Edgar Filing: Globalstar, Inc.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2016



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

For the transition period from to

Commission file number 001-33117

GLOBALSTAR, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		41-2116508
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

300 Holiday Square Blvd.

Covington, Louisiana 70433

(Address of principal executive offices and zip code)

Registrant's Telephone Number, Including Area Code: (985) 335-1500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer ¨

Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of July 28, 2016, 946,270,691 shares of voting common stock and 134,008,656 shares of nonvoting common stock were outstanding. Unless the context otherwise requires, references to common stock in this Report mean the Registrant’s voting common stock.

FORM 10-Q

GLOBALSTAR, INC.

TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	40

Item 4.	Controls and Procedures.	41

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	41

Item 1A.	Risk Factors.	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	42

Item 3.	Defaults Upon Senior Securities.	42

Item 4.	Mine Safety Disclosures.	42

Item 5.	Other Information.	42

Item 6.	Exhibits.	42

Signatures		43

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Revenue:
Service revenues	$	20,970		$	18,616		$	39,719		$	35,723
Subscriber equipment sales	4,116			4,407			7,203			8,322
Total revenue	25,086			23,023			46,922			44,045
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	7,937			8,027			15,528			15,461
Cost of subscriber equipment sales	2,886			2,983			5,064			6,114
Marketing, general and administrative	11,450			10,159			20,060			18,755
Depreciation, amortization, and accretion	19,224			19,271			38,379			38,317
Total operating expenses	41,497			40,440			79,031			78,647
Loss from operations	(16,411		)	(17,417		)	(32,109		)	(34,602		)
Other income (expense):
Loss on extinguishment of debt	—			(2,189		)	—			(2,254		)
Loss on equity issuance	(2,075		)	(2,912		)	(1,923		)	(2,912		)
Interest income and expense, net of amounts capitalized	(9,049		)	(9,244		)	(18,154		)	(17,761		)
Derivative gain	40,499			237,087			39,155			129,222
Other	685			(452		)	(76		)	3,681
Total other income (expense)	30,060			222,290			19,002			109,976
Income (loss) before income taxes	13,649			204,873			(13,107		)	75,374
Income tax expense (benefit)	(450		)	106			(259		)	334
Net income (loss)	$	14,099		$	204,767		$	(12,848	)	$	75,040

Other comprehensive income (loss):
Foreign currency translation adjustments	(925		)	447			(1,576		)	(843		)
Total comprehensive income (loss)	$	13,174		$	205,214		$	(14,424	)	$	74,197

Net income (loss) per common share:
Basic	$	0.01		$	0.20		$	(0.01	)	$	0.07
Diluted	0.01			0.17			(0.01		)	0.07
Weighted-average shares outstanding:
Basic	1,049,381			1,009,917			1,045,205			1,005,406
Diluted	1,249,672			1,205,450			1,045,205			1,199,182

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

(Unaudited)



	June 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	11,269		$	7,476
Accounts receivable, net of allowance of $4,330 and $5,270, respectively	16,164			14,536
Inventory	9,698			12,023
Prepaid expenses and other current assets	5,030			4,456
Total current assets	42,161			38,491
Property and equipment, net	1,059,019			1,077,560
Restricted cash	37,918			37,918
Prepaid second-generation ground costs	4,165			8,929
Intangible and other assets, net of accumulated amortization of $6,873 and $6,315, respectively	13,497			12,117
Total assets	$	1,156,760		$	1,175,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	38,112		$	32,835
Accounts payable	6,039			8,118
Accrued contract termination charge	19,468			19,121
Accrued expenses	26,955			22,439
Payables to affiliates	240			616
Deferred revenue	25,225			23,902
Total current liabilities	116,039			107,031
Long-term debt, less current portion	540,350			548,286
Employee benefit obligations	4,894			4,810
Derivative liabilities	200,482			239,642
Deferred revenue	6,125			6,413
Debt restructuring fees	20,795			20,795
Other non-current liabilities	11,931			10,907
Total non-current liabilities	784,577			830,853
Commitments and contingent liabilities (Notes 7 and 8)
Stockholders’ equity:
Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at June 30, 2016 and December 31, 2015, respectively	—			—
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at June 30, 2016 and December 31, 2015, respectively	—			—
Voting Common Stock of $0.0001 par value; 1,200,000,000 shares authorized; 946,245,007 and 904,448,226 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	95			90
Nonvoting Common Stock of $0.0001 par value; 400,000,000 shares authorized; 134,008,656 shares issued and outstanding at June 30, 2016 and December 31, 2015	13			13
Additional paid-in capital	1,624,875			1,591,443
Accumulated other comprehensive loss	(6,409		)	(4,833		)
Retained deficit	(1,362,430		)	(1,349,582		)
Total stockholders’ equity	256,144			237,131
Total liabilities and stockholders’ equity	$	1,156,760		$	1,175,015

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(12,848	)	$	75,040
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	38,379			38,317
Change in fair value of derivative assets and liabilities	(39,155		)	(129,222		)
Stock-based compensation expense	1,848			1,472
Amortization of deferred financing costs	4,672			4,667
Provision for bad debts	396			1,900
Noncash interest and accretion expense	5,487			5,712
Loss on extinguishment of debt	—			2,254
Loss on equity issuance	1,923			2,912
Noncash expense related to legal settlement	1,094			—
Unrealized foreign currency gain	(77		)	(3,442		)
Other, net	262			618
Changes in operating assets and liabilities:
Accounts receivable	(2,144		)	(3,652		)
Inventory	2,924			2,562
Prepaid expenses and other current assets	(868		)	(788		)
Other assets	104			(493		)
Accounts payable and accrued expenses	(1,474		)	(63		)
Payables to affiliates	(377		)	(25		)
Other non-current liabilities	50			(429		)
Deferred revenue	805			1,398
Net cash provided by (used in) operating activities	1,001			(1,262		)
Cash flows used in investing activities:
Second-generation network costs (including interest)	(5,307		)	(10,344		)
Property and equipment additions	(6,345		)	(2,325		)
Purchase of intangible assets	(806		)	(1,343		)
Net cash used in investing activities	(12,458		)	(14,012		)
Cash flows provided by (used in) financing activities:
Principal payments of the Facility Agreement	(16,418		)	(3,225		)
Proceeds from issuance of stock to Terrapin	28,500			24,000
Proceeds from issuance of common stock and exercise of options and warrants	3,016			419
Net cash provided by financing activities	15,098			21,194
Effect of exchange rate changes on cash	152			(170		)
Net increase in cash and cash equivalents	3,793			5,750
Cash and cash equivalents, beginning of period	7,476			7,121
Cash and cash equivalents, end of period	$	11,269		$	12,871
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	10,922		$	9,746
Income taxes	127			5


	Six Months Ended
	June 30, 2016			June 30, 2015
Supplemental disclosure of non-cash financing and investing activities:
Increase in capitalized accrued interest for second-generation satellites and ground costs	1,500			995
Increase in accrued second-generation network costs	191			—
Capitalization of the accretion of debt discount and amortization of prepaid financing costs	2,099			1,580
Payments made in convertible notes and common stock	—			735
Principal amount of debt converted into common stock	—			6,491
Reduction of debt discount and issuance costs due to note conversions	—			2,085
Fair value of common stock issued upon conversion of debt	—			26,669
Reduction in derivative liability due to conversion of debt	—			20,008
Fair value of common stock issued to vendor for payment of invoices	—			16,684

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Globalstar, Inc. (“Globalstar” or the “Company”) provides Mobile Satellite Services (“MSS”) including voice and data communications services through its global satellite network. Thermo Capital Partners LLC, through its affiliates (collectively, “Thermo”), is the principal owner and largest stockholder of Globalstar. The Company’s Chairman and Chief Executive Officer controls Thermo. Two other members of the Company's Board of Directors are also directors, officers or minority equity owners of various Thermo entities.

