NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Through its global satellite network, Globalstar, Inc. ("Globalstar" or the "Company") provides Mobile Satellite Services ("MSS"), including communications products and services, wholesale capacity services, terrestrial spectrum and network solutions and government services. The Company provides communications products and services to its subscribers, including data transmissions and voice communications (Commercial IoT, SPOT and Duplex). Wholesale capacity services include satellite network access and related services using the Company's network of in-orbit satellites and ground stations ("gateways") pursuant to the Company's spectrum licenses, which the Company refers to collectively as the Globalstar System. The Company also utilizes the Globalstar System for terrestrial spectrum and network solutions. Government services include strategic partnerships as well as hardware and software designs to develop specific applications operating over the Globalstar System. 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 Executive Chairman of the Company's Board of Directors (the "Board") controls Thermo.
The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"); however, management believes the disclosures made are adequate to make the information presented in this Report not misleading. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 27, 2026 (the "2025 Annual Report").
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. The Company evaluates estimates on an ongoing basis.
These unaudited interim condensed consolidated financial statements include the accounts of Globalstar and all its subsidiaries. The Company's consolidated financial statements include results and amounts for the Globalstar SPE (as defined below), which is a variable interest entity ("VIE") further described in Note 2, of which Globalstar is the primary beneficiary. Intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, the information included herein includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of the Company’s condensed consolidated statements of operations, consolidated balance sheets, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the full year or any future period.
Recent Developments
On April 13, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Amazon.com, Inc., a Delaware corporation (“Amazon”), Grapefruit Acquisition Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Amazon (“Acquisition Sub I”), and Grapefruit Acquisition Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Amazon (“Acquisition Sub II” and, together with Amazon and Acquisition Sub I, the “Buyer Parties”), pursuant to which and subject to the terms and conditions of the Merger Agreement, the Buyer Parties have agreed to acquire the Company (the "Mergers"). Refer to Note 14: Subsequent Events for discussion of the Merger Agreement, including the related transactions.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures. This ASU requires public companies to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company plans to adopt this standard when it becomes effective on January 1, 2027. The Company is evaluating the impact this ASU may have on its financial statement disclosures.
In September 2025, the FASB issued ASU 2025-07, "Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Non-cash Consideration from a Customer in a Revenue Contract." This ASU exclude from the scope of derivative accounting certain contracts with underlyings that are based on the operations or activities of one of the parties to the contract. This ASU also clarifies that an entity receiving share-based noncash consideration from a customer that is consideration for the transfer of goods or services in a revenue contract is required to apply the guidance on noncash consideration in ASC 606. The standard is effective for annual and interim reporting periods beginning after December 16, 2026, with early adoption permitted. The standard may be applied using a prospective or modified retrospective transition approach. The Company is evaluating the impact this ASU may have on accounting for embedded derivatives and the related financial statement disclosures.
2. SPECIAL PURPOSE ENTITY
The Company provides wholesale capacity services over its mobile satellite system (the "Services") to its customer, Apple Inc. (the "Customer"), pursuant to a service agreement and certain related ancillary agreements (collectively, the "Service Agreements") for the Phase 1 Service Period and Phase 2 Service Period (as defined below). The Service Agreements generally require Globalstar to allocate network capacity to support the Services, which launched in November 2022.
Effective November 5, 2024, (the "2024 Closing Date") the Company and the Customer amended the Service Agreements and entered into other related agreements (the Service Agreements as amended, collectively, the "Updated Services Agreements") for Globalstar to deliver expanded services to the Customer over a new MSS network, including a new satellite constellation, expanded ground infrastructure, and increased global MSS licensing (the "Extended MSS Network") for the Services provided over the Extended MSS Network. The Extended MSS Network will be (i) owned by Globalstar Licensee, LLC, together with its subsidiaries (collectively, the "Globalstar SPE"), a VIE, and (ii) operated by the Company. The Customer (i) has prepaid, and is required, subject to certain conditions, to continue to prepay for, certain services to be delivered by the Company to the Customer who will utilize the Extended MSS Network under the Updated Services Agreements and (ii) is a passive equity holder in Globalstar SPE.
The Company's allocated capacity supports the following phases of the Services: 1) current Services provided over the Globalstar System ("Phase 1 Service Period"), 2) future Services provided over the new replacement satellites ("Phase 2 Service Period"), of which such Services are expected to commence following the launch of the first set of such replacement satellites, which is currently scheduled for May 2026 (refer to Note 9: Commitments and Contingencies for further discussion), and 3) future Services provided over the Extended MSS Network.
The Globalstar SPE holds and administers, or will administer in the future, certain spectrum licenses, satellites, ground stations and other network assets for use and operation by the Company and to enable and provide services to the Customer pursuant to the Updated Services Agreements. The Globalstar SPE does not have commercial operations.
The table below includes the assets of the Globalstar SPE as of March 31, 2026 and December 31, 2025 (in thousands):
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
Assets: | | | | |
Cash and cash equivalents | | $ | 2,011 | | | $ | 720 | |
Property and equipment, net | | 717,342 | | | 653,668 | |
| Prepaid network costs | | 185,547 | | | 158,547 | |
Intangibles and other asset, net | | 11,686 | | | 11,684 | |
Total Assets | | $ | 916,586 | | | $ | 824,619 | |
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Customer Class B Units
On the 2024 Closing Date, the Customer purchased 400,000 Class B Units in the Globalstar SPE (the "Customer Class B Units") for $400 million, representing a 20% equity interest in the Globalstar SPE. Following the completion of the Mergers (discussed in Note 14: Subsequent Events), Acquisition Sub II will acquire all of the Customer Class B Units in the Globalstar SPE.
The Company holds 1,600,000 Class A Units in the Globalstar SPE, representing an 80% equity ownership in the Globalstar SPE. The Company's 80% ownership in the Globalstar SPE exposes it to residual profit or loss of the Globalstar SPE and Globalstar will absorb any expense variability of the Globalstar SPE. The Company has power over the most significant activity of the Globalstar SPE and is exposed to losses and benefits of the Globalstar SPE through its equity interest. The Company assessed the accounting considerations pursuant to ASC 810: Consolidation, and concluded that it is the primary beneficiary of the Globalstar SPE and consolidated the Globalstar SPE into the financial statements appearing in this Report. Based on the redemption provision and other characteristics of the arrangement, the Company recorded the total equity contributions from the Customer of $400 million as equity on the Globalstar SPE financial statements and a non-current liability on the Company's consolidated balance sheet. The initial minority investment in the Globalstar SPE included $224 million of in-kind contributions from the Customer and $176 million in cash contributions. The in-kind contributions included long-lead items, satellite construction in progress assets, ground network construction in progress assets, and intangible licensing work in progress assets.
