UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM 10-Q



(Mark
One)



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



For
the quarterly period ended June 30, 2012



OR



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



For
the transition period from                 
to



Commission
file number 001-33117



GLOBALSTAR,
INC.

(Exact
Name of Registrant as Specified in Its Charter)



|Delaware                        |  | 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)



(985)
335-1500

Registrant’s
telephone number, including area code



Indicate
by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ̈Nox



Indicate
by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈Nox



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. YesxNo ̈



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). YesxNo ̈



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 ̈                      |  | Accelerated filerx        
|--------------------------------------------- |  | --------------------------
|                                              |  |                           
|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 ̈Nox



As
of July 27, 2012,301,610,812 shares of voting common stock and106,767,684
shares of nonvoting common stock were outstanding. Unless the context otherwise requires,
references to common stock in this Report mean Registrant’s voting common stock.











GLOBALSTAR,
INC.

TABLE
OF CONTENTS



|                                | Page                                                                                 
|------------------------------- | -------------------------------------------------------------------------------------
|                                |                                                                                      
|PART I -  Financial Information |                                                                                      
|                                |                                                                                      
|Item 1.                         | Financial Statements                                                                 
|                                |                                                                                      
|Item 2.                         | Management’s Discussion and Analysis of Financial Condition and Results of Operations
|                                |                                                                                      
|Item 3.                         | Quantitative and Qualitative Disclosures about Market Risk                           
|                                |                                                                                      
|Item 4.                         | Controls and Procedures                                                              
|                                |                                                                                      
|PART II -  Other Information    |                                                                                      
|                                |                                                                                      
|Item 1A.                        | Risk Factors                                                                         
|                                |                                                                                      
|Item 6.                         | Exhibits                                                                             
|                                |                                                                                      
|Signatures                      | 40                                                                                   



2







GLOBALSTAR,
INC.



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

(In
thousands, except per share data)

(Unaudited)



|                                                                                                     |  | Three
    Months Ended |         |   | Six
    Months Ended |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | -------------------- | -
|                                                                                                     |  | June 30,               |         |   | June 30,             |  
|                                                                                                     |  | 2012                   |         |   | 2011                 |  
|                                                                                                     |  |                        |         |   |                      |  
|Revenue:                                                                                             |  |                        |         |   |                      |  
|Service revenues                                                                                     |  | $                      | 14,150  |   |                      | $
|Subscriber equipment sales                                                                           |  |                        | 5,831   |   |                      |  
|Total revenue                                                                                        |  |                        | 19,981  |   |                      |  
|Operating expenses:                                                                                  |  |                        |         |   |                      |  
|Cost of services (exclusive of depreciation,
    amortization, and accretion shown separately below) |  |                        | 5,797   |   |                      |  
|Cost of subscriber equipment sales                                                                   |  |                        | 3,701   |   |                      |  
|Cost of subscriber equipment sales – reduction
    in the value of inventory                         |  |                        | 49      |   |                      |  
|Marketing, general, and administrative                                                               |  |                        | 8,763   |   |                      |  
|Reduction in the value of long-lived assets                                                          |  |                        | 7,139   |   |                      |  
|Contract termination charge                                                                          |  |                        | 22,048  |   |                      |  
|Depreciation, amortization,
    and accretion                                                        |  |                        | 15,888  |   |                      |  
|Total operating expenses                                                                             |  |                        | 63,385  |   |                      |  
|Loss from operations                                                                                 |  |                        | (43,404 | ) |                      |  
|Other income (expense):                                                                              |  |                        |         |   |                      |  
|Interest income and expense, net of amounts capitalized                                              |  |                        | (3,781  | ) |                      |  
|Derivative gain                                                                                      |  |                        | 20,432  |   |                      |  
|Other                                                                                                |  |                        | (632    | ) |                      |  
|Total other income                                                                                   |  |                        | 16,019  |   |                      |  
|Loss before income taxes                                                                             |  |                        | (27,385 | ) |                      |  
|Income tax expense                                                                                   |  |                        | 148     |   |                      |  
|Net loss                                                                                             |  | $                      | (27,533 | ) |                      | $
|Loss per common share:                                                                               |  |                        |         |   |                      |  
|Basic                                                                                                |  | $                      | (0.07   | ) |                      | $
|Diluted                                                                                              |  |                        | (0.07   | ) |                      |  
|Weighted-average shares outstanding:                                                                 |  |                        |         |   |                      |  
|Basic                                                                                                |  |                        | 379,433 |   |                      |  
|Diluted                                                                                              |  |                        | 379,433 |   |                      |  
|                                                                                                     |  |                        |         |   |                      |  
|Comprehensive loss                                                                                   |  | $                      | (27,443 | ) |                      | $



