidly
that a lack of innovation could lead to failure, particularly given the current competitive landscape. Over the past year, we have
made changes to our business to adapt to this evolving marketplace, evaluated the resources available to us and adjusted our
business model to better position Globalstar as a valid competitor in the space.
Contrary to our experience with Commercial IoT, the disruption to the outdoor retail industry was brief and sales post-recovery
have accelerated. The impact of the pandemic on the retail industry was reflected in a decrease in SPOT sales early in the year
due to store closings and an increase in subscriber churn due to economic uncertainties; however, this negative impact was
short-lived. We saw a significant turnaround in online sales and activations following store re-openings in the summer, ultimately
activating a record number of SPOT subscribers in each quarter since then, and this momentum has continued into 2021.
Competitive hardware and service pricing, successful product launches, and a change in consumer lifestyle following the start
of the pandemic have each contributed to record gross activations.
Despite the challenges impacting businesses on a global scale, our commitment and corporate purpose remain unchanged.
At Globalstar we continue to strive towards providing reliable satellite connectivity across the globe while pushing the terrestrial
spectrum asset towards value realization through both new authorized countries and ecosystem development.
1
GLOBALSTAR 2020 ANNUAL REPORT FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial Highlights
• Globalstar recorded improved overall profitability during 2020 with Adjusted EBITDA1 increasing 12% from 2019.
Higher engineering services revenue and a significant decrease in operating expenses were offset partially by lower
subscriber-driven revenue due in part to a decrease in Commercial IoT hardware sales. While the volume of Commercial
IoT hardware units sold during 2020 was down from 2019, we believe our sales pipeline has not been reduced, only
delayed as we expect recovery to 2019 sales levels during the second half of 2021. This expectation is founded in part on
the volume of year-to-date sales in 2021, which are up from the comparable, pre-pandemic period in 2020.
• We have also made significant balance sheet improvements, pursuant to our commitment to delever our balance sheet
and better position Globalstar to realize its significant potential value. In March 2021, we announced the exercise of the
remaining outstanding second lien warrants, which provided funding totaling $47.3 million. These proceeds were used to
pay principal outstanding under our first lien loan agreement. The remaining outstanding amount under this agreement (net
of restricted cash) is now approximately $84 million, of which $58 million is due on the final maturity date of December 31,
2022. We are pleased to have this milestone behind us and, with less than $6 million due in scheduled principal payments
over the next twelve months, we are on sound footing relative to our remaining debt repayment obligations.
Terrestrial Spectrum Licensing and Commercialization
• November 2020 brought great progress for Globalstar in the form of terrestrial authorizations obtained in Canada, Brazil
and Kenya. These three countries represent an additional covered population of 300 million and 3.7 billion MHz-PoPs,
bringing our total terrestrial authority to over 9 billion MHz-PoPs and coverage of a total population of approximately 700
million. This achievement represents a major milestone toward our global spectrum harmonization initiative.
•
In February 2021, we announced that Qualcomm will include Band n53 in the X65 5G flagship modem. By having
global 5G band support for n53 in Qualcomm’s modem, our potential device ecosystem expands significantly.
• Another recent spectrum-related announcement was the upcoming deployment of Band 53 spectrum with Nokia at the
Port of Seattle. This deployment is one of many ongoing through our partnership with Nokia.
• We also recently announced that XCOM Labs has joined our growing list of ecosystem supporters, joining Airspan and
Nokia. We expect XCOM will be on the cutting edge of 5G and future wireless services and look forward to the ways they
can help us deploy our spectrum resources.
New Product Development
•
•
In May 2020, we introduced the first Jeep licensed product, the SPOT X Jeep Edition, 2-Way Satellite Messenger. This
product played a key role in helping drive brand awareness within the off-road adventure markets, exposing SPOT to a
passionate new base of potential users.
In June 2020, Globalstar launched the ST100 Satellite Transmitter. This lightweight all-in-one commercial IoT board
provides SATCOM integration capability for any OEM. Utilized by simply adding power and a mechanical enclosure, the
ST100 provides a customizable approach applicable to several target industries. The launch further extended the strength
of Globalstar’s positioning within the satellite IoT industry.
2
GLOBALSTAR 2020 ANNUAL REPORT •
In August 2020, we launched the newest generation of satellite messaging devices, SPOT Gen4. This newest SPOT device
offers users more tracking features and a new enhanced mapping interface, improved product specifications for water
resistance and a new carabiner with strap to complete the modern industrial design. The SPOT Gen4 is part of an
award-winning product portfolio that provides an affordable and vital line of communication with friends, family, colleagues
and S.O.S. capability using GPS location and satellite connectivity powered by Globalstar.
• October 2020 marked the official launch timing of the second licensed and co-branded Jeep product, the SPOT Gen4
Jeep Special Edition Satellite Messenger, reintroducing SPOT to Jeep enthusiasts everywhere. The Gen4 Jeep Special
Edition brings all the connectivity and reliability users have come to rely from SPOT in a distinctively Jeep branded edition.
Global Sales and Expansion Opportunities
•
•
In June 2020, we reinvigorated and restarted operations at the previously dormant gateway in Córdoba, Argentina
dramatically enhancing service levels in the region. The new infrastructure extended Globalstar’s service throughout South
America, enabling voice calls, two-way communication, and internet connectivity. The new station will allow uninterrupted
coverage in the territories of Argentina, Brazil, Chile, Paraguay and Uruguay. The installation demonstrates Globalstar’s
continued investment in infrastructure development in South America.
In September 2020, Globalstar Europe Satellite Services Ltd, announced that specialist reseller, Traksat had deployed over
1,200 Globalstar-enabled safety and tracking devices for humanitarian organizations internationally. Globalstar’s reliability,
competitive pricing and user-friendly devices present NGOs with a solution aligned with their unique business needs.
2021 OUTLOOK
All things considered, Globalstar had a successful year and we have made significant strides in several of our key initiatives
to kick off 2021. We have been successful in advancing our terrestrial authorizations, forging strong partnerships in the
commercial development of Band 53 and n53 while achieving growth in our core satellite business. We have also launched
new products and are developing additional products that will help our IoT partners offer exciting new services. Through the
pandemic we have learned that we are greater than the sum of our parts and that ultimately, these tests will only make us
stronger and better poised for success in 2021 and beyond.
We would like to thank our employees for continuing to embrace change, and our partners, customers and shareholders for
their continued trust and support of our business. We wish you all a safe and healthy 2021.
James Monroe III
Executive Chairman
David Kagan
Chief Executive Officer
1 See the reconciliation to GAAP net income (loss) following this letter.
3
GLOBALSTAR 2020 ANNUAL REPORT GLOBALSTAR, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
Net (loss) income
$
(109,639)
$
15,324
Year Ended
December 31,
2020
2019
Interest income and expense, net
Derivative gain
Income tax expense
Depreciation, amortization and accretion
EBITDA
Non-cash reduction in the value of inventory
Non-cash reduction in the value of long-lived assets
Non-cash compensation
Foreign exchange and other
Debt refinancing third party fees
Revenue recognition related to terminated contract
Non-cash settlement of pension plan
Non-cash adjustment to international operations
Shareholder litigation insurance recovery
Gain on legal settlement
Change to estimated impact upon adoption of ASC 606
48,429
(2,897)
662
96,815
33,370
662
416
5,808
1,629
1,113
(2,915)
2,075
-
-
-
-
Adjusted EBITDA (1)
$
42,158
$
62,464
(145,073)
545
95,772
29,032
416
1,124
6,162
235
5,232
-
455
927
(1,820)
(120)
(3,885)
37,758
(1) EBITDA represents earnings before interest, income taxes, depreciation, amortization, accretion and derivative (gains)/losses.
Adjusted EBITDA excludes non-cash compensation expense, reduction in the value of assets, foreign exchange (gains)/losses, and
certain other non-recurring charges as applicable. Management uses Adjusted EBITDA in order to manage the Company's business
and to compare its results more closely to the results of its peers. EBITDA and Adjusted EBITDA do not represent and should not
be considered as alternatives to GAAP measurements, such as net income/(loss). These terms, as defined by us, may not be
comparable to similarly titled measures used by other companies.
The Company uses Adjusted EBITDA as a supplemental measurement of its operating performance. The Company believes it best
reflects changes across time in the Company's performance, including the effects of pricing, cost control and other operational
decisions. The Company's management uses Adjusted EBITDA for planning purposes, including the preparation of its annual
operating budget. The Company believes that Adjusted EBITDA also is useful to investors because it is frequently used by securities
analysts, investors and other interested parties in their evaluation of companies in similar industries. As indicated, Adjusted
EBITDA does not include interest expense on borrowed money or depreciation expense on our capital assets or the payment of
income taxes, which are necessary elements of the Company's operations. Because Adjusted EBITDA does not account for these
expenses, its utility as a measure of the Company's operating performance has material limitations. Because of these limitations, the
Company's management does not view Adjusted EBITDA in isolation and also uses other measurements, such as revenues and
operating profit, to measure operating performance.
[This page intentionally left blank]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 001-33117
GLOBALSTAR, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
41-2116508
(I.R.S. Employer
Identification No.)
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
Common Stock, par value $0.0001 per share
Trading Symbol
GSAT
Name of exchange on
which registered
NYSE American
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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 ☒ 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 ☒ 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. (Check one):
Large accelerated filer ☐
Accelerated filer
Non-accelerated filer
☐
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 has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)
Yes ☐ No ☒
The aggregate market value of the registrant's common stock held by non-affiliates at June 30, 2020, the last business day
of the registrant's most recently completed second fiscal quarter, was approximately $200.2 million.
As of February 26, 2021, 1,677,878,734 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 registrant's voting common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference in
Part III of this Report.
FORM 10-K
For the Fiscal Year Ended December 31, 2020
TABLE OF CONTENTS
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits, Financial Statement Schedules
Form 10-K Summary
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Signatures
Page
3
13
27
28
28
28
29
30
30
44
45
95
95
96
96
96
96
96
96
97
98
98
[This page intentionally left blank]
PART I
Forward-Looking Statements
Certain statements contained in or incorporated by reference into this Annual Report on Form 10-K (the "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 of this 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.
Item 1. Business
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.
Recent Developments: COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global
pandemic. Various levels of governmental agencies and authorities have taken measures to reduce the spread of COVID-19,
including “stay at home” orders, social distancing and closures of non-essential businesses. The success of our business
depends on our global operations, including the performance of our satellites and ground stations as well as our supply chain
and consumer demand, among other things. As a result of COVID-19, we have experienced a reduction in the volume of sales
of our subscriber equipment, particularly from our customers that operate in the oil and gas industry, have received requests for
service pricing concessions from certain customers, and expect an impact on the ability of certain of our customers to pay
outstanding balances. Our results of operations for the year ended December 31, 2020 partially reflect this impact; however, we
expect that this trend may continue and the full extent of the impact is unknown. In recent months, some governmental agencies
have lifted certain restrictions. However, if customer demand continues to be low, our future equipment sales, subscriber
activations and sales margin will be impacted. We have implemented several measures to minimize the impact on our
operations and sustain our liquidity position, including:
•
•
Receiving economic relief and support under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act,
including a $5.0 million forgivable payroll protection program loan (the "PPP Loan") and the deferral of certain
payroll taxes,
Refocusing internal resources on high-value opportunities, such as working with federal agencies that may require our
equipment and services in times of crisis,
3
• Working with our product manufacturers to ensure we will continue to have sufficient inventory levels on hand to
•
meet consumer demand, and
Supporting both consumer and commercial customers, particularly those that operate in the retail and oil and gas
industries, to adjust pricing where necessary, whether under e-commerce promotions or temporary service pricing
concessions.
Satellite Network
Our constellation of Low Earth Orbit ("LEO") satellites includes second-generation satellites and certain first-generation
satellites, which are currently being used as in-orbit spares. We also have one on-ground spare second-generation satellite that
we may include in a future launch. 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. We achieved this longer life by increasing the solar array and battery capacity, using a larger fuel
tank, adding redundancy for key satellite equipment, and improving radiation specifications and additional lot level testing for
all susceptible electronic components, in order to account for the accumulated dosage of radiation encountered during a 15-year
mission at the operational altitude of the satellites. The second-generation satellites use passive S-band antennas on the body of
the spacecraft providing additional shielding for the active amplifiers which are located inside the spacecraft, unlike the first-
generation amplifiers that were located on the outside as part of the active antenna array. Each satellite has a high degree of on-
board subsystem redundancy, an on-board fault detection system and isolation and recovery for safe and quick risk mitigation.
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.
Ground Network
Our satellites communicate with a network of gateways, each of which serves an area of approximately 700,000 to
1,000,000 square miles. A gateway must be within line-of-sight of a satellite and the satellite must be within line-of-sight of the
subscriber to provide services. We have positioned our gateways to provide coverage over most of the Earth's land and human
population and continue to evaluate and expand our gateway footprint to optimize coverage. We own and operate the majority
of these gateways and the rest are owned by independent gateway operators ("IGOs").
Each of our gateways has multiple antennas that communicate with our satellites and pass communications seamlessly
between antenna beams and satellites as the satellites traverse the gateways, thereby reflecting the signals from our users'
terminals to our gateways. Once a satellite acquires a signal from an end-user, the Globalstar System authenticates the user and
establishes the voice or data channel to complete the call to the public switched telephone network (“PSTN”), a cellular or
another wireless network or the internet for data communications including Commercial IoT. In 2019, we signed a contract with
MIL-SAT LLC for the procurement and production of new antennas for certain of our gateways around the world, and all
antennas have been delivered under the terms of that contract. Although we currently do not have any remaining contractual
obligations with MIL-SAT, we expect to purchase additional antennas in the future directly from the manufacturer.
We believe that our terrestrial gateways provide a number of advantages over the in-orbit switching used by our main
competitor, including better call quality, reduced call latency and convenient, localized phone numbers for inbound and
outbound calling. We also believe that our network's design enables faster and more cost-effective system maintenance and
upgrades because the system's software and much of its hardware are located on the ground. Our multiple gateways allow us to
reconfigure our system quickly to extend another gateway's coverage to make up for lost coverage from a disabled gateway or
to handle increased call capacity resulting from surges in demand.
Our ground network includes our ground equipment, which uses patented CDMA technology to permit communication to
multiple satellites. Patented receivers in our handsets track the pilot channel and signaling channel as well as three additional
communications channels simultaneously. Compared to other satellite and network architectures, we offer superior call clarity
with virtually no discernible delay. 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 designed our
second-generation ground network to provide our customers with enhanced services featuring speeds up to 72 kbps as well as
increased capacity, when combined with our next-generation products. The second-generation ground network is an Internet
4
protocol multimedia subsystem ("IMS") based solution providing such industry standard services as voice, internet, email and
short message services ("SMS").
Communications Products and Services
We currently provide the following communications services:
•
•
•
•
two-way voice communication and data transmissions using mobile or fixed devices, including our GSP-1700 phone,
two generations of our Sat-Fi® and other fixed and data-only devices ("Duplex");
one-way or two-way communication and data transmissions using mobile devices, including our SPOT family of
products, such as SPOT X ®, SPOT Gen4TM 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
engineering services to assist certain customers in developing new applications to operate on our network,
enhancements to our ground network and other communication services using our MSS and terrestrial spectrum
licenses ("Engineering and Other").
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 to expand our satellite communications business by effectively leveraging our network capabilities and
distribution relationships. Among our current initiatives is the development of a two-way reference design module to expand
our Commercial IoT offerings.
Customers
The specialized needs of our global customers span many industries. As of December 31, 2020, we had approximately
745,000 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; and
transportation. 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.
Our top revenue-generating markets in the United States and Canada are government (including federal, state and local
agencies), public safety and disaster relief, oil and gas, recreation and personal telecommunications. In recent years, the portion
of our customers using Commercial IoT devices has increased significantly. No one customer was responsible for more than
10% of our revenue in 2020, 2019 or 2018.
Duplex Two-Way Voice and Data Products
Mobile Voice and Data Satellite Communications Services and Equipment
We provide mobile voice and data services to a wide variety of commercial, government and individual customers for
remote business continuity, recreational usage, safety, emergency preparedness and response and other applications. We offer
our services for use only with equipment designed to work on our network. Subscribers typically pay an initial activation fee, a
monthly usage fee for a fixed or unlimited number of minutes and fees for additional services such as voicemail, call
forwarding, short messaging, email, data compression and internet access. Extra fees may also apply for non-voice services,
roaming and long-distance. We regularly monitor our service offerings in accordance with customer demands and market
changes and offer pricing plans such as bundled minutes, annual plans and unlimited plans.
We offer the GSP-1700 phone, which includes a user-friendly color LCD screen and a variety of accessories. We believe
that the GSP-1700 is among the smallest, lightest and least-expensive satellite phones. We are the only MSS provider using
Qualcomm Incorporated's ("Qualcomm") patented CDMA technology, which we believe provides superior voice quality when
compared to competitors' handsets. We no longer manufacture the GSP-1700 phone. Instead, we sell refurbished GSP-1700
5
phones to new subscribers through our existing distribution channels. These phones are generally obtained through a buyback
program that we have in place to purchase devices from deactivated subscribers, or subscribers that have upgraded to our Sat-Fi
® device, in order to address demand for handsets.
We offer another voice and data solution, Sat-Fi2®, which is the next-generation model of our original Sat-Fi®. Sat-Fi2® is
the first product to operate using our second-generation ground infrastructure, resulting in higher data speeds, enhanced
applications and improved performance. With Sat-Fi2®, our customers can use their Wi-Fi-enabled smartphones and tablets to
send and receive communications via the Globalstar System when traveling beyond cellular coverage. We believe Sat-Fi2®
provides fast and affordable mobile satellite data speeds. Through a convenient smartphone app that enables connectivity
between Wi-Fi-enabled devices and Sat-Fi® satellite hot spots, subscribers in range of a Sat-Fi2® device can easily send and
receive email and SMS messages and make voice calls from their own device at any time.
Fixed Voice and Data Satellite Communications Services and Equipment and Data Modem Services and Equipment
Among other places, we provide fixed voice and data services in rural villages, at remote industrial, commercial and
residential sites and on ships at sea. Fixed voice and data satellite communications services are an attractive alternative to
mobile satellite communications services in environments where multiple users will access the services within a defined
geographic area and cellular or ground phone service is not available. Our fixed voice and data service plans are similar to our
mobile voice and data plans and offer similar flexibility.
In addition to data utilization through fixed and mobile services described above, we offer data-only services through
Duplex devices with two-way transmission capabilities. Duplex asset-tracking applications enable customers to directly control
their remote assets and perform complex monitoring activities. We offer asynchronous and packet data service in all of our
Duplex territories. Customers can use our products to access the internet, corporate virtual private networks and other customer-
specific data centers. Our satellite data modems can be activated under any of our current pricing plans.
Product Distribution
Our sales group is responsible for conducting direct sales with key accounts and for managing indirect agent, dealer and
reseller relationships. Our typical dealer is a communications services business-to-business equipment retailer. In addition to
buying through our distribution managers, agents, dealers and resellers, customers also place orders through our existing sales
force and through our direct e-commerce website.
SPOT Consumer Retail Products
The SPOT product family has initiated approximately 7,500 rescues since its launch in 2007. Averaging nearly two rescues
per day, SPOT delivers affordable and reliable satellite-based connectivity and real-time GPS tracking to hundreds of thousands
of users, completely independent of cellular coverage. We are not aware of any other competitive offering that can match the
life-saving record of our SPOT family of products. As we continue to innovate and grow the SPOT family of products, we are
committed to providing affordable, life-saving products to an expanding target market of millions of people globally.
We differentiate ourselves from other MSS providers by offering affordable, high-utility mobile satellite products that
appeal to both businesses and the mainstream consumer market. We believe that we are the only vertically-integrated mobile
satellite company. Our vertical integration results in decreased pre-production costs, greater quality assurance and shorter time
to market for our retail consumer products.
SPOT Satellite GPS Messenger
We began commercial sales of the first SPOT products and services when we introduced the SPOT Personal Tracker in
2007. We continue to innovate this product and have released multiple generations of our SPOT Satellite GPS Messenger to the
market. The most recent generations of SPOT devices which we currently sell include SPOT Gen4TM and SPOT X®. Compared
to earlier generations of our SPOT Satellite GPS Messenger, SPOT Gen4TM offers enhanced functionality with more tracking
features in a new mapping interface and improved product specifications for water resistance. The product also enables users to
transmit predefined messages to a specific preprogrammed email address, phone or data device, including requests for
assistance and “SOS” messages in the event of an emergency.
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SPOT X®, which was launched in May 2018, is our first two-way SPOT Satellite GPS Messenger with keyboard
functionality allowing subscribers to send and receive SMS messages and improved tracking and SOS functions. An upgraded
version of SPOT X® was launched in September 2019 with enhanced performance and features, including the flexibility to use
the SPOT X® device to connect to a smartphone via Bluetooth® wireless technology through the SPOT X® app to send and
receive satellite messages.
We target our SPOT Satellite GPS Messenger to recreational and commercial markets that require personal tracking,
emergency location and messaging solutions that operate beyond the reach of terrestrial wireless and wireline coverage. Using
our network and web-based mapping software, this device provides consumers with the ability to trace a path geographically or
map the location of individuals or equipment. SPOT Satellite GPS Messenger products and services are available virtually
everywhere through our product distribution channels and our direct e-commerce website.
SPOT Trace®
SPOT Trace® is a cost-effective, anti-theft and asset-tracking device. SPOT Trace® ensures cars, motorcycles, boats,
ATVs, snowmobiles and other valuable assets are where they need to be, notifying owners via email or text anytime movement
is detected, using 100% satellite technology to provide location-based messaging and emergency notification for on or off the
grid communications.
Product Distribution
We distribute and sell our SPOT products through a variety of distribution channels. We have distribution relationships
with a number of "Big Box" retailers and other similar distribution channels, including Amazon, Bass Pro Shops, Cabela's,
Camping World, Gander Outdoors, REI, Sportsman's Warehouse, Academy, and West Marine. We also sell SPOT products and
services directly using our existing sales force and through our direct e-commerce website, www.findmespot.com, as well as
through certain of our IGOs.
Commercial IoT One-Way Transmission Products
Commercial IoT service is currently a one-way data service from an IoT device over the Globalstar System that can be
used to track and monitor assets. Our subscribers use our Commercial IoT devices for a host of applications: to track assets,
such as cargo containers and rail cars; to monitor utility meters; and to monitor oil and gas assets. At the heart of the
Commercial IoT service is a demodulator and RF interface, called an appliqué, which is located at a gateway and an application
server in our facilities. The appliqué-equipped gateways provide coverage over vast areas of the globe. The small size of the
devices makes them attractive for use in tracking asset shipments, monitoring unattended remote assets, trailer tracking and
mobile security. Current users include various governmental agencies, including the Federal Emergency Management Agency
(“FEMA”), the U.S. Army, the U.S. Air Force, the National Oceanic and Atmospheric Administration (“NOAA”), the U.S.
Forest Service and the U.K. Ministry of Defence, as well as other organizations, including BP, Shell and The Salvation Army.
We designed our Commercial IoT service to address demand in the market for a small and cost-effective solution for
sending data, such as geographic coordinates, from assets or individuals in remote locations to a central monitoring
station. Customers realize an efficiency advantage from tracking assets on a single global system as compared to several
regional systems.
Satellite Transmitter Modules and Chips
We offer small satellite transmitter modules, such as the STX-3 and ST100, and chips, such as the ASIC, which enable an
integrator’s products to access our Commercial IoT network. We have sales arrangements with major resellers to market our
IoT services, including some value-added resellers that integrate our modules into their proprietary solutions designed to meet
certain specialized niche market applications. The STX3 provides additional opportunities to integrate satellite connectivity into
products used for vehicle and asset tracking, remote data reporting and data logger reporting that have limited size
requirements. Affordable pricing, low power consumption and its small size make the STX3 a highly efficient device ready for
integration in a wide variety of applications. The ST100, or ST100 Satellite Transmitter, is a small, lightweight and low power
IoT board with embedded antennas. The ST100 offers a customizable approach to new commercial IoT product innovations and
can be used by simply adding power, a mechanical enclosure and configuring the settings within the device firmware. For more
advanced technical requirements, third parties can write their own firmware on the ST100 and utilize Globalstar APIs,
Bluetooth® wireless technology and the serial connector to expand the use of the board and integrate it with other devices or
hardware. The ASIC provides a single chip one-way solution that can be embedded in a customer's owns solution.
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SmartOne Asset Managers
We also offer complete products that utilize the STX-3 and ST100 transmitter modules. Our Commercial IoT units,
including the enterprise-grade SmartOne family of asset-ready tracking units, are used worldwide by industrial, commercial and
government customers. These products provide cost-effective, low-power, ultra-reliable, secure monitoring that help solve a
variety of security applications and asset tracking challenges. Partnering with existing third party technology providers, we are
developing IoT products to connect existing and new users and accelerate deployment of an expanded Globalstar IoT product
suite.
Launched in March 2018, our SmartOne Solar™ device was the first of these products. It is solar-powered and supports
similar functionality to our SmartOne suite of products without the need to recharge batteries or line power the device over an
expected life of up to ten years. These features will result in a longer field life than existing devices. Solar-powered devices also
take advantage of our network's ability to support multiple billions of daily transmissions. The SmartOne Solar™ also has
unparalleled safety and environmental certifications including ATEX, IECEx, North America (NEC & CEC), IP68/69K, and
HERO.
Product Distribution
The reseller channel for Commercial IoT equipment and service is comprised primarily of value-added resellers and
commercial communications equipment companies that retain and bill clients directly, outside of our billing system. Many of
our resellers specialize in niche vertical markets where high-use customers are concentrated. We expect that demand for our
Commercial IoT products and services will increase as more applications are developed and deployed that utilize our
technology.
We are also developing Commercial IoT products that support two-way communications allowing for both tracking and
control of assets.
Engineering and Other
We provide engineering services to assist certain customers in developing new applications to operate on our network and
to enhance our ground network. These services include hardware and software designs to develop specific applications
operating over our network, as well as the installation of gateways and antennas.
In February 2020, we entered into an agreement (i) providing for a potential customer to pay us for non-recurring
engineering (NRE) services in connection with the assessment of a potential service utilizing certain of our assets and capacity,
and (ii) setting forth the primary terms for the potential development and operation of the service (the “Terms Agreement”).
The Terms Agreement does not provide for material payments to us or impose material obligations on us unless, among other
things, we and the potential customer have achieved certain technical milestones. The Terms Agreement includes certain
binding protective provisions, including an exclusivity provision not affecting current services, access rights related to the
affected assets, certain information rights and certain provisions for future financings. The Terms Agreement may be terminated
by the customer at any time in its sole discretion.
Independent Gateway Operators
Our wholesale operations encompass primarily bulk sales of wholesale minutes to IGOs around the globe. IGOs maintain
their own subscriber bases that are mostly exclusive to us and promote their own service plans. The IGO system allows us to
expand in regions that hold significant growth potential but are harder to serve without sufficient operational scale or where
local regulatory requirements do not permit us to operate directly.
As of December 31, 2020, we had four IGOs that own gateways in Australia, South Korea, Russia and Turkey. Except for
Globalstar Asia Pacific, our joint venture in South Korea in which we hold a 49% equity interest, we have no financial interest
in these IGOs and conduct business with them through arms’ length contracts for wholesale minutes of service. During 2020,
we entered into an agreement to acquire the outstanding 51% equity interest in our joint venture in South Korea and expect the
acquisition to close in 2021.
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Spectrum and Regulatory Structure
We benefit from a world-wide 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.
Satellite Network
In the United States, the Federal Communications Commission ("FCC") has authorized us to operate between
1610-1618.725 MHz for “Uplink” communications from mobile earth terminals to our satellites and between 2483.5-2500 MHz
for “Downlink” communications from our satellites to our mobile earth terminals. The FCC has also authorized us to operate
our domestic gateways with our first-generation satellites in the 5091-5250 and 6875-7055 MHz bands.
Three of our subsidiaries hold our FCC licenses. Globalstar Licensee LLC holds our MSS license. GUSA Licensee LLC
(“GUSA”) is authorized by the FCC to distribute mobile and fixed subscriber terminals and to operate gateways in the United
States. GUSA holds the licenses for our gateways in Texas, Florida and Alaska. Another subsidiary, GCL Licensee LLC
(“GCL”), holds an FCC license to operate a gateway in Puerto Rico. GCL is also subject to regulation by the Puerto Rican
Telecommunications Regulatory Board.
Our prior Non-Geostationary Satellite Orbit (“NGSO”) satellite constellation license issued by the FCC is valid until
October 2024. This license applies only to our continued use of our first-generation satellites.
We licensed and registered our second-generation satellites in France. We also obtained all authorizations necessary from
the FCC to operate our domestic gateways with our second-generation satellites. In accordance with our authorization to
operate the second-generation satellites, we completed the enhancements to the existing gateway operations in Aussaguel,
France to include satellite operations and control functions. We have redundant satellite operation control facilities in
Covington, Louisiana, Milpitas, California and Aussaguel, France.
The frequency assignments filed on the behalf of Globalstar by the French National Frequencies Agency (“ANFR”), with
the ITU in 2009, have been recorded in the Master international Frequency Register ("MIFR"). This recording of the Globalstar
frequency assignments in the MIFR provides international recognition of these assignments and facilitates the use of these
assignments while the frequency coordination process with the two remaining systems is completed.
During 2020, our French authorizations to provide MSS and operate the gateway in Aussaguel, France were renewed for an
additional 10-year term.
Terrestrial Authority for Globalstar's Licensed 2.4 GHz Spectrum
In December 2016, the FCC unanimously adopted a Report and Order permitting us to seek modification of our existing
MSS licenses to provide terrestrial broadband services over 11.5 MHz of our licensed Mobile Satellite Services spectrum at
2483.5 to 2495 MHz throughout the United States of America and its Territories. In August 2017, the FCC modified
Globalstar's MSS licenses, granting us authority to provide terrestrial broadband services over that 11.5 MHz portion of our
satellite 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. We will need to comply with
certain conditions in order to provide terrestrial broadband service over this spectrum.
In December 2018, we successfully completed the Third Generation Partnership Project (“3GPP”) standardization process
for the 11.5 MHz of 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. 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.
During 2019, we executed a spectrum managers lease 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.
We believe our MSS spectrum position provides potential for harmonized terrestrial authority across many international
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regulatory domains and have been seeking approvals in various international jurisdictions. To date, we have received 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
protocol for private LTE 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.
National Regulation of Service Providers
In order to operate gateways, applicable laws and regulations require the IGOs and our affiliates in each country to obtain a
license or licenses from that country's telecommunications regulatory authority. In addition, the gateway operator must enter
into appropriate interconnection and financial settlement agreements with local and interexchange telecommunications
providers. All gateways operated by us or the IGOs are licensed by the appropriate regulatory authority.
Our subscriber equipment generally must be type certified in countries in which it is sold or leased. The manufacturers of
the equipment and our affiliates or IGOs are jointly responsible for securing type certification. We have received type
certification in multiple countries for each of our products.
Industry
We compete in the MSS sector of the global communications industry. MSS operators provide voice and data services
using a network of one or more satellites and associated ground facilities. Mobile satellite services are usually complementary
to, and interconnected with, other forms of terrestrial communications services and infrastructure and are intended to respond to
users' desires for connectivity at all times and locations. Customers typically use satellite voice and data communications in
situations where existing terrestrial wireline and wireless communications networks are impaired or do not exist.
Worldwide, government organizations, military, natural disaster aid associations, event-driven response agencies and
corporate security teams depend on mobile and fixed voice and data communications services on a regular basis. Businesses
with global operations require communications services when operating in remote locations around the world. MSS users span
the forestry, maritime, government, oil and gas, mining, leisure, emergency services, construction and transportation sectors,
among others.
Over the past two decades, the global MSS market has experienced significant growth. Increasingly, better-tailored,
improved technology products and services are creating new channels of demand for mobile satellite services. Growth in
demand for mobile satellite services is driven by the declining cost of these services, the diminishing size and lower cost of the
devices, as well as heightened demand by governments, businesses and individuals for ubiquitous global voice and data
coverage. Growth in mobile satellite data services is driven by the rollout of new applications requiring higher bandwidth, as
well as low-cost data collection and asset-tracking devices and technological improvements permitting integration of mobile
satellite services over smartphones and other Wi-Fi enabled devices.
Communications industry sectors that are relevant to our business include:
• MSS, which provide customers with connectivity to mobile and fixed devices using a network of satellites and ground
•
•
facilities;
fixed satellite services, which use geostationary satellites to provide customers with voice and broadband
communications links between fixed points on the earth's surface; and
terrestrial services, which use a terrestrial network to provide wireless or wireline connectivity and are complementary
to satellite services.