Extended MSS Network Prepayments and 2024 Debt Repayment
The Updated Services Agreements provide, among other things, that the Customer will make cash payments to the Company for capital expenditures in connection with the Extended MSS Network. The payments required by the Updated Services Agreements consist of: (1) an infrastructure prepayment (as increased in April 2026, the "Infrastructure Prepayment") of up to $1.58 billion, which is to be funded quarterly (as needed) over the construction period of the satellites to be used in the Extended MSS Network, the proceeds of which the Globalstar SPE will use, together with the proceeds from the sale of the Customer Class B Units, to pay amounts due for the Extended MSS Network (including, but not limited to, construction and launch costs) and (2) an amount of $235 million that was used to fully retire the 2023 13% Notes (the "2024 Debt Repayment"), as described further herein. The terms of the Infrastructure Prepayment and the 2024 Debt Repayment are contained within one agreement (as amended in April 2026, the "2024 Prepayment Agreement"). Regardless of whether or not the Mergers are successfully consummated (as discussed in Note 14: Subsequent Events), the Company expects (i) to fully pay off amounts owed under the 2024 Prepayment Agreement and to redeem the Customer Class B Units within the design useful life of the new satellites and (ii) that such amounts payable to the Customer will be fully offset by amounts payable by the Customer under the Updated Services Agreements.
Infrastructure Prepayment
To date, the Company has received $708.6 million from the Customer pursuant to the Infrastructure Prepayment. No amounts were received during the first quarter of 2026. The Company records these prepayments as deferred revenue as they represent the Company’s obligation to provide future services to the Customer. The deferred revenue associated with the Infrastructure Prepayment will be recognized as revenue as services are performed using the Extended MSS Network. The Company accrues fees payable to the Customer on $225.0 million of the Infrastructure Prepayment and the fees will be reduced or eliminated entirely if the Company meets certain defined milestones (as amended in April 2026) associated with the
completion of the Extended MSS Network. The remainder of the Infrastructure Prepayment does not accrue fees. Refer to Note 3: Revenue for further discussion.
Service Fees
As consideration for the satellite services provided for in the Updated Services Agreements, the incremental service fees payable by the Customer to the Company include fees tied to the cost of the Extended MSS Network, fees for providing additional related services, fees tied to expenses incurred by the Company for the provision of such services, and performance bonuses. Payment of a portion of these fees is subject to the satisfaction of certain licensing, service levels and milestone achievements (as adjusted in April 2026). For a discussion of the amendment of these milestones and the potential downward adjustment of the Merger Consideration (as defined below) if we fail to attain them, see "Impact of Amendments of Arrangements with the Customer and the Pending Mergers" immediately below and Note 14: Subsequent Events. Additionally, the Updated Services Agreements also provide for annual service fees of $30 million to be accelerated. Such accelerated payments began in the first quarter of 2025.
Impact of Amendments of Arrangements with the Customer and the Pending Mergers
See Note 14: Subsequent Events for a discussion of certain arrangements with the Customer entered into on April 13, 2026 in connection with the Merger Agreement, including:
(1)amendments to the 2024 Prepayment Agreement;
(2)amendments to the SOW (as defined in Note 14: Subsequent Events), which among other things, amended certain milestones;
(3)the Amendment to the Thermo Guaranty (as defined below); and
(4)upon consummation of the Mergers, (1) a change in the ownership of the Globalstar SPE and (2) the treatment of the Customer and Thermo warrants.
3. REVENUE
Disaggregation of Revenue
The following table discloses revenue disaggregated by type of product and service (in thousands):
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| Three Months Ended | | |
| March 31, 2026 | | March 31, 2025 | | | | |
| Service revenue: | | | | | | | |
| Wholesale capacity services | $ | 46,267 | | | $ | 36,709 | | | | | |
| Subscriber services | | | | | | | |
| Commercial IoT | 7,450 | | | 6,580 | | | | | |
| SPOT | 8,655 | | | 9,371 | | | | | |
| Duplex | 2,576 | | | 3,452 | | | | | |
| Government and other services | 1,753 | | | 955 | | | | | |
| Total service revenue | 66,701 | | | 57,067 | | | | | |
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| Total subscriber equipment sales | 3,363 | | | 2,965 | | | | | |
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| Total revenue | $ | 70,064 | | | $ | 60,032 | | | | | |
"Wholesale capacity services" revenue in the above table includes revenue associated with the Updated Services Agreements and Service Agreements, as applicable. As consideration for the services provided by Globalstar, payments include a fixed service fee, payments relating to certain service-related operating expenses and capital expenditures, additional fees related to expanded services, and potential bonus payments subject to satisfaction of certain licensing, service and other related criteria. For a discussion of the Updated Services Agreements, see Note 2: Special Purpose Entity.
"Government and other services" revenue in the table above includes revenue associated with engineering and other communication services, such as terrestrial spectrum and network services, government service contracts and teleport lease arrangements. The Company's largest network services agreement is with Parsons Corporation, a leading technology provider
in the national security and global infrastructure markets, to utilize the Company's satellite network for a mission critical service for government applications.
Accounts Receivable
The Company records trade accounts receivable from its customers when it has a contractual right to receive payment either on demand or on fixed or determinable dates in the future. The Company's receivable balances by type and classification are presented in the table below, net of allowance for credit losses, and may include amounts related to earned but unbilled receivables (in thousands):
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
Accounts receivable, net of allowance for credit losses: | | | | |
Subscriber and other accounts receivable | | $ | 14,883 | | | $ | 15,070 | |
| Wholesale capacity accounts receivable | | 4,879 | | | 4,906 | |
| Total accounts receivable, net of allowance for credit losses | | $ | 19,762 | | | $ | 19,976 | |
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The Company has entered into a satellite procurement agreement for the replacement satellites and two launch services agreements to launch the replacement satellites to support the Phase 2 Service Period. The replacement satellites purchased under the satellite procurement agreement are intended to replace the Company's HIBLEO-4 U.S.-licensed system. Pursuant to the Service Agreements, payments are expected to be made to the Company by the Customer on a straight-line basis over the design life of the replacement satellites beginning with the initiation of service for the Phase 2 Service Period. Based on construction in progress recorded through March 31, 2026, the Company expects to bill $373.7 million associated with the Phase 2 Service Period. Refer to Note 9: Commitments and Contingencies for additional information regarding these agreements.