See
accompanying notes to unaudited interim condensed consolidated financial statements.



3







GLOBALSTAR,
INC.



CONDENSED
CONSOLIDATED BALANCE SHEETS

(In
thousands, except par value and share data)



|                                                                                                                                                                                          |  | (Unaudited)  |           |   | (Audited)        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | -
|                                                                                                                                                                                          |  | June 30,2012 |           |   | December 31,2011 |  
|ASSETS                                                                                                                                                                                    |  |              |           |   |                  |  
|Current assets:                                                                                                                                                                           |  |              |           |   |                  |  
|Cash and cash equivalents                                                                                                                                                                 |  | $            | 4,820     |   |                  | $
|Restricted cash                                                                                                                                                                           |  |              | 700       |   |                  |  
|Accounts receivable, net of allowance of $6,788 and $7,296, respectively                                                                                                                  |  |              | 11,781    |   |                  |  
|Inventory                                                                                                                                                                                 |  |              | 41,154    |   |                  |  
|Prepaid expenses and other current assets                                                                                                                                                 |  |              | 12,972    |   |                  |  
|Total current assets                                                                                                                                                                      |  |              | 71,427    |   |                  |  
|Property and equipment, net                                                                                                                                                               |  |              | 1,231,391 |   |                  |  
|Restricted cash                                                                                                                                                                           |  |              | 46,776    |   |                  |  
|Deferred financing costs                                                                                                                                                                  |  |              | 50,789    |   |                  |  
|Advances for inventory                                                                                                                                                                    |  |              | 9,158     |   |                  |  
|Intangible and other assets, net                                                                                                                                                          |  |              | 7,543     |   |                  |  
|Total assets                                                                                                                                                                              |  | $            | 1,417,084 |   |                  | $
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                      |  |              |           |   |                  |  
|Current liabilities:                                                                                                                                                                      |  |              |           |   |                  |  
|Current maturities of long-term debt                                                                                                                                                      |  | $            | 83,755    |   |                  | $
|Accounts payable, including contractor payables of $23,750 and $32,275, respectively                                                                                                      |  |              | 31,983    |   |                  |  
|Accrued contract termination charge                                                                                                                                                       |  |              | 22,048    |   |                  |  
|Accrued expenses                                                                                                                                                                          |  |              | 37,297    |   |                  |  
|Payables to affiliates                                                                                                                                                                    |  |              | 170       |   |                  |  
|Deferred revenue                                                                                                                                                                          |  |              | 15,019    |   |                  |  
|Total current liabilities                                                                                                                                                                 |  |              | 190,272   |   |                  |  
|Long-term debt, less current maturities                                                                                                                                                   |  |              | 655,208   |   |                  |  
|Employee benefit obligations                                                                                                                                                              |  |              | 7,375     |   |                  |  
|Derivative liabilities                                                                                                                                                                    |  |              | 18,689    |   |                  |  
|Deferred revenue                                                                                                                                                                          |  |              | 7,797     |   |                  |  
|Other non-current liabilities                                                                                                                                                             |  |              | 16,039    |   |                  |  
|Total non-current liabilities                                                                                                                                                             |  |              | 705,108   |   |                  |  
|                                                                                                                                                                                          |  |              |           |   |                  |  
|Commitments and contingences (Notes 8 and 9)                                                                                                                                              |  |              |           |   |                  |  
|                                                                                                                                                                                          |  |              |           |   |                  |  
|Stockholders’ equity:                                                                                                                                                                     |  |              |           |   |                  |  
|Preferred Stock of $0.0001 par value; 100,000,000 shares authorized and none issued and outstanding at June 30, 2012 and December 31, 2011:                                               |  |              |           |   |                  |  
|Series A Preferred Convertible Stock of $0.0001 par value, one share authorized and  none issued and outstanding at June 30, 2012 and December 31, 2011                                   |  |              | —         |   |                  |  
|Voting Common Stock of $0.0001 par value; 865,000,000 shares authorized; 301,610,812 and 297,175,777 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively   |  |              | 30        |   |                  |  
|Nonvoting Common Stock of $0.0001 par value. 135,000,000 shares authorized; 106,767,684 and 55,881,512 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively |  |              | 11        |   |                  |  
|Additional paid-in capital                                                                                                                                                                |  |              | 831,996   |   |                  |  
|Accumulated other comprehensive loss                                                                                                                                                      |  |              | (2,551    | ) |                  |  
|Retained deficit                                                                                                                                                                          |  |              | (307,782  | ) |                  |  
|Total stockholders’ equity                                                                                                                                                                |  |              | 521,704   |   |                  |  
|Total liabilities and stockholders’ equity                                                                                                                                                |  | $            | 1,417,084 |   |                  | $