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and footnote disclosures normally in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"); however, management believes the disclosures made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Globalstar Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on February 26, 2016 (the "2015 Annual Report"), and Management's Discussion and Analysis of Financial Condition and Results of Operations herein.

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

These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, condensed consolidated balance sheets, and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the full year or any future period.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB decided to delay the effective date of ASU No. 2014-09. With the one-year deferral, ASU No. 2014-09 is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Additionally, early adoption is now permitted. However, entities reporting under U.S. GAAP are not permitted to adopt the standard earlier than the original effective date of December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which does not change the core principle of the guidance in ASU No. 2014-09 but clarifies the implementation guidance on principal versus agent considerations. The effective date and transition requirements for ASU No. 2016-08 are the same as those of ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, which amends the guidance on accounting for licenses of intellectual property and identifying performance obligations in its new revenue standard. In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, which is intended to reduce the cost and complexity of applying the new revenue standard and result in more consistent application. The Company is currently evaluating the impact that these standards will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of these standards on its ongoing reporting.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU No. 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and retail inventory method (RIM) are excluded from this new guidance. This ASU replaces the concept of market with the single measurement of net realizable value and is intended to create efficiencies for preparers and more closely align U.S. GAAP with IFRS. This ASU is effective for public business entities in fiscal years, and interim periods within those years, beginning after December 15, 2016. Prospective application is required and early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures, but does not expect this ASU to have a material effect on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU. No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU No. 2015-17 simplifies the presentation of deferred taxes on the balance sheet by requiring classification of all deferred tax items as noncurrent including valuation allowances by jurisdiction. The ASU is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company is currently evaluating the impact this standard will have on its financial statements and related disclosures, but does not expect the effect to be material.

In March 2016, the FASB issued ASU No. 2016-02, Leases. The main difference between the provisions of ASU No. 2016-02 and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU No. 2016-02 retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of the standard on its ongoing reporting.

In March 2016, the FASB issued ASU No. 2016-04, Liabilities-Extinguishment of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products. ASU No. 2016-04 contains specific guidance for the derecognition of prepaid stored-value product liabilities within the scope of this ASU. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company does not expect this ASU to have a material effect on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU. No. 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments. ASU No. 2016-06 clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of this standard on its ongoing reporting.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for public business entities for annual and interim periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company has not yet determined the effect of this standard on its ongoing reporting.

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 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 will replace today’s incurred loss approach with an expected loss model for instruments measured at amortized cost. Entities will 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 is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The Company has not yet determined the effect of this standard on its ongoing reporting.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):



	June 30, 2016			December 31, 2015
Globalstar System:
Space component
First and second-generation satellites in service	$	1,211,226		$	1,211,768
Prepaid long-lead items	17,040			17,040
Second-generation satellite, on-ground spare	32,481			32,481
Ground component	48,184			46,870
Construction in progress:
Space component	81			81
Ground component	190,328			177,780
Next-generation software upgrades	8,435			3,440
Other	2,375			2,153
Total Globalstar System	1,510,150			1,491,613
Internally developed and purchased software	14,753			14,492
Equipment	11,996			10,802
Land and buildings	3,343			3,151
Leasehold improvements	1,731			1,671
Total property and equipment	1,541,973			1,521,729
Accumulated depreciation	(482,954		)	(444,169		)
Total property and equipment, net	$	1,059,019		$	1,077,560

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 ground component of construction in progress represents costs (including capitalized interest) associated with the Company's contracts with Hughes Network Systems, LLC ("Hughes") and Ericsson Inc. (“Ericsson”) to complete next-generation upgrades to the Company's ground infrastructure. The Company expects to begin depreciating this asset in the near future. See Note 7: Commitments for further discussion of these contracts.

Amounts included in the Company’s second-generation satellite, on-ground spare balance as of June 30, 2016 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 June 30, 2016, this satellite and the prepaid long-lead items ("LLI") have not been placed into service; therefore, the Company has not started to record depreciation expense for these items.

Pursuant to the Amended and Restated Contract for the construction of Globalstar Satellites for the Second Generation Constellation between the Company and Thales Alenia Space France ("Thales"), dated and executed in June 2009 (the "2009 Contract"), the Company paid €12 million in purchase price plus an additional €3.1 million in procurement costs for the LLI to be procured by Thales on the Company's behalf. The LLI were to be used in the construction of the Phase 3 satellites for the Company. As reflected on the Company's condensed consolidated balance sheets and in the above table, the Company believes that it owns the LLI and that title to them transferred upon payment. The Company has asked Thales to turn over the LLI. Despite historical statements to the contrary, Thales currently disputes the Company's ownership of the LLI and has asserted that the Company released its title to the LLI pursuant to that certain Release Agreement, dated as of June 24, 2012, which is described more fully in Note 8: Contingencies. Thales further asserts that the LLI belong to Thales and that Thales has no obligation to turn over possession of the LLI to the Company. The Company disputes Thales' assertions and is currently considering its rights and remedies to recover the LLI. At this time, the Company cannot predict the outcome related to this dispute, including, without limitation, the likelihood of any settlement or the probability of success with respect to any litigation that the Company may determine to commence with respect to the LLI.

Capitalized Interest and Depreciation Expense

The following table summarizes capitalized interest (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Interest costs eligible to be capitalized	$	11,947		$	10,589		$	23,792		$	20,705
Interest costs recorded in interest income (expense), net	(8,565		)	(8,125		)	(17,144		)	(16,049		)
Net interest capitalized	$	3,382		$	2,464		$	6,648		$	4,656

The following table summarizes depreciation expense (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Depreciation expense	$	19,118	$	19,127	$	38,168	$	38,030

3. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

As required by U.S. GAAP, the Company adopted the provisions of ASU No. 2015-03, Interest - Imputation of Interest - Simplifying the Presentation of Debt Issue Costs during the quarter ended March 31, 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the condensed consolidated balance sheets as a reduction in the carrying amount of the related debt liability, consistent with debt discounts. The Company has applied the provisions of this ASU on a retrospective basis, and therefore, the Company has reduced long-term debt on its condensed consolidated balance sheet as of December 31, 2015 by $57.9 million of deferred financing costs previously reported as assets.

Long-term debt consists of the following (in thousands):



	June 30, 2016						December 31, 2015
	Principal Amount		Unamortized Discount and Deferred Financing Costs		Carrying Value		Principal Amount		Unamortized Discount and Deferred Financing Costs		Carrying Value
Facility Agreement	$	559,429	$	51,702	$	507,727	$	575,846	$	57,829	$	518,017
Thermo Loan Agreement	88,400		31,136		57,264		83,222		32,558		50,664
8.00% Convertible Senior Notes Issued in 2013	16,936		3,465		13,471		16,747		4,307		12,440
Total Debt	664,765		86,303		578,462		675,815		94,694		581,121
Less: Current Portion	38,112		—		38,112		32,835		—		32,835
Long-Term Debt	$	626,653	$	86,303	$	540,350	$	642,980	$	94,694	$	548,286

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

Facility Agreement

On July 31, 2013, the Company entered into a Global Deed of Amendment and Restatement with Thermo, the Company's domestic subsidiaries, a syndicate of bank lenders, including BNP Paribas, Société Générale, Natixis, Credit Agricole Corporate and Investment Bank and Credit Industrial et Commercial, as arrangers, and BNP Paribas, as the security agent and COFACE Agent, providing for the amendment and restatement of its former facility agreement and certain related credit documents effective August 22, 2013 (the amended and restated facility agreement is herein referred to as the "Facility Agreement"). On August 7, 2015, the Company, Thermo, the lenders and their agent entered into a Second Global Amendment and Restatement Agreement (the "2015 GARA").

