Edgar Filing: Globalstar, Inc.

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2015



¨	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 October 29, 2015, 903,671,058 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.	42

Item 4.	Controls and Procedures.	42

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	43

Item 1A.	Risk Factors.	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	43

Item 3.	Defaults Upon Senior Securities.	43

Item 4.	Mine Safety Disclosures.	43

Item 5.	Other Information.	43

Item 6.	Exhibits.	43

Signatures		45

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Revenue:
Service revenues	$	19,644		$	18,511		$	55,367		$	52,647
Subscriber equipment sales	4,034			4,930			12,356			15,324
Total revenue	23,678			23,441			67,723			67,971
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	7,761			7,868			23,222			21,926
Cost of subscriber equipment sales	2,914			3,836			9,028			11,240
Cost of subscriber equipment sales - reduction in the value of inventory	—			—			—			7,317
Marketing, general and administrative	9,675			8,783			28,430			24,799
Depreciation, amortization, and accretion	19,417			21,047			57,734			66,393
Total operating expenses	39,767			41,534			118,414			131,675
Loss from operations	(16,089		)	(18,093		)	(50,691		)	(63,704		)
Other income (expense):
Loss on extinguishment of debt	—			(12,936		)	(2,254		)	(39,615		)
Loss on equity issuance	(2,920		)	—			(5,832		)	(748		)
Interest income and expense, net of amounts capitalized	(9,019		)	(9,067		)	(26,780		)	(33,853		)
Derivative gain (loss)	54,194			166,989			183,416			(418,663		)
Other	(1,953		)	2,586			1,728			2,955
Total other income (expense)	40,302			147,572			150,278			(489,924		)
Income (loss) before income taxes	24,213			129,479			99,587			(553,628		)
Income tax expense	115			89			449			1,255
Net income (loss)	$	24,098		$	129,390		$	99,138		$	(554,883	)

Other comprehensive income (loss):
Foreign currency translation adjustments	(615		)	(493		)	(1,458		)	(871		)
Total comprehensive income (loss)	$	23,483		$	128,897		$	97,680		$	(555,754	)

Net income (loss) per common share:
Basic	$	0.02		$	0.13		$	0.10		$	(0.61	)
Diluted	0.02			0.11			0.09			(0.61		)
Weighted-average shares outstanding:
Basic	1,031,398			987,668			1,014,165			914,474
Diluted	1,234,551			1,189,190			1,221,287			914,474

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)



	September 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	27,973		$	7,121
Accounts receivable, net of allowance of $5,681 and $4,788, respectively	14,051			15,015
Inventory	12,080			14,734
Prepaid expenses and other current assets	5,719			7,944
Total current assets	59,823			44,814
Property and equipment, net	1,083,516			1,113,560
Restricted cash	37,918			37,918
Deferred financing costs, net	61,164			63,862
Prepaid second-generation ground costs	13,909			—
Intangible and other assets, net of accumulated amortization of $6,631 and $6,315, respectively	10,979			8,266
Total assets	$	1,267,309		$	1,268,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	19,642		$	6,450
Accounts payable	9,653			6,922
Accrued contract termination charge	19,712			21,308
Accrued expenses	29,118			22,342
Payables to affiliates	536			481
Deferred revenue	24,987			21,740
Total current liabilities	103,648			79,243
Long-term debt, less current portion	618,837			623,640
Employee benefit obligations	5,537			5,499
Derivative liabilities	238,087			441,550
Deferred revenue	6,334			6,572
Debt restructuring fees	20,795			20,795
Other non-current liabilities	10,996			12,205
Total non-current liabilities	900,586			1,110,261
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 September 30, 2015 and December 31, 2014, respectively	—			—
Series A Preferred Convertible Stock of $0.0001 par value; one share authorized and none issued and outstanding at September 30, 2015 and December 31, 2014, respectively	—			—
Voting Common Stock of $0.0001 par value; 1,200,000,000 shares authorized; 903,655,140 and 864,378,563 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	90			86
Nonvoting Common Stock of $0.0001 par value; 400,000,000 shares authorized; 134,008,656 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	13			13
Additional paid-in capital	1,590,094			1,503,619
Accumulated other comprehensive loss	(4,356		)	(2,898		)
Retained deficit	(1,322,766		)	(1,421,904		)
Total stockholders’ equity	263,075			78,916
Total liabilities and stockholders’ equity	$	1,267,309		$	1,268,420

See accompanying notes to unaudited interim condensed consolidated financial statements.

GLOBALSTAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Nine Months Ended
	September 30, 2015			September 30, 2014
Cash flows provided by (used in) operating activities:
Net income (loss)	$	99,138		$	(554,883	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	57,734			66,393
Change in fair value of derivative assets and liabilities	(183,416		)	418,663
Stock-based compensation expense	2,073			2,312
Amortization of deferred financing costs	7,110			7,591
Provision for bad debts	3,035			1,688
Reduction in value of inventory	—			7,317
Noncash interest and accretion expense	8,381			13,511
Loss on extinguishment of debt	2,254			39,615
Loss on equity issuance	5,832			748
Other, net	424			1,426
Unrealized foreign currency gain	(2,150		)	(3,017		)
Changes in operating assets and liabilities:
Accounts receivable	(2,532		)	(2,699		)
Inventory	2,045			4,403
Prepaid expenses and other current assets	749			(961		)
Other assets	(648		)	(2,028		)
Accounts payable and accrued expenses	4,534			1,317
Payables to affiliates	55			242
Other non-current liabilities	(904		)	193
Deferred revenue	3,600			5,044
Net cash provided by operating activities	7,314			6,875
Cash flows used in investing activities:
Second-generation network costs (including interest)	(15,484		)	(3,862		)
Property and equipment additions	(6,062		)	(2,203		)
Net cash used in investing activities	(21,546		)	(6,065		)
Cash flows provided by (used in) financing activities:
Principal payment of the Facility Agreement	(3,225		)	—
Proceeds from issuance of stock to Terrapin	39,000			—
Payment of deferred financing costs	—			(164		)
Proceeds from issuance of common stock and exercise of options and warrants	426			9,303
Net cash provided by financing activities	36,201			9,139
Effect of exchange rate changes on cash	(1,117		)	(136		)
Net increase in cash and cash equivalents	20,852			9,813
Cash and cash equivalents, beginning of period	7,121			17,408
Cash and cash equivalents, end of period	$	27,973		$	27,221
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	9,746		$	10,335
Income taxes	4,720			95