Within the major satellite sectors, fixed and MSS operators differ significantly from each other. Fixed satellite services
providers, such as Intelsat Ltd., Eutelsat Communications and SES S.A., and aperture terminal companies, such as Hughes and
Gilat Satellite Networks, are characterized by large, often stationary or "fixed," ground terminals that send and receive high-
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bandwidth signals to and from the satellite network for video and high speed data customers and international telephone
markets. On the other hand, MSS providers, such as Globalstar, ORBCOMM, Inmarsat PLC (“Inmarsat”) and Iridium
Communications Inc. (“Iridium”), focus more on voice and/or data services (including data services which track the location of
remote assets such as shipping containers), where mobility or small-sized terminals are essential. As mobile satellite terminals
begin to offer higher bandwidth to support a wider range of applications, we expect MSS operators will increasingly compete
with fixed satellite services operators.
LEO systems reduce transmission delay compared to a geosynchronous system due to the shorter distance signals have to
travel. In addition, LEO systems are less prone to signal blockage and, consequently, we believe provide a better overall quality
of service.
Competition
The global communications industry is highly competitive. We currently face substantial competition from other service
providers that offer a range of mobile and fixed communications options. Our most direct competition comes from other global
MSS providers. Our largest global competitors are ORBCOMM, Inmarsat and Iridium. We compete primarily on the basis of
coverage, quality, portability and pricing of services and products. In recent years, advancements in technology have also
encouraged non-traditional companies to enter the market.
Inmarsat owns and operates a fleet of geostationary satellites. Due to its multiple-satellite geostationary system, Inmarsat's
coverage area extends to and covers most bodies of water more completely than our system. Accordingly, Inmarsat is the
leading provider of satellite communications services to the maritime sector. Inmarsat also offers global land-based and
aeronautical communications services. We compete with Inmarsat in several key areas, particularly in our maritime
markets. Inmarsat markets mobile handsets designed to compete with both Iridium’s mobile handset service and our GSP-1700
handset service.
Iridium owns and operates a fleet of low earth orbit satellites. Iridium provides voice and data communications to
businesses, United States and foreign governments, non-governmental organizations and consumers. Iridium markets products
and services that are similar to those marketed by us. Additionally, Garmin's inReach devices provide two-way tracking with
SOS capabilities, Honeywell Global Tracking has a personal tracking unit that enables a smartphone with satellite tracking and
messaging capabilities and Somewear has a satellite hotspot; these products work on Iridium's satellite network.
ORBCOMM owns and operates a fleet of low earth orbit satellites. ORBCOMM primarily provides asset tracking,
monitoring and control solutions for its customers in the IoT market, which directly compete with our IoT products and
services.
We compete with regional mobile satellite communications services in several markets. In these cases, our competitors
serve customers who require regional, not global, mobile voice and data services, so our competitors present a viable alternative
to our services. All of these competitors operate geostationary satellites. Our principal regional MSS competitor in the Middle
East and Africa is Thuraya.
In some of our markets, such as rural telephony, we compete directly or indirectly with very small aperture terminal
(“VSAT”) operators that offer communications services through private networks using very small aperture terminals or hybrid
systems to target business users. VSAT operators have become increasingly competitive due to technological advances that
have resulted in smaller, more flexible and cheaper terminals.
We compete indirectly with terrestrial wireline (“landline”) and wireless communications networks. We provide service in
areas that are inadequately covered by these ground systems. To the extent that terrestrial communications companies invest in
underdeveloped areas, we will face increased competition in those areas.
Our SPOT products compete indirectly with Personal Locator Beacons (“PLB”s). A variety of manufacturers offer PLBs to
industry specifications.
Our industry has significant barriers to entry, including the cost and difficulty associated with obtaining spectrum licenses
and successfully building and launching a satellite network. In addition to cost, there is a significant amount of lead-time
associated with obtaining the required licenses, designing and building the satellite constellation and synchronizing the network
technology.
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Governmental Regulations
Please refer to Item 1A: Risk Factors - "Risks Related to Government Regulations" for further discussion of the impact of
governmental regulations on our business.
United States International Traffic in Arms Regulations and United States Export Administration Regulations
The United States International Traffic in Arms regulations under the United States Arms Export Control Act authorize the
President of the United States to control the export and import of articles and services that can be used in the production of
arms. The President has delegated this authority to the U.S. Department of State, Directorate of Defense Trade Controls. United
States Export Administration Regulations enforced by the United States Bureau of Industry and Security, as well as regulations
enforced by the United States Office of Foreign Assets Control regulate the export of certain products, services, and associated
technical data. Among other things, these regulations limit the ability to export certain articles and related technical data to
certain nations. Some information involved in the performance of our operations falls within the scope of these regulations. As
a result, we may have to obtain an export authorization or restrict access to that information by international companies that are
our vendors or service providers. We have received and expect to continue to receive export licenses for covered articles and
technical data shared with approved parties outside the United States. We also are subject to restrictions related to transactions
with persons subject to United States or foreign sanctions. These regulations, enforced by the United States Office of Foreign
Assets Control, limit our ability to offer services and equipment to certain parties or in certain areas.
Environmental Matters
We are subject to various laws and regulations relating to the protection of the environment and human health and safety
(including those governing the management, storage and disposal of hazardous materials). Some of our operations require
continuous power supply. As a result, current and historical operations at our ground facilities, including our gateways, include
storing fuels and batteries, which may contain hazardous materials, to power back-up generators. As an owner or operator of
property and in connection with our current and historical operations, we could incur significant costs, including cleanup costs,
fines, sanctions and third-party claims, as a result of violations of or in connection with liabilities under environmental laws and
regulations.
Foreign Operations
We supply services and products to a number of foreign customers. Although most of our sales are denominated in U.S.
dollars, we are exposed to currency risk for sales in Canada, Europe, Brazil and various other countries. In 2020, approximately
28% of our sales were generated in foreign countries, which generally are denominated in local currencies. See Note 2:
Revenue in the Consolidated Financial Statements for additional information regarding revenue by country. For more
information about our exposure to risks related to foreign locations, see Item 1A: Risk Factors - "We face special risks by doing
business in international markets and developing markets, including currency and expropriation risks, which could increase
our costs or reduce our revenues in these areas."
Intellectual Property
We hold various U.S. and foreign patents and patents pending that expire between 2021 and 2035. These patents cover
many aspects of our satellite system, our global network and our user terminals. In recent years, we have reduced our foreign
filings and decided to allow some previously granted foreign patents to lapse based on (a) the relative significance of the patent,
(b) our assessment of the likelihood that someone would infringe in the foreign country, and (c) the probability that we could or
would enforce the patent in light of the expense of filing and maintaining the foreign patent which, in some countries, is quite
substantial. We continue to maintain all of the patents in the United States, Canada and Europe that we believe are important to
our business. Our intellectual property is pledged as security for our obligations under our senior secured credit facility
agreement (the “First Lien Facility Agreement”) and second lien credit facility agreement (the "Second Lien Facility
Agreement").
Human Capital
As of December 31, 2020, we had 346 employees in twelve countries around the world; 23 of our employees were located
in Brazil and subject to collective bargaining agreements. We consider our relationship with our employees to be good.
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Our compensation and benefit packages are designed to attract and retain employees and were developed using market
research. We attract employees through various platforms, such as online job portals, in-person job fairs, local universities and
employee referrals. Salaries are competitive and based on job position, physical location, experience and skills. In addition to
base salary, certain employees participate in longer-term incentive programs, which includes awards of stock-based
compensation. Our benefits packages include, but are not limited to, health insurance, a retirement plan, an employee stock
purchase plan, flexible spending accounts, life and accidental injury insurance, long- and short-term disability, and paid time off
for holidays, vacation, sick time and parental leave.
We also encourage training and development through Globalstar University, which is an online platform that hosts a
variety of training programs ranging from leadership and management programs to technical, on the job training. Employee
engagement is also important for us, and includes an interactive wellness program, corporate communications and employee
surveys. Our commitment to diversity and inclusion is part of our worldwide culture, which our employees confirmed in our
most recent employee survey with "Diversity and Inclusion" being one of the highest rated culture categories.
Seasonality
Usage on the network and, to some extent, sales are subject to seasonal and situational changes. April through October are
typically our peak months for usage-based service revenues and equipment sales. We also experience event-driven revenue
fluctuations in our business. Most notably, emergencies, natural disasters and other sizable projects where satellite-based
communications devices are the only solution may generate an increase in revenue. In the consumer area, SPOT devices sales
are influenced by outdoor and leisure activity opportunities, as well as our promotional efforts.
Services and Equipment
Sales of services accounted for approximately 88%, 86% and 85% of our total revenues for 2020, 2019, and 2018,
respectively. We also sell the related voice and data equipment to our customers, which accounted for approximately 12%, 14%
and 15% of our total revenues for 2020, 2019, and 2018, respectively.
Additional Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange
Commission (the “SEC”). The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and
information statements and other information that issuers (including Globalstar) file electronically with the SEC. Our electronic
SEC filings are available to the public at the SEC's internet site, www.sec.gov.
We make available free of charge financial information, news releases, SEC filings, including our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports on our website at
www.globalstar.com as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.
The documents available on, and the contents of, our website are not incorporated by reference into this Report.
Item 1A. Risk Factors
You should carefully consider the risks described below, as well as all of the information in this Report and all of the other
reports we file from time to time with the SEC, in evaluating and understanding us and our business. Additional risks not
presently known or that we currently deem immaterial may also impact our business operations and the risks identified in this
Report may adversely affect our business in ways we do not currently anticipate. Our business, financial condition or results of
operations could be materially adversely affected by any of these risks.
Risks Related to Our Business
The effect of an epidemic or pandemic, including the current COVID-19 pandemic, could have an adverse impact on
our operations and the operations of our customers and may have a material adverse impact on our financial condition
and results of operations.
An epidemic or pandemic could significantly disrupt our operations, including, but not limited to, our workforce, supply
chain, regulatory processes and market demand of our products. An epidemic or pandemic could also significantly impact our
customers, including their demand for and ability to pay for our services and equipment.
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In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. International,
federal, state and local governments have taken measures to combat this pandemic, including “stay at home” orders, social
distancing and closures of non-essential businesses.
We are currently experiencing a reduction in sales of our subscriber equipment, which could result in fewer subscriber
activations in future periods, and challenges in the collection of outstanding receivables from certain our customers, specifically
those concentrated in the oil and gas and retail industries. These factors may negatively impact our results of operations and our
ability to maintain compliance with our debt covenants.
We source our products from both domestic and foreign contract manufacturers, with the largest concentration in China.
Policies were put in place in China to reduce the transmission of COVID-19, which may impact the availability of labor at our
manufacturing facility as well as the interruption of components and products moving through our supply chain. If facilities
close or produce low volume due to COVID-19, we may have difficulty sourcing products to sell in the future and may incur
additional costs and lost revenue.
The extent to which COVID-19 could continue to impact our operations and financial condition will depend on future
developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the
severity of the virus and the actions to contain its impact. We are not able at this time to estimate the full impact of COVID-19
on our financial or operational results, but the impact could be material. We continue to monitor our ability to remain in
compliance with financial covenants over the next twelve months. If we are not able to maintain compliance, we may need to
cure the noncompliance with one or more Equity Cure Contributions or seek a waiver of the affected covenants. There is no
assurance that we will be able to do this successfully, and if we do not, our lenders would be able to exercise their remedies
under the First Lien Facility Agreement, including accelerating maturity of all our obligations under the First Lien Facility
Agreement.
Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently
known to us or that we currently do not expect to present significant risks to our operations or financial results.
The implementation of our business plan and our ability to generate income from operations assume we are able to
maintain a healthy constellation and ground network capable of providing commercially acceptable levels of coverage
and service quality, which are contingent on a number of factors.
Our products and services are subject to the risks inherent in relying on a large-scale, complex telecommunications system
employing advanced technology. Any disruption to our satellites, services, information systems or telecommunications
infrastructure could result in degrading or disrupting services to our customers for an indeterminate period of time.
Although we designed our second-generation satellites to provide commercial service over a 15-year life, we can provide
no assurance as to whether any or all of them will continue in operation for their full 15-year design life. Satellites utilize highly
complex technology and operate in the harsh environment of space and therefore are subject to significant operational risks
while in orbit.
Our satellites may experience temporary outages or otherwise may not be fully functioning at any given time. There are
some remote tools we use to remedy certain types of problems affecting the performance of our satellites, but the physical
repair of satellites in space is not feasible. We do not insure our satellites against in-orbit failures after an initial period of six
months, whether the failures are caused by internal or external factors. In-orbit failure may result from various causes, including
component failure, solar array failures, telemetry transmitter failures, loss of power or fuel, inability to control positioning of
the satellite, solar or other astronomical events, including solar radiation and flares, and collision with space debris or other
satellites. These failures are commonly referred to as anomalies. Some of our satellites have had malfunctions and other
anomalies in the past and may have anomalies in the future. Anomalies may occur, for reasons described above or arising from
the failure of other systems or components, and intrasatellite redundancy may not be available upon the occurrence of such
anomalies. There can be no assurance that, in these cases, it will be possible to restore normal operations. Where service cannot
be restored, the failure could cause the satellite to have less capacity available for service, to suffer performance degradation or
to cease operating prematurely, either in whole or in part. We cannot guarantee that we could successfully develop and
implement a solution if one of these anomalies occurs.
Further, from time to time we move and relocate satellites within our constellation to improve coverage and service quality.
Satellite repositioning may increase the risk of collision or damage to our satellites and may result in degraded service during
the repositioning. Although we do not incur any direct cash costs related to the failure of a satellite, if a satellite fails, we record
an impairment charge in our statement of operations to reduce the remaining net book value of that satellite, if any, to zero, and
any such impairment charges could depress our net income (or increase our net loss) for the period in which the failure occurs.
Additionally, human operators may execute improper implementation commands that may negatively impact a satellite's
performance.
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In order to maintain commercially acceptable service long-term, we must obtain and launch additional satellites from time
to time. We cannot provide any assurance that negotiations with satellite manufacturers will be successful or at commercially
reasonable prices.
If we experience operational disruptions with respect to our gateways or operations center, we may not be able to
provide service to our customers.
Our satellite network traffic is supported by our gateways distributed around the globe. We operate our satellite
constellation from our Network Operations Control Centers at three locations (France, California and Louisiana) to provide
geo-redundancy and ongoing coverage. Our gateway facilities are subject to the risk of significant malfunctions or catastrophic
loss due to unanticipated events and would be difficult to replace or repair and could require substantial lead-time to do so. In
North America, we have implemented contingency coverage which allows neighboring gateways to provide services in the
event of a gateway failure. Material changes in the operation of these facilities may be subject to prior FCC approval, and the
FCC might not give such approval or may subject the approval to other conditions that could be unfavorable to our business.
Our gateways and operations centers may also experience service shutdowns or periods of reduced service in the future as a
result of equipment failure, delays in deliveries or regulatory issues. Any such failure would impede our ability to provide
service to our customers, which could have a material impact on our business.
The actual orbital lives of our satellites may be shorter than we anticipate, and we may be required to reduce available
capacity on our satellite network prior to the end of their orbital lives.
We anticipate that our second-generation satellites will have 15 year orbital lives. A number of factors will affect the actual
commercial service lives of each satellite, including:
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the amount of propellant used in maintaining the satellite's orbital location or relocating the satellite to a new orbital
location (and, for a newly-launched satellite, the amount of propellant used during orbit raising following launch);
the durability and quality of its construction;
the performance of its components;
hazards and conditions in space such as solar flares and space debris;
operational considerations, including operational failures and other anomalies; and
changes in technology which may make all or a portion of our satellite fleet obsolete.
It is possible that the actual orbital lives of one or more of our existing satellites may be shorter than originally anticipated.
Further, it is possible that the total available payload capacity of a satellite may need to be reduced prior to the satellite reaching
its end-of-orbital life. We periodically review the expected orbital life of each of our satellites using current engineering data. A
reduction in the orbital life of any of our satellites could result in a reduction of revenue, the recognition of an impairment loss
and an acceleration of capital expenditures. The potential impact on our revenue from a reduction in the orbital life of one or
more satellites may vary depending on the satellite's orbital location as well as the type of device and service a customer is
using.
The implementation of our business plan depends on increased demand for wireless communications services via
satellite (including IoT applications) and via terrestrial mobile broadband networks, both for our existing services and
products and for new services and products. If demand does not increase, our revenues and profitability may not
increase as we expect.
Demand for wireless communication services may not grow, or may decrease, either generally or in particular geographic
markets, for particular types of services or during particular time periods. A lack of demand could impair our ability to sell our
services and develop and successfully market new services, could exert downward pressure on prices, or both. This, in turn,
could decrease our revenue and profitability and adversely affect our ability to increase our revenue and profitability over time.
We plan to introduce new products and services that work over our network as well as terrestrial mobile broadband
services. However, we cannot predict with certainty the potential longer-term demand for these products and services or the
extent to which we will be able to meet demand. Our business plan assumes we will grow our subscriber base. If we are not
able to do so, it may adversely impact our business prospects.
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The success of our business plan will depend on a number of factors, including but not limited to:
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our ability to maintain the health, capacity and control of our satellites;
our ability to maintain the health of our ground network;
our ability to influence the level of market acceptance and demand for our products and services;
our ability to introduce new products and services that meet this market demand;
our ability to retain current customers and obtain new customers;
our ability to obtain additional business using our existing and future spectrum authority both in the United States and
internationally;
our ability to control the costs of developing an integrated network providing related products and services, as well as
our future terrestrial mobile broadband services;
our ability to market successfully our products and services;
our ability to develop and deploy innovative network management techniques to permit mobile devices to transition
between satellite and terrestrial modes;
the cost and availability of user equipment that operates on our network;
the effectiveness of our competitors in developing and offering similar products and services;
our ability to successfully predict market trends;
our ability to hire and retain qualified executives, managers and employees;
our ability to provide attractive service offerings at competitive prices to our target markets; and
our ability to raise additional capital on acceptable terms when required.
Rapid and significant technological changes in the satellite communications industry may impair our competitive
position and require us to make significant capital expenditures, which may require additional capital that has not been
arranged.
The space and communications industries are subject to rapid advances and innovations in technology. New technology
could render our system obsolete or less competitive by satisfying consumer demand in more attractive ways or through the
introduction of incompatible standards. Particular technological developments that could adversely affect us include the
deployment by our competitors of new satellites with greater power, flexibility, efficiency or capabilities, as well as continuing
improvements in terrestrial wireless technologies. We must continue to keep up with technological changes and remain
competitive. Customer acceptance of the services and products that we offer will continually be affected by the technology in
our product and service offerings relative to competitive offerings. New technologies may be protected by patents and therefore
may not be available to us. We expect to face competition from companies using new technologies and new satellite systems.
The hardware and software we utilize in operating our first-generation gateways were designed and manufactured over 20
years ago and portions have deteriorated. This original equipment may become less reliable as it ages and will be more difficult
and expensive to service. It may be difficult or impossible to obtain all necessary replacement parts for the hardware before the
new equipment and software is fully deployed. Some of the hardware and software we use in operating our gateways are
significantly customized and tailored to meet our requirements and specifications and could be difficult and expensive to
service, upgrade or replace. Although we maintain inventories of some spare parts, it nonetheless may be difficult, expensive or
impossible to obtain replacement parts for our hardware due to a limited number of parts being manufactured to our
requirements and specifications. In addition, our business plan contemplates updating or replacing some of the hardware and
software in our network as technology advances, but the complexity of our requirements and specifications may present us with
technical and operational challenges that complicate or otherwise make it expensive or infeasible to carry out such upgrades and
replacements. If we are not able to suitably service, upgrade or replace our equipment, it could harm our ability to provide our
services and generate revenue.
Our business is capital intensive. We may not be able to raise adequate capital to finance our business strategies, or we
may be able to do so only on terms that significantly restrict our ability to operate our business.
Implementation of our longer-term business strategy requires a substantial outlay of capital. As we pursue business
strategies and seek to respond to developments in our business and opportunities and trends in our industry, our actual capital
expenditures may differ from our expected capital expenditures. There can be no assurance that we will be able to satisfy our
capital requirements in the future. In addition, if one of our satellites failed unexpectedly, there can be no assurance of insurance
recovery for our losses or the timing thereof, and we may need to obtain additional financing to replace the satellite. If we
determine that we need to obtain additional funds through external financing and are unable to do so, we may be prevented
from fully implementing our business strategy.
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If we do not develop, acquire and maintain proprietary information and intellectual property rights, it could limit the
growth of our business and reduce our market share.
Our business depends on technical knowledge, and we base our business plan in part on our ability to keep up with new
technological developments and incorporate them in our products and services. We own or have the right to use our patents,
work products, inventions, designs, software, systems and similar know-how. Our proprietary information may be disclosed to
others, or others may independently develop similar information, systems and know-how. Protection of our information,
systems and know-how may result in litigation, the cost of which could be substantial. Third parties may assert claims that our
products or services infringe on their proprietary rights. Any such claims, if made, may prevent or limit our sales of products or
services or increase our costs.
We license much of the software we require to support critical gateway operations from third parties. This software was
developed or customized specifically for our use. We license technical information for the design, manufacture and sale of our
products. This intellectual property is essential to our ability to continue to operate our constellation and sell our products and
services. We license software to support customer service functions, such as billing, from third parties that developed or
customized it specifically for our use. If the third-party licensors cease to support and service our software, or our licenses are
no longer available on commercially reasonable terms, it might be difficult, expensive or impossible for us to obtain such
services from alternative vendors. Replacing such software could be difficult, time consuming and expensive. This might
require us to obtain substitute technology with lower quality or performance standards or at a greater cost.
Others may claim that our products violate their patent or intellectual property rights, which could be costly and
disruptive to us.
We operate in an industry fraught with significant intellectual property litigation. Intellectual property infringement claims
or litigation may be brought against us. Defending intellectual property suits is both costly and time-consuming and, even if
ultimately successful, may divert management's attention from other business concerns. An adverse determination in litigation
to which we may become a party could, among other things:
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subject us to significant liabilities to third parties, including treble damages;
require disputed rights to be licensed from a third party for royalties that may be substantial;
require us to cease using technology that is important to our business; or
prohibit us from selling some or all of our products or offering some or all of our services.
Lack of availability of components from the electronics industry, required in our retail products, gateways and satellites
could delay or adversely impact our operations.
We rely upon the availability of components, materials and component parts from the electronics industry. The electronics
industry is subject to occasional shortages in parts availability depending on fluctuations in supply and demand. Industry
shortages may result in delayed shipments of materials or increased prices, or both. As a consequence, elements of our
operation which use electronic parts, such as our retail products, gateways and satellites, could be subject to disruptions, cost
increases or both.
We face special risks by doing business in international markets and developing markets, including currency and
expropriation risks, which could increase our costs or reduce our revenues in these areas.
Although our most economically important geographic markets currently are the United States and Canada, we have
substantial markets for our mobile satellite services in, and our business plan includes, developing countries or regions that are
underserved by existing telecommunications systems, such as rural Brazil, Central America, Argentina and Africa. Developing
countries are more likely than industrialized countries to experience market, currency and interest rate fluctuations and high
inflation. In addition, these countries present risks relating to government policy, price, wage and exchange controls, social
instability, expropriation and other adverse economic, political and diplomatic conditions.
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Conducting operations outside the United States involves numerous special risks and expanding our international
operations would increase these risks. These risks include, but are not limited to:
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difficulties in penetrating new markets due to established and entrenched competitors;
difficulties in developing products and services that are tailored to the needs of local customers;
lack of local acceptance or knowledge of our products and services;
unavailability of or difficulties in establishing relationships with distributors;
significant investments, including the development and deployment of gateways in countries that require them to
connect the traffic coming to and from their territory;
instability of international economies and governments;
changes in laws and policies affecting trade and investment in other jurisdictions;
noncompliance with the Foreign Corrupt Practices Act ("FCPA"), UK Bribery Act, sanctions laws and export controls;
exposure to varying legal standards in other jurisdictions, including intellectual property protection and other similar
laws and regulations;
difficulties in obtaining required regulatory authorizations;
difficulties in enforcing legal rights in other jurisdictions;
variations in local domestic ownership requirements;
requirements that operational activities be performed in-country;
changing and conflicting national and local regulatory requirements; and
uncertainty in foreign currency exchange rates and exchange controls.
These risks could affect our ability to compete successfully and expand internationally. To the extent that the prices for our
products and services are denominated in U.S. dollars, any appreciation of the U.S. dollar against other currencies will increase
the cost of our products and services to our international customers and, as a result, may reduce the competitiveness of our
international offerings and make it more difficult for us to grow internationally. Limited availability of U.S. currency in some
local markets or governmental controls on the export of currency may prevent our customers from making payments in U.S.
dollars or delay the availability of payment due to foreign bank currency processing and controls.
Our operations involve transactions in a variety of currencies. Sales denominated in foreign currencies involve primarily
the Canadian dollar, the euro and the Brazilian real. Accordingly, our operating results may be significantly affected by
fluctuations in the exchange rates for these currencies. Approximately 28% and 31% of our total revenue was to customers
primarily located in Canada, Europe, Central America, and South America during 2020 and 2019, respectively. Our results of
operations for 2020 and 2019 included net losses of approximately $0.7 million and net gains of $0.1 million, respectively, on
foreign currency transactions. We may be unable to offset unfavorable currency movements as they adversely affect our
revenue and expenses. Our inability to do so could have a substantial negative impact on our operating results and cash flows.
Our global operations expose us to trade and economic sanctions, other restrictions, liabilities and exposure to penalties
imposed by the United States, the European Union and other governments and organizations.
The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad
range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic
sanctions laws, export control laws, FCPA and other federal statutes and regulations, including those established by the Office
of Foreign Assets Control ("OFAC"). Under these laws and regulations, as well as other anti-corruption laws, anti-money-
laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various
government agencies require export licenses. They may seek to impose modifications to business practices, including cessation
of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs,
which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or
regulations could adversely impact our business, results of operations and financial condition.
Although we have implemented policies and procedures in these areas, we cannot assure you that our policies and
procedures are sufficient or that directors, officers, employees, representatives, distributors, consultants, IGOs, dealers and
resellers, joint venture partners, independent agents, vendors, customers or subscribers have not engaged and will not engage in
conduct for which we may be held responsible. We cannot assure you that our business partners have not engaged and will not
engage in conduct that could materially affect their ability to perform their contractual obligations to us or result in us being
held liable for such conduct. Violations of the FCPA, OFAC restrictions or other export control, anti-corruption, anti-money-
laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to
other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of
operations.
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The United Kingdom and European Union are important markets to our business. The uncertainty surrounding the
United Kingdom's decision to leave the European Union could adversely impact our business, results of operations and
financial condition.
We sell our products and services in the United Kingdom (the “UK”) and throughout Europe. In particular, the UK is the
largest market in Europe for our SPOT product family. On June 23, 2016, the UK voted in an advisory referendum for the UK
to leave the European Union (the “EU”) and, subsequently, on March 29, 2017, the UK government began the formal process
of leaving the EU ("Brexit"). The UK withdrew from the EU on January 31, 2020. Effective January 1, 2021, the EU and UK
entered into the Trade and Cooperation Agreement regarding trade policies and other political and strategic issues.
The future consequences of Brexit are unknown at this time, but Brexit has created legal, regulatory, and currency risk that
may have a materially adverse impact on our business. Furthermore, this uncertainty could negatively impact the economies of
other countries in which we operate.
We face intense competition in all of our markets, which could result in a loss of customers, lower revenues and
difficulty entering new markets.
Satellite-based Competitors
There are currently at least four other MSS operators providing services similar to ours on a global or regional basis:
Iridium, Thuraya, Inmarsat and ORBCOMM Inc. The provision of satellite-based products and services is subject to downward
price pressure when the capacity exceeds demand or as new competitors enter the marketplace with competitive pricing
strategies. We also face competition with respect to network coverage and market share in specialized industries, such as
maritime and governmental.
Other providers of satellite-based products could introduce their own products similar to our SPOT, Commercial IoT or
Duplex products, which may materially adversely affect our business plan and sales volume. In addition, we may face
competition from new competitors or new technologies. Many companies target the same customers, and we may not be able to
successfully retain our existing customers or attract new customers. As a result, we may not grow our customer base and
revenue.
Terrestrial Competitors
In addition to our satellite-based competitors, terrestrial wireless voice and data service providers are continuing to expand
into rural and remote areas, particularly in less developed countries. They provide the same general types of services and
products that we provide through our satellite-based system. Many of these companies have greater resources, more name
recognition and newer technologies than we do. Industry consolidation could adversely affect us by increasing the scale or
scope of our competitors and thereby making it more difficult for us to compete. We could lose market share and revenue as a
result of increasing competition from land-based communication service providers.
Although satellite communications services and ground-based communications services are not identical, the two compete
in similar markets with similar services. Consumers may perceive cellular voice communication products and services as
cheaper and more convenient than satellite-based products and services.
Terrestrial Broadband Network Competitors
We also expect to compete with a number of other satellite companies that plan to develop terrestrial networks that utilize
their MSS spectrum. DISH Network received FCC approval to offer terrestrial wireless services over the MSS spectrum that
previously belonged to TerreStar and ICO Global. Further, Ligado Networks (formerly LightSquared) also received FCC
approval to build out a wireless network utilizing its MSS spectrum. Any of these competitors could deploy terrestrial mobile
broadband networks before we do, could combine with existing terrestrial networks that provide them with greater financial or
operational flexibility than we have or could offer wireless services, including mobile broadband services, that customers prefer
over ours.
We have a significant amount of indebtedness, which may adversely affect our cash flow and our ability to operate our
business, including our ability to incur additional indebtedness.
As of December 31, 2020, our current sources of liquidity include cash on hand ($13.3 million), restricted cash ($3.6
million) and future cash flows from operations. We also have non-current restricted cash ($51.1 million), which consists
primarily of a debt service reserve account, which is pledged to secure all of our obligations under the First Lien Facility
Agreement. This account will be used towards the final scheduled principal payment due upon maturity. Our operating
expenses for the twelve-month period ended December 31, 2020 were $187.7 million. Our short-term and long-term liquidity
requirements include primarily paying our debt service obligations and funding our operating costs. We cannot provide
assurance that we will not experience a liquidity shortfall in the short or long-term.
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As of December 31, 2020, the principal balance of our debt obligations was $423.9 million, consisting of $187.0 million
under the First Lien Facility Agreement, $230.6 million under the Second Lien Facility Agreement, $1.4 million under the
8.00% Convertible Senior Notes Issued in 2013 (the "2013 8.00% Notes") and $5.0 million under the PPP Loan. Our significant
indebtedness could have several consequences. It could increase our vulnerability to adverse economic, industry or competitive
developments by dictating that a substantial portion of cash flow from operations be dedicated to the payment of principal and
interest on our indebtedness and therefore reducing our ability to use our cash flow to fund our operations, capital expenditures,
return of capital to shareholders, and future business opportunities. Our indebtedness could restrict us from making strategic
acquisitions by limiting our ability to obtain additional financing for working capital, capital expenditures, product
development, debt service requirements, acquisitions and general corporate purposes. Our indebtedness could restrict us from
paying dividends to our shareholders. It could limit our flexibility in planning for, or reacting to, changes in our business or
industry, placing us at a competitive disadvantage compared to competitors who are not as highly leveraged as us and who,
therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting. Additionally, even
though our current debt agreements place limits on our ability to incur additional debt, in the future we may incur additional
debt which could further exacerbate these risks.
Restrictive covenants in our debt agreements may limit our operating and financial flexibility and our inability to
comply with these covenants could have significant implications.
Our First Lien Facility Agreement and Second Lien Facility Agreement contain a number of significant restrictions and
covenants. See Note 6: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements in Part
II, Item 8 of this Report for further discussion of our debt covenants. Complying with these restrictive covenants, including
financial and non-financial covenants in our First Lien Facility Agreement and Second Lien Facility Agreement, as well as
those that may be contained in any agreements governing future indebtedness, may impair our ability to finance our operations
or capital needs or to take advantage of favorable business opportunities. Our facility agreements include a limitation on
expenditures in connection with spectrum rights, which may prohibit us from making certain expenditures that we consider
accretive to our business and would otherwise make. Our ability to comply with these covenants will depend on our future
performance, which may be affected by events beyond our control. Our failure to comply with these covenants would be an
event of default. An event of default under the First Lien Facility Agreement or Second Lien Facility Agreement would permit
the lenders to accelerate the indebtedness under these agreements. That acceleration would permit holders of our obligations
under other agreements that contain cross-acceleration provisions to accelerate our obligations to them. See Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources of
this Report for further discussion.
Our networks and those of our third-party service providers and customers may be vulnerable to unauthorized or
unlawful access. Our use of personal information could give rise to costs and liabilities arising from developing data
privacy laws.
Our network and those of our third-party service providers and our customers may be vulnerable to unauthorized access,
attacks, malware, data breaches and other security problems. Persons who circumvent security measures could wrongfully
obtain or use information from such networks or cause interruptions, delays or malfunctions in our operations. A data breach or
network disruption could harm our reputation, cause demand for our products and services to fall or compromise our ability to
pursue our business plans. A number of significant, widespread security breaches compromised companies and governmental
agencies. In some cases, these breaches originated from outside the United States. We may be required to expend significant
resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation,
caused by any breaches. In addition, our customer contracts may not adequately protect us against liability to third parties with
whom our customers conduct business.