See
accompanying notes to unaudited interim condensed consolidated financial statements.



4







GLOBALSTAR,
INC.



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In
thousands)

(Unaudited)



|                                                                                            |  | Six Months Ended |        
|------------------------------------------------------------------------------------------- |  | ---------------- | -------
|                                                                                            |  | June 30,2012     |        
|                                                                                            |  |                  |        
|Cash flows provided by (used in) operating activities:                                      |  |                  |        
|Net loss                                                                                    |  | $                | (52,058
|Adjustments to reconcile net loss to net cash from operating activities:                    |  |                  |        
|Depreciation, amortization, and accretion                                                   |  |                  | 30,623 
|Change in fair value of derivative assets and liabilities                                   |  |                  | (13,911
|Stock-based compensation expense                                                            |  |                  | 394    
|Amortization of deferred financing costs                                                    |  |                  | 1,673  
|Loss on equity method investment                                                            |  |                  | 210    
|Noncash interest expense                                                                    |  |                  | 2,884  
|Impairment of long-lived assets                                                             |  |                  | 7,218  
|Contract termination charge                                                                 |  |                  | 22,048 
|Foreign currency and other, net                                                             |  |                  | 1,586  
|Changes in operating assets and liabilities:                                                |  |                  |        
|Accounts receivable                                                                         |  |                  | 202    
|Inventory                                                                                   |  |                  | 317    
|Prepaid expenses and other current assets                                                   |  |                  | 891    
|Other assets                                                                                |  |                  | 146    
|Accounts payable and accrued expenses                                                       |  |                  | (933   
|Payables to affiliates                                                                      |  |                  | (208   
|Other non-current liabilities                                                               |  |                  | (540   
|Deferred revenue                                                                            |  |                  | 1,366  
|Net cash provided by (used in) operating activities                                         |  |                  | 1,808  
|Cash flows used in investing activities:                                                    |  |                  |        
|Second-generation satellites, ground and related launch costs                               |  |                  | (33,562
|Property and equipment additions                                                            |  |                  | (195   
|Investment in businesses                                                                    |  |                  | (200   
|Restricted cash                                                                             |  |                  | (700   
|Net cash used in investing activities                                                       |  |                  | (34,657
|Cash flows from financing activities:                                                       |  |                  |        
|Borrowings from Facility Agreement                                                          |  |                  | 5,008  
|Proceeds from contingent equity agreement                                                   |  |                  | 23,000 
|Proceeds from issuance of common stock and exercise of warrants                             |  |                  | 100    
|Proceeds from the issuance of 5.0% convertible notes                                        |  |                  | —      
|Proceeds from the contribution to the debt service reserve account                          |  |                  | —      
|Payment of deferred financing costs                                                         |  |                  | (250   
|Net cash from financing activities                                                          |  |                  | 27,858 
|Effect of exchange rate changes on cash                                                     |  |                  | (140   
|Net (decrease) increase in cash and cash equivalents                                        |  |                  | (5,131 
|Cash and cash equivalents, beginning of period                                              |  |                  | 9,951  
|Cash and cash equivalents, end of period                                                    |  | $                | 4,820  
|Supplemental disclosure of cash flow information:                                           |  |                  |        
|Cash paid for:                                                                              |  |                  |        
|Interest                                                                                    |  | $                | 16,894 
|Income taxes                                                                                |  |                  | 144    
|Supplemental disclosure of non-cash financing and investing activities:                     |  |                  |        
|Reduction in accrued second-generation satellites and ground costs                          |  |                  | 5,039  
|Reduction in capitalized accrued interest for second-generation satellites and ground costs |  |                  | 2,473  
|Capitalization of the accretion of debt discount and amortization of prepaid finance costs  |  |                  | 6,334  
|Payments made in Common Stock                                                               |  |                  | 933    
|Reduction in assets and liabilities due to note conversions                                 |  |                  | —      
|Fair value adjustment due to warrant conversions                                            |  |                  | 420    
|Conversion of contingent equity account derivative liability to equity                      |  |                  | 5,853  
|Value of warrants issued in connection with the contingent equity account loan fee          |  |                  | 2,226  
|Recognition of a beneficial conversion feature on long-term debt                            |  |                  | —      
|Value of warrants issued in connection with raising capital and debt                        |  |                  | —      
|Capitalized interest paid in common stock on the 5% and 8% Notes                            |  |                  | 2,874  