	Nine Months Ended
	September 30, 2015			September 30, 2014
Supplemental disclosure of non-cash financing and investing activities:

Increase in non-cash capitalized accrued interest for second-generation network costs	1,574			1,237
Capitalization of the accretion of debt discount and amortization of prepaid financing costs	2,416			1,973
Payments made in convertible notes and common stock	735			12,910
Principal amount of debt converted into common stock	6,491			76,040
Reduction of debt discount and issuance costs due to note conversions	2,085			28,073
Increase in accrued second-generation network costs	2,392			1,887
Fair value of common stock issued upon conversion of debt	26,669			269,826
Reduction in derivative liability due to conversion of debt	20,008			182,051
Fair value of common stock issued to vendor for payment of invoices	16,684			—
Increase of principal amount of Thermo Loan Agreement	6,000			—

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, (“Thermo”) is Globalstar’s principal owner and largest stockholder. Globalstar’s Executive Chairman and Chief Executive Officer controls Thermo and its affiliates. Two other members of Globalstar’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 (“GAAP”) in the United States of America 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; 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 Globalstar, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (the "SEC") on March 2, 2015 (the "2014 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 GAAP requires management to make estimates and assumptions that affect the 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. 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, income taxes and the value of stock-based compensation. Actual results could differ from these estimates. Certain reclassifications have been made 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 its majority owned or otherwise controlled 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 and comprehensive loss, condensed consolidated balance sheets, and condensed consolidated statements of cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the full year or any future period.

The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure. Based on this evaluation, the Company determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.

Recently Issued Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, Income Statement - Extraordinary and Unusual Items. This ASU eliminates the separate presentation of extraordinary items, net of tax and the related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. ASU 2015-01 was issued to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP and more closely align U.S. GAAP with International Financial Reporting Standards ("IFRS"). This standard is effective for periods beginning after December 15, 2015. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, a reporting entity may elect prospective or retrospective application. If adopted prospectively, both the nature and amount of any subsequent adjustments to previously reported extraordinary items must be disclosed. The Company does not expect this ASU to have a material effect on its consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation - Amendments to the Consolidation Analysis. ASU 2015-02 was issued in response to concerns that current GAAP might require a reporting entity to consolidate another legal entity in situations in which the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of

the legal entity’s economic benefits or obligations. The amendments included in ASU 2015-02 are intended to improve targeted areas in the consolidation guidance, which includes legal entities such as limited partnerships and limited liability companies and the evaluation of fees paid to a decision maker. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effect of the standard on its ongoing reporting.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest - Simplifying the Presentation of Debt Issue Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a reduction in the carrying amount of the related debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this ASU. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Upon adoption, if applicable, this ASU will be applied on a retrospective basis, wherein the consolidated balance sheet of each period presented will be adjusted to reflect the effects of applying the new guidance. The Company would be required to comply with the applicable disclosures for a change in an accounting principle, including the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (that is, the previously reported debt issuance cost asset and the adjusted debt liability). The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.

In August 2015, the FASB decided to delay the effective date of ASU No. 2014-09, Revenue from Contracts with Customers. ASU 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. With the one-year deferral, ASU 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. The Company is currently evaluating the impact this standard 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 the standard on its ongoing reporting.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU 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 aligns U.S. GAAP with IFRS. This ASU is effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those years. 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.

2. PROPERTY AND EQUIPMENT

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



	September 30, 2015			December 31, 2014
Globalstar System:
Space component
First and second-generation satellites in service	$	1,211,768		$	1,211,904
Prepaid long-lead items	17,040			17,040
Second-generation satellite, on-ground spare	32,481			32,481
Ground component	45,782			47,595
Construction in progress:
Space component	63			30
Ground component	166,314			141,789
Other	4,989			2,458
Total Globalstar System	1,478,437			1,453,297
Internally developed and purchased software	14,607			15,392
Equipment	12,645			12,647
Land and buildings	3,127			3,590
Leasehold improvements	1,670			1,620
Total property and equipment	1,510,486			1,486,546
Accumulated depreciation	(426,970		)	(372,986		)
Total property and equipment, net	$	1,083,516		$	1,113,560

Amounts in the above table consist primarily of costs incurred related to the construction of the Company’s second-generation constellation and ground upgrades. Amounts included in the Company’s second-generation satellite, on-ground spare balance as of September 30, 2015, 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 of satellites. As of September 30, 2015, 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 the Globalstar Satellite for the Second Generation Constellation between Globalstar and Thales Alenia Space France ("Thales"), dated and executed in June 2009 ("2009 Contract"), Globalstar paid €12 million in purchase price plus an additional €3.1 million in procurement costs for the LLI to be procured by Thales on Globalstar's behalf. The LLI were to be used in the construction of the Phase 3 satellites for Globalstar. As reflected on the Company's condensed consolidated balance sheets and in the above table, Globalstar believes that it owns the LLI and that the title transferred upon procurement. Recently, Globalstar asked Thales to turn over the LLI. Despite historical statements to the contrary, Thales currently disputes Globalstar's ownership of the LLI and has recently asserted that Globalstar released its title to the LLI pursuant to that certain Release Agreement, dated as of June 24, 2012, which is described more fully below. Thales further asserts that the LLI belong to Thales and that Thales has no obligation to turn over possession of this LLI to Globalstar. Globalstar disputes Thales' assertions and is currently considering its rights and remedies to recover the LLI. At this time, Globalstar 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 which Globalstar may determine to commence with respect to the LLI.