We collect and store data, including our customers' personal information. In jurisdictions around the world, personal
information is increasingly becoming the subject of extensive legislation and regulations to protect consumers’ privacy and
security, including the EU's General Data Protection Regulation that became effective in 2018. The interpretation of privacy
and data protection laws and regulations regarding the collection, storage, transmission, use and disclosure of such information
in some jurisdictions is unclear and ever evolving. These laws may be interpreted and applied differently from country to
country and in a manner that is not consistent with our current data protection practices. Complying with these varying
international requirements could cause us to incur additional costs or change our business practices. Our services are accessible
in many foreign jurisdictions, and some of these jurisdictions may claim that we are required to comply with their laws, even
where we have no local entity, employees or infrastructure. We could be forced to incur significant expenses if we were
required to modify our products, services or existing security and privacy procedures in order to comply with new or expanded
regulations across numerous jurisdictions. In addition, we could face liability to end users alleging that their personal
information is not collected, stored, transmitted, used or disclosed appropriately or in accordance with our privacy policies or
applicable laws, including claims and litigation resulting from such allegations. Any failure on our part to protect information
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pursuant to applicable regulations could result in a loss of user confidence, reputation and customers, which could materially
impact our results of operations and cash flows.
Due to fluctuations in the insurance market, we may be unable to obtain and maintain our insurance coverages, and the
insurance we obtain may not cover all risks we undertake. As a result, we may incur material uninsured or under-
insured losses.
The price, terms and availability of insurance have fluctuated significantly since we began offering commercial satellite
services. The cost of obtaining insurance can vary as a result of either satellite failures or general conditions in the insurance
industry. Rising premiums on insurance policies could increase our costs. In addition to higher premiums, insurance policies
may provide for higher deductibles, shorter coverage periods and additional policy exclusions. Our insurance could become
more expensive and difficult to maintain and may not be available in the future on commercially reasonable terms, if at all. Our
failure to maintain sufficient insurance could also create an event of default under our debt agreements. Our insurance may not
adequately cover losses incurred arising from claims brought against us or otherwise, which could be material.
Product Liability Insurance and Product Replacement or Recall Costs
We are subject to product liability and product recall claims if any of our products and services are alleged to have caused
injury to persons or damage to property. If any of our products prove to be defective, we may need to recall and redesign them.
In addition, any claim or product recall that results in significant adverse publicity may negatively affect our business, financial
condition or results of operations. We do not maintain any product recall insurance, so any product recall we are required to
initiate could have a significant impact on our financial position, results of operations or cash flows. We investigate potential
quality issues as part of our ongoing effort to deliver quality products to our customers.
Because consumers may use SPOT products and services in isolated or dangerous locations, users of our devices who
suffer injury or death may seek to assert claims against us alleging failure of the device to facilitate timely emergency response.
We cannot assure investors that any legal disclaimers will be effective or insurance coverage will be sufficient to protect us
from material losses.
General Liability Insurance In-Orbit Exposures
Our liability policy, covers amounts up to €70 million per occurrence (with a €70 million annual limit) that we and other
specified parties may become liable to pay for bodily injury and property damages to third parties related to processing,
maintaining and operating our satellite constellation. Our current policy has a one-year term, which expires in October 2021.
Our current in-orbit liability insurance policy contains, and we expect any future policies would likewise contain, specified
exclusions and material change limitations customary in the industry. These exclusions may relate to, among other things,
losses resulting from in-orbit collisions, acts of war, insurrection, terrorism or military action, government confiscation, strikes,
riots, civil commotions, labor disturbances, sabotage, unauthorized use of the satellites and nuclear or radioactive
contamination, as well as claims directly or indirectly occasioned as a result of noise, pollution, electrical and electromagnetic
interference or interference with the use of property.
Our in-orbit insurance does not cover losses that might arise as a result of a satellite failure, other operational problems
affecting our constellation, or damage resulting from de-orbiting a satellite. As a result, a failure of one or more of our satellites
or the occurrence of equipment failures, collision damage, or other related problems that may result during the de-orbiting
process could constitute an uninsured loss and could materially harm our financial condition.
Our satellites may collide with space debris which could adversely affect the performance of our constellation.
Our ability to maneuver our satellites to avoid potential collisions with space debris is limited by, among other factors,
uncertainties and inaccuracies in the projected orbit location of, and predicted conjunctions with, debris objects tracked and
cataloged by the U.S. government. Some space debris is too small to be tracked, and therefore its orbital location is completely
unknown. Debris that cannot be tracked is still large enough to potentially cause severe damage to or failure of one of our
satellites should a collision occur. If our constellation experiences satellite collisions with space debris, our service could be
impaired. Any such collision could potentially expose us to significant losses.
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We operate in many tax jurisdictions, and changes in tax rates or adverse results of tax examinations could materially
increase our costs.
We operate in various U.S. and foreign tax jurisdictions. The process of determining our anticipated tax liabilities involves
many calculations and estimates which are inherently complex. Our tax obligations are subject to review and possible challenge
by the taxing authorities of these jurisdictions, such as the ongoing income tax return audit being conducted by the Canada
Revenue Agency of our Canadian subsidiary. If taxing authorities were to successfully challenge our current tax positions, or if
we changed the manner in which we conduct certain activities, we could become subject to material, unanticipated tax
liabilities. We may also become subject to additional tax liabilities as a result of changes to tax laws in any of our applicable tax
jurisdictions, which in certain circumstances could have a retroactive effect.
We are exposed to trade credit risk in the ordinary course of our business activities.
We are exposed to risk of loss in the event of nonperformance by our customers of their obligations to us. Some of our
customers may be highly leveraged or subject to their own operating and regulatory risks. Many of our customers finance their
activities through cash flow from operations, the incurrence of debt or the issuance of equity. From time to time, credit is less
available and available on more restrictive terms. The combination of reduction of cash flow resulting from declines in
commodity prices and the lack of availability of debt or equity financing may result in a significant reduction in our customers'
liquidity and ability to make payments or perform on their obligations to us. Even if our credit review and analysis mechanisms
work properly, we may experience financial losses in our dealings with other parties. Any increase in the nonpayment or
nonperformance by our customers could reduce our cash flows.
To illustrate, our Commercial IoT business is heavily concentrated in the oil and gas industry and was negatively impacted
by the downturn in this industry in recent years, most specifically resulting from the COVID-19 pandemic. As an example, our
largest customer for the last three years is a reseller to oil and gas companies. A high-volume customer not performing its trade
obligations to us could adversely affect our cash flow and financial condition. Concentrations of customers in certain industries
may further increase trade credit risk to our business if certain experience a similar economic downturn.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to
increase significantly.
Our obligations under our First Lien Facility Agreement bear interest at a variable rate. As a result, an increase in interest
rates could result in a substantial increase in interest expense.
Additionally, in July 2017, the Financial Conduct Authority in the United Kingdom ("FCA") announced that the Libor rate
would be phased out and financial institutions would no longer need to make Libor submissions after 2021. Our First Lien
Facility Agreement provides for a fallback rate in the event Libor is unable to be determined. At this time, we cannot provide
assurance of the impact this Libor phase out will have on our financial statements and internal processes.
A natural disaster could diminish our ability to provide communications service.
Natural disasters could damage or destroy our ground stations and disrupt service to our customers. In addition, the
collateral effects of disasters such as flooding may impair, damage or destroy our ground equipment. If a natural disaster were
to impair, damage or destroy any of our ground facilities, we may be rendered unable to provide service to our customers in the
affected area, either temporarily or indefinitely. Even if our gateways are not affected by natural disasters, our service could be
disrupted if a natural disaster damages the public switch telephone network, terrestrial wireless networks or our ability to
connect to the public switch telephone network or terrestrial wireless networks. Additionally, there are inherent dangers and risk
associated with our satellite operations, including the risk of increased radiation. Any such failures or service disruptions could
harm our business and results of operations.
We have been in the past from time to time, and may be in the future, subject to litigation and investigations that could
have a substantial, adverse impact on our business.
From time to time we are subject to litigation, including claims related to our business activities. We have also been in the
past, and may be in the future, subject to investigations by regulators and governmental agencies, including the United States
Department of the Treasury's Office of Foreign Assets Control, the United States Department of Commerce, Bureau of Industry
and Security and the United States Immigration and Customs Enforcement. Irrespective of their merits, litigation and
investigations may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of
management attention. In our opinion there is no pending litigation, investigation, dispute or claim that could have a material
adverse effect on our financial condition, results of operations or liquidity. However, we may be wrong in this assessment.
Additionally, in the future we may become subject to additional litigation that could have a material adverse effect on our
financial position and operating results, on the trading price of our securities and on our ability to access capital markets.
22
Wireless devices' radio frequency emissions are the subject of regulation and litigation concerning their environmental
effects, which includes alleged health and safety risks. As a result, we may be subject to new regulations, demand for our
services may decrease, and we could face liability based on alleged health risks.
There has been adverse publicity concerning alleged health risks associated with radio frequency transmissions from
portable hand-held telephones and other telecommunications devices that have transmitting antennas. Lawsuits have been filed
against participants in the wireless communications industry alleging a number of adverse health consequences, including
cancer, as a result of wireless phone usage. Other claims allege consumer harm from failures to disclose information about radio
frequency emissions or aspects of the regulatory regimes governing those emissions. Although we have not been party to any
such lawsuits, we may be exposed to such litigation in the future. Courts or governmental agencies could determine that we do
not comply with applicable standards for radio frequency emissions and power or that there is valid scientific evidence that use
of our devices poses a health risk. Any such finding could reduce our revenue and profitability and expose us and other
communications service providers or device sellers to litigation, which, even if frivolous or unsuccessful, could be costly to
defend.
Furthermore, any actual or perceived risk from radio frequency emissions could reduce the number of our subscribers and
demand for our products and services.
Risks Related to Government Regulations
Our business is subject to extensive government regulation that will impact our future success.
Our MSS system is subject to significant regulation by the FCC in the United States, by the ARCEP and ANFR in France
and in other foreign jurisdictions where we do business by similar authorities. Additionally, the availability of globally
harmonized spectrum on which our MSS system depends is managed by the ITU. The rules and regulations of these regulatory
authorities are subject to change and may not continue to permit our operations as currently conducted or as we plan to conduct
them. Further, certain regulatory authorities may decide to allow additional uses within our ITU-allocation of spectrum that may
be incompatible with our continued provision of MSS.
Failure to operate our satellites, ground stations, mobile earth terminals or other facilities as required by our licenses and
applicable government regulations could result in the imposition of government sanctions against us, up to and including
cancellation of our licenses.
Our system requires regulatory authorization in each of the jurisdictions in which we or the IGOs provide service. We and
the IGOs may not be able to obtain or retain all regulatory approvals needed for operations. Regulatory changes, such as those
resulting from judicial decisions or adoption of treaties, legislation or regulation in countries where we operate or intend to
operate, may also significantly affect our business.
Our operations are subject to certain regulations of the United States State Department's Directorate of Defense Trade
Controls (the export of satellites and related technical data), United States Treasury Department's Office of Foreign Assets
Control (financial transactions and transactions with sanctioned persons or countries) and the United States Commerce
Department's Bureau of Industry and Security (export of satellites and related technical data, our gateways and phones) and as
well as other similar foreign regulations. These U.S. and foreign obligations and regulations may limit or delay our ability to
offer products and services in a particular country. We may be required to provide U.S. and some foreign government law
enforcement and security agencies with call interception services and related government assistance, in respect of which we
face legal obligations and restrictions in various jurisdictions. These regulations may limit or delay our ability to operate in a
particular country or engage in transactions with certain parties and may impose significant compliance costs. As new laws and
regulations are issued, we may be required to modify our business plans or operations. If we fail to comply with these
regulations in any country, we could be subject to sanctions that could affect, materially and adversely, our ability to operate in
that country. Failure to obtain the authorizations necessary to use our assigned radio frequency spectrum and to distribute our
products in certain countries could have a material adverse effect on our ability to generate revenue and on our overall
competitive position.
23
Spectrum values historically have been volatile, and may again be volatile in the future, which could cause the value of
our business to fluctuate.
Our business plan includes forming strategic partnerships to maximize the use and value of our spectrum, network assets
and combined service offerings in the United States and internationally. Value that we may be able to realize from these
partnerships will depend in part on the value ascribed to our spectrum. Historically, valuations of spectrum in other frequency
bands have been volatile, and we cannot predict the future value that we may be able to realize for our spectrum and other
assets. In addition, to the extent that the FCC makes additional spectrum available or promotes the more flexible use or greater
availability (e.g., via spectrum leasing or new spectrum sales) of existing satellite or terrestrial spectrum allocations, the
availability of such additional spectrum could reduce the value that we are able to realize for our spectrum.
Our business plan to use our licensed MSS spectrum to provide terrestrial wireless services depends upon action by
third parties, which we cannot control.
Our business plan includes utilizing our licensed MSS spectrum to provide terrestrial wireless services, including mobile
broadband applications, around the world. Our MSS licenses, including our terrestrial authority, are valid through various
specified terms, which we will seek to renew. In addition, we will need to comply with certain conditions in order to provide
terrestrial broadband service under our MSS licenses, including obtaining FCC certifications for our equipment that will utilize
this spectrum authority. We are seeking similar approvals in various foreign jurisdictions, including applying for licenses and
commencing due diligence efforts. We cannot guarantee that such efforts will be successful.
We have entered into agreements with multiple third parties to develop an ecosystem of radios and devices using our
terrestrially authorized spectrum. These third parties intend to use our terrestrially authorized spectrum to offer wireless services
to their respective customers. Our anticipated future revenues and profitability is dependent upon the commercial success of
their offerings.
Other future regulatory decisions could reduce our existing spectrum allocation or impose additional spectrum sharing
agreements on us, which could adversely affect our services and operations.
Under the FCC's plan for MSS in our frequency bands, we must share frequencies in the United States with other licensed
MSS operators. To date, there are no other authorized CDMA-based MSS operators and no pending applications for
authorization. However, the FCC or other regulatory authorities may require us to share spectrum with other systems that are
not currently licensed by the United States or any other jurisdiction.
We registered our second-generation constellation with the ITU through France rather than the United States. The French
radio frequency spectrum regulatory agency, ANFR, submitted the technical papers filing to the ITU on our behalf in July 2009.
As with the first-generation constellation, the ITU requires us to coordinate our spectrum assignments with other administrators
and operators that use any portion of our spectrum frequency bands. We are actively engaged in but cannot predict how long the
coordination process will take; however, we are able to use the frequencies during the coordination process in accordance with
our national licenses.
The FCC and other regulatory jurisdictions internationally are permitting expanded unlicensed use of the 5 GHz band
including within our C-band Forward Link (earth station to satellite), which operates at 5091-5250 Mhz which may have a
significant adverse impact on our ability to provide mobile satellite services.
If the FCC revokes, modifies or fails to renew or amend our licenses, our ability to operate may be curtailed.
We hold FCC licenses for the operation of our satellites, our U.S. gateways and other ground facilities and our mobile earth
terminals that are subject to revocation if we fail to satisfy specified conditions or meet prescribed milestones. The FCC
licenses are also subject to renewal and modification by the FCC. There can be no assurance that the FCC will renew the FCC
licenses we hold. If the FCC revokes, modifies or fails to renew or amend any FCC licenses we hold, or if we fail to satisfy any
of the conditions of our respective FCC licenses, then we may not be able to continue to provide mobile satellite
communications services, which would have a material adverse effect on or business and operations.
If our French regulator, or any other regulator, revokes, modifies or fails to renew or amend our licenses, our ability to
operate may be curtailed.
We hold licenses issued by, and subject to the continued regulatory jurisdiction of, the French Ministry in charge of Space
and the ARCEP, the French independent administrative authority of post and electronic communications regulations, for the
operation of our second-generation satellites. These licenses are subject to revocation if we fail to satisfy specified conditions
or meet prescribed milestones. These licenses are also subject to modification by the French regulators. There can be no
assurance that the French regulators will renew the licenses we hold. If MESR, ARCEP or other French regulators revoke,
modify or fail to renew or amend the licenses we hold or if we fail to satisfy any of the conditions of our respective French
licenses, then we may not be able to continue to provide mobile satellite communications services, which would have a material
adverse effect on our business and operations.
24
Furthermore, if we operate in any country without a valid license, we could face regulatory fines and criminal sanctions.
We hold certain licenses in each country where our ground infrastructure is located. If we fail to maintain such licenses within
any particular country, we may not be able to continue to operate the ground infrastructure located within that country, which
could prevent us from continuing to provide mobile satellite communications services within that region.
Changes in international trade regulations and other risks associated with foreign trade could adversely affect our
sourcing from foreign manufacturers.
We source our products from both domestic and foreign contract manufacturers, the largest concentration of which being
in China. The adoption of regulations related to the importation of products, including quotas, duties, taxes and other charges or
restrictions on imported goods, and changes in U.S. customs procedures could result in an increase in the cost of our products.
Recently, the U.S. imposed increased tariffs on certain imports from China, including several of our products, resulting in lower
gross margin on impacted products. The current tariffs could increase or expand to additional categories of products not
currently covered. We cannot predict how any future tariffs or other trade restrictions will impact our business, but further trade
restrictions on our products may result in further reductions to gross margin.
Additionally, delays in goods clearing customs or the disruption of international transportation lines used by us could result
in our inability to deliver goods to customers in a timely manner or the loss of sales altogether. Current or future social and
environmental regulations or critical issues, such as those relating to the sourcing of conflict minerals from the Democratic
Republic of the Congo or the need to eliminate environmentally sensitive materials from our products, could restrict the supply
of components and materials used in production and increase our costs. Any delay or interruption to our manufacturing process
or in shipping our products could result in lost revenue, which would adversely affect our business, financial condition or
results of operations.
Risks Related to Our Common Stock
Our common stock is traded on the NYSE American but could be delisted in the future, which may impair our ability to
raise capital.
Our common stock is listed on the NYSE American under the symbol “GSAT.” Broker-dealers may be less willing or able
to sell and/or make a market in our common stock if it were delisted, which may make it more difficult for shareholders to
dispose of, or to obtain accurate quotations for the price of, our common stock. Removal of our common stock from listing on
the NYSE American may also make it more difficult for us to raise capital through the sale of our securities.
Restrictive covenants in our First Lien Facility Agreement do not allow us to pay dividends on our common stock for the
foreseeable future, which may affect the market for our shares.
We do not expect to pay cash dividends on our common stock. Our First Lien Facility Agreement currently prohibits the
payment of cash dividends. Any future dividend payments are within the discretion of our board of directors and will depend
on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial
condition, contractual restrictions, business opportunities, anticipated cash needs, provisions of applicable law and other factors
that our board of directors may deem relevant. We may not generate sufficient cash from operations in the future to pay
dividends on our common stock. Our inability to pay dividends may limit the market for our shares.
The market price of our common stock is volatile, and there is a limited market for our shares.
The trading price of our common stock is subject to wide fluctuations. Factors affecting the trading price of our common
stock may include, but are not limited to:
•
•
•
•
•
•
•
•
•
actual or anticipated variations in our operating results;
failure in the performance of our current or future satellites;
changes in financial estimates by research analysts, or any failure by us to meet or exceed any such estimates, or
changes in the recommendations of any research analysts that elect to follow our common stock or the common stock
of our competitors;
actual or anticipated changes in economic, political or market conditions, such as recessions or international currency
fluctuations;
actual or anticipated changes in the regulatory environment affecting our industry;
actual or anticipated changes in the value of terrestrial spectrum;
actual or anticipated sales of common stock by our controlling stockholder or others;
changes in the market valuations of our industry peers; and
announcement by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or
other strategic initiatives.
25
The trading price of our common stock may also decline in reaction to events that affect other companies in our industry
even if these events do not directly affect us. Our stockholders may be unable to resell their shares of our common stock at or
above the initial purchase price. Additionally, because we are a controlled company, there is a limited market for our common
stock, and we cannot assure our stockholders that a trading market will further develop or persist. In periods of low trading
volume, sales of significant amounts of shares of our common stock in the public market could lower the market price of our
stock.
The future issuance of additional shares of our common stock could cause dilution of ownership interests and adversely
affect our stock price.
We may issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of our
current stockholders. We are authorized to issue 1.9 billion shares of common stock and 100 million shares of preferred stock.
As of December 31, 2020, approximately 1.7 billion shares of common stock were issued and outstanding. As of December 31,
2020, there were 321.1 million shares available for future issuance (of which 100 million are designated as preferred), of which
approximately 4.2 million shares were contingently issuable upon the exercise of stock options, the conversion of convertible
notes and the vesting of restricted stock awards. We have issued and expect to issue additional shares of common stock upon
the exercise of the warrants issued with our Second Lien Facility Agreement. As of December 31, 2020, 115.0 million warrants
were outstanding and not reflected in the 4.2 million shares contingently issuable as they were out of the money. We may issue
additional shares of our common stock or other securities that are convertible into, or exercisable for, common stock for raising
capital or other business purposes. Future sales of substantial amounts of common stock, or the perception that such sales could
occur, may have a material adverse effect on the price of our common stock.
We have issued and may issue shares of preferred stock or debt securities with greater rights than our common stock.
Our certificate of incorporation authorizes our board of directors to issue one or more series of preferred stock and set the
terms of the preferred stock without seeking any further approval from holders of our common stock. Currently, there are 100
million shares of preferred stock authorized. Any preferred stock that is issued may rank ahead of our common stock in terms of
dividends, priorities and liquidation premiums and have preferential voting rights to those held by the holders of our common
stock.
If persons engage in short sales of our common stock, the price of our common stock may decline.
Selling short is a technique used by a stockholder to take advantage of an anticipated decline in the price of a security. A
significant number of short sales or a large volume of other sales within a relatively short period of time can create downward
pressure on the market price of a security. Further sales of common stock could cause even greater declines in the price of our
common stock due to the number of additional shares available in the market, which could encourage short sales that could
further undermine the value of our common stock. Holders of our securities could, therefore, experience a decline in the value
of their investment as a result of short sales of our common stock.
Provisions in our charter documents, debt agreements and Delaware corporate law may discourage takeovers, which
could affect the rights of holders of our common stock and convertible notes.
Provisions of Delaware law and our amended and restated certificate of incorporation, amended and restated bylaws and
our debt agreements could hamper a third party's acquisition of us or discourage a third party from attempting to acquire control
of us. These provisions include:
•
•
•
•
•
•
•
the election of our Minority Directors by a plurality of the vote of our stockholders other than Thermo;
the requirement that (i) any extraordinary corporate transaction, such as a merger, reorganization or liquidation,
involving us or any of our subsidiaries and (ii) any sale or transfer of a material amount of assets of Globalstar or any
sale or transfer of assets of any of our subsidiaries which are material to us has to be approved by the Strategic Review
Committee until such time as Thermo no longer beneficially owns at least 45% of our common stock;
the ability of our board of directors to issue preferred stock with voting rights or with rights senior to those of the
common stock without any further vote or action by the holders of our common stock;
the division of our board of directors into three separate classes serving staggered three-year terms;
the fact that if Thermo does not own a majority of our outstanding capital stock entitled to vote in the election of
directors, our directors will be able to be removed for cause only with the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of capital stock entitled to vote in the election of directors;
prohibitions, at such time when Thermo does not own a majority of our outstanding capital stock entitled to vote in the
election of directors, on our stockholders acting by written consent;
prohibitions on our stockholders calling special meetings of stockholders or filling vacancies on our board of directors;
26
•
•
•
the requirement, at such time when Thermo does not own a majority of our outstanding capital stock entitled to vote in
the election of directors, that our stockholders must obtain a super-majority vote to amend or repeal our amended and
restated certificate of incorporation or bylaws;
change of control provisions in our First Lien Facility Agreement and Second Lien Facility Agreement, which provide
that a change of control will constitute an event of default and, unless waived by the lenders, will result in the
acceleration of the maturity of all indebtedness under that agreement; and
change of control provisions in our 2006 Equity Incentive Plan, which provide that a change of control may accelerate
the vesting of all outstanding stock options, stock appreciation rights and restricted stock.
We also are subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions,
prohibits us from engaging in any business combination with any interested stockholder, as defined in that section, for a period
of three years following the date on which that stockholder became an interested stockholder. This provision does not apply to
Thermo, which became our principal stockholder prior to our initial public offering.
These provisions also could make it more difficult for our stockholders to take certain corporate actions, and could limit the
price that investors might be willing to pay in the future for shares of our common stock.
We are controlled by Thermo, whose interests may conflict with yours.
As of December 31, 2020, Thermo owned approximately 62% of our outstanding common stock; additionally, Thermo
owns warrants that may be converted into additional shares of common stock. We have depended substantially on Thermo to
provide capital to finance our business. Although extraordinary corporate transactions, material sales of assets and certain
transactions with related parties must be approved by the Strategic Review Committee, to the extent these and other matters are
also subject to a vote of our shareholders, Thermo is able to control such vote. These matters include the election of certain
members of our board of directors and numerous other matters, including changes of control and other significant corporate
transactions, so long as these transactions are not between Thermo and Globalstar and until such time as Thermo shall no longer
be the beneficial owner of 45% or more of our outstanding common stock.
Thermo is controlled by James Monroe III, our Executive Chairman. Through Thermo, Mr. Monroe holds equity interests
in, and serves as an executive officer or director of, a diverse group of privately-owned businesses not otherwise related to us.
We reimburse Thermo and Mr. Monroe for certain third party, documented, out-of-pocket expenses they incur in connection
with our business.
The interests of Thermo may conflict with the interests of our other stockholders. Thermo may take actions it believes will
benefit its equity investment in us or loans to us even though such actions might not be in your best interests as a holder of our
common stock.
Item 1B. Unresolved Staff Comments
Not Applicable
27
Item 2. Properties
As of December 31, 2020, our principal headquarters are located in Covington, Louisiana. We own or lease the facilities
described in the following table (in approximate square feet):
Location
Covington, Louisiana
Milpitas, California
Sebring, Florida
Managua
Clifton, Texas
Los Velasquez, Edo Miranda
Mississauga, Ontario
Aussaguel
Smith Falls, Ontario
High River, Alberta
Barrio of Las Palmas, Cabo Rojo
Wasilla, Alaska
Seletar Satellite Earth Station
Petrolina
Rio de Janeiro
Gaborone
Manaus
Presidente Prudente
Dublin
Panama City
Bosque Alegre, Argentina
Gaborone
Country
USA
USA
USA
Nicaragua
USA
Venezuela
Canada
France
Canada
Canada
Puerto Rico
USA
Singapore
Brazil
Brazil
Botswana
Brazil
Brazil
Ireland
Panama
Argentina
Botswana
Square Feet Facility Use
69,365 Corporate Offices
12,375 Satellite and Ground Control Center
12,375 Gateway
10,900 Gateway
10,000 Gateway
9,700 Gateway
9,502 Canada Office
7,502 Satellite Control Center and Gateway
6,500 Gateway
6,500 Gateway
6,000 Gateway
5,000 Gateway
4,500 Gateway
2,500 Gateway
2,120 Brazil Office
2,000 Gateway
1,900 Gateway
1,300 Gateway
Ireland Office
1,280
1,100 Panama Office
862 Gateway
270 Botswana Office
Owned/Leased
Leased
Leased
Leased
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Owned
Leased
Leased
Leased
Leased
Our owned properties in Clifton, Texas and Wasilla, Alaska are encumbered by liens in favor of the administrative agents
under our First Lien Facility Agreement and Second Lien Facility Agreement for the benefit of the lenders thereunder. See Part
II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital
Resources - Contractual Obligations and Commitments in this Report.
During 2020, we accepted an offer for the sale of our property in Nicaragua and anticipate that this sale will close in 2021.
Additionally, as previously discussed, during 2020 we signed an agreement for the acquisition of the remaining ownership of
our IGO in South Korea which we expect will close in 2021. As of December 31, 2020, we have executed additional
agreements for new gateway locations that are expected to commence during 2021. We intend to further expand the number
ground stations we operate globally.
Item 3. Legal Proceedings
For a description of our material legal and regulatory proceedings and settlements, see Note 9: Commitments and
Contingencies in our Consolidated Financial Statements in Part II, Item 8 of this Report.
Item 4. Mine Safety Disclosures
Not Applicable
28
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock Information
Our common stock trades on the NYSE American under the symbol "GSAT".
As of February 26, 2021, 1,677,878,734 shares of our common stock were outstanding, held by 203 holders of record. The
number of holders of record is based upon the actual number of holders registered at such date and does not include holders of
shares in street name or persons, partnerships, associates, corporations or other entities in security position listings maintained
by depositories.
Dividend Information
We have never declared or paid any cash dividends on our common stock. Our First Lien Facility Agreement and Second
Lien Facility Agreement prohibit us from paying dividends. We currently intend to retain any future earnings and do not expect
to pay any dividends in the foreseeable future. See Note 6: Long-Term Debt and Other Financing Arrangements in our
Consolidated Financial Statements for further discussion.
29
Item 6. Selected Financial Data
Omitted pursuant to recent amendments to Regulation S-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and
applicable notes to our Consolidated Financial Statements and other information included elsewhere in this Report, including
risk factors disclosed in Part I, Item IA. Risk Factors. The following information contains forward-looking statements, which
are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may
differ from those expressed or implied by the forward-looking statements. See “Forward-Looking Statements” at the beginning
of this Report.
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 years ended December 31, 2020 and 2019
Our results of operations for the twelve months ended December 31, 2020 were impacted by COVID-19. While we cannot
predict the full extent or duration of the future impact of COVID-19, certain trends or uncertainties related to COVID-19 that
impact revenue or expense items are discussed below.
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.
During the twelve months ended December 31, 2020, total revenue decreased $3.2 million to $128.5 million from $131.7
million in 2019. This variance was due primarily to an out-of-period adjustment, which increased Duplex service revenue by
$3.9 million during 2019, related to a change in the calculation of the estimated impact from the initial adoption of ASC 606.
See below for a further discussion of the fluctuation in revenue.
The following table sets forth amounts and percentages of our revenue by type of service (dollars in thousands).
Service Revenue:
Duplex (1)
SPOT
Commercial IoT
Engineering and Other
Total Service Revenue
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Revenue
% of Total
Revenue
Revenue
% of Total
Revenue
$
$
33,878
46,417
17,174
15,722
113,191
27 % $
36 %
13 %
12 %
88 % $
39,794
50,461
16,972
2,274
109,501
31 %
40 %
13 %
1 %
85 %
(1) As previously disclosed, we recorded an out-of-period adjustment of $3.9 million during 2019 as a result of a change in the
estimated impact of ASC 606. This adjustment, which increased Duplex service revenue, is excluded from Duplex service
revenue in the table above. The percentages of total revenue calculations also exclude this adjustment.
30
The following table sets forth amounts and percentages of our revenue generated from equipment sales (dollars in
thousands).
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Revenue
% of Total
Revenue
Revenue
% of Total
Revenue
Equipment Revenue:
Duplex
SPOT
Commercial IoT
Other
$
1,883
8,176
5,140
97
Total Equipment Revenue
$
15,296
1 % $
7 %
4 %
— %
12 % $
1,325
7,617
9,300
90
18,332
2 %
6 %
7 %
— %
15 %
The following table sets forth our average number of subscribers and ARPU by type of revenue.
Average number of subscribers for the year ended:
Duplex
SPOT
Commercial IoT
IGO and Other
Total
ARPU (monthly):
Duplex (1)
SPOT
Commercial IoT
December 31,
2020
2019
50,116
267,816
414,452
27,264
759,648
$
56.33 $
14.44
3.45
56,856
281,584
399,960
27,481
765,881
58.33
14.93
3.54
(1) As previously disclosed, we recorded an out-of-period adjustment of $3.9 million during 2019 as a result of a change in
the estimated impact of ASC 606. This adjustment, which increased Duplex service revenue, is excluded from Duplex ARPU in
the table above. When the out-of-period adjustment is included in the calculation, ARPU for the twelve months ended
December 31, 2019 is $64.02.
The numbers reported in the above table are subject to immaterial rounding inherent in calculating averages.
During the twelve months ended December 31, 2020, gross Duplex and SPOT subscriber additions increased 1% and 12%,
respectively. The increase in Duplex gross subscriber additions from 2019 to 2020 was driven primarily by activations of Sat-
Fi2® due to increased demand as we launched an improved version in September 2019; fewer activations from legacy devices
partially offset this increase. Also, lower service plan prices continue to drive gross Duplex activations. SPOT gross subscriber
activations increased from 2019 to 2020 driven by a higher volume of unit sales, particularly of our SPOT X® device as well as
SPOT Gen4TM, our refreshed SPOT Satellite GPS Messenger launched in 2020. We are also seeing changes in consumer
behavior resulting from COVID-19, driving more customers to purchase our SPOT products for outdoor recreational activities.
Because our Commercial IoT subscribers are able to activate and deactivate their units several times during the year, gross
Commercial IoT subscriber additions are not considered to be a meaningful metric.