The Facility Agreement is scheduled to mature in December 2022. As of June 30, 2016, the Facility Agreement was fully drawn. Semi-annual principal repayments began in December 2014. The facility bears interest at a floating rate of LIBOR plus 2.75% through June 2017, increasing by an additional 0.5% each year thereafter to a maximum rate of LIBOR plus 5.75%. Ninety-five percent of the Company’s obligations under the Facility Agreement are guaranteed by COFACE, the French export credit agency. The Company’s obligations under the 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.

The Facility Agreement contains customary events of default and requires that the Company satisfy various financial and non-financial covenants. Pursuant to the terms of the Facility Agreement, the Company has the ability to cure noncompliance with financial covenants with Equity Cure Contributions (as described below) through a date as late as June 2019. If the Company violates any of these covenants and is unable to make a sufficient Equity Cure Contribution or obtain a waiver, it would be in default under the 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. The covenants in the 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. As of June 30, 2016, the Company was in compliance with respect to the covenants of the Facility Agreement.

The compliance calculations of the financial covenants of the Facility Agreement permit inclusion of 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 funded in order to achieve compliance with financial covenants, subject to the conditions set forth in the Facility Agreement. Each Equity Cure Contribution must be made in a minimum amount of $10 million for each measurement period or in the aggregate for all periods until the date that such funding is no longer allowed by the Facility Agreement. In August 2015 and February 2016, the Company drew $15 million and $6.5 million, respectively, under its common stock purchase agreement with Terrapin Opportunity, L.P. ("Terrapin") (the "August 2015 Terrapin Agreement"). The Company used a portion of these funds as an Equity Cure Contribution under the Facility Agreement with respect to the calculation of compliance with financial covenants for the measurement period ended December 31, 2015. In June 2016, the Company drew $22 million under the August 2015 Terrapin Agreement. The Company used these funds as an Equity Cure Contribution under the Facility Agreement with respect to the calculation of compliance with financial covenants for the measurement period ended June 30, 2016. The Company may draw the remaining amounts available under the August 2015 Terrapin Agreement to achieve compliance with certain financial covenants under the Facility Agreement.

The Facility Agreement requires the Company to maintain a total of $37.9 million in a debt service reserve account, which is pledged to secure all of the Company's obligations under the Facility Agreement. The use of these funds is restricted to making principal and interest payments under the Facility Agreement. As of June 30, 2016, the balance in the debt service reserve account, which was established with the proceeds of the loan agreement with Thermo discussed below, was $37.9 million and classified as restricted cash on the Company's condensed consolidated balance sheets.

Thermo Loan Agreement

In connection with the amendment and restatement of the Facility Agreement, the Company amended and restated its loan agreement with Thermo (as amended and restated, the “Loan Agreement”). All obligations of the Company to Thermo under the Loan Agreement are subordinated to all of the Company’s obligations under the Facility Agreement.

The Loan Agreement accrues interest at 12% per annum, which is capitalized and added to the outstanding principal in lieu of cash payments. The Company will make payments to Thermo only when permitted by the Facility Agreement. Principal and interest under the Loan Agreement become due and payable six months after the obligations under the Facility Agreement have been paid in full, or earlier if the Company has a change in control or if any acceleration of the maturity of the loans under the Facility Agreement occurs. As of June 30, 2016, $44.9 million of interest had accrued since 2009 with respect to the Loan Agreement; the Loan Agreement is included in long-term debt on the Company’s condensed consolidated balance sheets.

The Company evaluated the various embedded derivatives within the Loan Agreement (See Note 5: 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 conversion option and the contingent put feature were not deemed clearly and closely related to the Loan Agreement and were separately accounted for as a standalone derivative. The Company recorded this compound embedded derivative liability as a non-current liability on its condensed consolidated balance sheets with a corresponding debt discount, which is netted against the face value of the Loan Agreement.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the maturity of the Loan Agreement using an effective interest rate method. The fair value of the compound embedded derivative liability is marked-to-market at the end of each reporting period, with any changes in value reported in the condensed consolidated statements of operations. The Company determines the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices.

In connection with, and as a condition to the effectiveness of, the 2015 GARA, Thermo and certain of its affiliates executed and delivered to the agent under the Facility Agreement an undertaking (the “Second Thermo Group Undertaking Letter”) in which they agreed that, during the period commencing on the effective date of the 2015 GARA and ending on the later of March 31, 2018 and, if the Company's 8.00% Notes Issued in 2013 shall have been redeemed in full, September 30, 2019 (the “Commitment Period”), under certain circumstances, they will make, or cause to be made, available to the Company cash equity financing in the aggregate amount of up to $30.0 million.

The balance of this commitment is reduced by any cash equity financing received by the Company during the Commitment Period from Thermo or an external equity funding source, including Terrapin, if the Company uses the funds as an Equity Cure Contribution.

Simultaneously with the execution of the 2015 GARA and the Second Thermo Group Undertaking Letter, the Company entered into an Equity Commitment Agreement (the “Equity Agreement”) and the Loan Agreement.

Pursuant to the Equity Agreement, Thermo agreed to make, or cause to be made, available to the Company up to $30.0 million in additional cash equity investments as contemplated by the 2015 GARA and the Second Thermo Group Undertaking Letter. The price per share that Thermo will pay to purchase any shares of the Company's common stock pursuant to this equity commitment will be established using the same method as used to establish the price per share under the August 2015 Terrapin Agreement. If the issuance of shares of voting common stock to Thermo pursuant to the Equity Agreement would constitute a “Change of Control,” “Default” or “Event of Default” under any applicable agreement, the Company will issue instead an equal number of shares of non-voting common stock.

Since the inception of the 2015 GARA, the Company has received cash equity financing in excess of Thermo's equity commitment. This cash equity financing primarily includes draws under the August 2015 Terrapin Agreement in August 2015, February 2016, and June 2016 for $15.0 million, $6.5 million, and $22.0 million, respectively. As a result, Thermo has no remaining cash equity commitment under the Equity Agreement as of June 30, 2016.

All of the transactions between the Company and Thermo and its affiliates were reviewed and approved on the Company's behalf by a Special Committee of its independent directors, who were represented by independent counsel.

8.00% Convertible Senior Notes Issued in 2013

The 8.00% Convertible Senior Notes Issued in 2013 (the "2013 8.00% Notes") initially were convertible into shares of common stock at a conversion price of $0.80 per share of common stock, or 1,250 shares of the Company’s common stock per $1,000 principal amount of the 2013 8.00% Notes, subject to adjustment. The conversion price of the 2013 8.00% Notes is adjusted in the event of certain stock splits or extraordinary share distributions, or as a reset of the base conversion and exercise price pursuant to the terms of the Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee, dated May 20, 2013 (the "Indenture"). Due to common stock issuances by the Company since May 20, 2013 at prices below the then effective conversion rate, the base conversion price (rounded to the nearest cent) has been reduced to $0.73 per share of common stock as of June 30, 2016.