Capitalized Interest and Depreciation Expense

The following tables summarize capitalized interest (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Interest cost eligible to be capitalized	$	10,935		$	10,508		$	31,640		$	34,123
Interest cost recorded in interest expense, net	(8,292		)	(8,557		)	(24,400		)	(28,365		)
Net interest capitalized	$	2,643		$	1,951		$	7,240		$	5,758

The following table summarizes depreciation expense (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Depreciation expense	$	19,299	$	20,653	$	57,330	$	65,040

3. LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

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



	September 30, 2015				December 31, 2014
	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Facility Agreement	$	579,071	$	579,071	$	582,296	$	582,296
Thermo Loan Agreement	80,721		47,473		68,154		32,971
8.00% Convertible Senior Notes Issued in 2013	16,561		11,935		22,799		14,823
Total Debt	676,353		638,479		673,249		630,090
Less: Current Portion	19,642		19,642		6,450		6,450
Long-Term Debt	$	656,711	$	618,837	$	666,799	$	623,640

The principal amounts shown above include payment of in-kind interest, as applicable. The carrying value is net of 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

The Company’s senior secured credit facility agreement, as amended and restated (the “Facility Agreement”), is scheduled to mature in December 2022. As of September 30, 2015, 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 under 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 September 30, 2015, the Company was in compliance with respect to 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 February and June 2015, the Company drew $10 million and $14 million, respectively, under its agreement with Terrapin Opportunity, L.P. (“Terrapin”), as described below. The Company deemed these funds to be Equity Cure

Contributions under the Facility Agreement and treated them accordingly in the Company's calculation of compliance with certain financial covenants for the measurement periods ended December 31, 2014 and June 30, 2015. In August 2015, the Company drew $15 million under its new Common Stock Purchase Agreement with Terrapin (the "August 2015 Terrapin Agreement"). The Company can use these funds as an Equity Cure Contribution under the Facility Agreement in the calculation of financial covenants for the measurement period ended December 31, 2015, if needed.

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 September 30, 2015, 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.

On August 7, 2015, the Company, Thermo, the lenders and their agent entered into a Second Global Amendment and Restatement Agreement (the “2015 GARA”). Pursuant to the 2015 GARA:

•

The Facility Agreement was amended and restated as described below and in the form attached to the 2015 GARA. The amendments to the Facility Agreement clarify the definition of Net Debt (which previously was ambiguous and subject to varying interpretations), adjust the calculation of the Net Debt to Adjusted Consolidated EBITDA covenant, change the way in which certain Equity Cure Contributions are calculated, and extend by up to June 2019 the date through which Equity Cure Contributions can be made.

•

The lenders agreed that the $14 million equity financing the Company received from Terrapin on June 22, 2015 would be credited towards an Equity Cure Contribution for the measurement period ended June 30, 2015 and that any equity financing the Company raised between the closing date and June 30, 2016 may be used to the extent required as an Equity Cure Contribution for any period ending on or before June 30, 2016.


•	The lenders waived any existing defaults or events of default under the Facility Agreement.


•	Thermo agreed to make, or caused to be made, available to the Company cash equity financing, subject to certain conditions, of $30.0 million, all as further described below.


•	Thermo repeated in favor of the lenders and agent each of the representations and warranties previously made by Thermo in the Amended and Restated Thermo Subordinated Deed executed in July 2013.


•	The Company paid a waiver fee to the agent and lenders in the aggregate amount of $85,000.

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. The Loan Agreement becomes 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 September 30, 2015, $37.2 million of interest had accrued with respect to the Loan Agreement; the Thermo loan 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% Notes Issued in 2013 shall have been redeemed in full, September 30, 2019 (the “Commitment Period”), under the circumstances described below, they will make, or cause to be made, available to the Company cash equity financing in the aggregate amount of $30.0 million.

Thermo and its affiliates are required to provide these funds during the Commitment Period if:


•	The Company requests the funds, or


•	An Event of Default occurs and is continuing under the Facility Agreement, and, at the direction of the agent under the Facility Agreement, the Company delivers a notice to Terrapin under the Purchase Agreement drawing the amount set forth in the agent’s notice, and Terrapin fails to purchase shares of the Company's voting common stock to provide the Company with cash proceeds in such amount.

The balance of this commitment will be 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 a 2015 Thermo Loan Agreement (the “New Thermo 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. 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. Thermo's remaining cash equity commitment under the Equity Agreement is $15.0 million as of September 30, 2015.

In connection with the 2015 GARA, the Second Thermo Group Undertaking Letter and the Equity Agreement, the Company agreed to increase the principal amount under the Thermo Loan Agreement by $6.0 million. This fee was capitalized as a deferred financing cost and is being amortized over the term of the Facility Agreement.

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 "8.00% Notes Issued in 2013") 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 8.00% Notes Issued in 2013, subject to adjustment. The conversion price of the 8.00% Notes Issued in 2013 will be 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 "New 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) was reduced to $0.73 per share of common stock as is the current conversion price as of September 30, 2015.