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 the Company has previously received consideration. The Company's contract liabilities by type and classification are presented in the table below (in thousands):
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
Short-term contract liabilities: | | | | |
Subscriber and other contract liabilities | | $ | 15,227 | | | $ | 17,091 | |
Wholesale capacity contract liabilities, net of contract asset | | 38,789 | | | 44,929 | |
| Total short-term contract liabilities | | $ | 54,016 | | | $ | 62,020 | |
Long-term contract liabilities: | | | | |
Subscriber and other contract liabilities | | $ | 1,202 | | | $ | 1,296 | |
| Wholesale capacity contract liabilities, net of contract asset | | 836,452 | | | 805,634 | |
| Total long-term contract liabilities | | $ | 837,654 | | | $ | 806,930 | |
| Total contract liabilities | | $ | 891,670 | | | $ | 868,950 | |
For subscriber and other contract liabilities, the amount of revenue recognized during the three months ended March 31, 2026 and 2025 from performance obligations included in the total contract liability balance at the beginning of these periods was $6.2 million and $6.6 million, respectively. For wholesale capacity contract liabilities, the amount of revenue recognized during the three months ended March 31, 2026 and 2025 from performance obligations included in the total contract liability balance at the beginning of these periods was $39.1 million and $28.5 million, respectively.
The duration of the Company’s contracts with subscribers is generally one year or less. The Updated Services Agreements have no expiration date; therefore, the related contract liabilities may be recognized as revenue over various periods according to when the related performance obligation is satisfied.
The components of wholesale capacity contract liabilities are presented in the table below (in thousands):
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
| Wholesale capacity contract liabilities, net: | | | | |
Additional consideration associated with the 2023 Funding Agreement (1) | | $ | 6,920 | | | $ | 6,920 | |
| Advanced payments for services expected to be performed with the ground spare satellite launched in June 2022 | | 19,715 | | | 20,155 | |
| Advanced payments contractually owed for services expected to be performed with the replacement satellite constellation prior to the Phase 2 Service Period | | 968 | | | 3,924 | |
Advanced payments for the quarterly access fee, service-related operating and capital expenditures and other services | | 37,605 | | | 37,682 | |
Advanced payments under the Infrastructure Prepayment (See Note 2: Special Purpose Entity) | | 708,593 | | | 708,593 | |
Additional consideration associated with the Updated Services Agreements (2) | | 76,491 | | | 53,504 | |
Other advanced payments associated with future performance obligations (3) | | 68,238 | | | 60,674 | |
Contract asset (4) | | (43,289) | | | (40,889) | |
| Wholesale capacity contract liabilities, net | | $ | 875,241 | | | $ | 850,563 | |
(1)Includes additional consideration associated with the below-market interest rate within the 2023 Funding Agreement (as defined in Note 6: Long-Term Debt and Other Financing Arrangements below). This consideration will be recognized over the estimated Phase 2 Service Period. Refer to Note 6: Long-Term Debt and Other Financing Arrangements for discussion of the payoff of the 2021 Funding Agreement during March 2026.
(2)Primarily represents additional consideration for the implied economic benefit to Globalstar for receiving payments in advance of service. This consideration primarily includes an estimate of the significant financing component totaling $71.7 million related primarily to the Infrastructure Prepayment. The Company expects to recognize this consideration over the estimated Extended MSS Network service period.
(3)Includes primarily: a) advanced service payments totaling $52.5 million pursuant to the Updated Services Agreements, which provide for a portion of annual service fees to be accelerated and b) $13.3 million of make whole fees paid by Customer for the extinguishment of the 2023 13% Notes in 2024. These advanced payments will be recognized during the Extended MSS Network service period.
(4)Primarily includes warrants with an initial fair value at the time of issuance of $48.3 million which was recorded in equity with an offset to a contract asset on the Company's consolidated balance sheets. The fair value of the warrants is recorded as a reduction to revenue over time and totaled $40.8 million as of March 31, 2026.
4. LEASES
The Company has operating and finance leases for facilities and equipment around the world, including corporate offices, satellite control centers, ground control centers, gateways and certain equipment. Overall, finance leases are not significant to the Company and are not included in the disclosures below.
The following tables disclose the components of the Company’s operating leases (in thousands):
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
| Operating leases: | | | | |
| Right-of-use asset, net | | $ | 67,005 | | | $ | 66,698 | |
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| Short-term lease liability (recorded in accrued expenses) | | 8,948 | | | 7,998 | |
| Long-term lease liability | | 54,315 | | | 54,549 | |
| Total operating lease liabilities | | $ | 63,263 | | | $ | 62,547 | |
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During the first quarter of 2026, the Company modified existing leases in connection with the expansion underway pursuant to the Updated Services Agreements. For certain gateway locations, the Company has extended the lease term and/or expanded the leased footprint.
Lease Cost
The components of lease cost are reflected in the table below (in thousands):
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| | Three Months Ended | | |
| | March 31, 2026 | | March 31, 2025 | | | | |
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Operating lease cost (1) | | $ | 2,454 | | | $ | 1,652 | | | | | |
| Short-term lease cost | | 56 | | | 82 | | | | | |
| Total lease cost | | $ | 2,510 | | | $ | 1,734 | | | | | |
(1) Includes sublease income.
Weighted-Average Remaining Lease Term and Discount Rate
The following table discloses the weighted-average remaining lease term and discount rate for operating leases:
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| | As of: |
| | March 31, 2026 | | December 31, 2025 |
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| Weighted-average lease term | | 15.9 years | | 15.7 years |
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| Weighted-average discount rate | | 8.1 | % | | 8.3 | % |
Supplemental Cash Flow Information
The below table discloses supplemental cash flow information for operating leases (in thousands):
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| | Three Months Ended |
| | March 31, 2026 | | March 31, 2025 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | |
| Operating cash flows for operating leases | | $ | 1,910 | | | $ | 1,667 | |
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Maturity Analysis
The following table reflects undiscounted cash flows on an annual basis for the Company’s lease liabilities as of March 31, 2026 (in thousands):
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| | Operating Leases | | |
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| 2026 (remaining) | | $ | 11,110 | | | |
| 2027 | | 9,055 | | | |
| 2028 | | 8,528 | | | |
| 2029 | | 6,426 | | | |
| 2030 | | 6,030 | | | |
| Thereafter | | 68,144 | | | |
| Total lease payments | | $ | 109,293 | | | |
| Imputed interest | | (46,030) | | | |
| Discounted lease liability | | $ | 63,263 | | | |
In connection with the Extended MSS Network, the Company will likely enter into additional operating leases in the future, the amount and timing of which are unknown and excluded from the table above.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
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| As of: |
| March 31,
2026 | | December 31,
2025 |
| Globalstar System: | | | |
| Space component | $ | 1,078,191 | | | $ | 1,078,242 | |
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| Ground component | 107,459 | | | 107,536 | |
| Construction in progress: | | | |
| Space component | 1,111,723 | | | 998,215 | |
| Ground component | 114,643 | | | 90,132 | |
| Other | 10,244 | | | 8,694 | |
| Total Globalstar System | 2,422,260 | | | 2,282,819 | |
| Internally developed and purchased software | 26,337 | | | 26,033 | |
| Equipment | 21,624 | | | 20,649 | |
| Land and buildings | 3,909 | | | 3,845 | |
| Leasehold improvements | 2,453 | | | 2,458 | |
| Total property and equipment | 2,476,583 | | | 2,335,804 | |
| Accumulated depreciation | (1,047,880) | | | (1,030,346) | |
| Total property and equipment, net | $ | 1,428,703 | | | $ | 1,305,458 | |
The Company has agreements with Macdonald, Dettwiler and Associates Corporation ("MDA Space") and Space Exploration Technologies Corp. ("SpaceX") for 1) the purchase and launch of the satellites that are intended to replace the Company's HIBLEO-4 U.S.-licensed system and 2) the purchase and launch of third-generation satellites to support the Extended MSS Network. Refer to Note 9: Commitments and Contingencies for additional information regarding these agreements.