The 2013 8.00% Notes are senior unsecured debt obligations of the Company with no sinking fund. The 2013 8.00% Notes will mature on April 1, 2028, subject to various call and put features, and bear interest at a rate of 8.00% per annum. Interest on the 2013 8.00% Notes is payable semi-annually in arrears on April 1 and October 1 of each year. Interest is paid in cash at a rate of 5.75% per annum and in additional notes at a rate of 2.25% per annum. The Indenture for the 2013 8.00% Notes provides for customary events of default. As of June 30, 2016, the Company was in compliance with respect to the terms of the 2013 8.00% Notes and the Indenture.

Subject to certain conditions set forth in the Indenture, the Company may redeem the 2013 8.00% Notes, with the prior approval of the majority lenders under the Facility Agreement, in whole or in part, at any time on or after April 1, 2018, 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, at the holder’s option, to require the Company to purchase some or all of the 2013 8.00% Notes held by it on each of April 1, 2018 and 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.

Subject to the procedures for conversion and other terms and conditions of the Indenture, a holder may convert its 2013 8.00% Notes at its option at any time prior to the close of business on the business day immediately preceding April 1, 2028, into shares of common stock (or, at the option of the Company, cash in lieu of all or a portion thereof, provided that, under the Facility Agreement, the Company may pay cash only with the consent of the Majority Lenders).

As of June 30, 2016, holders had converted a total of $39.4 million principal amount of the 2013 8.00% Notes, resulting in the issuance of approximately 72.1 million shares of voting common stock. There were no conversions during the three and six month periods ended June 30, 2016. During the three-month period ended June 30, 2015, holders converted a total of $6.3 million principal amount of the 2013 8.00% Notes, resulting in the issuance of approximately 10.4 million shares of voting common stock, and recognition of a loss on extinguishment of debt of $2.2 million. During the six-month period ended June 30, 2015, holders converted a total of $6.5 million principal amount of the 2013 8.00% Notes, resulting in the issuance of approximately 10.9 million shares of voting common stock, and recognition of a loss on extinguishment of debt of $2.3 million.

Holders who convert 2013 8.00% Notes receive conversion shares over a 40-consecutive trading day settlement period. Accordingly, the portion of converted debt is extinguished on an incremental basis over the 40-day settlement period, reducing the Company's outstanding debt balance. As of June 30, 2016, no conversions had been initiated but not yet fully settled.

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 did not deem the conversion option and the contingent put feature to be clearly and closely related to the 2013 8.00% Notes and separately accounted for them as a standalone derivative. The Company recorded this compound embedded derivative liability as a non-current liability on its condensed consolidated balance sheets with a corresponding debt discount which is netted against the face value of the 2013 8.00% Notes.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the first put date of the 2013 8.00% Notes (April 1, 2018) using an effective interest rate method. The Company is marking to market the fair value of the compound embedded derivative liability at the end of each reporting period, with any changes in value reported in the condensed consolidated statements of operations. The Company determines the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices.

Warrants Outstanding

Warrants are outstanding to purchase shares of common stock as shown in the table below:



	Outstanding Warrants		Strike Price
	June 30, 2016	December 31, 2015	June 30, 2016		December 31, 2015
Contingent Equity Agreement ⁽¹⁾	24,571,428	30,191,866	$	0.01	$	0.01
5.0% Warrants ⁽²⁾	—	8,000,000	—		0.32
	24,571,428	38,191,866

(1)

Pursuant to the terms of the Contingent Equity Agreement with Thermo (See Note 9: Related Party Transactions in the Consolidated Financial Statements in the 2015 Annual Report for a description of the Contingent Equity Agreement), the Company issued to Thermo warrants to purchase shares of common stock pursuant to the annual availability fee and subsequent reset provisions in the Contingent Equity Agreement. These warrants were issued between June 2009 and June 2012 and have a five-year exercise period from issuance. As of June 30, 2016, Thermo had exercised warrants to purchase approximately 16.9 million of these shares prior to the expiration of the associated warrants. In June 2016, Thermo exercised warrants to purchase 5.6 million shares of voting common stock for a total purchase price of $0.1 million. The exercise period for the remaining outstanding warrants expires in June 2017.

(2)

In June 2011, the Company issued warrants (the “5.0% Warrants”) to purchase 15.2 million shares of its voting common stock in connection with the issuance of its 5.0% Convertible Senior Unsecured Notes. In June 2016, Thermo exercised all of the remaining warrants outstanding to purchase 8.0 million shares of voting common stock for a total purchase price of $2.5 million. See Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2015 Annual Report for a complete description of the 5.0% Warrants.

Terrapin Opportunity, L.P. Common Stock Purchase Agreement

On December 28, 2012 the Company entered into a common stock purchase agreement with Terrapin pursuant to which the Company, subject to certain conditions, could require Terrapin to purchase up to $30.0 million of shares of voting common stock over the 24-month term following the effectiveness of a resale registration statement, which became effective on August 2, 2013. When the Company made a draw under this Terrapin common stock purchase agreement, it issued Terrapin shares of common stock at a price per share calculated as specified in the agreement. During the six months ended June 30, 2015, the Company drew $24.0 million under the agreement and issued 11.1 million shares of voting common stock to Terrapin at an average price of $2.18 per share. Through the term of this agreement, Terrapin purchased a total of 17.2 million shares of voting common stock at a total purchase price of $30.0 million. No funds remain available under this agreement.

In conjunction with the amendment of the Facility Agreement in August 2015 (as discussed above), the Company entered into a new common stock purchase agreement with Terrapin pursuant to which the Company may require Terrapin to purchase up to $75.0 million of shares of the Company’s voting common stock over the 24-month term following the date of the agreement. From time to time over the 24-month term, in the Company’s discretion, the Company may present Terrapin with up to 24 draw notices requiring Terrapin to purchase a specified dollar amount of shares of voting common stock, based on the price per share per day over ten consecutive trading days (a "Draw Down Period"). The per share purchase price for these shares of voting common stock will equal the daily volume weighted average price of the common stock on each date during the Draw Down Period on which shares are purchased by Terrapin, but not less than a minimum price specified by the Company (a “Threshold Price”), less a discount ranging from 2.75% to 4.00% based on the Threshold Price. In addition, in the Company’s discretion, but subject to certain limitations, the Company may grant to Terrapin the option to purchase additional shares during a Draw Down Period. The Company has agreed not to sell to Terrapin a number of shares of voting common stock that, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in their beneficial ownership of more than 9.9% of the then issued and outstanding shares of voting common stock. As discussed above in this Note 3: Long-Term Debt and Other Financing Arrangements and in Note 9: Related Party Transactions, Thermo committed, under certain conditions, to purchase equity securities of the Company on the same pricing terms as the August 2015 Terrapin Agreement.

In August 2015, the Company drew $15.0 million under the August 2015 Terrapin Agreement and issued 9.3 million shares of voting common stock to Terrapin at an average price of $1.61 per share. In February 2016, the Company drew $6.5 million under the August 2015 Terrapin Agreement and issued 6.4 million shares of voting common stock to Terrapin at an average price of $1.02 per share. In June 2016, the Company drew $22.0 million under the August 2015 Terrapin Agreement and issued 19.5 million

shares of voting common stock to Terrapin at an average price of $1.13 per share. As of June 30, 2016, $31.5 million remained available under the August 2015 Terrapin Agreement. The Company will make additional draws from time to time under the August 2015 Terrapin Agreement to be used as Equity Cure Contributions under the Facility Agreement or for general corporate purposes.