The 8.00% Notes Issued in 2013 are senior unsecured debt obligations of the Company with no sinking fund. The 8.00% Notes Issued in 2013 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 8.00% Notes Issued in 2013 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 New Indenture for the new 8.00% Notes Issued in 2013 provides for customary events of default. As of September 30, 2015, the Company was in compliance with respect to the 8.00% Notes Issued in 2013 and the New Indenture.

Subject to certain conditions set forth in the New Indenture, the Company may redeem the 8.00% Notes Issued in 2013, 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 8.00% Notes Issued in 2013 to be redeemed plus all accrued and unpaid interest thereon.

A holder of 8.00% Notes Issued in 2013 has the right, at the Holder’s option, to require the Company to purchase some or all of the 8.00% Notes Issued in 2013 held by it on each of April 1, 2018 and April 1, 2023 at a price equal to the principal amount of the 8.00% Notes Issued in 2013 to be purchased plus accrued and unpaid interest.

Subject to the procedures for conversion and other terms and conditions of the New Indenture, a holder may convert its 8.00% Notes Issued in 2013 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 September 30, 2015, holders had converted a total of $39.4 million principal amount of 8.00% Notes Issued in 2013, resulting in the issuance of approximately 71.1 million shares of voting common stock. The conversion activity during the three and nine-month periods ended September 30, 2014 and 2015 is included in the table below (in thousands).



Period	Principal Amount Converted		Shares of Voting Common Stock Issued	Loss on Extinguishment of Debt

First Quarter of 2014	$	7,046	14,624	$	10,497
Second Quarter of 2014	$	10,535	18,611	$	20,387
Third Quarter of 2014	$	6,807	11,411	$	12,936

First Quarter of 2015	$	237	418	$	65
Second Quarter of 2015	$	6,254	10,379	$	2,189
Third Quarter of 2015	$	—	—	$	—

Holders who convert 8.00% Notes Issued in 2013 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 September 30, 2015, no conversions had been initiated but not yet fully settled.

The Company evaluated the various embedded derivatives within the New Indenture for the 8.00% Notes Issued in 2013. The Company determined that the conversion option and the contingent put feature within the New Indenture required bifurcation from the 8.00% Notes Issued in 2013. The Company did not deem the conversion option and the contingent put feature to be clearly and closely related to the 8.00% Notes Issued in 2013 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 8.00% Notes Issued in 2013.

The Company is accreting the debt discount associated with the compound embedded derivative liability to interest expense through the first put date of the 8.00% Notes Issued in 2013 (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
	September 30, 2015	December 31, 2014	September 30, 2015		December 31, 2014
Contingent Equity Agreement ⁽¹⁾	30,191,866	30,191,866	$	0.01	$	0.01
5.0% Warrants ⁽²⁾	8,000,000	8,000,000	0.32		0.32
	38,191,866	38,191,866

(1)

Pursuant to the terms of the Contingent Equity Agreement with Thermo (See Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 Annual Report for a complete 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 have a five-year exercise period from issuance. These warrants were issued between June 2009 and June 2012, and the exercise periods expire through June 2017. As of September 30, 2015, Thermo had exercised warrants to purchase approximately 11.3 million of these shares prior to the expiration of the associated warrants.

(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. During 2013, a portion of the 5.0% Warrants was exercised to purchase 7.2 million shares of common stock. The remaining 5.0% Warrants are exercisable until June 2016, which is five years after their issuance. See Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 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. From time to time over the 24-month term following the effectiveness of the registration statement, and in the Company’s sole discretion, the Company had the right to present Terrapin with up to 36 draw down 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 was equal to the daily volume weighted average price of common stock on each date during the Draw Down Period on which shares were purchased, less a discount ranging from 3.5% to 8% based on a minimum price that the Company specified. In addition, in the Company’s sole discretion, but subject to certain limitations, the Company could require Terrapin to purchase a percentage of the daily trading volume of its common stock for each trading day during the Draw Down Period. The Company agreed not to sell to Terrapin a number of shares of voting common stock which, when aggregated with all other shares of voting common stock then beneficially owned by Terrapin and its affiliates, would result in the beneficial ownership by Terrapin or any of its affiliates of more than 9.9% of the then issued and outstanding shares of voting common stock.

When the Company made a draw under the Terrapin equity line agreement, it issued Terrapin shares of common stock at a price per share calculated as specified in the agreement. In February 2015, the Company drew $10.0 million under the agreement and issued 4.5 million shares of voting common stock to Terrapin at an average price of $2.22 per share. In June 2015, the Company drew the remaining $14.0 million under the agreement and issued 6.6 million shares of voting common stock to Terrapin at an average price of $2.13 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 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 the Draw Down Period. The Company has agreed not to sell to Terrapin a number of shares of voting common stock which, 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. At September 30, 2015, $60.0 million remained available under the August 2015 Terrapin Agreement. The Company will make 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 are designated as hedges. The following tables disclose the fair values of the derivative instruments on the Company’s condensed consolidated balance sheets (in thousands):



	September 30, 2015			December 31, 2014
Derivative assets:
Interest rate cap	$	8		$	46
Total derivative assets	$	8		$	46
Derivative liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	(28,664	)	$	(79,040	)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	(209,423		)	(362,510		)
Total derivative liabilities	$	(238,087	)	$	(441,550	)

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
	September 30, 2015			September 30, 2014
Interest rate cap	$	(11	)	$	(7	)
Compound embedded derivative with 8.00% Notes Issued in 2013	11,475			43,050
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	42,730			123,946
Total derivative gain (loss)	$	54,194		$	166,989



	Nine Months Ended
	September 30, 2015			September 30, 2014
Interest rate cap	$	(38	)	$	(113	)
Warrants issued with 8.00% Notes Issued in 2009	—			(67,523		)
Compound embedded derivative with 8.00% Notes Issued in 2009	—			(16,406		)
Compound embedded derivative with 8.00% Notes Issued in 2013	30,367			(98,376		)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	153,087			(236,245		)
Total derivative gain (loss)	$	183,416		$	(418,663	)

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 ranging from $586.3 million to $14.8 million 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 instrument. 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 8.00% Notes Issued in 2013

As a result of the conversion option and the contingent put feature within the 8.00% Notes Issued in 2013, 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 8.00% Notes Issued in 2013. 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 Loan Agreement with Thermo as amended and restated in July 2013, 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.