As of March 31, 2026, in connection with the construction and launch preparation of the replacement satellites, the Company has incurred $299.4 million and $91.8 million in capital expenditures for milestones completed under the related agreements with MDA Space and SpaceX, respectively. The replacement satellites will be placed into service after their launch, which for the first set is scheduled for May 2026, and begin depreciating once they are operational. As of March 31, 2026, in connection with the construction and launch preparation of the third-generation satellites to support the Extended MSS Network, the Company has incurred $495.8 million and $92.2 million for milestones completed under the related agreements with MDA Space and SpaceX, respectively. The costs related to the replacement and third-generation satellites, as well as the associated personnel costs and capitalized interest, are reflected in the "space component" of construction in progress in the table above.
In connection with the Extended MSS Network, the Company has procured ground equipment and other network assets to upgrade existing and build new ground stations globally. The costs to support this effort, such as construction, equipment, personnel and capitalized interest, are reflected in the "ground component" of construction in progress in the table above.
6. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
Long-term debt consists of the following (in thousands):
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| As of: |
| | March 31, 2026 | | December 31, 2025 |
| | Principal
Amount | | Unamortized Premium (Discount) and Deferred Financing Costs | | Carrying
Value | | Principal
Amount | | Unamortized Premium (Discount) and Deferred Financing Costs | | Carrying
Value |
| 2024 Debt Repayment | $ | 221,625 | | | $ | 82,660 | | | $ | 304,285 | | | $ | 221,625 | | | $ | 86,045 | | | $ | 307,670 | |
| 2023 Funding Agreement | 182,147 | | | (11,871) | | | 170,276 | | | 182,147 | | | (12,164) | | | 169,983 | |
| 2021 Funding Agreement | — | | | — | | | — | | | 6,250 | | | (115) | | | 6,135 | |
| Total debt | $ | 403,772 | | | $ | 70,789 | | | $ | 474,561 | | | $ | 410,022 | | | $ | 73,766 | | | $ | 483,788 | |
| Less: current portion | 42,400 | | | — | | | 42,400 | | | 31,950 | | | (115) | | | 31,835 | |
| Long-term debt | $ | 361,372 | | | $ | 70,789 | | | $ | 432,161 | | | $ | 378,072 | | | $ | 73,881 | | | $ | 451,953 | |
The carrying value of debt reflected above is net of deferred financing costs and any premium or discount to the loan amount at issuance, including accretion. As of March 31, 2026, the current portion of long-term debt relates to the 2023 Funding Agreement; these amounts are expected to be paid under the Updated Services Agreements through service fee offsets from the Customer during the next twelve months. The Company's obligations under its debt agreements included in the table above are secured by a first-priority lien over substantially all of the assets of the Company and its domestic subsidiaries.
2024 Debt Repayment
As discussed in Note 2: Special Purpose Entity, pursuant to the Updated Services Agreements, the Customer funded $235 million (including $13.3 million of make whole premium payments, which were recorded to deferred revenue) for the Company to retire its outstanding 2023 13% Notes. The 2024 Debt Repayment is expected to be fully repaid by offsetting against amounts payable by the Customer to the Company on a quarterly basis over a period of 32 quarters commencing on a fixed repayment date in the future that is not tied to the launch of services. The 2024 Debt Repayment is classified as debt because the Company's repayment obligations will commence on such date regardless of when services are provided under the Updated Services Agreements. The 2024 Debt Repayment accrues annual fees, which would be reduced or eliminated entirely if the Company meets certain defined milestones (as amended in April 2026) associated with the completion of the Extended MSS Network, at which time prior accruals will be reduced or eliminated. These accrued fees are included in noncurrent liabilities on the Company's balance sheet and totaled $33.5 million as of March 31, 2026. As of March 31, 2026, the outstanding principal balance of the 2024 Debt Repayment was $221.6 million.
On the issuance date, the Company recorded the 2024 Debt Repayment at fair value. The difference between the principal amount of the 2024 Debt Repayment and the fair value was recorded as a debt premium. Additionally, the Company was required to bifurcate the fair value of the interest reduction mechanism and record a derivative asset upon issuance equal to the debt premium. The debt premium is amortized as an offset to interest expense using the effective interest rate method. Refer to Note 7: Derivatives and Note 8: Fair Value Measurements for further information.
2023 Funding Agreement
In 2023, the Service Agreements were amended to provide for, among other things, payment of up to $252 million to the Company (the "2023 Funding Agreement"), which the Company has used and intends to use to fund 50% of the amounts due under its 2022 agreement with MDA Space, as well as launch, insurance and ancillary costs incurred in connection with the construction and launch of replacement satellites purchased under such agreement. As of March 31, 2026, the outstanding principal balance under the 2023 Funding Agreement was $182.1 million.
The total amount paid to the Company under the 2023 Funding Agreement, including fees, is expected to be fully repaid by offsetting against amounts payable by the Customer pursuant to the Service Agreements beginning in the third quarter of 2026 and continuing for no longer than 16 consecutive quarters. Compounded fees are accrued at a fixed rate based on the average outstanding balance of the 2023 Funding Agreement. The balance accrued for these fees was $27.3 million as of March 31, 2026, of which $12.4 million is included in "Accounts payable and accrued expenses" and $14.9 million is included in "Other non-current liabilities" on the Company's balance sheet.
For as long as any amount funded under the 2023 Funding Agreement is outstanding, the Company will be subject to certain covenants, including (i) maintenance of a minimum cash balance of $30 million, (ii) interest coverage and leverage ratios, and (iii) other customary negative covenants, including limitations on certain asset transfers, expenditures and investments. Thermo guaranteed certain of the Company’s obligations under the 2023 Funding Agreement and Service Agreements. See Note 10: Related Party Transactions for further information regarding Thermo's guarantee.