See
accompanying notes to unaudited interim condensed consolidated financial statements.



5







GLOBALSTAR,
INC.



NOTES
TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.
BASIS OF PRESENTATION



The
Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with generally
accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Certain
information and footnote disclosures normally in financial statements have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission; 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, 2011 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, the value of stock-based compensation, the
reserve for product warranties, and income taxes. Actual results could differ from these estimates.



All
significant intercompany transactions and balances have been eliminated in the consolidation. In the opinion of management, such
information includes all adjustments, consisting of normal recurring adjustments, that are necessary for a fair presentation of
the Company’s condensed consolidated statements of operations, condensed consolidated balance sheets, and condensed consolidated
statements of cash flows for the periods presented. These unaudited interim condensed consolidated financial statements include
the accounts of Globalstar and its majority owned or otherwise controlled subsidiaries. The results of operations for the three
and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full year or any
future period.



Recently
Issued Accounting Pronouncements



In
December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This ASU defers the changes
in ASU 2011-05 that relate to the presentation of reclassification adjustments and supersedes certain pending paragraphs. ASU 2011-12
will be applied retrospectively. ASU 2011-12 is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2011. This adoption has been reflected in the Company’s condensed consolidated financial statements.



In
June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.”
This ASU amends the FASB Accounting Standards Codification (“Codification”) to allow an entity the option to present
the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required
to present each component of net income along with total net income, each component of other comprehensive income along with a
total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present
the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments
to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. ASU 2011-05 will be applied retrospectively. ASU 2011-05 is effective
for fiscal years, and interim periods within those years, beginning after December 15, 2011. This adoption has been reflected in
the Company’s condensed consolidated financial statements.