4. DERIVATIVES

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



	June 30, 2016			December 31, 2015
Derivative assets:
Interest rate cap	$	1		$	6
Total derivative assets	$	1		$	6
Derivative liabilities:
Compound embedded derivative with 2013 8.00% Notes	$	(20,420	)	$	(26,203	)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	(180,062		)	(213,439		)
Total derivative liabilities	$	(200,482	)	$	(239,642	)

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



	Three Months Ended						Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Interest rate cap	$	(1	)	$	(6	)	$	(5	)	$	(27	)
Compound embedded derivative with 2013 8.00% Notes	5,335			37,928			5,783			18,892
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	35,165			199,165			33,377			110,357
Total derivative gain	$	40,499		$	237,087		$	39,155		$	129,222

Intangible and Other Assets

Interest Rate Cap

In June 2009, in connection with entering into the Facility Agreement, under which interest accrues at a variable rate, the Company entered into five ten-year interest rate cap agreements. The interest rate cap agreements reflect a variable notional amount at interest rates that provide coverage to the Company for exposure resulting from escalating interest rates over the term of the Facility Agreement. The interest rate cap provides limits on the six-month Libor rate (“Base Rate”) used to calculate the coupon interest on outstanding amounts on the Facility Agreement and is capped at 5.50% should the Base Rate not exceed 6.5%. Should the Base Rate exceed 6.5%, the Company’s Base Rate will be 1% less than the then six-month Libor rate. The Company paid an approximately $12.4 million upfront fee for the interest rate cap agreements. The interest rate cap did not qualify for hedge accounting treatment, and changes in the fair value of the agreements are included in the condensed consolidated statements of operations.

Derivative Liabilities

The Company has identified various embedded derivatives resulting from certain features in the Company’s debt instruments. These embedded derivatives required bifurcation from the debt host agreement. All embedded derivatives that required bifurcation are recorded as a derivative liability on the Company’s condensed consolidated balance sheets with a corresponding debt discount netted against the principal amount of the related debt instrument. The Company accretes the debt discount associated with each derivative liability to interest expense over the term of the related debt instrument using an effective interest rate method. The fair value of each embedded derivative liability is marked-to-market at the end of each reporting period with any changes in value reported in its condensed consolidated statements of operations. Each liability 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 the 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 condensed 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 blend of a Monte Carlo simulation model and market prices.

Compound Embedded Derivative with the Amended and Restated Thermo Loan Agreement

As a result of the conversion option and the contingent put feature within the Thermo Loan Agreement, the Company recorded a compound embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the face value of the Amended and Restated Loan Agreement. The Company determined the fair value of the compound embedded derivative liability using a blend of a Monte Carlo simulation model and market prices.

5. 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 table provides a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):



	June 30, 2016
	(Level 1)		(Level 2)			(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	1		$	—		$	1
Total assets measured at fair value	$	—	$	1		$	—		$	1

Liabilities:
Liability for potential stock issuance to Hughes	$	—	$	(7,418	)	$	—		$	(7,418	)
Compound embedded derivative with 2013 8.00% Notes	—		—			(20,420		)	(20,420		)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—			(180,062		)	(180,062		)
Total liabilities measured at fair value	$	—	$	(7,418	)	$	(200,482	)	$	(207,900	)



	December 31, 2015
	(Level 1)		(Level 2)			(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	6		$	—		$	6
Total assets measured at fair value	$	—	$	6		$	—		$	6

Liabilities:
Liability for potential stock issuance to Hughes	$	—	$	(5,495	)	$	—		$	(5,495	)
Compound embedded derivative with 2013 8.00% Notes	—		—			(26,203		)	(26,203		)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—			(213,439		)	(213,439		)
Total liabilities measured at fair value	$	—	$	(5,495	)	$	(239,642	)	$	(245,137	)

Assets

Interest Rate Cap

The fair value of the interest rate cap is determined using observable pricing inputs including benchmark yields, reported trades, and broker/dealer quotes at the reporting date. See Note 4: Derivatives for further discussion.

Liabilities

Liability for potential stock issuance to Hughes

The Company has one liability classified as Level 2. As described in Note 7: Commitments, the Company agreed to provide downside protection after the issuance of shares of common stock to Hughes in lieu of cash for contract payments in June 2015. This feature requires the Company to issue to Hughes additional shares of common stock equal to the difference, if any, between $15.5 million and the total amount of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on September 30, 2016. The value of this option is calculated using a Black-Scholes pricing model. This liability is marked-to-market at each balance sheet date and through the settlement date.

Derivative Liabilities

The Company has two derivative liabilities classified as Level 3. The Company marks-to-market these liabilities at each reporting date with the changes in fair value recognized in the Company’s condensed consolidated statements of operations. See Note 4: Derivatives for further discussion.

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



	June 30, 2016
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes	100% - 130%	0.5	%	$	0.73	$	1.21
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	40% - 130%	1.3	%	$	0.73	$	1.21



	December 31, 2015
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with 2013 8.00% Notes	75% - 90%	1.1	%	$	0.73	$	1.44
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	50% - 90%	2.1	%	$	0.73	$	1.44

Fluctuation in the Company’s stock price is the primary driver for the changes in the derivative valuations during each reporting period. As the stock price decreases towards the current conversion price for each of the related derivative instruments, the value to the holder of the instrument generally decreases, thereby decreasing the liability on the Company’s condensed consolidated balance sheets. These valuations are sensitive to the weighting applied to each of the simulated values. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the expected volatility of the Company's stock price. Decreases in expected volatility would generally result in a lower fair value measurement.

Probability of a change of control is another significant unobservable input used in the fair value measurement of the Company’s derivative instruments. Subject to certain restrictions in each indenture, the Company’s debt instruments contain certain provisions whereby holders may require the Company to purchase all or any portion of the convertible debt instrument upon a change of control. A change of control will occur upon certain changes in the ownership of the Company or certain events relating to the trading of the Company’s common stock. The simulated fair value of the derivative liabilities above is sensitive to changes in the assumed probabilities of a change of control. Decreases in the assumed probability of a change of control would generally result in a lower fair value measurement.

In addition to the inputs described above, the valuation model used to calculate the fair value measurement of the compound embedded derivatives within the Company’s 2013 8.00% Notes and Thermo Loan Agreement included the following inputs and features: payment in kind interest payments, make whole premiums, a 40-day stock issuance settlement period upon conversion, automatic conversions, and the principal balance of each loan at the balance sheet date. There are also certain put and call features within the 2013 8.00% Notes that impact the valuation model. The trading activity in the market provides the Company with additional valuation support. The Company uses a weight factor to calculate the fair value of the embedded derivatives to align the fair value produced from the Monte Carlo simulation model with the market value of the 2013 8.00% Notes. Due to the similarities of the debt instruments, the Company applies a similar weight to the embedded derivative in the Thermo Loan Agreement. These valuations are sensitive to the weighting applied to each of the simulated values.