We count "subscribers" based on the number of devices that are subject to agreements that entitle them to use our voice or
data communications services rather than the number of persons or entities who own or lease those devices.
31
Engineering and other service revenue includes revenue generated primarily from certain governmental and engineering
service contracts which are not subscriber driven. Accordingly, we do not present ARPU for engineering and other service
revenue in the table above.
Service Revenue
Excluding the out-of-period adjustment discussed above, Duplex service revenue decreased 15% in 2020 due primarily to a
decline in average subscribers and ARPU of 12% and 3%, respectively. The decrease in average subscribers was driven by
normal churn in the subscriber base exceeding gross activations over the last twelve months. The decrease in ARPU was driven
primarily by lower priced service plans and promotional pricing in place during 2020, as well as unfavorable exchange rate
movements for various currencies.
SPOT service revenue decreased 8% in 2020 due to lower ARPU and average subscribers. The 5% decrease in ARPU was
due primarily to lower priced service plans introduced to new subscribers in mid-2019. The 3% decrease in average subscribers
(after adjusting for non-revenue-producing subscribers previously in the base) was due to elevated churn experienced during
2020, particularly in the months following the start of the COVID-19 pandemic. Although we had a record number of
subscriber activations during 2020, churn more than offset these gross additions.
Commercial IoT service revenue increased 1% in 2020 due to a 3% increase in average subscribers, offset partially by a 2%
decrease in ARPU. Average subscribers were higher during 2020 compared to 2019 despite end of period subscribers declining
from 421,000 at December 31, 2019 to 408,000 at December 31, 2020 following higher churn from the impact of COVID-19.
The decrease in ARPU was due to the impact of unfavorable exchange rate movements, specifically the strengthening of the
U.S. dollar relative to the Brazilian real.
Engineering and other service revenue increased $13.4 million in 2020. This increase was driven primarily by a higher
volume of engineering services contracts during 2020, including the completion of certain milestones associated with the
contract previously discussed, which generated $10.0 million of revenue during 2020. Additionally, in the fourth quarter of
2020, we recognized $2.9 million of revenue associated with a contract that was executed in 2007 for the construction of a
gateway in Nigeria, upon its termination due to lack of performance by the partner, and our performance of all obligations in
accordance with the terms of the contract. These remaining contract proceeds were previously held in non-current deferred
revenue.
Subscriber Equipment Sales
Revenue from Duplex equipment sales increased $0.6 million, or 42%, in 2020. This increase in revenue was driven
primarily by sales of our second-generation Duplex devices launched in the second half of 2019; these units are sold at higher
prices compared to our first generation devices. Additionally, sales of our GSP-1700 phones also increased year over year. The
vast majority of our device sales during the past two years were of our first-generation phones and accessories. We are
evaluating the profitability of our second-generation devices relative to our other product and service offerings and the cost to
maintain our second-generation ground infrastructure and technology. While we believe that our second-generation products
could contribute meaningfully to our future Duplex revenue, our past financial results are an important component of our
overall profitability analysis.
Revenue from SPOT equipment sales increased $0.6 million, or 7%, in 2020. This increase in revenue during 2020 was
driven by a higher sales volume of SPOT X® and SPOT Gen4TM, which is our refreshed SPOT Satellite GPS Messenger
launched in August 2020. Included in our SPOT Gen4TM sales were 8,500 units sold to Battlbox, a subscription box service, in
December 2020. We expect to see an increase in gross subscriber activations during 2021 following distribution of these boxes
to Battlbox subscribers. Offsetting the increase in volume were lower component part sales of $0.8 million. We occasionally
sell component parts to our equipment manufacturer to use in final products; these sales fluctuate based on the volume and price
of parts that we directly source for the production of our equipment. Compared to 2019, we sold fewer component parts to our
equipment manufacturer during 2020.
Revenue from Commercial IoT equipment sales decreased $4.2 million, or 45%, in 2020. This decrease in revenue resulted
from a decrease in demand following the start of the COVID-19 pandemic. We have experienced lower demand particularly
from our customers operating in the oil and gas industry. Offsetting this decline were sales of our recently-launched ST100, a
one-way satellite transmitter IoT board. Numerous resellers are currently conducting trials with this device and we expect
additional sales in 2021.
32
Operating Expenses:
Total operating expenses decreased 4% to $187.7 million in 2020 from $195.8 million in 2019. Lower cost of services, cost
of subscriber equipment sales, and marketing, general and administrative costs primarily contributed to the decrease in total
operating expenses. The main drivers of the variance in operating expenses are explained in further detail below.
Cost of Services
Cost of services decreased $2.7 million, or 7%, to $34.8 million in 2020 from $37.5 million in 2019. The decrease in cost of
services during 2020 was driven primarily by 1) lower maintenance costs of $1.3 million resulting from revisions to contract
terms with certain vendors for gateway and software maintenance and 2) lower research and development costs of $1.1 million
driven by the timing of new product development. Other smaller items, such as lower travel costs and costs to support our IGOs
also contributed to the remaining variance.
Cost of Subscriber Equipment Sales
Cost of subscriber equipment sales decreased by $2.5 million, or 16%, to $13.3 million in 2020 from $15.8 million in 2019.
This decrease is generally consistent with the decline in total revenue from subscriber equipment sales, particularly driven by
the decrease in Commercial IoT equipment, as explained above.
Cost of Subscriber Equipment Sales - Reduction in the Value of Inventory
During 2020, we wrote down the carrying value of inventory by $0.7 million following our decision to discontinue
production of a second-generation Duplex device, as well as an evaluation of excess or obsolete inventory related to end of life
products and technology. During 2019, we wrote down the value of inventory by $0.4 million after adjusting for changes in the
net realizable value of gateway spare parts due to excess.
Marketing, General and Administrative
Marketing, general and administrative expenses ("MG&A") decreased $3.5 million, or 8%, to $41.7 million in 2020 from
$45.2 million in 2019. MG&A expense was lower in 2020 due in part to the impact of COVID-19, including lower subscriber
acquisition costs (such as advertising and trade shows) of $1.8 million and lower travel costs of $1.0 million. Other smaller
items, such as personnel costs and credit losses also reduced MGA expense during 2020. Offsetting these decreases were higher
professional and legal fees related to strategic opportunities of $2.3 million.
Additionally, during 2019, we wrote off $3.1 million of financing costs associated with our efforts to refinance our debt
obligations. This write-off was recorded following our decision to pursue an amendment to our existing First Lien Facility
Agreement instead of issuing new first lien debt.
Reduction in the Value of Long-Lived Assets
During 2019, we recorded a reduction in the carrying value of long-lived assets of $1.1 million resulting from the change in
classification from held and used to held for sale of our former gateway location in Nicaragua. We reduced the carrying value to
the lower of cost or fair value less estimated cost to sell during the fourth quarter of 2019. During the fourth quarter of 2020, we
signed a contract for the sale of this property; the final selling price (net of estimated cost to sell) is $0.3 million and, as a result,
the Company recorded an additional impairment totaling $0.2 million during 2020. Additionally, during the fourth quarter of
2020, we wrote down $0.2 million related to the ground portion of construction in progress for one of our gateways resulting
from an analysis made over these balances.
33
Depreciation, Amortization and Accretion
Depreciation, amortization, and accretion expense increased $1.0 million to $96.8 million in 2020 compared to $95.8
million in 2019. This increase was due primarily to placing into service our new billing system implemented in 2020.
Other (Expense) Income:
Interest Income and Expense
Interest income and expense, net, decreased $14.1 million to expense of $48.4 million for 2020 compared to expense of
$62.5 million for 2019. This decrease was driven by lower gross interest costs totaling $14.7 million as well as an increase to
capitalized interest of $0.8 million (which decreases interest expense). Interest income and expense, net, was also impacted by a
decrease in interest income totaling $1.4 million.
Gross interest costs were impacted by lower interest associated with the First Lien Facility Agreement, the Loan Agreement
with Thermo, and the June 2019 Subordinated Loan Agreement; these items were offset by higher interest on the Second Lien
Facility Agreement that we entered into in November 2019. Lower interest costs for the First Lien Facility Agreement were due
to the modification of the First Lien Facility Agreement in November 2019, which reduced the principal balance outstanding
and the balance of deferred financing costs (resulting in lower amortization of deferred financing costs), as well as a decrease in
the interest rate driven by a reduction in LIBOR. Lower interest costs for the Loan Agreement with Thermo were driven by
Thermo's conversion of the entire principal balance outstanding under the Loan Agreement in February 2020. Lower interest
costs for the Subordinated Loan Agreement are due to the full repayment of this loan in November 2019.
Interest costs associated with the First Lien Facility Agreement decreased $24.2 million (including $11.7 million of
amortization of deferred financing costs), interest costs associated with the Loan Agreement with Thermo decreased
$16.6 million (including $3.4 million of accretion of debt discount) and interest costs associated with the Subordinated Loan
Agreement decreased $4.5 million (including $0.5 million of amortization of deferred financing costs). These decreases were
offset by $30.6 million of interest (including $4.0 million of accretion of debt discount and amortization of deferred financing
costs) associated with the Second Lien Facility Agreement.
Derivative Gain
We recorded derivative gains of $2.9 million and $145.1 million in 2020 and 2019, respectively. We recognize gains or
losses due to the change in the value of certain embedded features within our debt instruments that require standalone derivative
accounting. The gains recorded during 2020 were primarily impacted by fluctuations in the discount yield used in the valuation
of the embedded derivative associated with our Second Lien Facility Agreement. The gains recorded during 2019 were
impacted primarily by the assumed probability of conversion of the Loan Agreement with Thermo, which occurred in February
2020, and decreased the value of the associated derivative liability. See Note 8: Fair Value Measurements to our Consolidated
Financial Statements for further discussion of the computation of the fair value of our derivatives.
Foreign Currency (Loss) Gain
Foreign currency (loss) gain fluctuated by $0.8 million to a loss of $0.7 million in 2020 from a gain of $0.1 million in 2019.
Changes in foreign currency gains and losses are driven by the significant financial statement items we have denominated in
various currencies. The strengthening of the U.S. dollar relative to the Brazilian real unfavorably impacted our consolidated
statement of operations $4.0 million; this unfavorable impact was partially offset by the strengthening of the Canadian dollar
and the Euro relative to the U.S. dollar, $1.3 million and $1.7 million, respectively. Other smaller items contributed to the
remaining fluctuation. Foreign currency gains and losses are due primarily to the remeasurement of certain balances at the end
of each reporting period.
34
Other
Other expense increased to $3.6 million in 2020 compared to $2.9 million in 2019. We record the non-operating components
of net periodic benefit cost to other expense, including activity related to settlement of our pension liability. In December 2020
and 2019, we settled portions of our pension liability due to certain participants; these settlements resulted in losses of
$2.1 million and $0.5 million for each of 2020 and 2019, respectively. Offsetting this increase in expense were lower legal and
other adviser costs incurred related to the modification of our First Lien Facility Agreement, which were recorded to non-
operating expense under applicable accounting guidance.
Income Tax Expense
Income tax expense increased $0.2 million to $0.7 million in 2020 compared to $0.5 million in 2019. The primary income
tax expense is related to deferred state tax liabilities associated with net operating loss limitations.
Comparison of the Results of Operations for the years ended December 31, 2019 and 2018
Discussion of the results of operations for the years ended December 31, 2019 and 2018 can be found in the Globalstar
Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 28, 2020.
35
Liquidity and Capital Resources
Our principal liquidity requirements include paying our debt service obligations and funding our operating costs. Our
principal sources of liquidity include cash on hand, cash flows from operations and anticipated proceeds from the exercise of
warrants held by our Second Lien Facility Agreement lenders. Our operating cash flows are likely to continue to be negatively
impacted by COVID-19, as previously discussed. The uncertainties due to COVID-19 continue to evolve and we are
monitoring our financial position as circumstances develop. We expect to use proceeds from the exercise of warrants to meet
our obligations to raise no less than $45.0 million of equity prior to March 30, 2021. A portion of these proceeds will be used to
pay the next scheduled principal payment due under the First Lien Facility Agreement in June 2021; the remaining proceeds
will be used towards the following scheduled payment due in December 2021. A longer-term source of liquidity also includes
restricted cash held in our debt service reserve account. Although there are uncertainties related to the future impact from
COVID-19, we currently expect that sources of liquidity over the next twelve months will be sufficient for us to cover our
obligations. We may also access equity and debt capital markets from time to time, as needed, such as for liquidity, to improve
terms of our debt instruments and to lower our principal and interest requirements.
Overview
As of December 31, 2020, we held cash and cash equivalents of $13.3 million and restricted cash of $54.7 million, of which
$3.6 million and $51.1 million are recorded as current and non-current restricted cash, respectively, on our consolidated balance
sheet required under our First Lien Facility Agreement. The current portion of restricted cash on our consolidated balance sheet
will be used towards the next principal payment, which is scheduled for June 2021. The non-current portion of restricted cash
on our consolidated balance sheet will generally be used towards the final scheduled payment due upon maturity of the First
Lien Facility Agreement in December 2022 (see below for further discussion). As of December 31, 2019, we held cash and
cash equivalents of $7.6 million and had $51.5 million in restricted cash.
The carrying amount of our long-term debt outstanding was $385.4 million at December 31, 2020, compared to $464.2
million at December 31, 2019. At December 31, 2020, the current portion of our debt outstanding was $58.8 million and
represents the scheduled principal payments under our First Lien Facility Agreement and the PPP Loan due within one year of
the balance sheet date. We had no current debt outstanding at December 31, 2019.
The $78.8 million decrease in the carrying amount of our total debt balance was due primarily to the conversion of the Loan
Agreement with Thermo in February 2020 into shares of common stock, resulting in a $116.5 million reduction in net debt.
Also contributing to the decrease in the carrying amount of our total debt balance were unscheduled mandatory principal
payments for the First Lien Facility Agreement totaling $3.4 million during 2020. This decrease was offset by 1) a higher
carrying value of the Second Lien Facility Agreement of $32.4 million due to the accrual of PIK interest and the accretion of
debt discount, 2) a higher carrying value of the First Lien Facility Agreement of $3.8 million due to amortization of deferred
financing costs, and 3) the issuance of the PPP Loan in April 2020 of $4.9 million (net of debt issuance costs).
Cash Flows for the years ended December 31, 2020, 2019 and 2018
The following table shows our cash flows from operating, investing and financing activities (in thousands):
Statements of Cash Flows
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
Year Ended December 31,
2020
2019
2018
$
22,215 $
3,048 $
5,920
(14,536)
(11,491)
1,164
(7,923)
(17,401)
(18,196)
52
4
(112)
Net increase (decrease) in cash, cash equivalents and restricted cash
$
8,895 $
(16,362) $
(29,789)
36
Cash Flows Provided by Operating Activities
Net cash provided by operations includes primarily cash receipts from subscribers related to the purchase of equipment and
satellite voice and data services as well as cash received from the performance of engineering and other services. We use cash
in operating activities primarily for personnel costs, inventory purchases and other general corporate expenditures. Net cash
provided by operating activities was $22.2 million during 2020 compared to $3.0 million during 2019. This increase was due
primarily to higher net income after adjusting for non-cash items due to lower interest payments and operating expenses.
Partially offsetting this variance were working capital changes, which were more unfavorable in 2020 than in 2019. These
unfavorable changes were due primarily to an increase in accounts receivable and a decrease in deferred revenue, which were
both driven by the timing of services delivered under our subscriber and engineering service contracts relative to the timing of
cash receipts. Offsetting these unfavorable items were higher inventory sales as well as fewer inventory purchases and
favorable changes in prepaid and other current assets, driven in part by the final installment of $3.7 million received in January
2020 from the 2018 settlement of a business economic loss claim.
Net cash provided by operating activities was $3.0 million during 2019 compared to $5.9 million during 2018. This decrease
was due primarily to lower net income after adjusting for non-cash items. Lower net income was driven by: 1) higher interest
expense driven by a lower amount of cash interest capitalized during 2019 as well as higher gross interest payments due to the
payment of accrued interest on the Subordinated Loan Agreement in November 2019, 2) costs associated with efforts to
refinance our debt obligations, including a) the write-off of financing costs for the issuance of new first-lien debt that was
ultimately not pursued, as well as third-party costs to support the modification of our First Lien Facility Agreement and b) the
write-off of a portion of remaining deferred financing costs resulting from the partial paydown of the First Lien Facility
Agreement, and 3) the higher cost of goods sold for tariffs resulting from a recent ruling on the classification of certain of our
products. Offsetting the decrease due to lower net income were favorable working capital changes, including primarily the
timing of prepaid and other assets as well as other non-current liabilities.
Cash Flows Used in Investing Activities
Net cash used in investing activities was $14.5 million during 2020 compared to $11.5 million during 2019. During both
2020 and 2019, the nature of our capital expenditures was related to the procurement and deployment of new antennas for our
gateways. Additionally, in both 2020 and 2019, we incurred costs for other initiatives, including our new billing system, which
was placed into service in April 2020, as well as product development, including software and other back-office efforts.
Net cash used in investing activities was $11.5 million during 2019 compared to $17.4 million during 2018. This decrease
was due primarily to a reduction in the amount of cash interest capitalized of $2.9 million. As previously disclosed, our
construction in progress balance has decreased significantly since 2018, specifically related to our ground network; therefore,
the amount of interest eligible to be capitalized is lower. Also contributing to the variance in cash used in investing activities
were fewer property and equipment purchases related to our ground network and product development, including software and
other back-office efforts.
Cash Flows Provided by (Used in) Financing Activities
Net cash provided by financing activities was $1.2 million in 2020 compared to net cash used in financing activities of $7.9
million in 2019. In April 2020, we received proceeds of $5.0 million from the PPP Loan (discussed below); these proceeds
were offset by mandatory prepayments of principal on our First Lien Facility Agreement totaling $3.4 million (discussed
below) as well as the timing of payments for debt financing costs from our refinancing in 2019 totaling $1.1 million.
Net cash used in financing activities was $7.9 million in 2019 compared to $18.2 million in 2018. In June 2019, we entered
into a $62.0 million Subordinated Loan Agreement, the proceeds from which were used in part to pay principal of $47.4 million
towards our First Lien Facility Agreement. In November 2019, we completed a broad refinancing, which included the issuance
of a $193.0 million Second Lien Facility Agreement. The proceeds, net of a $6.0 million, or 3% OID, combined with cash on
hand and restricted cash were used to prepay a portion of our First Lien Facility Agreement of $151.6 million. Proceeds from
the Second Lien Facility Agreement were also used to pay off the entire balance of the Subordinated Loan Agreement of $62.0
million plus accrued interest of $4.0 million. We incurred $6.2 million in debt financing costs associated with the November
2019 refinancing. Additionally, we issued warrants to purchase shares of our common stock to each of the Second Lien Facility
Agreement lenders. In December 2019, Thermo exercised 9.5 million warrants resulting in cash proceeds to us of $3.6 million.
37
Indebtedness and Available Credit
First Lien Facility Agreement
In 2009, we entered into the First Lien Facility Agreement, which was amended and restated in July 2013, August 2015,
June 2017 and November 2019. The First Lien Facility Agreement is scheduled to mature in December 2022. As of
December 31, 2020, the principal amount outstanding under the First Lien Facility Agreement was $187.0 million, of which
$57.5 million was recorded as current debt based on the contractual terms of the loan.
Our indebtedness under the First Lien Facility Agreement bears interest at a floating rate of LIBOR plus a margin that
increases by 0.5% each year thereafter to a maximum rate of LIBOR plus 5.75%. Interest on the First Lien Facility Agreement
is payable semi-annually in arrears in June and December of each calendar year. Ninety-five percent of our obligations under
the First Lien Facility Agreement are guaranteed by Bpifrance Assurance Export S.A.S. ("BPIFAE"). Our obligations under the
First Lien Facility Agreement are guaranteed on a senior secured basis by all of our domestic subsidiaries and are secured by a
first priority lien on substantially all of our assets and our domestic subsidiaries (other than their FCC licenses), including
patents and trademarks, 100% of the equity of our domestic subsidiaries and 65% of the equity of certain foreign subsidiaries.
The First Lien Facility Agreement contains customary events of default and requires that we satisfy various financial and
non-financial covenants. The compliance calculations of the financial covenants of the First Lien Facility Agreement permit us
to include certain cash funds we receive from the issuance of our common stock and/or subordinated indebtedness. We refer to
these funds as "Equity Cure Contributions". If we violate any covenants and are unable to obtain a sufficient Equity Cure
Contribution or obtain a waiver, we would be in default under the First Lien Facility Agreement, and the lenders could
accelerate payment of the indebtedness. As of December 31, 2020, we were in compliance with respect to the covenants of the
First Lien Facility Agreement.
The First Lien Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined
and calculated in the First Lien Facility Agreement) on a semi-annual basis. During 2020, we were required to pay $0.3 million
and $3.1 million to our first lien lenders resulting from our Excess Cash Flow calculations as of December 31, 2019 and June
30, 2020, respectively. We expect to make another prepayment in 2021 from Excess Cash Flow as of December 31, 2020.
These payments reduce future principal payment obligations.
The First Lien Facility Agreement requires that we maintain a debt service reserve account, which is pledged to secure our
obligations under the First Lien Facility Agreement. The required balance in the debt service reserve account is fixed and must
equal at least $50.9 million. As of December 31, 2020, the balance in the debt service reserve account was approximately $51.1
million and is classified as non-current restricted cash on our consolidated balance sheet as it will be used towards the final
scheduled payment due upon maturity of the First Lien Facility Agreement in December 2022.
The amended and restated First Lien Facility Agreement includes a requirement that we raise no less than $45.0 million
from the sale of equity prior to March 30, 2021. These proceeds will be applied towards the principal payment due on June 30,
2021 and then, if applicable, to the next scheduled principal payments. We currently expect to fulfill this requirement with
proceeds from the exercise of the remaining warrants issued to the Second Lien Facility Agreement lenders in November 2019.
We will access equity and debt capital markets, if necessary to fund any remaining requirements not satisfied through warrant
proceeds. In December 2019, we received proceeds of $3.6 million from the exercise of a portion of warrants issued to the
Second Lien Facility Agreement lenders, which is retained in the equity proceeds account under the First Lien Facility
Agreement and is recorded in current restricted cash on our consolidated balance sheet as of December 31, 2020. Since
December 31, 2020, certain of the Second Lien Facility Agreement lenders exercised approximately 5.5 million warrants at a
price of $0.38 per share, the proceeds of which will be used to fulfill a portion of the $45.0 million requirement discussed
above.
See Note 6: Long-Term Debt and Other Financing Arrangements to our Consolidated Financial Statements for further
discussion of the First Lien Facility Agreement.
Subordinated Loan Agreement
On July 2, 2019, we entered into a Subordinated Loan Agreement (the “Subordinated Loan Agreement”), effective as of
June 28, 2019, with Thermo Funding Company LLC (an affiliated entity to Thermo, as previously defined in this filing), and
certain other unaffiliated parties (together with Thermo, the “Lenders”). Under the Subordinated Loan Agreement, we borrowed
$62.0 million from the Lenders on June 28, 2019 for the primary purpose of funding the June 30, 2019 scheduled payment of
38
interest and principal under our First Lien Facility Agreement and maintaining compliance with the financial covenants
thereunder. The Subordinated Loan Agreement accrued interest at 15% per annum, which was capitalized and added to the
outstanding principal in lieu of cash payments. Prior to repayment, the Subordinated Loan Agreement had accrued a total of
$4.0 million. In November 2019, the Subordinated Loan Agreement was paid in full from a portion of the proceeds from the
Second Lien Facility Agreement (see further discussion below).
Second Lien Facility Agreement
In November 2019, we entered into a $199.0 million Second Lien Facility Agreement with Thermo, EchoStar Corporation
and certain other unaffiliated lenders. The Second Lien Facility Agreement is scheduled to mature in November 2025. The
loans under the Second Lien Facility Agreement bear interest at a blended rate of 13.5% per annum to be paid-in-kind (or in
cash at our option, subject to restrictions in the First Lien Facility Agreement). The cash proceeds from this loan were net of a
3% original issue discount. As of December 31, 2020, the principal amount outstanding under the Second Lien Facility
Agreement was $230.6 million.
As additional consideration for the loan, we issued the lenders warrants to purchase 124.5 million shares of common stock
an exercise price of $0.38 per share. These warrants expire on March 31, 2021. As of December 31, 2020, approximately 115.0
million warrants remain outstanding. Subsequent to December 31, 2020, an additional 5.5 million warrants were exercised at
price of $0.38 per share.
The Second Lien Facility Agreement contains customary events of default and requires us to satisfy various financial and
non-financial covenants. As of December 31, 2020, we were in compliance with all the covenants of the Second Lien Facility
Agreement.
See Note 6: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements for further
discussion of the Second Lien Facility Agreement.
Thermo Loan Agreement
We had an amended and restated loan agreement with Thermo (the “Loan Agreement”). Our obligations to Thermo under
the Loan Agreement were subordinated to all of our obligations under the First Lien Facility Agreement and the Second Lien
Facility Agreement. The Loan Agreement was convertible into shares of common stock at a conversion price of $0.69 (as
adjusted) per share of common stock and accrued interest at 12% per annum, which we capitalized and added to the outstanding
principal in lieu of cash payments.
On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement, which totaled
$137.4 million and included accrued interest since inception of $93.9 million. This conversion resulted in the issuance of 200.1
million shares of common stock.
See Note 6: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements for further
discussion of the Thermo Loan Agreement.
8.00% Convertible Senior Notes Issued in 2013
Our 2013 8.00% Notes are convertible into shares of our common stock at a conversion price of $0.69 (as adjusted) per
share of common stock. As of December 31, 2020, the principal amount outstanding of the 2013 8.00% Notes was $1.4 million.
The 2013 8.00% Notes will mature on April 1, 2028, subject to various call and put features. Interest on the 2013 8.00% Notes
is payable semi-annually in arrears on April 1 and October 1 of each year. We pay interest in cash at a rate of 5.75% per annum
and by issuing additional 2013 8.00% Notes at a rate of 2.25% per annum.
A holder of 2013 8.00% Notes has the right to require us to purchase some or all of the 2013 8.00% Notes on April 1, 2023
at a price equal to the principal amount of the 2013 8.00% Notes to be purchased plus accrued and unpaid interest.
The indenture governing the 2013 8.00% Notes provides for customary events of default. As of December 31, 2020, we
were in compliance with the terms of the 2013 8.00% Notes and the Indenture.
See Note 6: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements for further
discussion of the 2013 8.00% Notes.
39
Payroll Protection Program Loan
As previously discussed, we sought relief under the CARES Act, including receiving a PPP Loan of $5.0 million loan under
the payroll protection program (the "PPP") in April 2020. As of December 31, 2020, the principal amount outstanding under the
PPP Loan was $5.0 million, of which $1.4 million is classified as current based on the contractual terms of the loan (as
modified). The Company applied for loan forgiveness in December 2020, in accordance with the terms of the CARES Act,
based on payroll and other allowable costs incurred since the date of the loan. Any amount not forgiven by the Small Business
Administration (the "SBA") is subject to an interest rate of 1.00% per annum commencing on the date of the loan with principal
and interest payments beginning after the SBA has concluded on forgiveness, subject to the PPP rules. Our first and second lien
lenders will require us to accelerate the repayment of any portion of the loan amount that is not forgiven.
See Note 6: Long-Term Debt and Other Financing Arrangements to our Consolidated Financial Statements for further
discussion of the PPP Loan.
Contractual Obligations and Commitments
Contractual obligations at December 31, 2020 are as follows (in thousands):
Contractual Obligations:
2021
2022
2023
2024
2025
Thereafter
Total
Debt obligations (1)
$ 57,468 $ 129,520 $
1,455 $
— $
— $ 446,782 $ 635,225
Interest on long-term debt (2)
Purchase obligations (3)
Inventory purchase obligations (4)
Operating lease obligations (5)
Pension obligations
Total
8,996
1,585
6,430
2,597
502
7,030
4,220
—
2,479
505
41
2,280
—
2,510
497
—
—
—
2,383
510
—
—
—
2,405
526
—
—
—
8,802
2,604
16,067
8,085
6,430
21,176
5,144
$ 77,578 $ 143,754 $
6,783 $
2,893 $
2,931 $ 458,188 $ 692,127
(1) These amounts include principal and payment in kind interest payments. Interest on the Second Lien Facility Agreement
accrues interest at a blended rate of 13.5% per annum and is capitalized and added to the total outstanding principal in lieu
of cash payments. Principal and interest under the Second Lien Facility Agreement become due and payable in November
2025.
We have $5.0 million outstanding under the PPP Loan. We applied for loan forgiveness, including both principal and
interest, in accordance with the terms of the CARES Act. Any amounts not forgiven are subject to an interest rate of 1.00%
per annum. As we expect the entire $5.0 million to be forgiven, this amount is excluded from the table above.
See Note 6: Long-Term Debt and Other Financing Arrangements in our Consolidated Financial Statements for further
discussion of these debt arrangements.
(2) Amounts include projected interest payments to be made in cash. Debt outstanding under our First Lien Facility Agreement
bears interest at a floating rate and, accordingly, we estimated our interest costs in future periods.
(3) We have purchase commitments with certain vendors related to the procurement, deployment and maintenance of our
network. In prior disclosures, our contractual obligations table included a contract that we previously had with MIL-SAT
LLC for the procurement and production of new antennas for our gateways. While there are no remaining purchase
commitments under this contract, we expect to purchase additional antennas for certain gateways in the future directly from
the manufacturer.
See Note 9: Commitments and Contingencies in our Consolidated Financial Statements for discussion on our contractual
commitments.
(4) Amounts include obligations for non-cancelable purchase orders for inventory as of December 31, 2020. We expect to
fulfill these purchase orders during 2021 based on current forecasted equipment sales.
(5) As of December 31, 2020, we executed additional operating leases, primarily for new gateway locations, that are expected
to commence during 2021. Accordingly, these leases are not included on the balance sheet as of December 31, 2020 or in
the table above. We are in the process of evaluating these lease obligations.
40
Recently Issued Accounting Pronouncements
For a discussion of recent accounting guidance and the expected impact that the guidance could have on our Consolidated
Financial Statements, see Note 1: Summary of Significant Accounting Policies in our Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial
Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in our
Consolidated Financial Statements and accompanying notes. Note 1: Summary of Significant Accounting Policies in our
Consolidated Financial Statements contains a description of the accounting policies used in the preparation of our financial
statements as well as the consideration of recently issued accounting standards and the estimated impact these standards will
have on our financial statements. We evaluate our estimates on an ongoing basis, including those related to revenue recognition;
property and equipment; income taxes; and derivative instruments. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable under the circumstances. Actual amounts could differ significantly
from these estimates under different assumptions and conditions.
We define a critical accounting policy or estimate as one that is both important to our financial condition and results of
operations and requires us to make difficult, subjective or complex judgments or estimates about matters that are uncertain. We
believe that the following are the critical accounting policies and estimates used in the preparation of our Consolidated
Financial Statements. In addition, there are other items within our Consolidated Financial Statements that require estimates but
are not deemed critical as defined in this paragraph.
41
Revenue Recognition
Our primary types of revenue include (i) service revenue from two-way voice communication, and one-way and two-way
data transmissions between a mobile or fixed device, (ii) subscriber equipment revenue from the sale of fixed and mobile
devices as well as other products and accessories, and (iii) service revenue from providing engineering and support services to
certain customers. The complexities or judgements involved in revenue recognition is discussed in detail below by type of
revenue.
Unless otherwise disclosed, service revenue is recognized over a period of time (consistent with the customer's receipt and
consumption of the benefits of our performance) and revenue from the sale of subscriber equipment is recognized at a point in
time (consistent with the transfer of risks and rewards of ownership of the hardware). We record customer payments received in
advance of the corresponding service period as deferred revenue. We provide Duplex, SPOT and Commercial IoT services
directly to customers and indirectly through resellers and IGOs. Credits granted to customers are expensed or charged against
revenue or accounts receivable over the remaining term of the customer contract. Subscriber acquisition costs primarily include
dealer and internal sales commissions and certain other costs, including but not limited to, promotional costs, cooperative
marketing credits and shipping and fulfillment costs. We capitalize incremental costs to obtain a contract to the extent we
expect to recover them; these costs include internal and external initial activation commissions. All other subscriber acquisitions
costs are expensed at the time of the related sale.
For Duplex service revenue, we recognize revenue for monthly access fees in the period services are rendered. Access fees
represent the minimum monthly charge for each line of service based on its associated rate plan. We also recognize revenue for
airtime minutes and data in excess of the monthly access fees in the period such minutes or data are used. Under certain annual
plans whereby a customer prepays for a predetermined amount of minutes and data, revenue is recognized consistent with the
customer's expected pattern of usage, based on historical experience because we believe that this method most accurately
depicts the satisfaction of our obligation to the customer. The estimated timing of revenue recognition for these usage-based
customers is driven by historical customer usage patterns. For annual plans where the customer is charged an annual fee to
access our system, we recognize revenue on a straight-line basis over the term of the plan.