Compound Embedded Derivative with 8.00% Notes Issued in 2009

As a result of the conversion rights and features and the contingent put feature embedded within the 8.00% Notes Issued in 2009, the Company recorded a compound embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the principal amount of the 8.00% Notes Issued in 2009. The Company determined the fair value of the compound embedded derivative using a blend of a Monte Carlo simulation model and market prices. On April 15, 2014, the remaining principal amount of 8.00% Notes Issued in 2009 was converted into common stock; accordingly, the derivative liability embedded in the 8.00% Notes Issued in 2009 is no longer outstanding. See 8.00% Convertible Senior Unsecured Notes Issued in 2009 in Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 Annual Report for a complete description of the 8.00% Notes Issued in 2009.

Warrants Issued with 8.00% Notes Issued in 2009

Due to the cash settlement provisions and reset features in the 8.00% Warrants issued with the 8.00% Notes Issued in 2009, the Company recorded the 8.00% Warrants as an embedded derivative liability on its condensed consolidated balance sheets with a corresponding debt discount that is netted against the principal amount of the 8.00% Notes Issued in 2009. The Company determined the fair value of the warrant derivative using a Monte Carlo simulation model. The exercise period for the 8.00% Warrants expired in June 2014; accordingly, the derivative liability for the 8.00% Warrants is no longer outstanding.

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):



	September 30, 2015
	(Level 1)		(Level 2)		(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	8	$	—		$	8
Total assets measured at fair value	$	—	$	8	$	—		$	8

Liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	—	$	—	$	(28,664	)	$	(28,664	)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—		(209,423		)	(209,423		)
Total liabilities measured at fair value	$	—	$	—	$	(238,087	)	$	(238,087	)



	December 31, 2014
	(Level 1)		(Level 2)		(Level 3)			Total Balance
Assets:
Interest rate cap	$	—	$	46	$	—		$	46
Total assets measured at fair value	$	—	$	46	$	—		$	46

Liabilities:
Compound embedded derivative with 8.00% Notes Issued in 2013	$	—	$	—	$	(79,040	)	$	(79,040	)
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	—		—		(362,510		)	(362,510		)
Total liabilities measured at fair value	$	—	$	—	$	(441,550	)	$	(441,550	)

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

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:



	September 30, 2015
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with 8.00% Notes Issued in 2013	75% - 85%	0.8	%	$	0.73	$	1.57
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	50% - 85%	1.9	%	$	0.73	$	1.57



	December 31, 2014
	Stock Price Volatility	Risk-Free Interest Rate		Note Conversion Price		Market Price of Common Stock
Compound embedded derivative with 8.00% Notes Issued in 2013	70% - 100%	1.2	%	$	0.73	$	2.75
Compound embedded derivative with the Amended and Restated Thermo Loan Agreement	50% - 100%	2.1	%	$	0.73	$	2.75

Fluctuations in the Company’s stock price are the primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases above the current conversion price for each of the related derivative instruments, the value to the holder of the instrument generally increases, thereby increasing the liability on the Company’s condensed consolidated balance sheets.

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 8.00% Notes Issued in 2013 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 8.00% Notes Issued in 2013 that impact the valuation model.

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 8.00% Notes Issued in 2013. 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) for the three and nine months ended September 30, 2015 (in thousands):



Balance at June 30, 2015	$	(292,293	)
Derivative adjustment related to conversions and exercises	—
Unrealized gain, included in derivative gain (loss)	54,206
Balance at September 30, 2015	$	(238,087	)


Balance at December 31, 2014	$	(441,550	)
Derivative adjustment related to conversions and exercises	20,008
Unrealized gain, included in derivative gain (loss)	183,455
Balance at September 30, 2015	$	(238,087	)

6. ACCRUED EXPENSES AND OTHER NON-CURRENT LIABILITIES

Accrued expenses consist of the following (in thousands):



	September 30, 2015		December 31, 2014
Accrued interest	$	5,283	$	827
Accrued compensation and benefits	2,397		2,597
Accrued property and other taxes	5,312		6,727
Accrued customer liabilities and deposits	3,005		3,358
Accrued professional and other service provider fees	2,237		1,925
Accrued commissions and rebates	1,162		686
Accrued telecommunications expenses	1,594		1,135
Accrued satellite and ground costs	928		1,531
Accrued inventory in transit	906		1,189
Accrued liability for potential stock issuance to Hughes	4,664		—
Other accrued expenses	1,630		2,367
Total accrued expenses	$	29,118	$	22,342

Other accrued expenses include primarily outsourced logistics services, storage, warranty reserve, maintenance, rent, payments to independent gateway operators ("IGOs") and liability for contingent consideration.

Accrued liability for potential stock issuance to Hughes includes the estimated value at September 30, 2015 of the downside protection that the Company provided to Hughes in connection with its April 2015 agreement (as amended). As described in Note 7: Commitments, the Company agreed to provide downside protection for a period of 130 trading days 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 the last day of the 130-day period. The value of this option was calculated using a Black-Scholes pricing model. This liability is marked to market at each balance sheet date and through the settlement date, and is considered a level 2 financial instrument, as defined in Note 5: Fair Value Measurements.