As the Company makes draws under the 2023 Funding Agreement, the amount of each draw is recorded at fair value using a discounted cash flow model. The Company records a debt discount or premium for the difference between the fair value of the debt and the proceeds received and accretes the debt discount or amortizes the debt premium with an offset to interest expense through the maturity date using the effective interest rate method.
2021 Funding Agreement
During 2021, the Company received payments totaling $94.2 million (as amended, the "2021 Funding Agreement"). This funding was repaid by offsetting against amounts payable as services were performed by the Company. The last recoupment was made in March 2026. The debt discount associated with the 2021 Funding Agreement was accreted to interest expense through the maturity date using the effective interest rate method. No interest accrued on amounts outstanding under the 2021 Funding Agreement. During the three months ended March 31, 2026, a total of $6.3 million was recouped pursuant to the terms of the 2021 Funding Agreement. As of March 31, 2026, the outstanding principal balance under the 2021 Funding Agreement was zero.
Series A Preferred Stock
In 2022, the Company issued 149,425 shares of its 7.0% Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share (the "Series A Preferred Stock") with a fair value of $105.3 million and total outstanding amount of $149.4 million. The shares of Series A Preferred Stock do not possess voting rights, other than with respect to certain matters specifically affecting the rights and obligations of the Series A Preferred Stock.
Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by the Board or a committee thereof, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. During the three months ended March 31, 2026, the Company made dividend payments to the holders of the Series A Preferred Stock, which were approved by the Board totaling $2.6 million.
The Series A Preferred Stock may be redeemed by the Company, in whole or in part, at any time. The holders of the Series A Preferred Stock do not have any rights to convert or require the Company to redeem such stock. The holders of the Series A Preferred stock have customary liquidation preferences.
Refer to Note 14: Subsequent Events for discussion of the Mergers, including the proposed cancellation of the Series A Preferred Stock in exchange for the liquidation preference upon consummation of the Mergers.
7. DERIVATIVES
The Company reflected on its balance sheet an embedded derivative resulting from certain features in the Company’s 2024 Debt Repayment. This derivative instrument is not designated as a hedge. The fair value of the 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 the consolidated statements of operations and consolidated statements of cash flows as a non-cash operating activity.
The terms of the 2024 Debt Repayment contain an interest reduction mechanism that is required to be bifurcated and was recorded as an embedded derivative on the Company's consolidated balance sheet with a corresponding debt premium that was added to the principal amount of the 2024 Debt Repayment. The Company determined the fair value of the embedded derivatives using a discounted cash flow model. As the discount yield and the effective interest rate of the loan fluctuate based on projected cash flows, the derivative value is adjusted. When project milestones (as amended in April 2026) are achieved, the Company removes associated future cash flows from the total interest savings projections used to fair value the embedded derivative. The majority of the present value of the cash flows removed from the derivative asset is recorded as a debt discount, while the remaining portion relieves the balance of accrued interest associated with that milestone on the Company's consolidated balance sheet.
As of March 31, 2026 and December 31, 2025, the Company recorded the fair value of the embedded derivative, totaling $111.9 million and $114.5 million, respectively. The Company records a derivative gain or loss resulting from mark-to-market adjustments, which is reflected in "Derivative loss and other (expense) income" in the Company’s consolidated statement of operations.
See Note 8: Fair Value Measurements for further discussion.
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 Company marks-to-market its derivatives 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 information.
Embedded Derivative within the 2024 Debt Repayment
The embedded derivative relating to the 2024 Debt Repayment is valued using a discounted cash flow model. The most significant input used in the fair value measurement was the discount yield, which was 6.79% and 6.05%, at March 31, 2026 and December 31, 2025, respectively. As the discount yield used in the valuation process increases, the fair value of the embedded derivative decreases. Similarly, as the length of time between the reporting date and the start date of the interest payments decreases, the present value of the projected interest savings increases, resulting in a higher derivative asset value.
The significant unobservable input that drives the cash flows used in the fair value measurement includes the estimated achievement of project milestones (as amended in April 2026). As the probability of reaching the relevant milestones increases, the fair value of the embedded derivative would also increase.
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):
| | | | | | | | | | | |
| Three Months Ended March 31, 2026 | | Twelve Months Ended December 31, 2025 |
| Balance at beginning of period | $ | 114,461 | | | $ | 108,799 | |
| Issuance of embedded derivative within the 2024 Debt Repayment | — | | | 2,480 | |
| Settlement of a portion of the derivative asset for project milestone achieved | — | | | (11,337) | |
Unrealized (loss) gain, included in derivative and other | (2,602) | | | 14,519 | |
| Balance at end of period | $ | 111,859 | | | $ | 114,461 | |
Fair Value of Debt Instruments and Other Financing Arrangements
The carrying amount of the Company's long-term debt approximates its fair value as the debt was recently issued and current market rates for instruments with similar terms, credit characteristics, and remaining maturities are not significantly different from the contractual rates of the Company's outstanding debt. When the Company makes draws on the 2023 Funding Agreement, each draw is recorded at fair value based on market rates at the time of the draw.
9. COMMITMENTS AND CONTINGENCIES
Updated Services Agreements
The Updated Services Agreements set forth the primary terms for the Company to provide expanded services to the Customer and incur costs related to the Extended MSS Network, which primarily relate to the construction of new gateways and the upgrade of existing gateways as well as new satellite construction and launch services, including both the replacement satellites related to the Phase 2 Services Period and the third-generation satellites related to the Extended MSS Network. The Updated Services Agreements have an indefinite term but are terminable by the Customer at any time upon advance notice or a force majeure event, or by either party upon the occurrence of certain events of default. The Updated Services Agreements obligate the Company to comply with various commitments.
Refer to Note 14: Subsequent Events for discussion of the Mergers and the related amendments to certain arrangements with the Customer, including the SOW Amendment.
Satellite Procurement Agreements
In February 2022, the Company entered into a satellite procurement agreement with MDA Space pursuant to which the Company will acquire at least 17 satellites (and up to 26 satellites) to replace its HIBLEO-4 U.S.-licensed system with an amended contract price of $329.3 million for 17 of the replacement satellites. In addition, MDA Space provided a satellite operations control center for $5.0 million as well as other equipment for $4.2 million. The projected delivery dates were later than the dates specified in the satellite procurement agreement. The Company is contractually entitled to receive liquidated damages from MDA Space based upon the terms of the satellite procurement agreement due to MDA Space's failure to meet delivery milestones and the parties are discussing this matter. Any damages would reduce amounts owed to MDA Space when realized or realizable. The first set of replacement satellites was delivered in April 2026 and is scheduled to be launched in May 2026. The second batch of replacement satellites is scheduled for delivery later in 2026.
In February 2025, the Company entered into another agreement with MDA Space pursuant to which the Company will acquire more than 50 third-generation satellites related to the Extended MSS Network. The total contract price for these satellites is $775.0 million.