We provide certain engineering services to assist customers in developing new applications to operate on our network. We
generally recognize the revenues associated with these services when the performance obligations are performed, the timing of
which may involve complex judgements by management.
At times, we sell subscriber equipment through multiple-element arrangement contracts with services. When we sell
subscriber equipment and services in bundled arrangements and determine that we have separate performance obligations, we
allocate the bundled contract price among the various performance obligations based on relative stand-alone selling prices at
contract inception of the distinct goods or services underlying each performance obligation and recognizes them when, or as,
each performance obligation is satisfied. Determination of the relative stand-alone selling prices is complex and involves
judgement, as prices may vary based on many factors, such as promotions, customer, volume and/or type of equipment sold.
Property and Equipment
The vast majority of our property and equipment is costs incurred related to the construction of our second-generation
constellation and ground station upgrades. Accounting for these assets requires us to make complex judgments and estimates.
We capitalize costs associated with the design, manufacture, test and launch of our low earth orbit satellites. For assets that are
sold or retired, including satellites that are de-orbited and no longer providing services, we remove the estimated cost and
accumulated depreciation. We recognize a loss from an in-orbit failure of a satellite equal to its net book value, if any, in the
period it is determined that the satellite is not recoverable.
Estimating the useful life of our assets is complex and involves judgement; to the extent the useful life of our significant
assets changes, this could impact our operating results. The estimated useful lives of our assets is based on many factors,
including estimated design life, information from our engineering department and our overall strategy for the use of the assets.
A one year reduction in the estimated useful life of our second-generation satellites and ground network would result in an
annual increase to depreciation expense of $5.2 million and $1.1 million, respectively. We capitalize costs associated with the
design, manufacture and test of our ground stations and other capital assets. We track capitalized costs associated with our
ground stations and other capital assets by fixed asset category and allocate them to each asset as it comes into service.
We evaluate the appropriateness of estimated depreciable lives assigned to our property and equipment and revise such lives
to the extent warranted by changing facts and circumstances.
42
We review the carrying value of our assets for impairment whenever events or changes in circumstances indicate that the
recorded value may not be recoverable. If indicators of impairment exist, we compare future undiscounted cash flows to the
carrying value of the asset group. If an asset is not recoverable, its carrying value would be adjusted down to fair value and an
impairment loss would be recorded. Key assumptions in our impairment tests include projected future cash flows, the timing of
network upgrades and current discount rates. Additionally, from time to time, we perform profitability analyses to determine if
investments in certain products and/or services remain viable. In the event we determine to no longer support a product or
service, or that an asset is not expected to generate future benefit, the asset may be abandoned and an impairment loss may be
recorded.
Income Taxes
We use the asset and liability method of accounting for income taxes. This method takes into account the differences
between financial statement treatment and tax treatment of certain transactions. We recognize deferred tax assets and liabilities
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Our deferred
tax calculation requires us to make certain estimates about our future operations. Changes in state, federal and foreign tax laws,
as well as changes in our financial condition or the carrying value of existing assets and liabilities, could affect these estimates.
We recognize the effect of a change in tax rates as income or expense in the period that the rate is enacted; however, as we have
a full valuation allowance on our deferred tax assets, there is no impact to the consolidated statements of operations and balance
sheets.
GAAP requires us to assess whether it is more likely than not that we will be able to realize some or all of our deferred tax
assets. If we cannot determine that deferred tax assets are more likely than not to be recoverable, GAAP requires us to provide a
valuation allowance against those assets. This assessment takes into account factors including: (a) the nature, frequency, and
severity of current and cumulative financial reporting losses; (b) sources of estimated future taxable income; and (c) tax
planning strategies. We must weigh heavily a pattern of recent financial reporting losses as a source of negative evidence when
determining our ability to realize deferred tax assets. Projections of estimated future taxable income exclusive of reversing
temporary differences are a source of positive evidence only when the projections are combined with a history of recent
profitable operations and can be reasonably estimated. Otherwise, GAAP requires that we consider projections inherently
subjective and generally insufficient to overcome negative evidence that includes cumulative losses in recent years. If necessary
and available, we would implement tax planning strategies to accelerate taxable amounts to utilize expiring carryforwards.
These strategies would be a source of additional positive evidence supporting the realization of deferred tax assets.
Derivative Instruments
We recognize all derivative instruments as either assets or liabilities on the balance sheet at their respective fair values. We
record recognized gains or losses on derivative instruments in the consolidated statements of operations.
We estimate the fair values of our derivative financial instruments using various techniques that are considered to be
consistent with the objective of measuring fair values. In selecting the appropriate technique, we consider, among other factors,
the nature of the instrument, the market risks that embody it and the expected means of settlement. There are various features
embedded in our debt instruments that require bifurcation from the debt host. For the conversion options and the contingent put
features in the Loan Agreement with Thermo and the 2013 8.00% Notes, we use a Monte Carlo simulation model to determine
fair value. For the mandatory prepayments in the Second Lien Facility Agreement, we use a probability weighted discounted
cash flow model to determine fair value. The timing and amount of these cash flows involve significant judgement. Valuations
derived from these models are subject to ongoing internal and external verification and review. Estimating fair values of
derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to,
change over the duration of the instrument with related changes in internal and external market factors. Our financial position
and results of operations may vary materially from quarter-to-quarter based on changes to the inputs and assumptions used in
the derivative valuation models changes in these estimates.
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our services and products are sold, distributed or available in over 120 countries. Our international sales are denominated
primarily in Canadian dollars, Brazilian reais and euros. In some cases, insufficient supplies of U.S. currency may require us to
accept payment in other foreign currencies. We reduce our currency exchange risk from revenues in currencies other than the
U.S. dollar by requiring payment in U.S. dollars whenever possible and purchasing foreign currencies on the spot market when
rates are favorable. We currently do not purchase hedging instruments to hedge foreign currencies. We are obligated to enter
into currency hedges with the lenders to the First Lien Facility Agreement no later than 90 days after any fiscal quarter during
which more than 25% of revenues is denominated in a single currency other than U.S. or Canadian dollars. Otherwise, we
cannot enter into hedging agreements other than interest rate cap agreements or other hedges described above without the
consent of the agent for the First Lien Facility Agreement, and with that consent the counterparties may only be the lenders to
the First Lien Facility Agreement.
We also have operations in Argentina, which is considered to have a highly inflationary economy. We continue to monitor
the significant uncertainty surrounding current Argentinian exchange mechanisms. Operations in this country are not
considered significant to our consolidated operations.
Our interest rate risk arises from our variable rate debt under our First Lien Facility Agreement, under which loans bear
interest at a floating rate based on the LIBOR. We have $187.0 million in principal outstanding under the First Lien Facility
Agreement. A 1.0% change in interest rates would result in a change to interest expense of approximately $1.9 million
annually.
See Note 8: Fair Value Measurements in our Consolidated Financial Statements for discussion of our financial assets and
liabilities measured at fair market value and the market factors affecting changes in fair market value of each.
44
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of Globalstar, Inc.
Report of Ernst & Young LLP, independent registered public accounting firm
Consolidated balance sheets at December 31, 2020 and 2019
Consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of stockholders’ equity for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Page
46
46
50
51
52
53
54
56
45
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Globalstar, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Globalstar, Inc. (the Company) as of December 31, 2020, and
the related consolidated statement of operations, comprehensive loss, stockholders’ equity, and cash flows for the period ended
December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated March 4, 2021, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosures to which it relates.
Useful life of Space component assets
Description of the
Matter
At December 31, 2020, the Company had $1.2 billion of Space component assets recorded as property
and equipment. As discussed in Note 1 to the consolidated financial statements, the Company’s Space
component assets are depreciated on a straight-line basis over their estimated useful life, which is
currently estimated to be 15 years. Management’s estimate of the useful life of its Space component
assets was based on estimated design life, information from the Company’s engineering department and
overall Company strategy for the use of the assets.
Auditing the Company’s estimate of the useful life of its Space component assets involved a high degree
of subjectivity due to the application of management’s judgment when evaluating the available
information to determine the estimated useful life. The resulting estimated useful life has a significant
effect on the timing of recognition of depreciation expense given the magnitude of the carrying amount
of the Space component assets.
46
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls
over the Company's process to determine the estimate useful life of its Space component assets,
including controls over management’s evaluation of the available information to determine the estimated
useful life.
Our testing of the Company's estimated useful life of the Space component assets included, among other
procedures, evaluating the application of available information to determine their estimated useful life.
We compared management’s useful life to the manufacturer’s estimated design life, publicly available
information on the estimated useful life of similar assets, operation and performance of the assets per the
Company’s engineering group, and the life of its first-generation satellite constellation. Additionally,
we evaluated the effect of changes, if any, in the Company’s long-term strategy for use of the assets on
the useful life estimate.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
New Orleans, Louisiana
March 4, 2021
47
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders Globalstar, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Globalstar, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Globalstar, Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2020, the related consolidated statements of
operations, comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2020, and the related
notes and our report dated March 4, 2021, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New Orleans, Louisiana
March 4, 2021
48
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Globalstar, Inc.
Covington, Louisiana
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Globalstar, Inc. (the "Company") as of December 31, 2019,
the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each
of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the years in
the two-year period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States
of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Crowe LLP
We served as the Company's auditor from 2006 to 2019.
Oak Brook, Illinois
February 28, 2020
49
GLOBALSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)
Current assets:
Cash and cash equivalents
Restricted cash
ASSETS
Accounts receivable, net of allowance for credit losses of $4,352 and $2,952, respectively
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Restricted cash
Operating lease right of use assets, net
Intangible and other assets, net of accumulated amortization of $9,998 and $9,009, respectively
December 31,
2020
2019
$
13,330 $
3,625
22,147
13,736
15,649
68,487
715,909
51,068
14,400
38,229
7,606
622
21,760
16,341
16,931
63,260
799,914
50,900
15,871
35,645
Total assets
$
888,093 $
965,590
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Payables to affiliates
Deferred revenue
Total current liabilities
Long-term debt, less current portion
Lease liabilities
Employee benefit obligations
Derivative liabilities
Deferred revenue
Other non-current liabilities
Total non-current liabilities
Commitments and contingent liabilities (Note 9)
Stockholders’ equity:
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and
outstanding at December 31, 2020 and 2019, respectively
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued
and outstanding at December 31, 2020 and 2019, respectively
Voting Common Stock of $0.0001 par value; 1,900,000,000 shares authorized; 1,674,668,617
shares and 1,464,544,144 shares issued and outstanding at December 31, 2020 and December 31,
2019, respectively
Nonvoting Common Stock of $0.0001 par value; no shares authorized and none issued and
outstanding at December 31, 2020 and December 31, 2019, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
58,824 $
2,917
25,916
581
25,977
114,215
326,586
13,726
3,650
123
3,280
3,448
—
8,015
24,874
261
29,910
63,060
464,176
14,747
4,128
3,792
5,273
3,071
350,813
495,187
—
—
167
—
—
—
146
—
2,096,566
1,970,047
(2,944)
(3,449)
(1,670,724)
(1,559,401)
423,065
$
888,093 $
407,343
965,590
See accompanying notes to Consolidated Financial Statements.
50
GLOBALSTAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Revenue:
Service revenue
Subscriber equipment sales
Total revenue
Operating expenses:
Cost of services (exclusive of depreciation, amortization and accretion shown
separately below)
Cost of subscriber equipment sales
Cost of subscriber equipment sales - reduction in the value of inventory
Marketing, general and administrative
Reduction in the value of long-lived assets
Revision to contract termination charge
Depreciation, amortization and accretion
Total operating expenses
Loss from operations
Other (expense) income:
Interest income and expense, net of amounts capitalized
Derivative gain
Gain on legal settlement
Foreign currency (loss) gain
Other
Total other (expense) income
(Loss) income before income taxes
Income tax expense
Net (loss) income
Net (loss) income per common share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
Year Ended December 31,
2020
2019
2018
$
113,191 $
113,386 $
15,296
128,487
18,332
131,718
34,751
13,268
662
41,738
416
—
96,815
187,650
(59,163)
(48,429)
2,897
—
(727)
(3,555)
(49,814)
(108,977)
662
37,456
15,763
416
45,233
1,124
—
95,772
195,764
(64,046)
(62,464)
145,073
120
64
(2,878)
79,915
15,869
545
111,089
19,024
130,113
37,648
14,441
—
55,443
—
(20,478)
90,438
177,492
(47,379)
(43,612)
81,120
6,779
(3,070)
(229)
40,988
(6,391)
125
$
$
(109,639) $
15,324 $
(6,516)
(0.07) $
(0.07)
0.01 $
(0.07)
(0.01)
(0.01)
1,642,359
1,642,359
1,450,768
1,655,191
1,269,548
1,269,548
See accompanying notes to Consolidated Financial Statements.
51
GLOBALSTAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
Net (loss) income
Other comprehensive (loss) income:
Defined benefit pension plan liability adjustment
Net foreign currency translation adjustment
Total other comprehensive income
Total comprehensive (loss) income
Year Ended December 31,
2020
2019
2018
$
(109,639) $
15,324 $
(6,516)
2,042
(1,537)
505
1,097
(707)
390
(64)
3,164
3,100
$
(109,134) $
15,714 $
(3,416)
See accompanying notes to Consolidated Financial Statements.
52
GLOBALSTAR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Balances – December 31, 2017
1,261,949 $
Common
Shares
Common
Stock
Amount
Additional
Paid-In
Capital
126 $ 1,869,339 $
Accumulated
Other
Comprehensive
Income (Loss)
Net issuance of restricted stock awards and
recognition of stock-based compensation
Contribution of services
Issuance and recognition of stock-based
compensation of employee stock purchase plan
Issuance of stock for public offering
Stock offering issuance costs
Other comprehensive income
Impact of adoption of ASC 606
Net loss
Balances – December 31, 2018
Net issuance of restricted stock awards and
recognition of stock-based compensation
Contribution of services
Issuance and recognition of stock-based
compensation of employee stock purchase plan
Stock offering issuance costs
Investment in business
Fair value of warrants issued in connection with
Second Lien Facility Agreement
Issuance of stock for warrant exercises
Other comprehensive income
Net income
11,892
—
1,514
171,429
—
—
2
—
—
17
—
—
7,726
428
1,047
59,083
(259)
—
—
—
1,446,784 $
—
—
—
—
145 $ 1,937,364 $
Retained
Deficit
Total
(6,939) $ (1,571,302) $ 291,224
—
—
—
—
—
3,100
—
—
—
—
—
—
7,728
428
1,047
59,100
(259)
3,100
—
—
3,093
(6,516)
(3,839) $ (1,574,725) $ 358,945
3,093
(6,516)
6,003
—
2,257
—
—
—
9,500
—
—
—
—
—
—
—
—
1
—
—
4,118
338
1,096
(195)
155
23,562
3,609
—
—
—
—
—
—
—
—
—
390
—
—
—
—
—
—
—
—
4,118
338
1,096
(195)
155
23,562
3,610
390
—
15,324
15,324
Balances – December 31, 2019
1,464,544 $
146 $ 1,970,047 $
(3,449) $ (1,559,401) $ 407,343
Net issuance of restricted stock awards and
recognition of stock-based compensation
Contribution of services
Issuance and recognition of stock-based
compensation of employee stock purchase plan
Common stock issued in connection with conversion
of Loan Agreement with Thermo
Common stock issued in connection with conversion
of 2013 8.00% Notes
Impact of adoption of Credit Loss Standard
Other comprehensive income
Net loss
7,637
—
1
—
4,766
232
2,253
—
1,048
200,140
20
120,441
95
—
—
—
—
—
—
—
32
—
—
—
—
—
—
—
—
—
505
—
—
—
4,767
232
—
1,048
—
120,461
—
32
(1,684)
(1,684)
—
505
(109,639)
(109,639)
Balances – December 31, 2020
1,674,669 $
167 $ 2,096,566 $
(2,944) $ (1,670,724) $ 423,065
See accompanying notes to Consolidated Financial Statements.
53
GLOBALSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows provided by operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Year Ended December 31,
2019
2018
2020
$
(109,639) $
15,324 $
(6,516)
Depreciation, amortization and accretion
Change in fair value of derivative liabilities
Stock-based compensation expense
Amortization of deferred financing costs
Reduction in the value of long-lived assets and inventory
Provision for credit losses
Noncash interest and accretion expense
Revision to contract termination charge
Change to estimated impact upon adoption of ASC 606
Loss on pension settlement
Noncash revenue recognized from terminated contract
Unrealized foreign currency loss (gain)
Other, net
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable and accrued expenses
Payables to affiliates
Other non-current liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows used in investing activities:
Second-generation network costs (including interest)
Property and equipment additions
Purchase of intangible assets
Net cash used in investing activities
Cash flows provided by (used in) financing activities:
Principal payments of the First Lien Facility Agreement
Proceeds from PPP Loan
Net proceeds from common stock offering and exercise of warrants
Payments for debt and equity issuance costs
Proceeds from Subordinated Loan Agreement
Payoff of Subordinated Loan Agreement
Proceeds from Second Lien Facility Agreement
Proceeds from issuance of common stock and exercise of options
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
96,815
(2,897)
5,670
4,243
1,078
1,656
33,847
—
—
2,075
(2,916)
1,362
338
(8,494)
2,176
981
(890)
(197)
319
(60)
(3,252)
22,215
(7,317)
(5,157)
(2,062)
(14,536)
(3,373)
4,973
—
(1,074)
—
—
—
638
1,164
52
8,895
59,128
95,772
(145,073)
5,700
15,896
1,540
1,747
21,453
—
(3,885)
455
—
(192)
143
(4,299)
(1,664)
(421)
864
(173)
(395)
359
(103)
3,048
(3,342)
(4,594)
(3,555)
(11,491)
(199,029)
—
3,610
(6,166)
62,000
(62,000)
192,990
672
(7,923)
4
(16,362)
75,490
Cash, cash equivalents and restricted cash, end of period
$
68,023 $
59,128 $
90,438
(81,120)
6,995
8,690
—
1,398
14,541
(20,478)
—
—
—
3,057
919
(3,792)
(486)
(7,926)
(3,794)
3,979
431
(1,394)
978
5,920
(7,032)
(7,349)
(3,020)
(17,401)
(77,866)
—
59,100
(276)
—
—
—
846
(18,196)
(112)
(29,789)
105,279
75,490
54
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
Restricted cash (See Note 6 for further discussion on restrictions)
Total cash, cash equivalents and restricted cash shown in the statement of cash
flows
$
$
13,330 $
7,606 $
54,693
51,522
15,212
60,278
68,023 $
59,128 $
75,490
As of December 31,
2020
2019
2018
$
10,918 $
27,353 $
68
45
25,867
155
Year Ended December 31,
2020
2019
2018
$
1,638 $
434 $
447
501
—
—
—
—
23,562
2,093
1,898
—
—
—
—
—
Supplemental disclosure of cash flow information:
Cash paid for:
Interest
Income taxes
Supplemental disclosure of non-cash financing and investing activities:
Increase in capitalized accrued interest for second-generation network costs
Capitalized accretion of debt discount and amortization of prepaid financing
costs
Principal amount of Loan Agreement with Thermo converted into common stock
137,366
Reduction of debt discount and issuance costs due to conversion of Loan
Agreement with Thermo
Fair value of common stock issued upon conversion of Loan Agreement with
Thermo
Reduction in derivative liability due to conversion of Loan Agreement with
Thermo
Fair value of warrants issued with Second Lien Facility Agreement
17,963
84,059
1,058
—
See accompanying notes to Consolidated Financial Statements.
55
GLOBALSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
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’s satellite communications business, by providing critical mobile communications to subscribers, serves
principally 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; and transportation.
Globalstar currently provides the following communications services:
•
•
•
•
two-way voice communication and data transmissions using mobile or fixed devices, including the GSP-1700 phone,
two generations of the Sat-Fi ® and other fixed and data-only devices ("Duplex");
one-way or two-way communication and data transmissions using mobile devices, including the SPOT family of
products, such as SPOT X ®, SPOT Gen4TM 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 commercial IoT products, such as the battery- and solar-powered SmartOne, STX-3 and
ST100 ("Commercial IoT"); and
engineering services to assist certain customers in developing new applications to operate on the Company's network,
enhancements to the Company's ground network and other communication services using the Company's MSS and
terrestrial spectrum licenses ("Engineering and Other").
Globalstar provides Duplex, SPOT and Commercial IoT products and services to customers directly and through a variety of
independent agents, dealers, resellers and independent gateway operators (“IGOs”).
COVID-19 Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global
pandemic. The impact caused by COVID-19 for the period ended December 31, 2020 and through the release date of these
consolidated financial statements included, among other effects, the accommodation of certain pricing concessions requested by
customers and experienced lower demand for its products and services, particularly from its customers that operate in the oil
and gas market. While the full extent and duration of the impact is unknown, the Company expects a continuation of this lower
demand at least until this industry fully recovers. While the Company also initially experienced a reduction in demand from its
customers that operate in the retail industry, this demand has recovered, due in part to the re-opening of most retailer store
locations. Additionally, the Company began and expects to continue to operate with a remote workforce, manage a supply chain
sourcing predominantly from China, and engage with international regulators remotely to advance the terrestrial spectrum
authorization process. There are a number of uncertainties that could impact the Company's future results of operations,
including the effectiveness of COVID-19 mitigation measures; the duration of the pandemic; global economic conditions;
changes to the Company's operations; changes in consumer confidence, behaviors and spending; work from home trends; and
the sustainability of supply chains.
In accordance with the Company's accounting policies disclosed in this Report, the Company reviews the carrying value of
long-lived assets, amortizable intangible assets and inventory when circumstances warrant an assessment in order to evaluate
whether indicators of impairment exist. No indicators of impairment of long-lived assets or intangible assets were identified;
furthermore, the reduction in cash flows from the areas of the business impacted by COVID-19 are expected to be temporary.
For inventory associated with the areas of the business impacted by COVID-19, the carrying value of inventory on hand was
already lower than its expected net realizable value; accordingly, no impairment has been necessary in connection with
56
COVID-19. For accounts receivable, the Company increased its loss rate for certain receivables as discussed in more detail in
this Note 1: Summary of Significant Accounting Policies.
Revised internal cash flow and financial projections have also been evaluated in light of financial covenant requirements in
the Company's facility agreements. This liquidity assessment considers relief granted to the Company under the Coronavirus
Aid, Relief, and Economic Security Act (the "CARES" Act), including a $5.0 million loan the Company received in April 2020
under the payroll protection program, which the Company expects to be forgiven, and the deferral of the payment of certain
payroll taxes. Additionally, the Company evaluated tax law changes pursuant to the CARES Act and revised its net operating
loss carryforwards and other estimates, as necessary.
For further discussion relating to the matters discussed above, see Note 6: Long-Term Debt and Other Financing
Arrangements and Note 13: Taxes.
Use of Estimates in Preparation of Financial Statements
The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Certain
reclassifications have been made to prior year Consolidated Financial Statements to conform to current year presentation. The
Company evaluates estimates on an ongoing basis.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Globalstar and all its subsidiaries. All significant
intercompany transactions and balances have been eliminated in the consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or
less.
Restricted Cash
Restricted cash is comprised of funds held in escrow by the agent for the Company’s senior secured facility agreement (the
“First Lien Facility Agreement”) to secure the Company’s principal and interest payment obligations related to its First Lien
Facility Agreement. Restricted cash is classified as either a current or non-current asset on the Company's Consolidated Balance
Sheet based on when these funds are expected to be used to pay principal and interest due under the First Lien Facility
Agreement.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of
cash and cash equivalents and restricted cash. Cash and cash equivalents and restricted cash consist primarily of highly liquid
short-term investments deposited with financial institutions that are of high credit quality.
Accounts and Notes Receivable
On January 1, 2020, the Company adopted the provisions of ASU No. 2016-13, Credit Losses, Measurement of Credit
Losses on Financial Instruments, and recognized the cumulative effect of initially applying the guidance as an adjustment to the
opening balance of retained deficit. As a result of adopting ASU No. 2016-13, the Company recorded a net decrease to
stockholders' equity of $1.7 million, which resulted in an increase to the opening retained deficit balance as of January 1, 2020.
The most significant driver of this adjustment was the Company’s change in accounting policy related to expected losses (rather
than incurred losses) from trade receivables applied to its portfolio based on historical and future performance.
Receivables are recorded when the right to consideration from the customer becomes unconditional, which is generally upon
billing or upon satisfaction of a performance obligation, whichever is earlier. Accounts receivable are uncollateralized, without
interest, and consist primarily of receivables from the sale of Globalstar services and equipment. For service customers,
57
payment is generally due within thirty days of the invoice date and for equipment customers, payment is generally due within
thirty to sixty days of the invoice date, or, for some customers, may be made in advance of shipment.
The Company performs ongoing credit evaluations of its customers and impairs receivable balances by recording specific
allowances for credit losses based on factors such as supportable and reasonable current trends, the length of time the
receivables are past due and historical collection experience. The Company believes that historical collection experience is the
most reasonable basis for predicting future performance. The Company’s major portfolio of contract assets are customer
receivables and, as such, historical delinquency percentages are generally consistent over time. The estimate of the allowance
for credit losses is computed using aging schedules by type of revenue (service and subscriber equipment), by product (Duplex,
SPOT and Commercial IoT) and by country. As discussed above, accounts receivable are considered past due in accordance
with the contractual terms of the applicable arrangements. The Company applies a loss rate to its portfolio of trade receivables
based on past-due status and records an allowance for credit losses, which represents the expected losses of those trade
receivables over their estimated contractual life. The estimated life may vary by service and product type, but is generally less
than one year. Allowances are generally recorded for all aging categories of outstanding receivables, including those in the
current category (which is a change from legacy GAAP). Accounts receivable balances that are determined likely to be
uncollectible are included in the allowance for credit losses. After attempts to collect a receivable have failed, the receivable is
written off against the allowance.
In March 2020, after the Company adopted ASU No. 2016-13, the World Health Organization declared the outbreak
COVID-19 a global pandemic. COVID-19 has resulted in some disruption to the Company, primarily as it relates to the volume
of equipment sales and uncertainties impacting the collection of certain outstanding receivables. Although the Company expects
this disruption to be temporary, it has considered the potential impact of COVID-19 on its portfolio of trade receivables and has
increased its loss rate for such receivables for the year ended December 31, 2020, in limited circumstances. The Company will
continue to reassess its sales and collections of receivables each reporting period to support its allowance across its portfolio.
The following is a summary of the activity in the allowance for credit losses (in thousands):
Balance at beginning of period
Impact of adoption of ASU 2016-13
Provision, net of recoveries
Write-offs and other adjustments
Balance at end of period
Inventory
Year Ended December 31,
2019
2020
2018
$
$
2,952 $
1,684
1,656
(1,940)
4,352 $
3,382 $
—
1,747
(2,177)
2,952 $
3,610
—
1,398
(1,626)
3,382
Inventory consists primarily of purchased products, including subscriber equipment devices, which work on the Company’s
network, of approximately $9.5 million and $12.0 million as of December 31, 2020 and 2019, respectively, as well as ground
infrastructure assets expected to be used as spare parts of approximately $4.3 million as of December 31, 2020 and 2019,
respectively. Inventory is stated at the lower of cost or net realizable value. Cost is computed using the first-in, first-out (FIFO)
method. Inventory write downs are measured as the difference between the cost of inventory and the net realizable value and
are recorded as a cost of subscriber equipment sales - reduction in the value of inventory in the Company’s Consolidated
Financial Statements. Product sales and returns from the previous 12 months and future demand forecasts are reviewed and
excess and obsolete inventory is written off.
For the years ended December 31, 2020 and 2019, the Company wrote down the value of inventory by $0.7 million and $0.4
million, respectively, after adjusting for changes in net realizable value. In 2020, the Company discontinued production of a
second-generation Duplex device, which was the majority of the write down recorded. The remaining reduction in value of
inventory recorded during 2020 was driven by an evaluation of excess or obsolete inventory related to end of life products and
technology. In 2019, the Company reduced the carrying value of gateway spare parts due to excess hardware parts. During the
year ended December 31, 2018, no write down of inventory was recorded.
Property and Equipment
The Globalstar System includes costs for the design, manufacture, test and launch of a constellation of low earth orbit
satellites (the “Space Component”), and primary and backup control centers and gateways (the “Ground Component”).
Property and equipment is stated at cost, net of accumulated depreciation.
58
Costs associated with the design, manufacture, test and launch of the Company’s Space and Ground Components are
capitalized. Capitalized costs associated with the Company’s Space Component, Ground Component, and other assets are
tracked by fixed asset category and are allocated to each asset as it comes into service. When a second-generation satellite was
incorporated into the second-generation constellation, the Company began depreciation on the date the satellite was placed into
service, which was the point that the satellite reached its orbital altitude, over its estimated depreciable life.
The Company capitalizes interest costs associated with the costs of assets in progress. Capitalized interest is added to the
cost of the underlying asset and is amortized over the depreciable life of the asset after it is placed into service. As the
Company’s construction in progress decreases, the Company capitalizes less interest, resulting in a higher amount of net
interest expense recognized under U.S. GAAP.
Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets as follows:
Space Component - 15 years from the commencement of service
Ground Component - 7 or 15 years from commencement of service
Software, Facilities & Equipment - 3 to 10 years
Buildings - 18 years
Leasehold Improvements - Shorter of lease term or the estimated useful lives of the improvements
The estimated useful lives of the Company's Space and Ground components were based on estimated design life,
information from the Company's engineering department and overall Company strategy for the use of these assets. The
Company evaluates and revises the estimated depreciable lives assigned to property and equipment based on changes in facts
and circumstances. When changes are made to estimated useful lives, the remaining carrying amounts are depreciated
prospectively over the remaining useful lives.
For assets that are sold or retired, including satellites that are de-orbited and no longer providing services, the estimated cost
and accumulated depreciation is removed from property and equipment.
The Company assesses the impairment of property and equipment whenever events or changes in circumstances indicate
that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the
assets to the estimated future undiscounted cash flows, excluding financing costs. If the asset is not recoverable, its carrying
value would be adjusted down to fair value and an impairment loss would be recorded. Additionally, the Company routinely
performs profitability analyses to determine if investments in certain products and/or services remain viable. In the event the
Company decides not to support a product or service, or determines that an asset is not expected to generate future benefit, the
asset may be abandoned and an impairment loss may be recorded on the associated assets.
Assets held for sale are carried at the lower of cost or fair value less estimated cost to sell; these assets are generally
classified as current on the Company's consolidated balance sheets as the disposal of these assets is expected within one year.
As of December 31, 2020 and 2019, the Company had approximately $0.3 million and $0.5 million, respectively, of assets
classified as held for sale due to the anticipated disposal of its former gateway location in Nicaragua. The change in
classification from held and used to held for sale resulted in an initial impairment of long-lived assets of $1.1 million during
2019, which was recorded in the Company's consolidated statement of operations. In the fourth quarter of 2020, the Company
signed a contract for the sale of this property; the final selling price (net of estimated costs to sell) is $0.3 million and, as a
result, the Company recorded an additional impairment totaling $0.2 million.
Leases
The Company has operating and finance leases for facilities and equipment throughout the United States and around the
world, including corporate offices, satellite control centers, ground control centers, gateways and certain equipment.
59
Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases include both
a right-of-use asset and a lease liability. The right-of-use asset represents the Company’s right to use the underlying asset in the
lease. Certain initial direct costs associated with consummating a lease are included in the initial measurement of the right-of-
use asset. The right-of-use asset also includes prepaid lease payments and lease incentives. The lease liability represents the
present value of the remaining lease payments discounted using the implicit rate in the lease on the lease commencement date.
For leases in which the implicit rate is not readily determinable, an estimated incremental borrowing rate is used, which
represents a rate of interest that the Company would pay to borrow on a collateralized basis over a similar term. The Company
has elected to combine lease and nonlease components, if applicable.
For operating leases, the Company records lease expense on a straight-line basis over the lease term in either marketing,
general and administrative expense or cost of services, depending on the nature of the underlying asset. For finance leases, the
Company records the amortization of the right-of-use asset through depreciation, amortization and accretion expense and
records the interest expense on the lease liability through interest expense, net, using the effective interest method.
Variable lease payments are payments made to a lessor due to changes in circumstances occurring after the commencement
date. Variable lease payments dependent upon an index or rate are included in the measurement of the lease liability; all other
variable lease payments are not included in the measurement of the lease liability and recognized when incurred. Variable lease
payments excluded from the measurement of the lease liability are uncommon and, when incurred, are immaterial for the
Company.
The Company’s existing leases have remaining lease terms of less than 1 year to 11 years. Lease terms include renewal or
termination options that the Company is reasonably certain to exercise. For leases with a term of twelve months or less, the
Company does not record a right-of-use asset and associated lease liability on its consolidated balance sheet.
The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in
circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the
carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If a right-of-use asset
is not recoverable, its carrying value would be adjusted down to fair value and an impairment loss would be recorded.