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



	September 30, 2015		December 31, 2014
Long-term accrued interest	$	189	$	131
Asset retirement obligation	1,274		1,184
Deferred rent and capital lease obligations	414		404
Liabilities related to the Cooperative Endeavor Agreement with the State of Louisiana	1,146		1,391
Uncertain income tax positions	5,626		6,061
Foreign tax contingencies	2,321		3,034
Other non-current liabilities	26		—
Total other non-current liabilities	$	10,996	$	12,205

7. COMMITMENTS

Contractual Obligations - Second-Generation Gateways and Other Ground Facilities

As of September 30, 2015, the Company had purchase commitments with Hughes Network Systems, LLC (“Hughes”) and Ericsson Inc. (“Ericsson”) related to the procurement, deployment and maintenance of the second-generation ground network.

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 to be delivered by the end 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 with an estimated delivery date of February 2016.

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 September 30, 2015. As the contract milestones are achieved, the related costs will be reclassified from Prepaid second-generation ground costs to construction in progress within Property and equipment. The Company recorded a loss equal to the value of the 7% discount of $1.2 million in its condensed consolidated statement of operations for the three months ended June 30, 2015. In the April 2015 agreement, as amended in July and August 2015, the Company agreed to provide downside protection for a period of 130 trading days after the issuance of the shares of common stock. 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 the last day of the 130-day period. Pursuant to this agreement, the Company recorded a liability of $4.7 million as of September 30, 2015 and $1.7 million as of June 30, 2015, respectively. This estimate of the value of this option was calculated using a Black-Scholes pricing model. This liability is marked to market at each balance sheet date and through the settlement date, which is expected to be in December 2015. The Company recorded this estimated loss, and subsequent changes in its condensed consolidated statement of operations for the nine months ended September 30, 2015.

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. The additional $1.9 million for delivery of four custom test equipment units and the $4.0 million for delivery of two additional RANs agreed to in March and April 2015, respectively, are now reflected in the contract through this amendment.

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 time line. 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 is estimated to be completed in the second quarter, instead of the third quarter, of 2016. As of September 30, 2015, the remaining amount due under the contract is $13.1 million.

The Company has signed various licensing and royalty agreements necessary for the manufacture and distribution of its second-generation products, which are expected to be introduced in 2016. 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. Globalstar 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 Globalstar materially breached the contract by failing to pay to Thales termination charges in the amount of €51.3 million by October 9, 2011, and that absent further agreement between the parties, Thales had no further obligation to manufacture or deliver satellites under Phase 3 of the 2009 Contract. The award required Globalstar to pay Thales approximately €53 million in termination charges and 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. Thales may refile the petition at a later date and pursue the confirmation of the arbitration award, which Globalstar will oppose. The tolling agreement has expired. 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, Globalstar 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 September 30, 2015. The releases became effective on December 31, 2012.

Under the terms of the Settlement Agreement, the parties agreed, among other things, to stay the New York Proceeding, and Globalstar 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 September 30, 2015, 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 (with limited exceptions related to tolling) shall terminate. The Release Agreement is a separate and independent agreement from the Settlement Agreement, and therefore it would survive any termination of the Settlement Agreement. As of September 30, 2015, no party had terminated the Settlement Agreement. Each of the Settlement Agreement and the Release Agreement provides that it supersedes all prior understandings, commitments and representations between the parties with respect to the subject matter thereof.

Litigation

Due to the nature of the Company's business, the Company is involved, from time to time, in various litigation matters or subject to disputes or routine claims regarding its business activities. Legal costs related to these matters are expensed as incurred. In management's opinion, there is no pending litigation, dispute or claim, other than those described in this report, which may 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 were $0.5 million at both September 30, 2015 and December 31, 2014.

Transactions with Thermo

The following table summarizes expenses Thermo incurred on behalf of the Company (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
General and administrative expenses	$	264	$	174	$	324	$	236
Non-cash expenses	137		137		411		411
Total	$	401	$	311	$	735	$	647

General and administrative expenses are related to expenses incurred by Thermo on the Company’s behalf which are charged to the Company. Non-cash expenses are related to services provided by two executive officers of Thermo (who are also directors of the Company) who receive no cash compensation from the Company; these expenses are treated as a contribution to capital. The Thermo expenses are based on actual amounts (with no mark-up) incurred or upon allocated employee time.

Since June 2009, Thermo and its affiliates have also deposited $60.0 million into a contingent equity account to fulfill a condition precedent for borrowing under the Facility Agreement, purchased $20.0 million of the Company’s 5.0% Notes, purchased $11.4 million of the Company's 8.00% Notes Issued in 2009, provided a $2.3 million short-term loan to the Company (which was subsequently converted into nonvoting common stock), loaned $37.5 million to the Company to fund the debt service reserve account, and funded $65 million in exchange for the Company's common stock in accordance with the Consent Agreement, the Common Stock Purchase Agreement, and the Common Stock Purchase and Option Agreement entered into in May 2013. See the sections The Consent Agreement, The Common Stock Purchase Agreement, and The Common Stock Purchase and Option Agreement in Note 3: Long-Term Debt and Other Financing Arrangements in the Consolidated Financial Statements in the 2014 Annual Report for a complete description of these agreements between the Company and Thermo.