Launch Services Agreements
In each of August 2023 and June 2025, Globalstar entered into a Launch Services Agreement with SpaceX and certain related ancillary agreements (collectively, the "Launch Services Agreements"), providing for the launch of the first and second sets, respectively, of the 17 replacement satellites that the Company is acquiring pursuant to the 2022 satellite procurement agreement with MDA Space. As a result of the delivery delays of the replacement satellites (discussed above), the Company and SpaceX established an updated launch window of May 2026 for the first set of replacement satellites. The launch window of the second set of replacement satellites has not been adjusted.
In October 2024, the Company entered into a separate agreement with SpaceX for the launch of the third-generation satellites related to the Extended MSS Network.
Expanded Ground Infrastructure
The Company has ground infrastructure purchase commitments with its third party antenna and other equipment manufacturers to support the Extended MSS Network. Outstanding purchase commitments to support the Extended MSS Network ground infrastructure as of March 31, 2026 were approximately $158.0 million.
Funding for Phase 2 Service Period Asset Procurement
Under the Service Agreements, subject to certain terms and conditions, the Company expects to receive payments equal to 95% of the approved capital expenditures under the satellite procurement agreement for the replacement satellites, launch services agreements for such replacement satellites and other ancillary equipment and launch costs (to be paid on a straight-line basis over the 12-year design life of such replacement satellites) beginning with the commencement of the Phase 2 Service Period.
Funding for Extended MSS Network Asset Procurement
As discussed in more detail in Note 2: Special Purpose Entity, the Updated Services Agreements provide for prepayments from the Customer for approved capital expenditures associated with the Extended MSS Network. As of March 31, 2026, the Company incurred $0.7 billion of the $2.0 billion projected spend for the Extended MSS Network. The Company will continue to incur these costs until the assets are placed into service.
10. RELATED PARTY TRANSACTIONS
Transactions with Thermo
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 Board are also directors, officers or minority equity owners of various Thermo entities.
Payables to Thermo related to arm's length transactions were $0.2 million and $0.4 million as of March 31, 2026 and December 31, 2025, respectively.
Certain general and administrative expenses are incurred by Thermo on behalf of the Company. These expenses include: (i) non-cash expenses, such as stock compensation costs, and (ii) expenses incurred by Thermo on behalf of the Company that are charged to the Company; these charges are based on actual amounts (with no mark-up) incurred by Thermo or upon allocated employee time.
Refer to Note 14: Subsequent Events for discussion of the Mergers and the related agreements with Thermo, including, but not limited to, Thermo's approval of the Merger Agreement, the Support Agreement (as defined in Note 14: Subsequent Events) and the proposed cancellation of the Series A Preferred Stock in exchange for the liquidation preference upon consummation of the Mergers, as well as the treatment of the warrants held by Thermo immediately prior to the consummation of the Mergers.
Lease Agreement
The Company has a lease agreement with Thermo Covington, LLC for the Company's headquarters office. Annual lease payments increase at a rate of 2.5% per year. 2026 lease payments will total $1.7 million. The lease term is ten years and is scheduled to expire in January 2029. During each of the three months ended March 31, 2026 and 2025, the Company incurred lease expense of $0.4 million under this lease agreement.
Series A Preferred Stock
Thermo owns $136.7 million of the Series A Preferred Stock, based upon the shares' liquidation preference. Holders of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Board, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. During the three months ended March 31, 2026, the Company made dividend payments to Thermo, which were approved by the Board, totaling $2.4 million. Refer to Note 14: Subsequent Events for discussion of the Mergers and the proposed cancellation of the Series A Preferred Stock in exchange for the liquidation preference upon consummation of the Mergers.
Service Agreements
In connection with the Service Agreements, the Customer and Thermo entered into a lock-up and right of first offer agreement that generally (i) requires Thermo to offer any shares of Globalstar common stock to the Customer before transferring them to any other person, other than affiliates of Thermo and (ii) prohibits Thermo from transferring shares of Globalstar common stock if such transfer would cause Thermo to hold less than 51.00% of the outstanding common stock of the Company for a period of five years from the launch of Services in November 2022. The Customer waived its rights under the lock-up and right of first offer agreement in connection with the Company's entry into the Merger Agreement. Refer to Note 14: Subsequent Events for more information about the Merger Agreement.
Certain amounts payable by the Company in connection with the 2023 Funding Agreement and certain other obligations under the Service Agreements are guaranteed by Thermo pursuant to a guaranty agreement (the "Thermo Guaranty"). As consideration for Thermo's guarantee, the Company issued to Thermo a warrant to purchase 666,668 shares of the Company’s common stock at an exercise price equal to $30.00 per share (as calculated pursuant to the Thermo Guaranty). The right to purchase 333,334 shares under the warrant vested immediately upon effectiveness of Thermo's guarantee, which occurred in December 2023, and the right to purchase the remaining 333,334 shares under the warrant would vest if and when Thermo advances aggregate funds of $25.0 million or more to the Company or a permitted third party pursuant to the terms of the Thermo Guaranty. The warrant expires in December 2028.
In connection with the Updated Services Agreements, the Company, the Customer and Thermo amended the Thermo Guaranty to lower the amount of Guaranteed Obligations (as defined in the Thermo Guaranty) to $100 million (collectively with the Thermo Guaranty, the "Amended Thermo Guaranty"). The entry into the Amended Thermo Guaranty required approval of the Company's stockholders (other than Thermo, including its affiliates), which was received at the Company's 2025 annual meeting of stockholders on May 20, 2025. No changes were made to the existing outstanding warrants associated with the Thermo Guaranty and no additional warrants or rights to purchase additional shares of the Company's common stock were issued to Thermo in connection with the entry into the Amended Thermo Guaranty.
To the extent Thermo is required to advance amounts under the Amended Thermo Guaranty, the Company is required to issue shares of its common stock to Thermo in respect of such advance in an amount equal to the amount of such payment divided by the average of the volume weighted average price of the Company’s common stock for the five trading days immediately preceding such payment.
In connection with the execution of the Merger Agreement, the Company, the Customer and Thermo entered into an amendment to the Amended Thermo Guaranty, dated as of April 13, 2026 (the “Amendment to Thermo Guaranty”), pursuant to which the Amended Thermo Guaranty will be terminated on the date that the Assumed Prepayment Agreement entered into by Amazon and the Customer replaces the 2023 and 2024 Prepayment Agreements (each as defined in the Amendment to Thermo Guaranty), which shall be the closing date of the First Merger (as defined in the Merger Agreement), provided that Amazon has made the first required payment under the Assumed Prepayment Agreement to the Customer.