The following table presents a rollforward for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Balance at beginning of period	$	(240,982	)	$	(548,526	)	$	(239,642	)	$	(441,550	)
Derivative adjustment related to conversions	—			19,140			—			20,008
Unrealized gain, included in derivative gain	40,500			237,093			39,160			129,249
Balance at end of period	$	(200,482	)	$	(292,293	)	$	(200,482	)	$	(292,293	)

Fair Value of Debt Instruments

The Company believes it is not practicable to determine the fair value of the Facility Agreement. Unlike typical long-term debt, interest rates and other terms for the Facility Agreement are not readily available and generally involve a variety of factors, including due diligence by the debt holders. As such, it is not practicable to determine the fair value of the Facility Agreement without incurring significant additional costs. 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):



	June 30, 2016				December 31, 2015
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Thermo Loan Agreement	$	57,264	$	29,207	$	50,664	$	17,244
2013 8.00% Notes	13,471		12,111		12,440		9,831

6. ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES

Accrued expenses consist of the following (in thousands):



	June 30, 2016		December 31, 2015
Accrued interest	$	319	$	317
Accrued compensation and benefits	2,927		2,098
Accrued property and other taxes	4,391		4,125
Accrued customer liabilities and deposits	3,336		3,216
Accrued professional and other service provider fees	2,401		1,830
Accrued commissions	969		1,216
Accrued telecommunications expenses	865		1,487
Accrued inventory	217		502
Accrued liability for potential stock issuance to Hughes	7,418		5,495
Accrued liability for legal settlement	1,422		328
Other accrued expenses	2,690		1,825
Total accrued expenses	$	26,955	$	22,439

Accrued liability for potential stock issuance to Hughes includes the estimated value at June 30, 2016 of the downside protection that the Company provided to Hughes in connection with its April 2015 agreement (as amended). See Note 5: Fair Value Measurements and Note 7: Commitments for further discussion.

Other accrued expenses include primarily capital lease obligations, occupancy costs, payments to independent gateway operators ("IGOs") and estimated payroll shortfall under the Cooperative Endeavor Agreement with the Louisiana Department of Economic Development.

Other non-current liabilities consist of the following (in thousands):



	June 30, 2016		December 31, 2015
Long-term accrued interest	$	96	$	96
Asset retirement obligation	1,373		1,302
Deferred rent and other deferred expense	561		593
Liability related to the Cooperative Endeavor Agreement with the State of Louisiana	616		716
Uncertain income tax positions	6,352		5,795
Foreign tax contingencies	2,706		2,311
Capital lease obligations	227		94
Total other non-current liabilities	$	11,931	$	10,907

As a result of the expiration of the statute of limitations associated with the tax position of one of the Company's foreign subsidiaries, the Company anticipates removing the total position of $6.4 million in the Company’s unrecognized tax benefits, inclusive of cumulative interest and penalties, from its non-current liabilities during the quarter ending September 30, 2016.

7. COMMITMENTS

Contractual Obligations - Second-Generation Satellites, Next-Generation Gateways and Other Ground Facilities

As of June 30, 2016, the Company had purchase commitments with Thales, Hughes and Ericsson related to the procurement, deployment and maintenance of the second-generation network.

Second-Generation Satellites

As of June 30, 2016, the Company had a contract with Thales for the construction of the Company’s second-generation low-earth orbit satellites and related services. The Company has successfully launched all of these second-generation satellites, excluding one on-ground spare. The Company and Thales have discussed the ownership of certain deliverables under this contract but have been unable to reach an agreement.

Effective October 24, 2014, the Company entered into a contract with Thales for in-orbit support services for the second-generation satellites delivered under the 2009 contract described in Note 2: Property and Equipment. These services will be performed over a three-year period for a total cost of approximately €1.9 million. A credit of €0.6 million was applied to the total cost, reducing the first annual payment to €0. This credit results from a settlement of amounts previously paid in conjunction with the 2009 contract.

Next-Generation Gateways and Other Ground Facilities

Hughes Network Systems

In May 2008, the Company entered into a contract with Hughes under which Hughes will design, supply and implement the Radio Access Network (RAN) ground network equipment and software upgrades for installation at a number of the Company’s satellite gateway ground stations and satellite interface chips to be used in various second-generation Globalstar devices.

In March 2015, the Company entered into an agreement with Hughes for the design, development, build, testing and delivery of four custom test equipment units for a total of $1.9 million. This test equipment was delivered during the fourth quarter of 2015. In April 2015, the Company extended the scope of work for delivery of two additional RANs for a total of $4.0 million. These RANs were delivered in February 2016. In July 2015, the Company and Hughes formally amended the contract to include the revised scope of work set forth in the March 2015 and April 2015 letter agreements.

In April 2015, Hughes exercised an option to be paid in shares of the Company's common stock (at a price 7% below market) in lieu of cash for certain of its remaining contract payments, including those related to the 2015 work mentioned above, totaling approximately $15.5 million. In June 2015, the Company issued 7.4 million shares of freely tradable common stock at the 7% discount pursuant to this option. The portion of these contract payments related to future milestone work is included in Prepaid second-generation ground costs on the condensed consolidated balance sheets as of June 30, 2016. As the contract milestones are achieved, the Company will reclassify the related costs from Prepaid second-generation ground costs to construction in progress within Property and equipment. In the April 2015 agreement (as amended), the Company agreed to provide downside protection through September 30, 2016. This feature requires that the Company issue additional shares of common stock equal to the difference, if any, between $15.5 million and the total amount of gross proceeds Hughes receives from the sale of any shares plus the market value of any shares still held by Hughes as of the close of trading on September 30, 2016. Pursuant to this agreement, the Company recorded a liability of $7.4 million as of June 30, 2016 and $5.5 million as of December 31, 2015, respectively. The Company calculated these estimates of the value of this option using a Black-Scholes pricing model. This liability is marked-to-market at each balance sheet date and through the settlement date. The Company records gains and losses resulting from changes in the value of this liability in its condensed consolidated statement of operations.

Ericsson

In October 2008, the Company entered into a contract with Ericsson to develop, implement and maintain a ground interface, or core network system, which will be installed at a number of the Company’s satellite gateway ground stations. In July 2014, the parties signed an amended and restated contract to specify the remaining contract value and a new milestone schedule to reflect a revised program timeline. Prior to the amended and restated contract being finalized, Ericsson and the Company agreed to defer certain milestone payments previously due under the 2008 contract to 2014 and beyond. The deferred payments were incurring interest at a rate of 6.5% per annum. In April 2015, the Company signed an amendment to the 2014 contract to incorporate certain changes in scope and timing identified as necessary by the parties. In conjunction with signing this amendment, the parties executed a new letter agreement under which Ericsson waived the remaining $1.0 million in deferred milestone payments and $0.4 million in interest accrued on the milestone payments under the 2008 contract. In the first quarter of 2015, the Company reversed these amounts from accounts payable, accrued expenses and construction in progress on the Company's condensed consolidated balance sheet. In August 2015, the Company and Ericsson executed a second amendment to the 2014 contract which incorporated revised payment and pricing schedules. This amendment also reflected an accelerated timeline for the project providing that the work was estimated to be completed in the second quarter, instead of the third quarter, of 2016. During the second quarter of 2016, the Company took possession of the final Ericsson hardware for the Company's global deployment. As of June 30, 2016, the remaining amount due under the contract is $6.0 million, which is related to the final acceptance of all contract deliverables.

Other Second-Generation Commitments

The Company has signed various licensing and royalty agreements necessary for the manufacture and distribution of its second-generation products. The Company will pay or has paid license fees for new product technology with royalty fees payable on a per unit basis as these units are manufactured, sold, or activated.