Derivative Instruments
Upon inception of a contract, the Company evaluates if the contract contains a derivative instrument. The Company has
financing arrangements that are hybrid instruments that contain embedded derivative features. Derivative instruments are
recognized as either assets or liabilities in the consolidated balance sheets and are measured at fair value with gains or losses
recognized in earnings. The Company determines the fair value of derivative instruments based on available market data and
assumptions developed by management using appropriate valuation models.
Deferred Financing Costs
Deferred financing costs are those costs directly incurred in obtaining long-term debt. These costs are amortized as
additional interest expense over the expected term of the corresponding debt. Deferred financing costs are recorded on the
Company's consolidated balance sheets as a reduction in the carrying amount of the related debt liability. The Company
classifies deferred financing costs consistent with the classification of the related debt outstanding at the end of the reporting
period. As of December 31, 2020 and 2019, the Company had net deferred financing costs of $38.5 million and $43.6 million,
respectively.
Fair Value of Financial Instruments
The Company believes it is not practicable to determine the fair value of the First Lien Facility Agreement, the Second Lien
Facility Agreement and the Payroll Protection Program Loan ("PPP Loan"). Interest rates and other terms for long-term debt are
not readily available and generally involve a variety of factors, including due diligence by the debt holders. For the Company’s
8.00% Convertible Senior Notes Issued in 2013 (“2013 8.00% Notes”), the fair value of debt is calculated using inputs
consistent with those used to calculate the fair value of the derivatives embedded in these instruments.
60
Litigation, Commitments and Contingencies
The Company is subject to various claims and lawsuits that arise in the ordinary course of business. Estimating liabilities
and costs associated with these matters requires judgment and assessment based on professional knowledge and experience of
our management and legal counsel. When a loss is considered probable and reasonably estimable, a liability is recorded for the
Company's best estimate. If there is a range of loss, the Company will record a reserve based on the low end of the range, unless
facts and circumstances can support a different point in the range. When a loss is probable, but not reasonably estimable,
disclosure is provided, as considered necessary. Reserves for potential claims or lawsuits may be relieved if the loss is no longer
considered probable. The ultimate resolution of any such exposure may vary from earlier estimates as further facts and
circumstances become known.
Gain/Loss on Extinguishment of Debt
Gain or loss on extinguishment of debt generally is recorded upon an extinguishment of a debt instrument or the conversion
of certain of the Company’s convertible notes. Gain or loss on extinguishment of debt is calculated as the difference between
the reacquisition price and net carrying amount of the debt and is recorded as an extinguishment gain or loss in the Company’s
consolidated statement of operations.
Revenue Recognition and Deferred Revenue
Revenue consists primarily of satellite voice and data service revenue, revenue generated from the sale of fixed and mobile
devices, and revenue from providing engineering and support services. A performance obligation is a promise in a contract to
transfer a distinct good or service to the customer. Each type of revenue is a separate performance obligation with distinct
deliverables and is therefore accounted for discretely. Revenue is measured based on the consideration specified in a contract
with a customer, adjusted for credits and discounts, as applicable, and is recognized when the Company satisfies a performance
obligation by transferring control over a product or service to a customer.
Generally, service revenue is recognized over a period of time and revenue from the sale of subscriber equipment is
recognized at a point in time. The recognition of revenue for service is over time as the customer simultaneously receives and
consumes the benefits of the Company’s performance over the contract term. The recognition of revenue for subscriber
equipment is at a point in time as the risks and rewards of ownership of the hardware transfer to the customer generally upon
shipment, which is when legal title of the product transfers to the customer, among other things (as discussed further below).
The Company does not record sales taxes, telecommunication taxes or other governmental fees collected from customers in
revenue. The Company excludes these taxes from the measurement of contract transaction prices.
The Company receives payment from customers in accordance with billing statements or invoices for customer contracts;
these payments may be in advance or arrears of services provided to the customer by the Company. Customer payments
received in advance of the corresponding service period are recorded as deferred revenue.
Upon activation of a Globalstar device, certain customers are charged an activation fee, which is recognized over the term of
the expected customer life. Credits granted to customers are expensed or charged against revenue or accounts receivable over
the remaining term of the contract. Estimates related to earned but unbilled service revenue are calculated primarily using
current subscriber data, including plan subscriptions and usage between the end of the billing cycle and the end of the period.
The recognition of service revenue related to amounts allocated to performance obligations that were satisfied (or partially
satisfied) in a previous period is not material to the Company’s financial statements. Amounts related to earned but unbilled
revenue from the sale of subscriber equipment are recognized if hardware is shipped prior to the invoice being generated. This
situation may result from multi-deliverable contracts, whereby equipment and service revenue are bundled and billed over time
to a single customer.
Provisions for estimated future warranty costs, returns and rebates are recorded as a cost of sale, or a reduction to revenue,
as applicable. These costs are based on historical trends and the provision is reviewed regularly and periodically adjusted to
reflect changes in estimates.
61
Certain contracts with customers may contain a financing component. Under ASC 606, an entity should adjust the promised
amount of the consideration for the effects of time value of money if the timing of the payments agreed upon by the parties to
the contract provides the customer or the entity with a significant benefit of financing for the transfer of goods or services to the
customer. This type of transaction is infrequent and not considered material to the Company. Additionally, in connection with
the adoption of ASC 606, the Company has applied the practical expedient related to the existence of a significant financing
component as it expects at contract inception that the period between payment by the customer and transfer of the promised
goods or services will be one year or less.
The following describes the principal activities from which the Company generates its revenue.
Duplex Service Revenue. The Company recognizes revenue for monthly access fees in the period services are rendered. The
Company offers certain annual plans whereby a customer prepays for a predetermined amount of minutes and data. In these
cases, revenue is recognized consistent with a customer's expected pattern of usage based on historical experience because the
Company believes that this method most accurately depicts the satisfaction of the Company's obligation to the customer. This
usage pattern is typically seasonal and highest in the second and third calendar quarters of the year. The Company offers other
annual plans whereby the customer is charged an annual fee to access the Company’s system with an unlimited amount of
usage. Annual fees for unlimited plans are recognized on a straight-line basis over the term of the plans.
SPOT Service Revenue. The Company sells SPOT services as monthly, annual or multi-year plans and recognizes revenue
on a straight-line basis over the service term, beginning when the service is activated by the customer.
Commercial IoT Service Revenue. The Company sells Commercial IoT services as monthly, annual or multi-year plans and
recognizes revenue ratably over the service term or as service is used, beginning when the service is activated by the customer.
Equipment Revenue. Subscriber equipment revenue represents the sale of fixed and mobile user terminals, SPOT and
Commercial IoT products, and accessories. The Company recognizes revenue upon shipment provided control has transferred
to the customer. Indicators of transfer of control include, but are not limited to; 1) the Company’s right to payment, 2) the
customer has legal title of the equipment, 3) the Company has transferred physical possession of the equipment to the customer
or carrier, and 4) the customer has significant risks and rewards of ownership of the equipment. The Company sells equipment
designed to work on its network through various channels, including through dealers, retailers and resellers (including IGOs) as
well as direct to consumers or other businesses by its global sales team and through its e-commerce website. The sales channel
depends primarily on the type of equipment and geographic region. Promotional rebates are offered from time to time. A
reduction to revenue is recorded to reflect the lower transaction price based on an estimate of the customer take rate at the time
of the sale using primarily historical data. This estimate is adjusted periodically to reflect actual rebates given to the Company’s
customers. Shipping and handling costs associated with outbound freight after control over a product has transferred to a
customer are accounted for as a fulfillment cost and are included in cost of subscriber equipment sales.
Engineering and Other Service Revenue. Other service revenue includes primarily revenue associated with engineering
services to assist customers in developing new applications to operate on its network. The revenue associated with these
engineering services is generally recorded over time as the services are rendered, and the Company's obligation to the customer
is satisfied. Additionally, the Company owns and operates its satellite constellation and earns a portion of its revenues through
the sale of airtime minutes or data on a wholesale basis to IGOs. Revenue from services provided to IGOs is recognized based
upon airtime minutes or data packages used by customers of the IGOs and in accordance with contractual fee arrangements.
Multiple-Element Arrangement Contracts. At times, the Company will sell subscriber equipment through multiple-element
arrangement contracts with services. When the Company sells subscriber equipment and services in bundled arrangements and
determines that it has separate performance obligations, the Company allocates the bundled contract price among the various
performance obligations based on relative stand-alone selling prices at contract inception of the distinct goods or services
underlying each performance obligation and recognizes revenue when, or as, each performance obligation is satisfied.
62
Stock-Based Compensation
The Company recognizes compensation expense in the financial statements for both employee and non-employee share-
based awards based on the grant date fair value of those awards. The Company uses the Black-Scholes option pricing model to
estimate the fair value of stock option awards on the date of grant. For restricted stock awards and units, the fair value is
determined from the stock price on the grant date. The Company's estimate of the forfeiture rate of its share-based awards also
impacts the timing of expense recorded over the vesting period of the award. The Company's estimate for pre-vesting
forfeitures is recognized over the requisite service periods of the awards on a straight-line basis, which is generally
commensurate with the vesting term. For share-based awards with a performance condition that affects vesting, the Company
recognizes compensation cost for awards if and when the performance condition is probable of achievement. See Note 15:
Stock Compensation for a description of methods used to determine the Company's assumptions.
Foreign Currency
The functional currency of the Company’s foreign consolidated subsidiaries is generally their local currency, unless the
subsidiary operates in a hyperinflationary economy, such as Venezuela and Argentina. Assets and liabilities of its foreign
subsidiaries are translated into United States dollars based on exchange rates at the end of the reporting period. Income and
expense items are translated at the average exchange rates prevailing during the reporting period. For 2020, 2019 and 2018, the
foreign currency translation adjustments were net losses of $1.5 million, net losses of $0.7 million and net gains of $3.2 million,
respectively.
Foreign currency transaction gains/losses were approximately net losses of $0.7 million, net gains of $0.1 million and net
losses of $3.1 million for each of 2020, 2019, and 2018, respectively. These were classified as other (expense) income on the
consolidated statement of operations.
Asset Retirement Obligation
Liabilities arising from legal obligations associated with the retirement of gateway long-lived assets are measured at fair
value and recorded as a liability. Upon initial recognition of a liability for retirement obligations, the Company also capitalizes,
as part of the asset carrying amount, the estimated costs associated with its expected retirement. This asset is depreciated over
the life of the gateway to be retired. Accretion of the asset retirement obligation liability and depreciation of the related assets
are included in depreciation, amortization and accretion in the accompanying consolidated statements of operations. As of both
December 31, 2020 and 2019, the Company had accrued approximately $1.6 million and $1.5 million, respectively, for asset
retirement obligations. The Company believes this estimate will be sufficient to satisfy the Company’s obligation under site
leases to remove the gateway equipment and restore the lease sites to their original condition.
Warranty Expense
Warranty terms extend from 90 days on equipment accessories to one year for fixed and mobile user terminals. A provision
for estimated future warranty costs is recorded as cost of sales when products are shipped. Warranty costs are based on
historical trends in warranty charges as a percentage of gross product shipments. The resulting accrual is reviewed regularly and
periodically adjusted to reflect changes in warranty cost estimates.
Research and Development Expenses
Research and development costs were $1.9 million, $3.2 million and $2.7 million for 2020, 2019 and 2018, respectively.
These costs are expensed as incurred as cost of services and include primarily the cost of new product development, chip set
design and other engineering work.
Income Taxes
The Company is taxed as a C corporation for U.S. tax purposes. The Company recognizes deferred tax assets and liabilities
for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis, operating losses and tax credit carryforwards. The Company measures deferred tax
assets and liabilities using tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax
rates in income in the period that includes the enactment date; however, as the Company has a full valuation allowance on its
deferred tax assets, there is no impact to the consolidated statements of operations and balance sheets.
63
The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be
realized. In assessing the likelihood of realization, management considers: (i) future reversals of existing taxable temporary
differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in
prior carry-back year(s) if carry-back is permitted under applicable tax law; and (iv) tax planning strategies.
Comprehensive (Loss) Income
All components of comprehensive (loss) income, including the minimum pension liability adjustment and foreign currency
translation adjustment, are reported in the financial statements in the period in which they are recognized. Comprehensive (loss)
income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner
sources.
(Loss) Earnings Per Share
The Company is required to present basic and diluted (loss) earnings per share. Basic (loss) earnings per share is computed
by dividing (loss) income available to common stockholders by the weighted average number of shares of common stock
outstanding during the period. 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 (loss) income. Common stock equivalents are included in
the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. The effect of potentially
dilutive common shares for the Company's convertible notes are calculated using the if-converted method. Generally, for all
other potentially dilutive common shares, the effect is calculated using the treasury stock method.
Intangible and Other Assets
Intangible Assets Not Subject to Amortization
A significant portion of the Company's intangible assets are licenses that provide the Company the exclusive right to
provide MSS services over the Globalstar System or to utilize designated radio frequency spectrum to provide terrestrial
wireless communication services in a particular region of the world. While licenses are issued for only a fixed time, such
licenses are subject to renewal by the Federal Communications Commission ("FCC") or equivalent international regulatory
authorities. These license renewals are expected to occur routinely and at nominal cost. Moreover, the Company has determined
that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of its
wireless licenses. As a result, the Company treats the wireless licenses as an indefinite-lived intangible asset. The Company re-
evaluates the useful life determination for wireless licenses annually, or more frequently if needed, to determine whether events
and circumstances continue to support an indefinite useful life. Intangible assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. If an indicator is present, the Company
would measure recoverability by comparing the carrying amount to the future undiscounted cash flows the asset is expected to
generate. If the asset is not recoverable, the undiscounted cash flows do not exceed the carrying amount and the carrying
amount would be adjusted down to its fair value.
Intangible Assets Subject to Amortization
Our intangible assets that do not have indefinite lives (primarily developed technology and customer relationships) are
amortized over their estimated useful lives. For information related to each major class of intangible assets, including
accumulated amortization and estimated average useful lives, see Note 5: Intangible and Other Assets.
Other Assets
Prepaid Licenses and Royalties
The Company has signed various licensing and royalty agreements necessary for the manufacture and distribution of its
second-generation products. Amounts that are prepaid are recorded primarily in noncurrent assets on the Company's
consolidated balance sheet. The Company estimates the portion of expense incurred or royalties earned for the next 12 months
and reclassifies these amounts to current assets on the Company's consolidated balance sheet each reporting period. The
Company will expense these amounts through depreciation expense over the life of the gateway, maintenance expense over the
term of the services, or cost of goods sold on a per unit basis as these units are manufactured, sold, or activated.
64
Business Economic Loss Claim Receivable
In accordance with ASC 450, the Company believes that the recognition of a gain is appropriate at the earlier of when the
gain is realizable or realized. A realized gain is one where cash (or other assets, such as claims to cash) has already been
received without expectation of repayment. A gain is realizable when assets are readily convertible to known amounts of cash
or claims to cash. In May 2018, the Company entered into a settlement agreement related a business economic loss claim. The
Company received proceeds of $7.4 million, net of legal fees, related to this settlement. The Company received the two
installments of $3.7 million each in January 2019 and January 2020. As part of the Company's assessment, it considered that the
terms of the settlement agreement are final (e.g. not subject to appeal) and the counterparty has the ability to pay the amount.
Therefore, the Company recorded a receivable and non-operating income for the amount of the settlement. When this receivable
was recorded in 2018, the Company imputed interest in accordance with ASC 835-30-15-2 as it represented a contractual right
to receive money on fixed or determinable dates. The difference between the present value and the face amount was treated as
a discount and was amortized as interest income over the life of the claim using the interest method.
Contract Acquisition Costs
The Company also capitalizes incremental costs to obtain a contract, or contract acquisition costs, to the extent it expects to
recover them. These capitalized costs primarily include deferred subscriber acquisition costs and are amortized consistently
with the pattern of transfer of the good or delivery of the service to which the asset relates. When a contract terminates prior to
the end of its expected life, the remaining contract acquisition cost associated with it becomes impaired and the amount is
expensed.
Total contract acquisition costs were $2.4 million and $2.0 million as of December 31, 2020 and 2019, respectively, and are
recorded in other assets on the Company's consolidated balance sheet. These costs are typically amortized to marketing, general
and administrative expenses over three years, which considers anticipated contract renewals. For the years ended December 31,
2020, 2019 and 2018, the amount of amortization related to contract acquisition costs was $2.1 million, $1.4 million and $1.5
million, respectively.
Impairment of Intangible and Other Assets
The Company assesses these intangible assets for impairment annually or more frequently if events or changes in
circumstances indicate that it is more likely than not that the asset is impaired. In assessing whether it is more likely than not
that such an asset is impaired, the Company assesses relevant events and circumstances that could affect the significant inputs
used to determine the fair value of the asset. If the Company determines that an impairment exists, any related loss is estimated
based on fair values.
Other Information
Advertising Expenses
Advertising costs were $2.5 million, $3.4 million and $3.6 million for 2020, 2019, and 2018, respectively. These costs are
expensed as incurred as marketing, general and administrative expenses.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General
Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. As part of the FASB's disclosure
framework project, it has changed the disclosure requirements for defined pension and other post-retirement benefit plans as
outlined in ASU No. 2018-14. This ASU is effective for public entities for annual periods beginning after December 15, 2020.
This ASU adds certain narrative disclosures and removes other disclosures as outlined in ASU No. 2018-14 related to the
defined benefit plan as outlined in ASU No. 2018-14. The Company adopted this standard when it became effective on January
1, 2021. The adoption of this standard will impact certain of the Company's disclosures in future filings.
In December 2019, the FASB issued ASU No. 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes. ASU No. 2019-12 amends the accounting treatment for income taxes by simplifying and clarifying certain aspects of the
existing guidance. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2020.
The Company adopted this standard when it became effective on January 1, 2021. The adoption of this standard did not have a
material effect on the Company's financial statements or related disclosures.
65
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.
2020-06: Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
Among other things, ASU No. 2020-06 simplifies the guidance in ASC 470 by eliminating two of the three models that require
separating embedded conversion features from convertible instruments. This ASU is effective for public entities for annual and
interim periods beginning after December 15, 2021. Early adoption is permitted as of the beginning of any interim or annual
reporting period, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
fiscal years. For existing debt instruments, the Company does not expect this standard will have a material impact to its
consolidated financial statements or related disclosures.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments.
ASU No. 2016-13, as amended, significantly changes how entities will measure credit losses for most financial assets and
certain other instruments that are not measured at fair value through net income. The standard replaced the incurred loss
approach with an expected loss model for instruments measured at amortized cost. Entities are required to apply the standard’s
provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the
guidance is effective. This ASU became effective for public entities for annual and interim periods beginning after December
15, 2019. The Company adopted this standard when it became effective on January 1, 2020. See further discussion above in
"Accounts and Notes Receivable" in this Note for a discussion of the impact to the Company's consolidated financial statements
and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement. As part of the FASB's disclosure framework project, it has eliminated,
amended and added disclosure requirements for fair value measurements. Entities are no longer required to disclose the amount
of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between
levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements. Public companies are
required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value
measurements. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. The
Company adopted this standard when it became effective on January 1, 2020. The adoption of this standard impacted certain of
the Company's disclosures included in Note 8: Fair Value Measurements.
66
2. REVENUE
Disaggregation of Revenue
The following table discloses revenue disaggregated by type of product and service (amounts in thousands):
Service revenue:
Duplex
SPOT
Commercial IoT
Engineering and Other
Total service revenue
Subscriber equipment sales:
Duplex
SPOT
Commercial IoT
Other
Total subscriber equipment sales
December 31, 2020
December 31, 2019
December 31, 2018
Year Ended
$
33,878 $
43,679 $
46,417
17,174
15,722
113,191
50,461
16,972
2,274
113,386
$
1,883 $
1,325 $
8,176
5,140
97
15,296
7,617
9,300
90
18,332
41,223
52,363
13,459
4,044
111,089
2,021
8,425
8,444
134
19,024
Total revenue
$
128,487 $
131,718 $
130,113
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):
Service revenue:
United States
Canada
Europe
Central and South America
Others
Total service revenue
Subscriber equipment sales:
United States
Canada
Europe
Central and South America
Others
Total subscriber equipment sales
December 31, 2020
December 31, 2019
December 31, 2018
Year Ended
$
84,290 $
80,704 $
18,217
7,040
2,717
927
113,191
20,709
8,628
2,513
832
113,386
$
8,226 $
9,937 $
3,741
1,639
1,674
16
15,296
4,632
1,707
1,946
110
18,332
78,918
20,186
9,190
2,183
612
111,089
11,756
3,051
2,487
1,472
258
19,024
Total revenue
$
128,487 $
131,718 $
130,113
During the third quarter of 2019, the Company revised its calculation of the estimated impact from the initial adoption of
ASC 606 to recognize additional revenue that should have been recognized under ASC 606 for contracts that were open at the
adoption date. The adjustment, which totaled $3.9 million, was recorded to Duplex service revenue and was deemed immaterial
to the Company’s financial statements for each period since January 1, 2018; this was reflected as an out-of-period amount.
67
Accounts Receivable
The Company has agreements with certain of its IGOs whereby the parties net settle outstanding payables and receivables
between the respective entities on a periodic basis. As of December 31, 2020 and 2019, $1.9 million and $6.5 million,
respectively, related to these agreements was included in accounts receivable on the Company’s consolidated balance sheet.
The decrease in this balance from December 31, 2019 to 2020 was due to a net settlement with one of the Company's IGOs that
reduced outstanding accounts receivable and accounts payable balances during the fiscal year end December 31, 2020.
Contract Liabilities
Contract liabilities, which are included in deferred revenue on the Company’s consolidated balance sheet, represent the
Company’s obligation to transfer service or equipment to a customer from whom it has previously received consideration. The
amount of revenue recognized during the years ended December 31, 2020 and 2019 from performance obligations included in
the contract liability balance at the beginning of these periods was $31.2 million and $30.9 million, respectively. Additionally,
during the fourth quarter of 2020, the Company recognized $2.9 million of revenue previously included in non-current deferred
revenue related to a contract executed in 2007 for the construction of a gateway in Nigeria, upon its termination due to a lack of
performance by the partner, and the Company's performance of all obligations in accordance with the terms of the contract.
In general, the duration of the Company’s contracts is one year or less; however, from time to time, the Company offers
multi-year contracts. As of December 31, 2020, the Company expects to recognize $26.0 million, or approximately 89%, of its
remaining performance obligations during the next twelve months.
3. LEASES
The following tables disclose the components of the Company’s finance and operating leases (amounts in thousands):
Operating leases:
Right-of-use asset, net
Short-term lease liability (recorded in accrued expenses)
Long-term lease liability
Total operating lease liabilities
Finance leases:
Right-of-use asset, net (recorded in intangible and other current assets, net)
Short-term lease liability (recorded in accrued expenses)
Long-term lease liability (recorded in non-current liabilities)
Total finance lease liabilities
As of:
As of:
December 31, 2020 December 31, 2019
$
$
$
$
14,400 $
15,871
1,330
13,726
15,056 $
1,634
14,747
16,381
19 $
11
9
20 $
95
68
19
87
68
Lease Cost
The components of lease cost are reflected in the table below (amounts in thousands). For the years ended December 31,
2020 and 2019, the Company has presented financial results and applied its accounting policies under ASC 842; for the year
ended December 31, 2018, financial results and accounting policies have not been adjusted and are reflected under legacy
GAAP pursuant to ASC 840.
Operating lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Short-term lease cost
Total lease cost
Twelve Months Ended
December 31, 2020
Twelve Months Ended
December 31, 2019
$
$
1,880 $
1,320
76
4
100
3,380 $
1,719
1,098
105
11
180
3,113
As reported under legacy GAAP, total rent expense for 2018 was approximately $1.4 million. The increase in lease
expense from 2018 to 2019 was due primarily to the lease entered into in February 2019 with Thermo Covington, LLC for the
Company's new headquarters office.
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.
Weighted-average lease term
Finance leases
Operating Leases
Weighted-average discount rate
Finance leases
Operating leases
Supplemental Cash Flow Information
As of:
As of:
December 31, 2020
December 31, 2019
1.8 years
8.3 years
1.5 years
8.9 years
7.2 %
8.4 %
8.1 %
8.4 %
The below table discloses supplemental cash flow information for finance and operating leases (in thousands). As noted
above, presentation for the year ended December 31, 2018 has not been adjusted under the modified retrospective method of
adoption.
Twelve Months Ended
December 31, 2020
Twelve Months Ended
December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
$
3,055 $
4
68
2,647
11
103
69
Maturity Analysis
The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of
December 31, 2020 (amounts in thousands):
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Imputed interest
Discounted lease liability
Operating Leases
Finance Leases
$
2,597 $
2,478
2,510
2,383
2,405
8,803
21,176 $
(6,120)
15,056 $
$
$
11
6
4
—
—
—
21
(1)
20
As of December 31, 2020, the Company had executed additional operating leases, primarily for new gateway locations, that
are expected to commence during 2021. Accordingly, these leases are not included on the balance sheet as of December 31,
2020 or in the maturity table above. The Company is in the process of evaluating these lease obligations.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
Globalstar System:
Space component
First and second-generation satellites in service
Second-generation satellite, on-ground spare
Ground component
Construction in progress:
Ground component
Other
Total Globalstar System
Internally developed and purchased software
Equipment
Land and buildings
Leasehold improvements
Total property and equipment
Accumulated depreciation
Total property and equipment, net
December 31,
2020
December 31,
2019
$
1,195,509 $
1,195,509
32,443
272,492
32,443
269,547
19,327
3,298
1,523,069
23,984
9,679
3,110
1,655
16,040
5,132
1,518,671
18,922
8,731
3,287
1,633
1,561,497
1,551,244
(845,588)
(751,330)
$
715,909 $
799,914
Amounts in the above table consist primarily of costs incurred related to the construction of the Company’s second-
generation constellation and ground upgrades. The remaining ground component of construction in progress represents costs
(including capitalized interest) incurred for assets to upgrade the Company's ground infrastructure in certain regions around the
world. These gateway assets will be deployed based on coverage optimization. The ground component of construction in
progress also includes costs (including capitalized interest) associated with the Company's contract for the procurement and
production of new gateway antennas. As of December 31, 2020, approximately $7.9 million of the ground component of CIP
70
includes costs associated with new antennas for certain of the Company's gateways around the world. The Company expects
these assets to be placed into service in the near future.
Amounts included in the Company’s second-generation satellite, on-ground spare balance as of December 31, 2020 and
2019, consist primarily of costs related to a spare second-generation satellite that has not been placed in orbit, but is capable of
being included in a future launch. As of December 31, 2020, this satellite has not been placed into service; therefore, the
Company has not started to record depreciation expense.
Capitalized Interest and Depreciation Expense
The following table summarizes capitalized interest for the periods indicated below (in thousands):
Interest cost eligible to be capitalized
Interest cost recorded in interest income (expense), net
Net interest capitalized
Year Ended December 31,
2019
2020
2018
$
$
50,721 $
(48,064)
2,657 $
64,058 $
(62,255)
1,803 $
51,819
(43,434)
8,385
The following table summarizes depreciation expense for the periods indicated below (in thousands):
Depreciation Expense
Year Ended December 31,
2019
2020
2018
$
84,853 $
83,575 $
81,779
The following table summarizes amortization expense for the periods indicated below (in thousands):
Amortization Expense
Year Ended December 31,
2019
2020
2018
$
11,962 $
12,197 $
8,659
During 2018, the Company placed into service developed technology associated with the launch of its next generation of
products. The amortization expense in the table above reflects primarily the 15-year life of these assets from the in-service date.
Geographic Location of Property and Equipment
Long-lived assets consist primarily of property and equipment and are attributed to various countries based on the physical
location of the asset, except for the Company’s satellites which are included in the long-lived assets of the United States. The
Company’s information by geographic area is as follows (in thousands):
Property and equipment:
United States
Canada
Europe
Central and South America
Other
Total property and equipment
Year Ended December 31,
2019
2020
$
687,302 $
772,498
11,814
3,170
13,614
9
$
715,909 $
12,239
3,126
11,786
265
799,914
71
5. INTANGIBLE AND OTHER ASSETS
Intangible Assets
The Company has intangible assets not subject to amortization, which include certain costs to obtain or defend regulatory
authorizations and a portion of capitalized interest associated with these assets. These costs primarily include efforts related to
the enhancement of the Company's licensed MSS spectrum to provide terrestrial wireless services as well as costs with
international regulatory agencies to obtain similar terrestrial authorizations outside of the United States. This category includes
work in progress assets as well as indefinite lived assets already placed into service. The Company also has intangible assets
subject to amortization, which primarily include developed technology and definite lived MSS licenses.
The gross carrying amount and accumulated amortization of the Company's intangible assets consist of the following (in
thousands):
December 31, 2020
December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Intangible Assets Not Subject to Amortization $ 21,496 $
— $ 21,496 $ 18,288 $
— $ 18,288
Intangible Assets Subject to Amortization:
Developed technology
Regulatory authorizations
$ 11,856 $
(7,016) $
4,840 $ 11,692 $
(6,232) $
5,460
1,866
(682)
1,184
1,937
(477)
1,460
$ 13,722 $
(7,698) $
6,024 $ 13,629 $
(6,709) $
6,920
Total
$ 35,218 $
(7,698) $ 27,520 $ 31,917 $
(6,709) $ 25,208
As of December 31, 2020 and 2019, customer relationships totaling $2.1 million and trade names totaling $0.2 million were
fully amortized and have been removed from the table above. For the twelve months ended December 31, 2020, the Company
recorded amortization expense on these intangible assets of $1.1 million. Amortization expense is recorded in operating
expenses in the Company’s consolidated statements of operations.
Excluding the effects of any acquisitions, dispositions or write-downs subsequent to December 31, 2020, total estimated
annual amortization of intangible assets is as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
$
$
1,110
1,108
840
594
416
1,956
6,024
72
Other Assets
Other assets consist of the following (in thousands):
Costs to obtain a contract
Long-term prepaid licenses and royalties
International tax receivables
Investments in businesses
Compound embedded derivative with the Second Lien Facility Agreement
Other long-term assets
Total other assets
6. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
Long-term debt consists of the following (in thousands):
December 31,
2020
2019
$
2,404 $
4,679
619
1,589
286
1,132
1,976
5,037
800
2,089
—
535
$
10,709 $
10,437
December 31, 2020
December 31, 2019
Unamortized
Discount and
Deferred
Financing
Costs
Principal
Amount
Carrying
Value
Principal
Amount
Unamortized
Discount and
Deferred
Financing
Costs
First Lien Facility Agreement
Second Lien Facility Agreement
Loan Agreement with Thermo
8.00% Convertible Senior Notes
Issued in 2013
Payroll Protection Program Loan
Total Debt
Less: Current Portion
Long-Term Debt
$
$
186,988 $
230,597
—
1,376
4,973
423,934
58,824
365,110 $
6,373 $
32,125
—
180,615 $
198,472
—
190,361 $
201,495
135,105
—
26
38,524
—
38,524 $
1,376
4,947
385,410
58,824
326,586 $
1,410
—
528,371
—
528,371 $
10,185 $
35,448
18,562
—
—
64,195
—
64,195 $
Carrying
Value
180,176
166,047
116,543
1,410
—
464,176
—
464,176
The principal amounts shown above include payment of in-kind interest, as applicable. The carrying value is net of deferred
financing costs and any discounts to the loan amounts at issuance, including accretion, as further described below. As of
December 31, 2020, the current portion of long-term debt represents the scheduled principal repayments under the First Lien
Facility Agreement and the PPP Loan due within one year of the balance sheet date.
First Lien Facility Agreement
In 2009, the Company entered into the First Lien 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 First Lien Facility Agreement was amended and restated in July 2013,
August 2015, June 2017 and November 2019.
The First Lien Facility Agreement is scheduled to mature in December 2022. Indebtedness under the First Lien Facility
Agreement bears interest at a floating rate of LIBOR plus a margin that increases by 0.5% each year to a maximum rate of
LIBOR plus 5.75%. The current interest rate is LIBOR plus 4.75%. Interest on the First Lien Facility Agreement is payable
semi-annually in arrears on June 30 and December 31 of each calendar year. Ninety-five percent of the Company's obligations
under the First Lien Facility Agreement are guaranteed by Bpifrance Assurance Export S.A.S. ("BPIFAE"), the French export
credit agency. The Company's obligations under the First Lien Facility Agreement are guaranteed on a senior secured basis by
all of its domestic subsidiaries and are secured by a first priority lien on substantially all of the assets of the Company and its
domestic subsidiaries (other than their FCC licenses), including patents and trademarks, 100% of the equity of the Company's
domestic subsidiaries and 65% of the equity of certain foreign subsidiaries.
73
As previously discussed, the Company received a loan under the CARES Act in April 2020. Due to restrictions limiting the
Company's ability to incur indebtedness, the execution of this loan required a waiver under the First Lien Facility Agreement,
which was approved by the Company's senior lenders.