During 2014, Thermo exercised warrants that were scheduled to expire in June 2014. The warrants that were exercised during 2014 included warrants for 4.2 million shares of the Company's common stock issued as partial consideration for the Amended and Restated Thermo Loan Agreement, resulting in the issuance of 4.2 million shares of Globalstar common stock; warrants for 11.3 million shares issued in connection with the annual availability fee for the Contingent Equity Agreement in 2009, resulting in the issuance of 11.3 million shares of Globalstar common stock; and 8.00% Warrants issued in 2009 to purchase 16.3 million shares of Globalstar common stock, resulting in the issuance of 14.7 million shares of Globalstar common stock. As of September 30, 2015, warrants to purchase approximately 30.2 million shares issued under the Contingent Equity Agreement and 8.0 million 5.0% Warrants remain outstanding, all of which are held by Thermo and are scheduled to expire between June 2016 and June 2017.

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. Thermo’s consideration for this commitment was added to the principal amount owed to Thermo under the Thermo Loan Agreement. If the Company requires Thermo to purchase equity securities under this commitment, the price per share of common stock will be calculated in the same manner as in the August 2015 Terrapin Agreement. In August 2015, the Company drew $15.0 million under the August 2015 Terrapin Agreement, which reduced Thermo's remaining cash equity commitment under the Equity Agreement to $15.0 million as of September 30, 2015.

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. During 2014, Thermo converted 175 million shares of nonvoting common stock into shares of voting common stock to comply with these covenants.

See Note 3: Long-Term Debt and Other Financing Arrangements 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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Accumulated other comprehensive income (loss), beginning of period	$	(3,741	)	$	493		$	(2,898	)	$	871
Other comprehensive loss:
Foreign currency translation adjustments	(615		)	(493		)	(1,458		)	(871		)
Accumulated other comprehensive loss, end of period	$	(4,356	)	$	—		$	(4,356	)	$	—

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

11. STOCK COMPENSATION

The Company’s 2006 Equity Incentive Plan (“Equity Plan”) provides long-term incentives to the Company’s key employees, officers, directors, consultants and advisers (“Eligible Participants”) to align stockholder and employee interests. Under the Equity Plan, the Company may grant incentive stock options, restricted stock awards, restricted stock units, and other stock based awards or any combination thereof to Eligible Participants. The Compensation Committee of the Company’s board of directors (or its designee for non-executive officers and directors) establishes the terms and conditions of any awards granted under the plans.

The Company recorded compensation expense related to its 2006 Equity Incentive Plan of $0.5 million and $1.1 million during the three-month periods ended September 30, 2015 and 2014, and $1.8 million and $2.1 million for the nine-month periods ended September 30, 2015 and 2014, respectively. These expenses are reflected in marketing, general and administrative expenses.

Grants to eligible participants of incentive stock options, restricted stock awards, and restricted stock units were as follows (in thousands of shares):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Grants of restricted stock awards and restricted stock units	78	201	170	607
Grants of options to purchase common stock	207	134	499	595
Total	285	335	669	1,202

Employee Stock Purchase Plan

The Company recorded expense of $0.1 million for the fair value of the stock granted under its Employee Stock Purchase Plan for each of the three-month periods ended September 30, 2015 and 2014. Expense for stock granted during the nine-month periods ended September 30, 2015 and 2014 was $0.3 million and $0.2 million, respectively. These expenses are reflected in marketing, general and administrative expenses. Through September 30, 2015, the Company had issued 2,798,898 shares of common stock pursuant to this plan.

12. GEOGRAPHIC INFORMATION

The Company attributes equipment revenue to various countries based on the location equipment is sold. Service revenue is attributed to the various countries based on where the service is processed. Long-lived assets consist primarily of property and equipment and are attributed to various countries based on the physical location of the asset at a given fiscal year-end, except for the satellites which are included in the long-lived assets of the United States. The Company’s information by geographic area is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Revenues:
Service:
United States	$	13,506	$	12,267	$	37,689	$	35,000
Canada	3,863		4,077		11,067		10,946
Europe	1,634		1,655		4,377		4,407
Central and South America	486		440		1,788		1,886
Others	155		72		446		408
Total service revenue	$	19,644	$	18,511	$	55,367	$	52,647
Subscriber equipment:
United States	2,304		2,510		5,883		8,340
Canada	962		1,418		3,401		4,187
Europe	313		540		1,299		1,628
Central and South America	409		437		1,465		930
Others	46		25		308		239
Total subscriber equipment revenue	$	4,034	$	4,930	$	12,356	$	15,324
Total revenue	$	23,678	$	23,441	$	67,723	$	67,971



	September 30, 2015		December 31, 2014
Property and equipment, net:
United States	$	1,079,306	$	1,108,675
Canada	467		357
Europe	499		413
Central and South America	2,717		3,309
Others	527		806
Total long-lived assets	$	1,083,516	$	1,113,560

13. EARNINGS (LOSS) PER SHARE

The Company is required to present basic and diluted earnings per share. Basic earnings 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 tables reconcile basic weighted average shares of common stock to diluted weighted average shares of common stock outstanding for the three and nine months ended September 30, 2015 and September 30, 2014 (in thousands):



	Three Months Ended September 30, 2015	Three Months Ended September 30, 2014
Weighted average common shares outstanding:
Basic shares outstanding	1,031,398	987,668
Incremental shares from assumed exercises of:
Stock options, restricted stock, restricted stock units and ESPP	7,111	7,340
8.00% Notes Issued in 2013	27,475	39,625
Thermo Loan Agreement	130,375	109,469
Warrants	38,192	45,088
Diluted shares outstanding	1,234,551	1,189,190



	Nine Months Ended September 30, 2015	Nine Months Ended September 30, 2014
Weighted average common shares outstanding:
Basic shares outstanding	1,014,165	914,474
Incremental shares from assumed exercises of:
Stock options, restricted stock, restricted stock units and ESPP	8,550	N/A
8.00% Notes Issued in 2013	27,778	N/A
Thermo Loan Agreement	132,602	N/A
Warrants	38,192	N/A
Diluted shares outstanding	1,221,287	914,474

For the three and nine months ended September 30, 2015 and the three months ended September 30, 2014, net income was adjusted for interest expense (net of capitalized amounts) related to the 8.00% Notes Issued in 2013 and the Thermo Loan Agreement for the computation of diluted earnings per share as these notes were assumed to be converted at the start of each respective period. There were no anti-dilutive stock options, restricted stock or restricted stock units excluded from diluted shares outstanding during the three or nine months ended September 30, 2015 or the three months ended September 30, 2014. The calculation of outstanding diluted shares excludes future share issuances under the August 2015 Terrapin Agreement.