Refer to Note 14: Subsequent Events for discussion of the Mergers, the Amendment to the Thermo Guaranty and the related amendment to the warrants issued to Thermo to provide for the automatic cashless exercise of any vested and unexercised warrants immediately prior to the consummation of the Mergers.
Governance
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.
Agreements with XCOM Labs, Inc.
Dr. Paul E. Jacobs is the Chief Executive Officer of Globalstar and also serves as the Executive Chairman of XCOM Labs, Inc. (now known as Virewirx, Inc.) ("XCOM") and is the controlling stockholder of XCOM. In connection with the entry into the Company's former Intellectual Property License Agreement with XCOM (the "License Agreement"), Globalstar issued to XCOM shares of Globalstar common stock for the transaction. Of the consideration paid for the License Agreement, additional shares were issued to Dr. Jacobs. In January 2026, the Company exercised its option to purchase certain intellectual property assets pursuant to the License Agreement, which terminated such agreement.
Certain general and administrative expenses are incurred by Virewirx, Inc. on behalf of the Company. These expenses include costs incurred by Virewirx, Inc. on behalf of the Company that are charged to the Company; these charges are based on actual amounts (with no mark-up) incurred by Virewirx, Inc. or upon allocated employee time.
Payables to Virewirx, Inc. related to arm's length transactions were less than $0.1 million as of December 31, 2025; no amounts were outstanding as of March 31, 2026.
Dr. Jacobs does not have any family relationships with any director or executive officer of the Company and has not been directly or indirectly involved in any related party transactions with the Company, except for transactions related to the License Agreement and the SSA.
11. LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per common share for the periods indicated (in thousands, except per share data):
| | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended | | |
| March 31, 2026 | | March 31, 2025 | | | | |
| Numerator: | | | | | | | |
Net loss | $ | (17,420) | | | $ | (17,331) | | | | | |
| Effect of Series A Preferred Stock dividends | (2,615) | | | (2,615) | | | | | |
| Net loss attributable to common shareholders | $ | (20,035) | | | $ | (19,946) | | | | | |
| | | | | | | |
| Denominator: | | | | | | | |
Weighted average shares outstanding - basic and diluted | 128,417 | | | 126,476 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net loss per common share: | | | | | | | |
Basic | $ | (0.16) | | | $ | (0.16) | | | | | |
Diluted | $ | (0.16) | | | $ | (0.16) | | | | | |
For each of the three months ended March 31, 2026 and 2025, 2.9 million and 1.4 million shares, respectively, of potential common stock were excluded from diluted shares outstanding because the effects of such securities would be anti-dilutive. Included in these shares for all periods presented is a portion of (i) the outstanding equity awards under the Company's 2006 Equity Incentive Plan, and (ii) the 3.3 million shares that may be purchased by the Customer pursuant to the warrants issued under the Service Agreements in 2022 based on the treasury stock method. Additionally, Thermo holds a right to purchase 0.3 million shares of common stock pursuant to the warrant issued for its guarantee of the 2023 Funding Agreement. For the first quarter of 2026, a portion of these shares were included in potentially dilutive shares based on the treasury stock method; for the first quarter of 2025, none of these shares are included in the potentially dilutive securities because the exercise price of the warrants exceeded the average market price of Globalstar common stock during the periods.
Excluded from the amounts above are an additional 0.3 million shares that may be purchased by Thermo pursuant to the warrant issued in connection with its guarantee of the 2023 Funding Agreement; the right to purchase these shares vests only if Thermo advances aggregate funds of $25.0 million or more to the Company or a permitted third party pursuant to the terms of Thermo's guarantee. Also excluded are unvested performance-based restricted stock units ("PSUs") that are subject to market and performance conditions as the condition for achievement was not met. The total unvested PSUs as of March 31, 2026 totaled 1.6 million shares.
Refer to Note 14: Subsequent Events for discussion of the Mergers and the related amendments to the warrants issued to the Customer and to Thermo to provide for the automatic cashless exercise of any vested and unexercised warrants immediately prior to the consummation of the Mergers.
12. SEGMENT REPORTING
An operating segment is defined as a component of an enterprise which has discrete financial information that is evaluated regularly by the Company’s Chief Operating Decision Maker ("CODM") to decide how to allocate resources and assess performance. In accordance with ASC 280, Segment Reporting, the Company’s only reportable segment is its MSS business. The Company's Chief Executive Officer, Dr. Paul E. Jacobs, is the Company's CODM. Dr. Jacobs manages the consolidated entity and uses net income (loss) as the measure of profit or loss to assess performance and allocate resources. Dr. Jacobs does not review total assets. Dr. Jacobs reviews revenue and certain operating expenses to determine resource allocations. Revenue is reviewed at a disaggregated level, consistent with the Company’s disclosures in Note 3: Revenue. Expenses are reviewed by the nature of the cost (Cost of Services, Marketing, General and Administrative and Cost of Subscriber Equipment Sales), consistent with the Company’s presentation in its statements of operations. Other operating segment expenses may include stock-based compensation, depreciation, amortization and accretion, the reduction in the value of assets and inventory, interest income and expense, foreign currency gains and losses, gains and losses on extinguishment of debt as well as other smaller items.
13. INCOME TAXES
The change in the Company’s effective tax rate when comparing the three months ended March 31, 2026 to the same period in 2025 was driven by a lower estimated annual effective tax rate in the current year, which reduced the proportional impact of state current tax expense and uncertain tax position expense relative to the prior year period. In both periods, tax expense is being driven primarily by state current tax on forecasted taxable income and the state tax impacts of uncertain tax positions in the United States.
The Company monitors the realizability of its deferred tax assets considering all relevant factors at each reporting period. As of March 31, 2026, based on the relevant weight of positive and negative evidence, including its ability to forecast future operating results, historical tax losses and its ability to utilize deferred tax assets within the requisite carryforward periods, the Company maintains a valuation allowance on the majority of its federal, state and foreign deferred tax assets.
14. SUBSEQUENT EVENTS
Pending Mergers
On April 13, 2026, the Company entered into the Merger Agreement with the Buyer Parties pursuant to which, and subject to the terms and conditions of the Merger Agreement, the Buyer Parties have agreed to acquire the Company.
The Company’s standing Strategic Review Committee (the "SRC"), a subcommittee of independent and disinterested members of the SRC, and the Board each unanimously approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Mergers. Following the execution of the Merger Agreement, Thermo, who
collectively holds approximately 57.6% of the issued and outstanding shares of the Company’s common stock, executed and delivered to the Company a written consent (the “Written Consent”) adopting the Merger Agreement and approving the transactions contemplated thereby, including the Mergers. The delivery of the Written Consent constitutes all required approvals of the Company’s stockholders under the Company’s organizational documents, Delaware law and the Merger Agreement necessary to consummate the Mergers, and no further approval of the Company’s stockholders is required or will be sought.