The First Lien Facility Agreement contains customary events of default and requires that the Company satisfy various
financial and non-financial covenants, including the following:
• The Company's capital expenditures do not exceed $15.0 million per year;
• The Company's expenditures in connection with its spectrum rights do not exceed $20.0 million;
• The Company maintains at all times a minimum liquidity balance of $4.0 million;
• The Company achieves for each period the following minimum adjusted consolidated EBITDA (as defined in the First
Lien Facility Agreement) (amounts in thousands):
Period
1/1/20-6/30/20
7/1/20-12/31/20
1/1/21-6/30/21
7/1/21-12/31/21
Minimum Amount
$
$
$
$
18,245
23,755
20,524
26,780
• The Company maintains a minimum debt service coverage ratio of 1.00:1;
• The Company maintains a maximum net debt to adjusted consolidated EBITDA ratio of 3.96:1 for the December 31,
2020 measurement period and 2.50:1 for the four semi-annual measurement periods leading up to December 31, 2022;
• The Company maintains a minimum interest coverage ratio of 3.63:1 for the December 31, 2020 measurement period,
increasing gradually each semi-annual period until the requirement equals 5.25:1 for the two semi-annual measurement
periods leading up to December 31, 2022; and
• The Company makes mandatory prepayments in specified circumstances and amounts, including if the Company
generates excess cash flow, monetizes its spectrum rights, receives the proceeds of certain asset dispositions or receives
more than $145.0 million from the sale of additional debt or equity securities.
Additionally, the covenants in the First Lien Facility Agreement limit the Company's ability to, among other things, incur or
guarantee additional indebtedness; make certain investments, acquisitions or capital expenditures above certain agreed levels;
pay dividends or repurchase or redeem capital stock or subordinated indebtedness; grant liens on its assets; incur restrictions on
the ability of its subsidiaries to pay dividends or to make other payments to the Company; enter into transactions with its
affiliates; merge or consolidate with other entities or transfer all or substantially all of its assets; and transfer or sell assets.
In calculating compliance with the financial covenants of the First Lien Facility Agreement, the Company may include
certain cash funds contributed to the Company from the issuance of the Company's common stock and/or subordinated
indebtedness. These funds are referred to as "Equity Cure Contributions" and may be used to achieve compliance with financial
covenants through maturity. If the Company violates any financial covenants and is unable to obtain a sufficient Equity Cure
Contribution or obtain a waiver, it would be in default under the First Lien Facility Agreement and payment of the indebtedness
could be accelerated. The acceleration of the Company's indebtedness under one agreement may permit acceleration of
indebtedness under other agreements that contain cross-acceleration provisions. As of December 31, 2020, the Company was in
compliance with respect to the covenants of the First Lien Facility Agreement.
The First Lien Facility Agreement requires mandatory prepayments of principal with any Excess Cash Flow (as defined and
calculated in the First Lien Facility Agreement) on a semi-annual basis. During 2020, the Company was required to pay $0.3
million and $3.1 million to its first lien lenders resulting from the Excess Cash Flow calculations as of December 31, 2019 and
June 30, 2020, respectively. The Company expects to make another prepayment in 2021 from Excess Cash Flow as of
December 31, 2020. These payments reduce future principal payment obligations.
The First Lien Facility Agreement also requires the Company to maintain a debt service reserve account, which is pledged to
secure all of the Company's obligations under the First Lien Facility Agreement. The required balance in the debt service
reserve account is fixed and must equal at least $50.9 million. As of December 31, 2020, the balance in the debt service reserve
74
account was approximately $51.1 million and is classified as non-current restricted cash on the Company's consolidated balance
sheet as it will be used towards the final scheduled payment due upon maturity of the First Lien Facility Agreement in
December 2022.
The amended and restated First Lien Facility Agreement includes a requirement that the Company raise no less than
$45.0 million from the sale of equity prior to March 30, 2021. These proceeds will be applied towards the principal payment
due on June 30, 2021 and then, if applicable, to the next scheduled principal payments. The Company currently expects to
fulfill this requirement with proceeds from the exercise of the remaining warrants issued to the Second Lien Facility Agreement
lenders in November 2019. The Company will access equity and debt capital markets, if necessary to fund any remaining
requirements not satisfied through warrant proceeds. In December 2019, the Company received proceeds of $3.6 million from
the exercise of a portion of warrants issued to the Second Lien Facility Agreement lenders, which is retained in the equity
proceeds account under the First Lien Facility Agreement and is recorded in current restricted cash on the Company's
consolidated balance sheet as of December 31, 2020. Since December 31, 2020, certain of the Second Lien Facility Agreement
lenders exercised approximately 5.5 million warrants at a price of $0.38 per share, the proceeds of which will be used to fulfill a
portion of the $45.0 million requirement discussed above.
Subordinated Loan Agreement
In July 2019, the Company entered into a Subordinated Loan Agreement (the “Subordinated Loan Agreement”) with
Thermo Funding Company LLC (an affiliated entity to Thermo), and certain unaffiliated parties. Under the Subordinated Loan
Agreement, the Company received $62.0 million to fund the June 30, 2019 payment of interest and principal under the
Company’s First Lien Facility Agreement and for certain other purposes. The Subordinated Loan Agreement accrued interest
at 15% per annum, which was capitalized and added to the outstanding principal in lieu of cash payments. Prior to repayment,
the Subordinated Loan Agreement had accrued a total of $4.0 million. In November 2019, the Subordinated Loan Agreement
was paid in full from a portion of the proceeds from the Second Lien Facility Agreement (see further discussion below). For
further discussion on the accounting treatment of the Subordinated Loan Agreement, refer to the Globalstar Annual Report on
Form 10-K for the year ended December 31, 2019.
Second Lien Facility Agreement
In November 2019, the Company entered into a $199.0 million Second Lien Facility Agreement with Thermo, EchoStar
Corporation and certain other unaffiliated lenders. The Second Lien Facility Agreement is scheduled to mature in November
2025. The loans under the Second Lien 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, subject to restrictions in the First Lien Facility Agreement).
The cash proceeds from this loan were net of a 3%, or $6.0 million, original issue discount (the "OID"). A portion of this
OID was recorded as a debt discount of $4.0 million. This debt discount was netted against the principal amount of the loan and
is being accreted using an effective interest method to interest expense over the term of the loan.
As additional consideration for the loan, the Company issued the lenders warrants to purchase 124.5 million shares of voting
common stock at an exercise price of $0.38 per share. These warrants expire on March 31, 2021. As of December 31, 2020,
approximately 115.0 million warrants remain outstanding. Since December 31, 2020, an additional 5.5 million warrants were
exercised at a price of $0.38 per share. The Company determined that the warrants were equity instruments and recorded them
as a part of stockholders’ equity. A portion of the warrants fair value was recorded as a debt discount of $15.8 million. This
debt discount was netted against the principal amount of the loan and is being accreted using an effective interest method to
interest expense over the term of the loan.
As previously discussed, the Company received a loan under the CARES Act in April 2020. Due to restrictions limiting the
Company's ability to incur indebtedness, the execution of this loan required a waiver under the Second Lien Facility
Agreement, which was approved by the Company's second lien lenders.
The Second Lien Facility Agreement contains customary events of default and requires that the Company satisfy various
financial and non-financial covenants. Unless shown below, covenants under the Second Lien Facility Agreement are consistent
with the covenants under the Company's First Lien Facility Agreement (discussed above). The financial covenants in the
Second Lien Facility Agreement require the Company to:
• maintain at all times a minimum liquidity balance of $3.6 million;
75
• achieve for each period the following minimum adjusted consolidated EBITDA (as defined in the Second Lien Facility
Agreement) (amounts in thousands):
Period
1/1/20-6/30/20
7/1/20-12/31/20
1/1/21-6/30/21
7/1/21-12/31/21
Minimum Amount
$
$
$
$
16,400
21,400
18,500
24,100
• maintain a minimum debt service coverage ratio of 0.90:1;
• maintain a maximum net debt to adjusted consolidated EBITDA ratio of 4.36:1 for the December 31, 2020 measurement
period and 2.75:1 for the four semi-annual measurement periods leading up to December 31, 2022; and
• maintain a minimum interest coverage ratio of 3.27:1 for the December 31, 2020 measurement period, increasing
gradually each semi-annual period until the requirement equals 4.73:1 for the two semi-annual measurement periods
leading up to December 31, 2022.
As of December 31, 2020, the Company was in compliance with the covenants of the Second Lien Facility Agreement.
The portion of the Second Lien Facility Agreement proceeds that was used to repay the Subordinated Loan Agreement was
considered a debt extinguishment pursuant to applicable accounting guidance. See discussion in the Subordinated Loan
Agreement section above for further information. The remaining Second Lien Facility Agreement was recorded at its carrying
value at inception.
The Company evaluated the various embedded derivatives within the Second Lien Facility Agreement related to certain
contingently exercisable put options. Due to the substantial discount upon issuance, as calculated under applicable accounting
guidance, these prepayment features were required to be bifurcated and separately valued. The Company initially recorded the
compound embedded derivative liability as a non-current liability on its consolidated balance sheets with a corresponding debt
discount, which is netted against the face value of the Second Lien Facility Agreement. The Company is accreting the debt
discount associated with the compound embedded derivative liability to interest expense through the maturity date using an
effective interest rate method.
Thermo's participation in the Second Lien Facility Agreement was reviewed and approved on the Company's behalf by the
Strategic Review Committee, which is a committee of disinterested and independent directors who are represented by
independent legal counsel. See Note 11: Related Party Transactions for further information on the role and responsibility of the
Strategic Review Committee.
Thermo Loan Agreement
In connection with the amendment and restatement of the First Lien Facility Agreement in July 2013, the Company
amended and restated its loan agreement with Thermo (the “Loan Agreement”). The Loan Agreement was convertible into
shares of common stock at a conversion price of $0.69 (as adjusted) per share of common stock. The Loan Agreement accrued
interest at 12% per annum, which was capitalized and added to the outstanding principal in lieu of cash payments.
On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement, which totaled
$137.4 million and included accrued interest since inception of $93.9 million. This conversion resulted in the issuance of
200.1 million shares of common stock. In accordance with applicable accounting guidance for debt extinguishment with related
parties, upon conversion, the remaining debt discount was written off and recorded as a contribution to capital though equity
and the associated derivative liability was marked to market at the conversion date and then extinguished through equity as a
contribution to capital.
The Company evaluated the various embedded derivatives within the Loan Agreement (See Note 8: Fair Value
Measurements for additional information about the embedded derivative in the Loan Agreement). The Company determined
that the conversion option and the contingent put feature upon a fundamental change required bifurcation from the Loan
Agreement. The Company recorded this compound embedded derivative liability as a non-current liability on its consolidated
balance sheets with a corresponding debt discount, which was netted against the face value of the Loan Agreement. Prior to
conversion in February 2020, the Company was accreting the debt discount associated with the compound embedded derivative
76
liability to interest expense through the maturity of the Loan Agreement using an effective interest rate method. The stated
maturity was used as the expected term for purposes of amortizing the debt discount, despite the Company's expectation of an
earlier conversion, based on the applicable accounting rules.
8.00% Convertible Senior Notes Issued in 2013
In 2013, the Company issued $54.6 million aggregate principal amount of its 2013 8.00% Notes. The 2013 8.00% Notes are
convertible into shares of common stock at a conversion price of $0.69 per share of common stock, as adjusted pursuant to the
terms of the indenture (the “Indenture”). The 2013 8.00% Notes are senior unsecured debt obligations that mature on April 1,
2028, subject to various call and put features, and bear interest at a rate of 8.00% per annum. Interest is paid in cash at a rate of
5.75% and in additional notes at a rate of 2.25%. Since issuance, $55.5 million of principal amount of the 2013 8.00% Notes
have been converted resulting in the issuance of 98.6 million shares of Globalstar common stock.
The Company may redeem the 2013 8.00% Notes, with the prior approval of the majority lenders under the First Lien
Facility Agreement and the Second Lien Facility Agreement, in whole or in part, at a price equal to the principal amount of the
2013 8.00% Notes to be redeemed plus all accrued and unpaid interest thereon. A holder of the 2013 8.00% Notes has the right
to require the Company to purchase some or all of the 2013 8.00% Notes held by it on April 1, 2023, or at any time if there is a
Fundamental Change (as defined in the Indenture), at a price equal to the principal amount of the 2013 8.00% Notes to be
purchased plus accrued and unpaid interest. A holder may convert its 2013 8.00% Notes at its option at any time prior to
April 1, 2028 into shares of common stock.
The Indenture provides for customary events of default. As of December 31, 2020, the Company was in compliance with
respect to the terms of the 2013 8.00% Notes and the Indenture.
The Company evaluated the various embedded derivatives within the Indenture for the 2013 8.00% Notes. The Company
determined that the conversion option and the contingent put feature within the Indenture required bifurcation from the 2013
8.00% Notes. The Company recorded this compound embedded derivative liability as a liability on its consolidated balance
sheets with a corresponding debt discount which was netted against the face value of the 2013 8.00% Notes. The debt discount
has been fully accreted as of September 30, 2017.
Payroll Protection Program Loan
In April 2020, the Company sought relief under the CARES Act and received a $5.0 million loan under the PPP. The PPP
Loan is an unsecured debt obligation and is scheduled to mature in April 2022. As permitted under the CARES Act, the
Company applied for loan forgiveness in December 2020, inclusive of both principal and accrued interest, in accordance with
the terms of the CARES Act, based on payroll costs incurred since disbursement of the PPP Loan. Any amount not forgiven by
the Small Business Administration (the "SBA") is subject to an interest rate of 1.00% per annum commencing on the date of the
PPP Loan. Principal and interest payments due under the PPP Loan are generally deferred until the review and approval of any
forgiveness is made by the SBA, subject to the PPP rules. Furthermore, the Company's first and second lien lenders would
require the Company to accelerate the repayment of any portion of the loan amount that is not forgiven.
The Company evaluated the applicable accounting guidance relative to the PPP Loan and accounted for the proceeds of the
PPP Loan as debt under ASC 470. The Company expects the PPP Loan to be forgiven, but cannot provide assurance of such
forgiveness until it has been approved by the Company's lender and the SBA. Any portion of the PPP Loan that is forgiven will
be recorded in the Company's condensed consolidated statement of operations as a gain on extinguishment of debt in the period
of forgiveness.
Debt maturities
Annual debt maturities for each of the five years following December 31, 2020 and thereafter are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
$
$
58,824
132,857
1,656
—
230,597
—
423,934
77
Amounts in the above table are calculated based on amounts outstanding at December 31, 2020, and therefore exclude paid-
in-kind interest payments that will be made in future periods.
7. DERIVATIVES
The Company has identified various embedded derivatives resulting from certain features in the Company’s existing
borrowing arrangements, requiring recognition on its 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
consolidated balance sheets (in thousands):
Derivative assets:
Compound embedded derivative with the Second Lien Facility Agreement
Total derivative assets
Derivative liabilities:
Compound embedded derivative with the 2013 8.00% Notes
Compound embedded derivative with the Loan Agreement with Thermo
Compound embedded derivative with the Second Lien Facility Agreement
Total derivative liabilities
December 31,
2020
December 31,
2019
$
$
$
$
286 $
286 $
—
—
(123) $
—
—
(123) $
(522)
(1,270)
(2,000)
(3,792)
As of December 31, 2020, the derivative asset recorded for the Compound embedded derivative with the Second Lien
Facility Agreement was included in Intangible and other assets, net on the Company's consolidated balance sheets.
The following table discloses the changes in value recorded as derivative gain in the Company’s consolidated statement of
operations (in thousands):
Year ended December 31,
2019
2018
2020
Compound embedded derivative with the 2013 8.00% Notes
Compound embedded derivative with the Loan Agreement with Thermo
399
212
235
144,838
Compound embedded derivative with the Second Lien Facility Agreement
Total derivative gain
$
2,286
2,897 $
—
145,073 $
569
80,551
—
81,120
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 consolidated statements of operations and its 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 consolidated balance sheet. See Note 8: Fair Value Measurements for further discussion.
Each liability or asset and the features embedded in the debt instrument, which required the Company to account for the
instrument as a derivative, are described below.
Compound Embedded Derivative with 2013 8.00% Notes
As a result of the conversion option and the contingent put feature within the 2013 8.00% Notes, the Company recorded a
compound embedded derivative liability on its consolidated balance sheets with a corresponding debt discount that is netted
against the face value of the 2013 8.00% Notes. The Company determined the fair value of the compound embedded derivative
liability using a Monte Carlo simulation model. The Company classifies this derivative liability consistent with the
classification of the 2013 8.00% Notes on the Company's consolidated balance sheet.
78
Compound Embedded Derivative with the Loan Agreement with Thermo
As a result of the conversion option and the contingent put feature within the Loan Agreement with Thermo as amended and
restated in 2013, the Company recorded a compound embedded derivative liability on its consolidated balance sheets with a
corresponding debt discount that was netted against the face value of the Loan Agreement. The Company determined the fair
value of the compound embedded derivative liability using a Monte Carlo simulation model. During the first quarter of 2020,
the compound embedded derivative with the Loan Agreement with Thermo was extinguished. See Note 6: Long-Term Debt and
Other Financing Arrangements for further discussion.
Compound Embedded Derivative with the Second Lien Facility Agreement
As a result of certain contingently exercisable put features within the Second Lien Facility Agreement, the Company
initially recorded a compound embedded derivative liability on its consolidated balance sheet with a corresponding debt
discount that is netted against the face value of the Second Lien Facility Agreement. The Company determined the fair value of
the compound embedded derivative liability using a probability weighted discounted cash flow model.
8. 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).
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):
Assets:
Compound embedded derivative with the Second Lien
Facility Agreement
Total assets measured at fair value
Liabilities:
Compound embedded derivative with the 2013 8.00%
Notes
Total liabilities measured at fair value
Fair Value Measurements at December 31, 2020:
(Level 1)
(Level 2)
(Level 3)
Total
Balance
— $
— $
— $
— $
286 $
286 $
286
286
— $
— $
— $
— $
(123) $
(123) $
(123)
(123)
$
$
$
$
79
Compound embedded derivative with 8.00% Notes
Issued in 2013
Compound embedded derivative with the Loan
Agreement with Thermo
Compound embedded derivative with the Second Lien
Facility Agreement
Fair Value Measurements at December 31, 2019:
(Level 1)
(Level 2)
(Level 3)
Total
Balance
$
— $
— $
(522) $
(522)
—
—
—
—
(1,270)
(1,270)
(2,000)
(2,000)
(3,792)
Total liabilities measured at fair value
$
— $
— $
(3,792) $
All of the Company's derivative assets and liabilities are classified as Level 3. The Company marks-to-market these assets
and liabilities at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the
Company’s consolidated statements of operations. See Note 7: Derivatives for further discussion.
2013 8.00% Notes and Loan Agreement with Thermo
The significant quantitative Level 3 inputs utilized in the valuation models are shown in the tables below:
Stock Price
Volatility
Risk-Free
Interest Rate
December 31, 2020:
Note
Conversion
Price
Discount
Rate
Market Price of
Common Stock
Compound embedded derivative with the 2013
8.00% Notes
40 - 85%
0.1%
$0.69
19%
$0.34
During the first quarter of 2020, the compound embedded derivative with the Loan Agreement with Thermo was
extinguished and, therefore, as of December 31, 2020, the value was zero. See Note 6: Long-Term Debt and Other Financing
Arrangements and Note 7: Derivatives for further discussion.
Stock Price
Volatility
Risk-Free
Interest Rate
December 31, 2019:
Note
Conversion
Price
Discount
Rate
Market Price of
Common Stock
Compound embedded derivative with the 2013
8.00% Notes
Compound embedded derivative with the Loan
Agreement with Thermo
70 - 130%
70 - 130%
1.6%
1.6%
$0.69
$0.69
27%
27%
$0.52
$0.52
Second Lien Facility Agreement
The compound embedded derivative with the Second Lien 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 13% and 18% at December 31, 2020 and 2019, respectively. As of December 31, 2020, the discount yield utilized in
the valuation was lower than the blended interest rate of the underlying debt. As a result, the features embedded in the
underlying debt resulted in an asset for the Company.
Decreases in the discount yield generally will result in a lower fair value measurement in the model. 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.
80
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):
Balances at beginning of period
Derivative adjustment related to conversions
Issuance of compound embedded derivative with the Second Lien Facility Agreement
Unrealized gain, included in derivative gain
Balances at end of period
Fair Value of Debt Instruments
Year Ended December 31,
2020
2019
$
(3,792) $
(146,865)
1,058
—
2,897
—
(2,000)
145,073
$
163 $
(3,792)
The Company believes it is not practicable to determine the fair value of the First Lien Facility Agreement, the Second Lien
Facility Agreement and the PPP Loan without incurring significant additional costs. Unlike typical long-term debt, interest rates
and other terms for these instruments are not readily available and generally involve a variety of factors, including due diligence
by the debt holders. The following table sets forth the carrying values and estimated fair values of the Company's other debt
instruments, which are classified as Level 3 financial instruments (in thousands):
Loan Agreement with Thermo
2013 8.00% Notes
Nonrecurring Fair Value Measurements
December 31, 2020
December 31, 2019
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
$
— $
— $
1,376
1,122
116,543 $
1,410
88,886
875
Compound Embedded Derivative with the Loan Agreement with Thermo
The Company follows the authoritative guidance regarding non-financial assets and liabilities that are remeasured at fair
value on a nonrecurring basis. On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan
Agreement with Thermo into shares of common stock. See further discussion in Note 6: Long-Term Debt and Other Financing
Arrangements. As a result of the conversion, the Company wrote off the total fair value of the compound embedded derivative
liability with the Loan Agreement with Thermo based on the derivative value on the conversion date of $1.1 million. This
embedded derivative was classified as a Level 3 fair value measurement on the Company's consolidated balance sheet. The
significant quantitative Level 3 inputs utilized in the valuation model are shown in the table below:
Stock Price
Volatility
Risk-Free
Interest Rate
February 19, 2020
Note
Conversion
Price
Discount Rate
Market Price
of Common
Stock
Compound embedded derivative with the
Loan Agreement with Thermo
70 - 130%
1.4 % $
0.69
27 % $
0.42
81
Long-Lived Assets
Long-lived assets and intangible and other assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
During 2019, the Company reclassified its former gateway location in Nicaragua from held and used to held for sale. This
asset was originally recorded at a total fair value of $1.6 million prior to the reduction in its value, resulting in a total loss of
$1.1 million during 2019. As of December 31, 2019, the fair value less estimated cost to sell was $0.5 million. During the
fourth quarter of 2020, the Company signed a contract for the sale of this property; the final selling price (net of estimated cost
to sell) is $0.3 million and, accordingly, the Company recorded an additional impairment totaling $0.2 million during 2020.
Additionally, during the fourth quarter of 2020, the Company wrote down $0.2 million related to of the ground portion of
construction in progress for one of its gateways resulting from an analysis made over these balances.
9. COMMITMENTS AND CONTINGENCIES
Network Obligations
The Company has purchase commitments with certain vendors related to the procurement, deployment and maintenance of
the Company's network. As of December 31, 2020, the Company's remaining purchase obligations under certain of these
noncancellable commitments are approximately $8.1 million; the timing of payments is driven by work performed under the
contracts over the remaining contract periods, which range from approximately one to three years.
Inventory Purchase Commitments
The Company has inventory purchase commitments with its third party product manufacturers in the normal course of
business. These commitments are generally non-cancelable and are based on sales forecasts. The Company estimates that its
open inventory purchase commitments as of December 31, 2020 were approximately $6.4 million.
Credit Card Processor Reserve
The Company is required to maintain a reserve of $5.0 million with its credit card processor to address any liability arising
from potential charge-backs. The balance at December 31, 2020 was $5.0 million and is recorded in prepaid expenses and other
current assets on the Company's consolidated balance sheet as the required reserve is held with the credit card processor.
Business Economic Loss Claim
In May 2018, the Company concluded the settlement of a business economic loss claim in which it was an absent member in
a tort class action lawsuit. The Company received proceeds of $7.4 million, net of legal fees, related to this settlement. The
Company received the two installments of $3.7 million each in January 2019 and January 2020.
Customer Bankruptcy Claim
During 2020, one of the Company's customers filed for Chapter 11 of the United States Bankruptcy Code resulting in the
Company reserving all open receivables due from the customer. This customer's plan of reorganization was confirmed by the
bankruptcy court and the order was issued in January 2021. The cure payment is expected to be made to Globalstar in early
2021 totaling $0.3 million. As of December 31, 2020, the confirmation was not yet made and accordingly the Company is
accounting for this matter as a gain contingency and has recorded such gain in 2021, when the contingency was resolved and
payment was made.
Other Litigation
Due to the nature of the Company's business, the Company is involved, from time to time, in various litigation matters or
subject to disputes or routine claims regarding its business activities. Legal costs related to these matters are expensed as
incurred.
In management's opinion, there is no pending litigation, dispute or claim, which could be expected to have a material
adverse effect on the Company's financial condition, results of operations or liquidity.
82
10. ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES
Accrued expenses consist of the following (in thousands):
Accrued compensation and benefits
Accrued property and other taxes
Accrued customer liabilities and deposits
Accrued professional and other service provider fees
Accrued commissions
Accrued telecommunications expenses
Accrued inventory
Accrued tariffs
Short-term lease liability
Other accrued expenses
Total accrued expenses
December 31,
2020
2019
4,270 $
4,702
6,551
2,705
1,722
1,284
499
1,795
1,330
1,058
25,916 $
3,455
3,864
5,751
3,192
1,829
610
702
1,795
1,634
2,042
24,874
$
$
Accrued compensation and benefits include primarily accrued vacation, payroll, benefits and taxes. The increase in this
balance from December 31, 2019 to 2020 is due primarily to higher accrued vacation balances as well as deferred payroll taxes
(as discussed below).
Accrued tariffs represent amounts payable to U.S Customs and Border Protection for a ruling issued in September 2019
related to the classification of certain of the Company's core products imported from China. The Company plans on filing a
protest against this ruling to challenge the classification and reduce the amounts owed.
Other accrued expenses include primarily vendor services, warranty reserve, occupancy costs and accrued network costs.
For the year ended December 31, 2019, other accrued expenses also included the estimated payroll shortfall under the
Cooperative Endeavor Agreement with the Louisiana Department of Economic Development.
The following is a summary of the activity in the warranty reserve account, which is included in other accrued expenses
above (in thousands):
Balance at beginning of period
Provision
Utilization
Balance at end of period
Other non-current liabilities consist of the following (in thousands):
Asset retirement obligation
Deferred tax liability
Deferred payroll taxes under CARES Act
Foreign tax contingencies
Other
Total other non-current liabilities
Year Ended December 31,
2019
2020
2018
$
$
186 $
543
(517)
212 $
153 $
525
(492)
186 $
143
372
(362)
153
December 31,
2020
2019
1,629 $
755
423
633
8
3,448 $
1,467
395
—
1,086
123
3,071
$
$
Asset retirement obligations reflect the estimated liability arising from legal obligations associated with the retirement of
certain long-lived assets; for further discussion, refer to Note 1: Summary of Significant Accounting Policies.
83
Deferred payroll taxes under the CARES Act reflect the Company's employer share of social security taxes that were
originally due during a portion of 2020. The Company expects these amounts will be repaid in two installments in December
2021 and December 2022; amounts in the table above reflect the portion due in December 2022.
Foreign tax contingencies reflect primarily amounts owed by the Company's Brazilian subsidiary pursuant to refinancing
programs in country.
11. RELATED PARTY TRANSACTIONS
Payables to Thermo and other affiliates related to normal purchase transactions were $0.6 million and $0.3 million as of
December 31, 2020 and 2019, 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 expenses charged to the Company were $0.6 million, $0.5 million, and $1.5 million for the periods ended December 31,
2020, 2019 and 2018, respectively.
In February 2019, the Company entered into a lease agreement with Thermo Covington, LLC for the Company's
headquarters office. Annual lease payments started at $1.4 million per year, increasing at a rate of 2.5% per year, for a lease
term of ten years. During the twelve months ended December 31, 2020 and 2019, the Company incurred lease expense of
$1.6 million and $1.5 million, respectively, due to Thermo under this lease agreement.
On February 19, 2020, Thermo converted the entire principal balance outstanding under the Loan Agreement resulting in the
issuance of 200.1 million shares of common stock.
In July 2019, the Company entered into a Subordinated Loan Agreement, effective June 28, 2019, with Thermo and certain
unaffiliated parties. Thermo's participation in the Subordinated Loan Agreement was $53.8 million and $3.4 million of interest
had accrued prior to its pay down. In November 2019, the Company entered into the Second Lien Facility Agreement. Thermo's
participation in the Second Lien 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 Second
Lien Facility Agreement was approximately $14.5 million, of which $13.4 million was accrued during the twelve months ended
December 31, 2020. In connection with the issuance of the Second Lien Facility Agreement, the holders received warrants to
purchase shares of voting common stock, of which Thermo received 59.5 million warrants with an exercise price of $0.38 per
share. As of December 31, 2020, approximately 50.0 million warrants remain outstanding and expire on March 31, 2021.
Additionally, the First Lien Facility Agreement requires Thermo to maintain minimum and maximum ownership levels in
the Company's common stock.
The Company has a Strategic Review Committee that is required to remain in existence for as long as Thermo and its
affiliates beneficially own forty-five percent (45%) or more of Globalstar’s outstanding common stock. To the extent permitted
by applicable law, the Strategic Review Committee has exclusive responsibility for the oversight, review and approval of,
among other things and subject to certain exceptions, any acquisition by Thermo and its affiliates of additional newly-issued
securities of the Company and any transaction between the Company and Thermo and its affiliates with a value in excess
of $250,000.
See Note 6: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt and financing
transactions with Thermo.
84
12. PENSIONS AND OTHER EMPLOYEE BENEFITS
Defined Benefit Plan
Until June 1, 2004, substantially all Old and New Globalstar employees and retirees who participated and/or met the vesting
criteria for the plan were participants in the Retirement Plan of Space Systems/Loral (the "Loral Plan"), a defined benefit
pension plan. The accrual of benefits in the Old Globalstar segment of the Loral Plan was curtailed, or frozen, by the
administrator of the Loral Plan in 2003. Prior to 2003, benefits for the Loral Plan were generally based upon contributions,
length of service with the Company and age of the participant. On June 1, 2004, the assets and frozen pension obligations of the
Globalstar Segment of the Loral Plan were transferred into a new Globalstar Retirement Plan (the "Globalstar Plan"). The
Globalstar Plan remains frozen and participants are not currently accruing benefits beyond those accrued as of October 23,
2003. The Company's funding policy is to fund the Globalstar Plan in accordance with the Internal Revenue Code and
regulations.
In each of December 2020 and 2019, the Company settled a portion of the pension liability related to retirees and terminated
vested employees in the Globalstar Plan as a de-risking strategy. The total settlements for 2020 and 2019 were $7.7 million and
$1.7 million, respectively, and were paid out through the assets held in the Globalstar Plan. The settlements resulted in a
reduction to the projected benefit obligation and a corresponding decrease to plan assets as of both December 31, 2020 and
2019. Additionally, in accordance with ASC 715 Compensation — Retirement Benefits, the Company recognized losses totaling
$2.1 million and $0.5 million, respectively, and these losses are included in other income (expense) in its consolidated
statement of operations during the twelve-month periods ended December 31, 2020 and 2019 associated with these settlements.
The losses represent the pro rata portion of actuarial losses that were previously deferred in other comprehensive income.
Defined Benefit Pension Obligation and Funded Status
Below is a reconciliation of projected benefit obligation, plan assets and the funded status of the Company’s defined benefit
plan (in thousands):
Year Ended December 31,
2020
2019
$
16,509 $
17,150
176
521
671
(7,669)
(1,029)
195
706
1,147
(1,660)
(1,029)
9,179 $
16,509
12,381 $
1,131
715
(7,669)
(1,029)
5,529 $
(3,650) $
12,661
2,179
230
(1,660)
(1,029)
12,381
(4,128)
$
$
$
$
Change in projected benefit obligation:
Projected benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss
Settlement
Benefits paid
Projected benefit obligation, end of year
Change in fair value of plan assets:
Fair value of plan assets, beginning of year
Return on plan assets
Employer contributions
Settlement
Benefits paid
Fair value of plan assets, end of year
Funded status, end of year-net liability
85
Net Benefit Cost and Amounts Recognized
Components of the net periodic benefit cost of the Company’s defined benefit pension plan were as follows (in thousands):
Net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized net actuarial loss
Settlement
Total net periodic benefit cost
Year Ended December 31,
2020
2019
2018
$
176 $
521
(793)
300
2,075
195 $
706
(794)
404
455
$
2,279 $
966 $
194
663
(901)
374
—
330
Amounts recognized in the consolidated balance sheet were as follows (in thousands):
December 31,
2020
2019
Amounts recognized:
Funded status recognized in other non-current liabilities
Net actuarial loss recognized in accumulated other comprehensive loss
Net amount recognized in retained deficit
$
$
(3,650) $
2,483
(1,167) $
(4,128)
4,525
397
The estimated net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit
cost in 2021 is $0.2 million. No amounts are expected to be amortized from accumulated other comprehensive loss into net
periodic benefit cost in 2021 related to prior service costs or net transition obligations.