8. CONTINGENCIES

Arbitration

On June 3, 2011, Globalstar filed a demand for arbitration against Thales before the American Arbitration Association to enforce certain rights to order additional satellites under the 2009 Contract. The Company did not include within its demand any claims that it had against Thales for work previously performed under the contract to design, manufacture and timely deliver the first 25 second-generation satellites. On May 10, 2012, the arbitration tribunal issued its award in which it determined that the Company had terminated the 2009 Contract "for convenience" and had materially breached the contract by failing to pay to Thales the €51.3 million in termination charges required under the contract. The tribunal additionally determined that absent further agreement between the parties, Thales had no further obligation to manufacture or deliver satellites under Phase 3 of the 2009 Contract. Based on these determinations, the tribunal directed the Company to pay Thales approximately €53 million in termination charges, plus interest by June 9, 2012. On May 23, 2012, Thales commenced an action in the United States District Court for the Southern District of New York by filing a petition to confirm the arbitration award (the “New York Proceeding”). Thales and the Company entered into a tolling agreement as of June 13, 2013, under which Thales dismissed the New York Proceeding without prejudice. The tolling agreement has expired. Thales may refile the petition at a later date and pursue the confirmation of the arbitration award, which the Company would oppose. Should Thales be successful in confirming the arbitration award, this would have a material adverse effect on the Company's financial condition, results of operations and liquidity.

On June 24, 2012, the Company and Thales agreed to settle their prior commercial disputes, including those disputes that were the subject of the arbitration award. In order to effectuate this settlement, the Company and Thales entered into a Release Agreement, a Settlement Agreement and a Submission Agreement. Under the terms of the Release Agreement, Thales agreed unconditionally and irrevocably to release and forever discharge the Company from any and all claims and obligations (with the exception of those items payable under the Settlement Agreement or in connection with a new contract for the purchase of any additional second-generation satellites), including, without limitation, a full release from paying €35.6 million of the termination charges awarded in the arbitration together with all interest on the award amount effective upon the earlier of December 31, 2012, and the effective date of the financing for the purchase of any additional second-generation satellites. Under the terms of the Release Agreement, the Company agreed unconditionally and irrevocably to release and forever discharge Thales from any and all claims (with limited exceptions), including, without limitation, claims related to Thales’ work under the 2009 satellite construction contract, including any obligation to pay liquidated damages, effective upon the earlier of December 31, 2012, and the effective date of the financing for the purchase of any additional second-generation satellites. In connection with the Release Agreement and the Settlement Agreement, the Company recorded a contract termination charge of approximately €17.5 million which is recorded in the Company’s condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015. The releases became effective on December 31, 2012.

Under the terms of the Settlement Agreement, the Company agreed to pay €17.5 million to Thales, representing one-third of the termination charges awarded to Thales in the arbitration, subject to certain conditions, on the later of the effective date of the new contract for the purchase of any additional second-generation satellites and the effective date of the financing for the purchase of these satellites. As of June 30, 2016, this condition had not been satisfied. Because the effective date of the new contract for the purchase of additional second-generation satellites did not occur on or prior to February 28, 2013, any party may terminate the Settlement Agreement. If any party terminates the Settlement Agreement, all parties’ rights and obligations under the Settlement Agreement shall terminate. The Release Agreement is a separate and independent agreement from the Settlement Agreement and provides that it supersedes all prior understandings, commitments and representations between the parties with respect to the subject matter thereof; therefore it would survive any termination of the Settlement Agreement. As of June 30, 2016, no party had terminated the Settlement Agreement.

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. During the second quarter of 2016, the Company increased an accrual related to the settlement of litigation incurred on behalf of the Company's Brazilian subsidiary. As of June 30, 2016, the Company expects the total settlement to be 4.5 million reais, or $1.4 million, which will be paid in Globalstar common stock. In management's opinion, there is no pending litigation, dispute or claim, other than those described in this report, which could be expected to have a material adverse effect on the Company's financial condition, results of operations or liquidity.

9. RELATED PARTY TRANSACTIONS

Payables to Thermo and other affiliates related to normal purchase transactions were $0.2 million and $0.6 million at each of June 30, 2016 and December 31, 2015, respectively.

Transactions with Thermo

Expenses incurred by Thermo on behalf of the Company, including non-cash expenses and those expenses charged to the Company, were $0.2 million and $0.4 million during the three months ended June 30, 2016 and 2015, respectively and were $0.3 million and $0.5 million during the six months ended June 30, 2016 and 2015, respectively. Non-cash expenses, which the Company accounts for as a contribution to capital, relate to services provided by two executive officers of Thermo (who are also directors of the Company and receive no cash compensation from the Company). The Thermo expense charges are based on actual amounts (with no mark-up) incurred or upon allocated employee time.

As of June 30, 2016, the principal amount outstanding under the Loan Agreement with Thermo was $88.4 million, and the fair value of the compound embedded derivative liability associated with the Loan Agreement was $180.1 million. For the three months ended June 30, 2016 and 2015, interest on the Loan Agreement was approximately $2.6 million and $2.2 million, respectively. For the six months ended June 30, 2016 and 2015, interest on the Loan Agreement was approximately $5.2 million and $4.2 million, respectively. In addition, as of June 30, 2016, warrants to purchase approximately 24.6 million shares issued under the Contingent Equity Agreement remain outstanding, all of which are held by Thermo and are scheduled to expire in June 2017. In June 2016, Thermo exercised warrants to purchase 5.6 million and 8.0 million shares of voting common stock related to the Contingent Equity Agreement and the Company's 5.0% Warrants, respectively. As a result of these warrant exercises, the Company received aggregate proceeds of $2.6 million in June 2016.

In August 2015, the Company entered into an Equity Agreement with Thermo. Thermo agreed to purchase up to $30.0 million in equity securities of the Company if the Company so requests or if an event of default is continuing under the Facility Agreement and funds are not available under the August 2015 Terrapin Agreement. As of June 30, 2016, the Company has received cash equity financing in excess of Thermo's equity commitment. This cash equity financing primarily includes draws under the August 2015 Terrapin Agreement in August 2015, February 2016, and June 2016 for $15.0 million, $6.5 million, and $22.0 million, respectively. As a result, Thermo had no remaining cash equity commitment under the Equity Agreement as of June 30, 2016.

The Facility Agreement requires Thermo to maintain minimum and maximum ownership levels in the Company's common stock. Thermo may convert shares of nonvoting common stock into shares of voting common stock as needed to comply with these ownership limitations.

See Note 3: Long-Term Debt and Other Financing Arrangements and Note 4: Derivatives for further discussion of the Company's debt and financing transactions with Thermo.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) includes all changes in equity during a period from non-owner sources.

The components of accumulated other comprehensive income (loss) were as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Accumulated other comprehensive loss, beginning of period	$	(5,484	)	$	(4,188	)	$	(4,833	)	$	(2,898	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(925		)	447			(1,576		)	(843		)
Accumulated other comprehensive loss, end of period	$	(6,409	)	$	(3,741	)	$	(6,409	)	$	(3,741	)

No amounts were reclassified out of accumulated other comprehensive loss for the periods shown above.