For the nine months ended September 30, 2014, diluted net loss per share of common stock was the same as basic net loss per share of common stock because the effects of potentially dilutive securities would be anti-dilutive.

14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In connection with the Company’s issuance of the 8.00% Notes issued in 2013, certain of the Company’s 100% owned domestic subsidiaries (the “Guarantor Subsidiaries”), fully, unconditionally, jointly, and severally guaranteed the payment obligations under the 8.00% Notes Issued in 2013. 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 September 30, 2015

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	19,523		$	620		$	3,560		$	(4,059	)	$	19,644
Subscriber equipment sales	219			2,853			889			73			4,034
Total revenue	19,742			3,473			4,449			(3,986		)	23,678
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	3,174			2,465			1,996			126			7,761
Cost of subscriber equipment sales	(52		)	2,365			(489		)	1,090			2,914
Marketing, general and administrative	2,538			4,229			2,908			—			9,675
Depreciation, amortization, and accretion	18,955			291			5,243			(5,072		)	19,417
Total operating expenses	24,615			9,350			9,658			(3,856		)	39,767
Loss from operations	(4,873		)	(5,877		)	(5,209		)	(130		)	(16,089		)
Other income (expense):
Loss on equity issuance	(2,920		)	—			—			—			(2,920		)
Interest income and expense, net of amounts capitalized	(8,872		)	(8		)	(140		)	1			(9,019		)
Derivative gain (loss)	54,194			—			—			—			54,194
Equity in subsidiary earnings	(12,545		)	(4,075		)	—			16,620			—
Other	(886		)	(354		)	4,094			(4,807		)	(1,953		)
Total other income (expense)	28,971			(4,437		)	3,954			11,814			40,302
Income (loss) before income taxes	24,098			(10,314		)	(1,255		)	11,684			24,213
Income tax expense	—			1			114			—			115
Net income (loss)	$	24,098		$	(10,315	)	$	(1,369	)	$	11,684		$	24,098
Comprehensive income (loss)	$	24,098		$	(10,315	)	$	(2,004	)	$	11,704		$	23,483

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2014

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	19,258		$	1,494		$	6,389		$	(8,630	)	$	18,511
Subscriber equipment sales	71			3,471			5,118			(3,730		)	4,930
Total revenue	19,329			4,965			11,507			(12,360		)	23,441
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	2,903			2,653			2,563			(251		)	7,868
Cost of subscriber equipment sales	31			2,962			4,823			(3,980		)	3,836
Marketing, general and administrative	1,906			3,850			4,408			(1,381		)	8,783
Depreciation, amortization, and accretion	19,180			1,879			6,974			(6,986		)	21,047
Total operating expenses	24,020			11,344			18,768			(12,598		)	41,534
Income (loss) from operations	(4,691		)	(6,379		)	(7,261		)	238			(18,093		)
Other income (expense):
Loss on extinguishment of debt	(12,936		)	—			—			—			(12,936		)
Loss on equity issuance	—			—			—			—			—
Interest income and expense, net of amounts capitalized	(9,001		)	(10		)	(57		)	1			(9,067		)
Derivative loss	166,989			—			—			—			166,989
Equity in subsidiary earnings	(12,653		)	(884		)	—			13,537			—
Other	1,782			409			364			31			2,586
Total other income (expense)	134,181			(485		)	307			13,569			147,572
Income (loss) before income taxes	129,490			(6,864		)	(6,954		)	13,807			129,479
Income tax (provision) expense	100			7			(18		)	—			89
Net income (loss)	$	129,390		$	(6,871	)	$	(6,936	)	$	13,807		$	129,390
Comprehensive income (loss)	$	129,390		$	(6,871	)	$	(7,429	)	$	13,807		$	128,897

Globalstar, Inc.

Condensed Consolidating Statement of Operations

Nine Months Ended September 30, 2015

(Unaudited)



	Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue:
Service revenues	$	57,373		$	2,042		$	14,950		$	(18,998	)	$	55,367
Subscriber equipment sales	573			8,917			6,380			(3,514		)	12,356
Total revenue	57,946			10,959			21,330			(22,512		)	67,723
Operating expenses:
Cost of services (exclusive of depreciation, amortization, and accretion shown separately below)	9,580			8,740			8,053			(3,151		)	23,222
Cost of subscriber equipment sales	8			7,808			5,243			(4,031		)	9,028
Marketing, general and administrative	6,563			12,645			9,222						28,430
Depreciation, amortization, and accretion	56,282			882			16,041			(15,471		)	57,734
Total operating expenses	72,433			30,075			38,559			(22,653		)	118,414
Income (loss) from operations	(14,487		)	(19,116		)	(17,229		)	141			(50,691		)
Other income (expense):
Loss on extinguishment of debt	(2,254		)	—			—			—			(2,254		)
Loss on equity issuance	(5,832		)	—			—			—			(5,832		)
Interest income and expense, net of amounts capitalized	(26,315		)	(23		)	(449		)	7			(26,780		)
Derivative gain	183,416			—			—			—			183,416
Equity in subsidiary earnings	(35,691		)	(10,150		)	—			45,841			—
Other	246