Assumptions
The weighted-average assumptions used to determine the benefit obligation and net periodic benefit cost were as follows:
For the Year Ended December 31,
2019
2018
2020
Benefit obligation assumptions:
Discount rate
Rate of compensation increase
Net periodic benefit cost assumptions:
Discount rate
Expected rate of return on plan assets
Rate of compensation increase
2.50 %
N/A
3.28 %
6.50 %
N/A
3.28 %
N/A
4.25 %
6.50 %
N/A
4.25 %
N/A
3.63 %
6.50 %
N/A
The assumptions, investment policies and strategies for the Globalstar Plan are determined by the Globalstar Plan
Committee. The Globalstar Plan Committee is responsible for ensuring the investments of the plans are managed in a prudent
and effective manner. Amounts related to the pension plan are derived from actuarial and other assumptions, including discount
rates, mortality, expected rate of return, participant data and termination. The Company reviews assumptions on an annual basis
and makes adjustments as considered necessary.
The expected long-term rate of return on pension plan assets is selected by taking into account the expected duration of the
projected benefit obligation for the plan, the asset mix of the plan and the fact that the plan assets are actively managed to
mitigate risk. Discount rates are determined annually based on the Plan administrator’s yield curve index, which considers
expected benefit payments and is discounted with rates from the yield curve to determine a single equivalent discount rate.
86
Plan Assets and Investment Policies and Strategies
The plan assets are invested in various mutual funds which have quoted prices. The plan has a target allocation. On a
weighted-average basis, target allocations for equity securities range from 50% to 60%, for debt securities 25% to 50% and for
other investments 0% to 15%. The defined benefit pension plan asset allocations as of the measurement date presented as a
percentage of total plan assets were as follows:
Equity securities
Debt securities
Total
December 31,
2020
2019
55 %
45
100 %
55 %
45
100 %
The fair values of the Company’s pension plan assets by asset category were as follows (in thousands):
December 31, 2020
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total
2,426 $
— $
2,426 $
619
1,553
931
—
—
—
619
1,553
931
5,529 $
— $
5,529 $
—
—
—
—
—
December 31, 2019
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Total
5,501 $
1,366
3,725
1,789
12,381 $
— $
—
—
—
— $
Significant
Unobservable
Inputs (Level 3)
—
—
—
—
—
5,501 $
1,366
3,725
1,789
12,381 $
United States equity securities
International equity securities
Fixed income securities
Other
Total
United States equity securities
International equity securities
Fixed income securities
Other
Total
Accumulated Benefit Obligation
$
$
$
$
The accumulated benefit obligation of the defined benefit pension plan was $9.2 million and $16.5 million at December 31,
2020 and 2019, respectively.
87
Benefits Payments and Contributions
The benefit payments to retirees over the next ten years are expected to be paid as follows (in thousands):
2021
2022
2023
2024
2025
2026 - 2030
$
502
505
497
510
526
2,605
For 2020 and 2019, the Company contributed $0.7 million and $0.2 million, respectively, to the Globalstar Plan. For 2021,
the Company's expected contributions to the Globalstar Plan will be $0.5 million.
401(k) Plan
The Company has a defined contribution employee savings plan, or “401(k),” which provides that the Company may match
the contributions of participating employees up to a designated level. Under this plan, the matching contributions were
approximately $0.6 million for each of 2020, 2019, and 2018.
13. TAXES
The components of income tax expense were as follows (in thousands):
Current:
Federal tax
State tax
Foreign tax
Total
Deferred:
Federal and state tax
Foreign tax
Total
Income tax expense
Year Ended December 31,
2019
2020
2018
$
$
— $
54
248
302
360
—
360
662 $
— $
56
94
150
395
—
395
545 $
—
30
95
125
—
—
—
125
U.S. and foreign components of income (loss) before income taxes are presented below (in thousands):
U.S. income (loss)
Foreign income (loss), net
Total income (loss) before income taxes
Year Ended December 31,
2019
2020
2018
$
$
(82,740) $
(26,237)
(108,977) $
47,545 $
(31,676)
15,869 $
28,699
(35,090)
(6,391)
As of December 31, 2020 and 2019, the Company had cumulative U.S. and foreign net operating loss ("NOL")
carryforwards for income tax reporting purposes of approximately $1.8 billion and $0.2 billion, respectively. The vast majority
of these NOL carryforwards were generated prior to 2018 and expire from 2021 through 2040, with less than 1% expiring prior
to 2025, and the remaining NOL carryforwards do not expire.
88
The components of net deferred income tax assets were as follows (in thousands):
Federal and foreign NOL and credit carry-forwards
Property and equipment and other long-term assets
Reserves and disallowed interest
Deferred tax assets before valuation allowance
Valuation allowance
Net deferred income tax liability
December 31,
2020
2019
$
507,105 $
475,171
(133,086)
(153,049)
6,349
380,368
2,310
324,432
(381,123)
(324,827)
$
(755) $
(395)
The change in the valuation allowance during 2020 of $56.3 million was due to the Company providing valuation
allowances against all of the tax benefit generated from its consolidated net losses. Due to the remeasurement of the state
impact on U.S. deferred tax assets and the Company’s reconciliation of various deferred tax assets to reflect the remaining
cumulative differences, the Company has remeasured all U.S. deferred tax assets resulting in an increase in both the deferred
tax asset and the associated valuation allowance. The change in property and equipment and other long-term assets was driven
primarily by depreciation due to the difference between tax and book depreciable lives. Due to the limitation on utilization of
state NOLs, the Company recorded deferred tax liabilities of $0.8 million and $0.4 million as of December 31, 2020 and 2019.
The actual provision for income taxes differs from the statutory U.S. federal income tax rate as follows (in thousands):
Provision at U.S. statutory rate of 21%
State income taxes, net of federal benefit
Change in valuation allowance (excluding impact of foreign exchange rates)
Effect of foreign income tax at various rates
Permanent differences
Net change in permanent items due to provision to tax return
Adjustment to reserved deferred assets
Adjustment to state deferred rate
Other (including amounts related to prior year tax matters)
Total
Tax Audits
Year Ended December 31,
2019
2018
2020
$
$
(22,885) $
(1,386)
61,540
(53)
5,809
1,914
(48,485)
4,200
8
662 $
3,333 $
1,055
(89,998)
(84)
7,942
2,475
62,085
13,639
98
545 $
(1,349)
890
(8,228)
(237)
7,031
1,813
—
—
205
125
The Company operates in various U.S. and foreign tax jurisdictions. The process of determining its anticipated tax liabilities
involves many calculations and estimates which are inherently complex. The Company believes that it has complied in all
material respects with its obligations to pay taxes in these jurisdictions. However, its position is subject to review and possible
challenge by the taxing authorities of these jurisdictions. If the applicable taxing authorities were to challenge successfully its
current tax positions, or if there were changes in the manner in which the Company conducts its activities, the Company could
become subject to material unanticipated tax liabilities. It may also become subject to additional tax liabilities as a result of
changes in tax laws, which could in certain circumstances have a retroactive effect.
In July 2018, the Company's Canadian subsidiary was notified that its income tax returns for the years ended October 31,
2015 and 2016 had been selected for audit. The Company has provided all requested information to the Canada Revenue
Agency ("CRA") and is working with the CRA to complete the audit.
Except for the audit noted above, neither the Company nor any of its subsidiaries is currently under audit by the IRS or by
any state income tax jurisdiction in the United States. The Company's corporate U.S. tax returns for 2017 and subsequent years
remain subject to examination by tax authorities. State income tax returns are generally subject to examination for a period of
three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination
by various states for a period of up to one year after formal notification to the states.
89
In the Company's international tax jurisdictions, numerous tax years remain subject to examination by tax authorities,
including tax returns for 2012 and subsequent years in most of the Company's international tax jurisdictions.
There are no unrecognized tax benefits as of December 31, 2020 and December 31, 2019.
Other
As of December 31, 2020, the Company had not provided foreign withholding taxes on approximately $3.0 million of
undistributed earnings from certain foreign subsidiaries indefinitely invested outside the U.S.
In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income
("GILTI") provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on
tangible assets of foreign corporations. The Company elected to account for GILTI tax in the period in which it is incurred, and
therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended
December 31, 2020 and 2019.
As previously discussed in Note 1: Summary of Significant Accounting Policies, the CARES Act was enacted in March
2020 to provide economic relief to eligible business and individuals impacted by COVID-19. The Company evaluated the
impact the CARES Act legislation has on its liquidity and tax positions. The net impact to the Company's NOL carryforwards
as of December 31, 2019 was $14.8 million due to the change in the interest limitations permitted under the CARES Act.
90
14. (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share is computed by dividing (loss) income available to common stockholders by the weighted
average number of shares of common stock outstanding during the period. 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 (loss)
income. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their
inclusion would be dilutive. The effect of potentially dilutive common shares for the Company's convertible notes are
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 calculation of basic and diluted (loss) earnings per share and reconciles basic weighted
average shares to diluted weighted average shares of common stock outstanding for the periods indicated (in thousands):
Net (loss) income
Effect of dilutive securities:
2013 8.00% Notes
Loan Agreement with Thermo
Year ended December 31,
2020
2019
2018
$
(109,639) $
15,324
$
(6,516)
—
—
(127)
(125,880)
—
—
Loss to common stockholders plus assumed conversions
$
(109,639) $
(110,683) $
(6,516)
Weighted average common shares outstanding:
Basic shares outstanding
1,642,359
1,450,768
1,269,548
Incremental shares from assumed exercises, conversions and
other issuance of:
Stock options, restricted stock, restricted stock units and
Employee Stock Purchase Plan
2013 8.00% Notes
Loan Agreement with Thermo
Warrants issued in connection with Second Lien Facility
Agreement
Diluted shares outstanding
Net (loss) income per common share:
—
—
—
—
1,642,359
4,743
2,044
195,805
1,831
1,655,191
—
—
—
—
1,269,548
Basic
Diluted
$
$
(0.07) $
(0.07) $
0.01
$
(0.07) $
(0.01)
(0.01)
For the years ended December 31, 2020 and 2018, 4.2 million shares and 201.7 million shares, respectively, of potential
common stock were excluded from diluted shares outstanding because the effects of potentially dilutive securities would be
anti-dilutive. Additionally, as of December 31, 2020, 115.0 million warrants issued to the lenders of the Second Lien Facility
Agreement were outstanding and not reflected in the 4.2 million potentially dilutive security amount above as they were out of
the money as of December 31, 2020.
15. STOCK COMPENSATION
The Company’s Equity Incentive Plan (“Equity Plan”) provides long-term incentives to the Company’s key employees,
including officers, directors, consultants and advisers (“Eligible Participants”), and is designed to align stockholder and
employee interests. Under the Equity Plan, the Company may grant incentive stock options, nonstatutory stock options,
restricted stock awards, restricted stock units, and other stock based awards or any combination thereof to Eligible Participants.
The Compensation Committee of the Company’s Board of Directors establishes the terms and conditions of any awards granted
under the plans. As of December 31, 2020 and 2019, the number of shares of common stock that was authorized and remained
available for issuance under the Equity Plan was 26.7 million and 34.4 million, respectively.
91
Stock Options
The Company has granted incentive stock options under the Equity Plan. These options have various vesting terms, but
generally vest in equal installments over three years and expire in ten years. Non-vested options are generally forfeited upon
termination of employment.
The Company recognizes compensation expense for stock option grants over the employee's requisite service period, which
is generally based on the vesting period, based on the fair value at the date of grant using the Black-Scholes option pricing
model. The Company uses historical data, among other factors, to estimate the expected stock price volatility, the expected
option life and the expected forfeiture rate. The market price of common stock has been volatile at times in recent years. The
Company makes judgmental adjustments to project volatility during the expected term of the options, considering, among other
things, historical volatility of the share prices of its peer group and expectations with regard to business conditions that may
impact stock price fluctuations or stability. The Company estimates the expected term considering factors such as historical
exercise patterns and the recipients of the options granted. The risk-free rate is based on the United States Treasury Department
yield curve in effect at the time of grant for the expected life of the option. The Company assumes an expected dividend yield
of zero for all periods. The table below summarizes the assumptions for the indicated periods:
Risk-free interest rate
Expected term of options (years)
Volatility
Weighted average grant-date fair value per share
Year Ended December 31,
2019
2020
2018
1.7 %
5
72 %
2.5 %
5
63 %
$
0.32
$
0.29
$
2% - 3%
5
63 %
0.26
The following table represents the Company’s stock option activity for the year ended December 31, 2020:
Weighted Average
Exercise Price
Shares
7,827,464 $
700,000
(543,296)
7,984,168
1.42
0.54
1.34
1.35
1.45
Outstanding at January 1, 2020
Granted
Forfeited or expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
6,918,029 $
No stock options were exercised during 2020, accordingly, no amounts are shown in the table above. The intrinsic value of a
stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The
aggregate intrinsic value of all outstanding stock options at December 31, 2020 was nearly zero with a remaining contractual
life of 6.0 years. The aggregate intrinsic value of all vested stock options at December 31, 2020 was nearly zero with a
remaining contractual life of 6.2 years.
For the years ended December 31, 2020, 2019 and 2018, the Company recognized $0.3 million, $0.3 million and
$1.1 million, respectively, of compensation expense related to stock options. As of December 31, 2020, unrecognized
compensation expense related to nonvested stock options outstanding was approximately $0.4 million to be recognized over a
weighted-average period of 1.4 years.
The Company adjusts its estimates of expected forfeitures of equity awards based upon its review of recent forfeiture
activity and expected future employee turnover. The Company considers the impact of both pre-vesting forfeitures and post-
vesting cancellations for purposes of evaluating forfeiture estimates. The effect of adjusting the forfeiture rate is recognized in
the period in which the forfeiture estimate is changed.
92
Restricted Stock
Shares of restricted stock generally vest immediately, one year from the grant date, in equal annual installments over three
years or based on performance criteria. Non-vested shares are generally forfeited upon the termination of employment. Holders
of restricted stock awards are entitled to all rights of a stockholder of the Company with respect to the restricted stock,
including the right to vote the shares and receive any dividends or other distributions. Compensation expense associated with
restricted stock is measured based on the grant date fair value of the common stock and is recognized on a straight line basis
over the vesting period. The table below summarizes the weighted average grant date fair value of restricted stock for the
indicated periods:
Weighted average grant date fair value
$
0.36 $
0.46 $
0.49
The following is a rollforward of the activity in restricted stock for the year ended December 31, 2020:
Year Ended December 31,
2019
2020
2018
Nonvested at January 1, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Weighted Average
Grant Date
Fair Value
0.56
0.36
0.48
0.41
0.46
Shares
9,292,800 $
7,894,009
(9,344,341)
(106,860)
7,735,608 $
Included in the non-vested balance at December 31, 2020 are approximately 2.0 million performance-based restricted stock
awards that will vest upon the achievement of certain milestones. For the years ended December 31, 2020, 2019 and 2018, the
Company recognized $4.5 million, $4.3 million and $3.9 million, respectively, of compensation expense related to restricted
stock. The total fair value, as calculated on the day of vesting, of restricted stock awards that vested during 2020, 2019 and
2018 was $3.3 million, $4.1 million, and $3.1 million, respectively. As of December 31, 2020, unrecognized compensation
expense related to unvested restricted stock outstanding was approximately $2.1 million to be recognized over a weighted-
average period of 2.0 years.
Key Employee Bonus Plan
The Company has an annual bonus plan designed to reward designated key employees' efforts to exceed the Company's
financial performance goals for the designated calendar year ("Plan Year"). The bonus pool available for distribution is
determined based on the Company's adjusted EBITDA performance during the Plan Year. The bonus may be paid in cash or the
Company's common stock, as determined by the Compensation Committee and with the consent of our Lenders if paid cash.
For the 2020 Plan Year, the Company's adjusted EBITDA performance was within the bonus payout threshold according to
the plan document. As of December 31, 2020, $1.3 million was accrued on the Company's consolidated balance sheet related to
this bonus payment, which is expected to be made in the form of common stock during the first quarter of 2021.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the “Plan”) which provides eligible employees of the Company with
an opportunity to acquire shares of its common stock at a discount. The maximum aggregate number of shares of common
stock that may be purchased through the Plan is 14.0 million shares. The number of shares that may be purchased through the
Plan will be subject to proportionate adjustments to reflect stock splits, stock dividends, or other changes in the Company’s
capital stock.
The Plan permits eligible employees to purchase shares of common stock during two semi-annual offering periods
beginning on June 15 and December 15 (the “Offering Periods”). Eligible employees may purchase shares of up to 15% of their
total compensation per pay period, but may purchase in any calendar year no more than the lesser of $25,000 in fair market
value of common stock or 500,000 shares of common stock, as measured as of the first day of each applicable Offering Period.
93
The price an employee pays is 85% of the fair market value of common stock. Fair market value is equal to the lesser of the
closing price of a share of common stock on either the first day or the last day of the Offering Period.
For each of 2020 and 2019, the Company received $0.6 million in proceeds related to shares issued under this plan. For the
years ended December 31, 2020, 2019 and 2018, the Company recorded compensation expense of approximately $0.4 million,
$0.5 million and $0.5 million, respectively, which is reflected in marketing, general and administrative expenses. Additionally,
the Company has issued approximately 10.5 million shares through December 31, 2020 related to the Plan.
The fair value of the employees’ stock purchase rights granted under the ESPP was estimated using the Black-Scholes
option pricing model with the following assumptions for the following years:
Year Ended December 31,
2020
2019
Risk-free interest rate
Expected term (months)
Volatility
0.9 %
6
123 %
Weighted average grant-date fair value per share
$
0.18
$
16. ACCUMULATED OTHER COMPREHENSIVE LOSS
2.4 %
6
128 %
0.20
Accumulated other comprehensive loss includes all changes in equity during a period from non-owner sources. The change
in accumulated other comprehensive loss for all periods presented resulted from foreign currency translation adjustments and
minimum pension liability adjustments.
The components of accumulated other comprehensive loss were as follows (in thousands):
Accumulated minimum pension liability adjustment
Accumulated net foreign currency translation adjustment
Total accumulated other comprehensive loss
December 31,
2020
2019
$
$
(2,483) $
(461)
(2,944) $
(4,525)
1,076
(3,449)
For each of the periods ended December 31, 2020 and 2019, the minimum pension liability adjustment in the table above
includes a settlement loss of $2.1 million and $0.5 million, respectively. See further discussion in Note 12: Pensions and Other
Employee Benefits.
No amounts were reclassified out of accumulated other comprehensive income (loss) for the periods shown above.
94
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934
as of December 31, 2020, the end of the period covered by this Report. This evaluation was based on the guidelines established
in Internal Control - Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In designing and evaluating the disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives.
Based on this evaluation, each of our Principal Executive Officer and Principal Financial Officer concluded that as of
December 31, 2020 our disclosure controls and procedures were effective to provide reasonable assurance that information we
are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
We believe that the Consolidated Financial Statements included in this Report fairly present, in all material respects, our
consolidated financial position and results of operations as of and for the year ended December 31, 2020.
(b) Changes in internal control over financial reporting
As of December 31, 2020, our management, with the participation of our Principal Executive Officer and Principal Financial
Officer, evaluated our internal control over financial reporting. Although our employees have followed remote work
arrangements caused by COVID-19, these circumstances have not adversely affected the Company's ability to maintain
operations, including adequate financial reporting systems, internal control over financial reporting and disclosure controls and
procedures. Additionally, in April 2020, we implemented a new billing system which resulted in our subscribers migrating to
the new system. As a result of this migration, we planned and implemented changes to our internal control over financial
reporting, none of which adversely affected the Company's internal control over financial reporting. Based on that evaluation,
our Principal Executive Officer and Principal Financial Officer concluded that no changes in our internal control over financial
reporting occurred during the year ended December 31, 2020 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Management's Annual Report on Internal Control over Financial Reporting
Management of the Company, including our Principal Executive Officer and Principal Financial Officer, is responsible for
establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of
the Securities Exchange Act of 1934, as amended. The Company's internal controls were designed to provide reasonable
assurance as to the reliability of our financial reporting and the preparation and presentation of the Consolidated Financial
Statements for external purposes in accordance with accounting principles generally accepted in the United States and includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
The Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the
criteria in Internal Control - Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the
Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design
effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Through this
evaluation, management did not identify any material weakness in the Company's internal control over financial reporting.
There are inherent limitations in the effectiveness of any system of internal control over financial reporting; however, based on
95
the evaluation, management has concluded the Company's internal control over financial reporting was effective as of
December 31, 2020.
The Company’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP,
an independent registered public accounting firm, as stated in their report, which appears herein.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference from the applicable information set forth in "Executive
Officers," "Election of Directors," "Information about the Board of Directors and its Committees," and "Security Ownership of
Directors and Executive Officers - Section 16(a) Beneficial Ownership Reporting Requirements" which will be included in our
definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC, and Part I, Item 1. Business -
Additional Information in this Report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from the applicable information set forth in
"Compensation of Executive Officers", "Compensation of Directors" and "2020 Pay Ratio" which will be included in our
definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference from the applicable information set forth in "Security
Ownership of Principal Stockholders and Management" and "Equity Compensation Plan Information" which will be included in
our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the applicable information set forth in "Other
Information - Related Person Transactions" and "Information about the Board of Directors and its Committees" which will be
included in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference from the applicable information set forth in "Other
Information - Globalstar's Independent Registered Accounting Firm" which will be included in our definitive Proxy Statement
for our 2021 Annual Meeting of Stockholders to be filed with the SEC.
96
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Report:
(1) Financial Statements and Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets at December 31, 2020 and 2019
Consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of stockholders’ equity for the years ended December 31, 2020, 2019 and 2018
Consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is in the financial statements or
notes thereto.
(3) Exhibits
See Exhibit Index
97
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 4, 2021
GLOBALSTAR, INC.
By:
/s/ David B. Kagan
David B. Kagan
Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints David B. Kagan and Rebecca S. Clary, jointly and severally, his or her attorney-in-fact, with the power of substitution,
for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying
and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated as of March 4, 2021.
Signature
/s/ David B. Kagan
David B. Kagan
/s/ Rebecca S. Clary
Rebecca S. Clary
/s/ James Monroe III
James Monroe III
/s/ William A. Hasler
William A. Hasler
/s/ James F. Lynch
James F. Lynch
/s/ Michael J. Lovett
Michael J. Lovett
/s/ Keith O. Cowan
Keith O. Cowan
/s/ Benjamin G. Wolff
Benjamin G. Wolff
/s/ Timothy E. Taylor
Timothy E. Taylor
Title
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
98
Exhibit
Number
2.1*
3.1*
3.2*
4.1*
4.2*
4.3
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
Description
EXHIBIT INDEX
Agreement and Plan of Merger dated as of April 24, 2018 by and among Globalstar, Inc., GBS Acquisitions, Inc.,
Thermo Acquisitions, Inc., Stockholders of Thermo Acquisitions, Inc. and Thermo Development, Inc. (Exhibit
2.1 to Form 8-K filed April 25, 2018)
Corrected Second Amended and Restated Certificate of Incorporation of Globalstar, Inc. (Exhibit 3.1 to Form 8-K
filed June 19, 2019)
Fourth Amended and Restated Bylaws of Globalstar, Inc. (Exhibit 3.1 to Form 8-K filed on April 15, 2019)
Indenture between Globalstar, Inc. and U.S. Bank, National Association as Trustee dated as of April 15, 2008
(Exhibit 4.1 to Form 8-K filed April 16, 2008)
Fourth Supplemental Indenture between Globalstar, Inc. and U.S. Bank, National Association as Trustee dated as
of May 20, 2013, including Form of Global 8% Convertible Senior Note due 2028 (Exhibit 4.1 to Form 8-K filed
May 20, 2013)
Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
Amended and Restated Loan Agreement between Globalstar, Inc., and Thermo Funding Company LLC dated as
of July 31, 2013 (Exhibit 10.4 to Form 8-K filed August 22, 2013)
Common Stock Purchase Agreement dated as of June 30, 2017 between Globalstar, Inc. and Thermo Funding II
LLC (Exhibit 10.3 to Current Report on Form 8-K filed July 7, 2017)
Voting Agreement dated as of April 24, 2018 (Exhibit 10.1 to Form 8-K filed on April 25, 2018)
Termination of Agreement and Plan of Merger dated as of July 31, 2018 (Exhibit 10.1 to Form 8-K filed on
August 1, 2018)
Settlement Agreement dated December 14, 2018 (Exhibit 10.1 to form 8-K filed December 17, 2018)
Lease Agreement by and between Globalstar, Inc. and Thermo Covington, LLC dated February 1, 2019 (Exhibit
10.1 to Form 10-Q filed May 2, 2019)
Form of Indemnification Agreement between Globalstar, Inc. and its Directors dated February 26, 2019 (Exhibit
10.50 to Form 10-K filed February 28, 2019)
Subordinated Loan Agreement Dated as of July 2, 2019 by and among Globalstar, Inc. and Other Lenders
(Exhibit 10.1 to Form 10-Q filed August 9, 2019)
Fourth Global Amendment and Restatement Agreement dated as of November 26, 2019 between Globalstar, Inc.,
Thermo Funding Company LLC, BNP Paribas and the other lenders thereto Amendment and Restatement
Agreement dated as of November 26, 2019 between Globalstar, Inc., Thermo Funding Company LLC, BNP
Paribas and the other lenders thereto (Exhibit 10.37 to Form 10-K filed February 28, 2020)
Fourth Amended and Restated Facility Agreement dated as of November 26, 2019 between Globalstar, Inc., BNP
Paribas and the other lenders party thereto (Exhibit 10.38 to Form 10-K filed February 28, 2020)
Second Lien Facility Agreement dated as of November 26, 2019 between Globalstar, Inc., Global Loan Agency
Services Limited, GLAS Trust Corporation Limited and other lenders thereto (Exhibit 10.39 to Form 10-K filed
February 28, 2020)
Form of Common Stock Purchase Warrant dated November 27, 2019 between Globalstar, Inc. and other lenders
thereto (Exhibit 10.40 to Form 10-K filed February 28, 2020)
Registration Rights Agreement dated November 26, 2019 between Globalstar, Inc. and other lenders thereto
(Exhibit 10.41 to Form 10-K filed February 28, 2020)
Intercreditor Agreement dated November 26, 2019 between BNP Paribas, Global Loan Agency Services Limited,
The Senior Lenders, The Second Lien Lenders, Globalstar, Inc., BNP Paribas, GLAS Trust Corporation Limited
and other lenders thereto (Exhibit 10.42 to Form 10-K filed February 28, 2020)
Third Amended and Restated Globalstar, Inc. 2006 Equity Incentive Plan (Appendix A to Definitive Proxy
Statement filed April 16, 2019)
Amended and Restated Employee Stock Purchase Plan (Appendix B to Definitive Proxy Statement filed April 16,
2019)
Form of Restricted Stock Units Agreement for Non-U.S. Designated Executives under the Globalstar, Inc. 2006
Equity Incentive Plan (Exhibit 10.2 to Form 10-Q filed August 14, 2007)
99
10.18*
10.19*
10.20*
Form of Notice of Grant and Restricted Stock Agreement under the Globalstar, Inc. 2006 Equity Incentive Plan
(Exhibit 10.29 to Form 10-K filed March 17, 2008)
Form of Non-Qualified Stock Option Award Agreement for Members of the Board of Directors under the
Globalstar, Inc. 2006 Equity Incentive Plan (Exhibit 10.1 to Form 8-K filed November 20, 2008)
Form of Stock Option Award Agreement for use with executive officers (Exhibit 10.45 to Form 10-K filed March
31, 2011)
10.21*†
2018 Key Employee Bonus Plan (Exhibit 10.54 to Form 10-K filed February 23, 2018)
10.22*†
2019 Key Employee Bonus Plan (Exhibit 10.52 to Form 10-K Filed February 28, 2020)
10.23*††
2020 Key Employee Bonus Plan (Exhibit 10.1 to Form 10-Q filed November 5, 2020)
10.24††
2021 Key Employee Bonus Plan
10.25*
10.26*
16.1*
21.1
23.1
23.2
24.1
31.1
31.2
32.1
32.2
Letter Agreement with David Kagan dated November 27, 2017 (Exhibit 10.55 to Form 10-K filed February 23,
2018)
Letter Agreement with David Kagan dated September 4, 2018 (Exhibit 10.59 to Form 10-K filed February 28,
2019)
Letter from Letter from Crowe LLP addressed to the Securities and Exchange Commission (Exhibit 16.1 to Form
8-K Filed March 5, 2020) LLP addressed to the Securities and Exchange Commission (Exhibit 16.1 to Form 8-K
Filed March 5, 2020)
Subsidiaries of Globalstar, Inc.
Consent of Ernst & Young LLP
Consent of Crowe LLP
Power of Attorney (included as part of page titled "Signatures")
Section 302 Certification of Principal Executive Officer of Globalstar, Inc.
Section 302 Certification of Principal Financial Officer of Globalstar, Inc.
Section 906 Certification of Principal Executive Officer of Globalstar, Inc.
Section 906 Certification of Principal Financial Officer of Globalstar, Inc.
101.INS
XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
*
†
††
Incorporated by reference.
Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the
Commission. The omitted portions have been filed with the Commission.
† Portions of the exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
100
Exhibit 31.1
Certification of Principal Executive Officer of Globalstar, Inc.
Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
I, David B. Kagan, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Globalstar, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my
conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 4, 2021
By:
/s/ David B. Kagan
David B. Kagan
Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2
Certification of Principal Financial Officer of Globalstar, Inc.
Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
I, Rebecca S. Clary, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Globalstar, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my
conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 4, 2021
By:
/s/ Rebecca S. Clary
Rebecca S. Clary
Chief Financial Officer (Principal Financial Officer)
Certification of Principal Executive Officer Under Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code), the undersigned officer of Globalstar, Inc. (the “Company”), does hereby certify that:
This annual report on Form 10-K for the year ended December 31, 2020 of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K
fairly presents, in all material respects, the financial condition and results of operations of the Company.
Exhibit 32.1
March 4, 2021
By:
/s/ David B. Kagan
David B. Kagan
Chief Executive Officer (Principal Executive Officer)
Certification of Principal Financial Officer Under Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code), the undersigned officer of Globalstar, Inc. (the “Company”), does hereby certify that:
This annual report on Form 10-K for the year ended December 31, 2020 of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K
fairly presents, in all material respects, the financial condition and results of operations of the Company.
Exhibit 32.2
March 4, 2021
By:
/s/ Rebecca S. Clary
Rebecca S. Clary
Chief Financial Officer (Principal Financial Officer)
Stock Performance Graph
The following graph shows a comparison from December 31, 2015 through December 31, 2020 of cumulative
total return for our Common Stock, the NASDAQ Telecommunications Index, the S&P 500 Stock Index and the
Dow Jones Industrial Average Index, assuming $100 had been invested in each on December 31, 2015. Such returns
are based on historical results and are not intended to suggest future performance. The calculation of cumulative
total return is based on the change in stock price and assumes reinvestment of dividends for the NASDAQ
Telecommunications Index and the Dow Jones Industrial Average Index. We have never paid dividends on our
Common Stock and have no present plans to do so.
Globalstar, Inc. Common Stock Performance Graph
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$-
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
Globalstar, Inc.
S&P 500 Stock Index
Nasdaq Telecommunications Index
Dow Jones Industrial Average Index
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Executive Officers
David B. Kagan
Chief Executive Officer
Rebecca S. Clary
Vice President, Chief Financial
Officer
L. Barbee Ponder IV
General Counsel and Vice
President, Regulatory Affairs
Corporate Secretary
Richard S. Roberts
Corporate Secretary
Common Stock
The Company’s voting
common stock is traded on the
NYSE American under the
symbol “GSAT.” As of March
29, 2021, the Company had
1,682,137,512 voting shares
outstanding and 203 holders of
record.
Executive Office
Globalstar, Inc.
1351 Holiday Square Blvd.
Covington, LA 70433
USA
(985) 335-1500
Company Home Page
www.globalstar.com
Stockholder Information
For further information about
the Company, hard copies of
this Report, SEC filings, and
other published corporate
information, please visit the
Company’s website noted
above.
Transfer Agent
Computershare
PO BOX 505000
Louisville, KY 40233-5000
(800) 962-4284
www.computershare.com
Independent Auditors
Ernst & Young, LLP
New Orleans, LA
Legal Counsel
Taft Stettinius & Hollister LLP
Cincinnati, OH
Investor Relations
Denise Davila
Corporate Communications
Manager
Board of Directors
James Monroe III
Executive Chairman
of the Board
Thermo Companies
James F. Lynch
Director
Thermo Companies
FiberLight LLC
William A. Hasler
Director
Ataraxis Biosciences and
Rubicon Ltd.
Benjamin G. Wolff
Director
Sarcos Robotics
Keith O. Cowan
Director
Cowan Consulting
Corporation LLC
Timothy E. Taylor
Director
Globalstar, Inc.
Thermo Companies
Michael J. Lovett
Director
Eagle River Partners LLC
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