11. GEOGRAPHIC INFORMATION

The Company attributes subscriber equipment sales 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. Property and equipment is attributed to the various countries based on the physical location of the asset at the end of a given period, except for the Company's satellites that are included in the property and equipment of the United States. The Company’s information by geographic area is as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenues:
Service revenue:
United States	$	14,407	$	12,468	$	27,676	$	24,183
Canada	4,066		3,771		7,310		7,204
Europe	1,805		1,541		3,263		2,743
Central and South America	570		688		1,188		1,302
Others	122		148		282		291
Total service revenue	$	20,970	$	18,616	$	39,719	$	35,723
Subscriber equipment sales:
United States	2,226		1,990		3,530		3,578
Canada	1,052		1,278		1,813		2,439
Europe	527		452		956		985
Central and South America	279		424		667		1,057
Others	32		263		237		263
Total subscriber equipment sales	$	4,116	$	4,407	$	7,203	$	8,322
Total revenue	$	25,086	$	23,023	$	46,922	$	44,045



	June 30, 2016		December 31, 2015
Property and equipment, net:
United States	$	1,054,493	$	1,073,327
Canada	626		510
Europe	454		484
Central and South America	3,126		2,782
Others	320		457
Total property and equipment, net	$	1,059,019	$	1,077,560

12. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are computed based on the weighted average number of shares of common stock outstanding during the period. Common stock equivalents are included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive.

The following table sets forth the calculation of basic and diluted earnings (loss) per share for the periods indicated (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016			2015
Net income (loss)	$	14,099	$	204,767	$	(12,848	)	$	75,040
Effect of dilutive securities:
2013 8.00% Notes	537		593		—			1,313
Thermo Loan Agreement	2,401		2,148		—			4,251
Income (loss) to common stockholders plus assumed conversions	$	17,037	$	207,508	$	(12,848	)	$	80,604
Weighted average common shares outstanding:
Basic shares outstanding	1,049,381		1,009,917		1,045,205			1,005,406
Incremental shares from assumed exercises, conversions and other issuances:
Stock options, restricted stock, restricted stock units and ESPP	5,793		8,667		—			8,534
2013 8.00% Notes	27,164		28,001		—			27,778
Thermo Loan Agreement	139,709		120,673		—			119,272
Warrants and other	27,625		38,192		—			38,192
Diluted shares outstanding	1,249,672		1,205,450		1,045,205			1,199,182
Income (loss) per share:
Basic	0.01		0.20		(0.01		)	0.07
Diluted	0.01		0.17		(0.01		)	0.07

For the six months ended June 30, 2016, 197.0 million shares of potential common stock were excluded from diluted shares outstanding because the effects of assuming issuance of these potentially dilutive securities would be anti-dilutive.

13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In connection with the Company’s issuance of the 2013 8.00% Notes, certain of the Company’s 100% owned domestic subsidiaries (the “Guarantor Subsidiaries”), fully, unconditionally, jointly, and severally guaranteed the payment obligations under the 2013 8.00% Notes. The following financial information sets forth, on a consolidating basis, the balance sheets, statements of operations and statements of cash flows for Globalstar, Inc. (“Parent Company”), for the Guarantor Subsidiaries and for the Parent Company’s other subsidiaries (the “Non-Guarantor Subsidiaries”).

The condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include disclosures included in annual financial statements. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses.

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended June 30, 2016

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	10,944		$	10,863		$	10,689		$	(11,526	)	$	20,970
Subscriber equipment sales	96			2,774			1,997			(751		)	4,116
Total revenue	11,040			13,637			12,686			(12,277		)	25,086
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	5,135			1,034			2,702			(934		)	7,937
Cost of subscriber equipment sales	43			2,112			1,478			(747		)	2,886
Marketing, general and administrative	5,430			1,322			16,219			(11,521		)	11,450
Depreciation, amortization, and accretion	18,851			206			288			(121		)	19,224
Total operating expenses	29,459			4,674			20,687			(13,323		)	41,497
Income (loss) from operations	(18,419		)	8,963			(8,001		)	1,046			(16,411		)
Other income (expense):
Loss on equity issuance	(2,075		)	—			—			—			(2,075		)
Interest income and expense, net of amounts capitalized	(9,000		)	(3		)	(47		)	1			(9,049		)
Derivative gain	40,499			—			—			—			40,499
Equity in subsidiary earnings (loss)	2,924			(968		)	—			(1,956		)	—
Other	170			92			328			95			685
Total other income (expense)	32,518			(879		)	281			(1,860		)	30,060
Income (loss) before income taxes	14,099			8,084			(7,720		)	(814		)	13,649
Income tax benefit	—			—			(450		)	—			(450		)
Net income (loss)	$	14,099		$	8,084		$	(7,270	)	$	(814	)	$	14,099
Comprehensive income (loss)	$	14,099		$	8,084		$	(8,195	)	$	(814	)	$	13,174

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended June 30, 2015

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	15,932		$	6,865		$	11,213		$	(15,394	)	$	18,616
Subscriber equipment sales	296			2,615			2,993			(1,497		)	4,407
Total revenue	16,228			9,480			14,206			(16,891		)	23,023
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	4,969			1,652			3,037			(1,631		)	8,027
Cost of subscriber equipment sales	78			2,137			3,286			(2,518		)	2,983
Marketing, general and administrative	4,940			1,832			16,561			(13,174		)	10,159
Depreciation, amortization, and accretion	18,778			293			329			(129		)	19,271
Total operating expenses	28,765			5,914			23,213			(17,452		)	40,440
Income (loss) from operations	(12,537		)	3,566			(9,007		)	561			(17,417		)
Other income (expense):
Loss on extinguishment of debt	(2,189		)	—			—			—			(2,189		)
Loss on equity issuance	(2,912		)	—			—			—			(2,912		)
Interest income and expense, net of amounts capitalized	(9,107		)	(5		)	(138		)	6			(9,244		)
Derivative gain	237,087			—			—			—			237,087
Equity in subsidiary earnings (loss)	(5,035		)	1,161			—			3,874			—
Other	(674		)	(132		)	355			(1		)	(452		)
Total other income (expense)	217,170			1,024			217			3,879			222,290
Income (loss) before income taxes	204,633			4,590			(8,790		)	4,440			204,873
Income tax expense (benefit)	(134		)	(8		)	248						106
Net income (loss)	$	204,767		$	4,598		$	(9,038	)	$	4,440		$	204,767
Comprehensive income (loss)	$	204,767		$	4,598		$	(8,591	)	$	4,440		$	205,214

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Six Months Ended June 30, 2016

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	27,882		$	18,358		$	20,114		$	(26,635	)	$	39,719
Subscriber equipment sales	424			4,466			3,674			(1,361		)	7,203
Total revenue	28,306			22,824			23,788			(27,996		)	46,922
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	9,948			2,070			5,597			(2,087		)	15,528
Cost of subscriber equipment sales	187			3,540			2,693			(1,356		)	5,064
Marketing, general and administrative	10,604			1,854			33,064			(25,462		)	20,060
Depreciation, amortization, and accretion	37,623			426			569			(239		)	38,379
Total operating expenses	58,362			7,890			41,923			(29,144		)	79,031
Income (loss) from operations	(30,056		)	14,934			(18,135		)	1,148			(32,109		)
Other income (expense):
Loss on equity issuance	(1,923		)	—			—			—			(1,923		)
Interest income and expense, net of amounts capitalized	(17,981		)	(12		)	(152		)	(9		)	(18,154		)
Derivative gain	39,155			—			—			—			39,155
Equity in subsidiary earnings (loss)	(1,427		)	2,079			—			(652		)	—
Other	(616		)	(112		)	604			48			(76		)
Total other income (expense)	17,208			1,955			452			(613		)	19,002
Income (loss) before income taxes	(12,848		)	16,889			(17,683		)	535			(13,107		)
Income tax benefit	—			—			(259		)	—			(259		)
Net income (loss)	$	(12,848	)	$	16,889