Merger Consideration
Pursuant to the terms in the Merger Agreement, each share of the Company’s common stock issued and outstanding at the effective time of the First Merger (including shares of the Company's common stock issued upon the automatic cashless exercise of warrants but excluding shares of Company common stock that are owned by the Company or any of its subsidiaries or the Buyer Parties or any of their respective wholly owned subsidiaries (such shares, the “Canceled Shares”)) will be converted into the right to receive, at the election of the holder, subject to the terms, conditions and procedures set forth in the Merger Agreement, either (i) cash in an amount equal to $90 per share (subject to a potential downward adjustment, as explained below) (the “Cash Consideration”) or (ii) a number of validly issued, fully paid and nonassessable shares of Amazon’s common stock equal to the exchange ratio (as determined in accordance with the Merger Agreement, which is subject to a potential downward adjustment, as explained below) with cash in lieu of fractional shares (the “Stock Consideration” and, together with the Cash Consideration, the “Merger Consideration”). If a holder does not make an election, such holder will receive the Stock Consideration. Elections to receive the Cash Consideration are subject to an automatic proration adjustment such that the maximum number of shares of the Company’s outstanding common stock eligible to be converted into the right to receive the Cash Consideration pursuant to the Merger Agreement is equal to 40% of the aggregate number of shares of the Company’s common stock issued and outstanding immediately prior to the effective time of the First Merger (other than Canceled Shares), and any excess number of Company common stock with respect to which elections have been made to receive the Cash Consideration will be automatically converted into the right to receive the Stock Consideration on a pro rata basis. The aggregate Merger Consideration is also subject to a potential downward adjustment capped at a maximum of $110 million in the event the Company does not achieve certain amended operational milestones prior to closing, based on the Company's agreements with the Customer, as amended in the manner described below.
Warrants; Preferred Stock
The Company's outstanding warrants include the warrants issued to the Customer that are exercisable in accordance with the Updated Services Agreements and to Thermo in connection with its guarantee of the 2023 Funding Agreement. In connection with the entry into Merger Agreement, the Company also agreed to amend the warrants issued to the Customer and Thermo to provide that, immediately prior to the effective time of the First Merger, each outstanding warrant held by the Customer and by Thermo that is vested and unexercised will be automatically exercised on a cashless basis and the shares of the Company’s common stock issued as a result of such exercise will be converted into the right to receive the Merger Consideration, as described above. In addition, pursuant to the amendment of the warrants issued to the Customer, Customer has the right (but not obligation) to exercise its warrants on a cashless basis prior to or at 5:00 p.m. (New York City time) on the date that is five (5) business days prior to the anticipated closing date of the Mergers.
Immediately following the effective time of the First Merger, each share of the Company's Series A Preferred Stock outstanding will be converted into the right to receive a liquidating distribution in the initial amount of the liquidation preference of $1,000 per share in cash, as increased by accrued dividends. Following this liquidating distribution, the Series A Preferred Stock will no longer be outstanding and the rights of the holders thereof will terminate.
Conditions to Closing and Other Terms of the Merger Agreement
The consummation of the Mergers is subject to certain closing conditions set forth in the Merger Agreement, including, but not limited to: (a) the receipt of stockholder approval (which has been satisfied through the delivery of the Written Consent as described above), (b) the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and the clearance or approval under certain specified antitrust, foreign investment, and satellite and telecommunications laws, (c) the absence of any law or order that prevents, makes illegal or enjoins the consummation of the Mergers, (d) the lapse of at least twenty (20) calendar days since the Company’s mailing to the Company’s stockholders of an information statement concerning the Mergers, the Written Consent and the other transactions contemplated by the Merger Agreement, (e) the effectiveness under the Securities Act of 1933, as amended, of the registration statement on Form S-4 to be filed by Amazon, in which the Company’s information statement will be included as a prospectus, (f) the absence of a Company Material Adverse Effect or a Parent Material Adverse Effect (each, as defined in the Merger Agreement) and (g) the achievement by the Company of certain HIBLEO-4 satellite milestones.
The Company also made customary representations and warranties in the Merger Agreement and agreed to customary covenants regarding the operation of the business of the Company and its subsidiaries prior to the consummation of the Mergers.
Termination and Termination Fees
The Merger Agreement contains customary termination rights for the Company and Amazon. The Merger Agreement may be terminated by either party if the Mergers are not consummated by April 13, 2027, which date may be extended to October 13, 2027 and again to April 13, 2028 if, as of such date, certain conditions related to regulatory approvals or, with respect to the first extension, satellite milestones, have not been satisfied or waived.
Upon termination of the Merger Agreement under certain circumstances, the Company will be required to pay Amazon a termination fee of approximately $419.8 million, including if (a) the Merger Agreement is terminated by Amazon as a result of a breach of the Merger Agreement by the Company, (b) prior to such termination, a bona fide alternative acquisition proposal has been made and (c) within twelve months after the date of such termination, the Company enters into or consummates an alternative acquisition transaction. Amazon will be required to pay the Company a termination fee of approximately $592.1 million under certain circumstances, including if the Merger Agreement is terminated because certain required regulatory approvals have not been obtained.
Certain Agreements with the Customer
•Globalstar SPE: Following the closing of the Mergers, Acquisition Sub II will acquire all of the Customer Class B Units in Globalstar Licensee LLC.
•Amendment to 2024 Prepayment Agreement: On April 13, 2026, the Company and Customer entered into an amendment to the 2024 Prepayment Agreement, pursuant to which the parties increased the maximum amount of the High Power Infrastructure Prepayment Balance (as defined in the 2024 Prepayment Agreement) by approximately $468 million to an aggregate maximum amount of approximately $1.58 billion.
•Amendment to Statement of Work: On April 13, 2026, in connection with the entry into the Merger Agreement, the Company and the Customer amended their November 5, 2024 Statement of Work (the "SOW"), pursuant to which the parties amended certain service milestones under the SOW.
•Amendment to Thermo Guaranty: In connection with the execution of the Merger Agreement, the Company, the Customer and Thermo entered into the Amendment to Thermo Guaranty, pursuant to which the Amended Thermo Guaranty is amended so as to terminate on the date that the Assumed Prepayment Agreement entered into by Amazon and the Customer replaces the 2023 and 2024 Prepayment Agreements, which shall be the closing date of the First Merger, provided that Amazon has made the first required payment under the Assumed Prepayment Agreement to the Customer.
For further discussion on the agreements referenced above, specifically those associated with the Updated Services Agreements, refer to Note 2: Special Purpose Entity, Note 6: Long-Term Debt and Other Financing Arrangements and Note 9: Commitments and Contingencies. For further discussion on the Company's agreements with Thermo, refer to Note 10: Related Party Transactions.