In
May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this ASU generally represent clarification of Topic 820,
but also include instances where a particular principle or requirement for measuring fair value or disclosing information about
fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for
disclosing information about fair value measurements in accordance with GAAP and IFRS. The amendments are effective for interim
and annual periods beginning after December 15, 2011 and are to be applied prospectively. This adoption did not have an impact
on the Company’s condensed consolidated financial statements.



2.
MANAGEMENT'S PLANS REGARDING FUTURE OPERATIONS



In
each of the last three years and the six months ended June 30, 2012, the Company has generated operating losses, which has adversely
affected the Company’s liquidity. These operating results were caused primarily by the deterioration of the Company’s
first-generation satellite constellation and delays in the launch and deployment of its second-generation satellites, which in
turn reduced its ability to provide reliable Duplex service to its customers. In response to these circumstances, the Company developed
a plan to improve operations; complete the launches of the remaining second-generation satellites; complete the construction, deployment
and activation of additional second-generation satellites and next-generation ground upgrades; and obtain additional financing.



As
further described below, the Company has taken the following steps pursuant to its plan.



| | • | Reduced operating expenses by decreasing headcount and streamlining its supply chain and other operations,
consolidating its world-wide operations, including the completion of the relocation of its corporate headquarters to Covington,
Louisiana, and simplifying its product offerings.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Increased revenues by focusing on marketing its Simplex and SPOT products targeted to the consumer
and enterprise markets.
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | Successfully launched 18 second-generation satellites.
| | - | ------------------------------------------------------



| | • | Generated cash by issuing $38.0 million in 5.0% Notes and drawing $37.2 million from its contingent
equity account.
| | - | -------------------------------------------------------------------------------------------------------------------



| | • | Improved liquidity by obtaining lender agreement to defer principal payments on its senior unsecured
facility agreement (the “Facility Agreement”).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Obtained the required licensing to activate its ground stations in North America to send to, and
receive call traffic from, its second-generation satellites.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



6







| | • | Settled disputes with Thales Alenia Space (“Thales”) regarding prior contractual issues
and agreed with Thales on a commercial proposal to purchase from Thales six additional second-generation satellites.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Company believes that these actions, combined with additional actions included in its operating plan, will result in improved cash
flows from operations. These additional actions include, among other things, the following:



| | • | Launching six more second-generation satellites during the second half of 2012.
| | - | -------------------------------------------------------------------------------



| | • | Continuing to focus on reducing and controlling operating expenses.
| | - | -------------------------------------------------------------------



| | • | Restructuring payment arrangements in its contracts with major service providers.
| | - | ---------------------------------------------------------------------------------



| | • | Improving its key business processes and leveraging its information technology platform.
| | - | ----------------------------------------------------------------------------------------



| | • | Increasing revenue and ARPU through further implementation of its sales and marketing programs designed
to take advantage of the continued expansion of the Company’s Duplex coverage.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Despite
continued improvements in operating results, the Company does not have sufficient cash on hand, cash flows from operations, and
available funds in its contingent equity account to meet its existing contractual obligations over the next 12 months. The Company
is currently seeking additional external financing and amendments to its existing debt obligations, including the Facility and
the 5.75% Convertible Senior Unsecured Notes (the “5.75% Notes”) and certain other contractual obligations. In addition,
substantial other uncertainties remain related to the timing and outcome of the fourth launch of six second-generation satellites,
the Company’s ability to comply in future periods with one of the Facility’s nonfinancial covenants (see Note 4 for
further discussion), the remaining useful life of the first-generation satellites still in service and the impact and timing of
the Company’s plans to improve operating cash flows and to restructure its contractual obligations. If the resolution of
these uncertainties materially and negatively impacts cash and liquidity, the Company’s ability to continue to execute its
business plans will be adversely affected.



Further,
the Company’s longer-term business plan includes launching additional second-generation satellites beyond the first 24, making
major improvements to its ground infrastructure and releasing new products. To execute these longer-term plans successfully, the
Company will need to obtain additional external financing to fund these expenditures. Although the Company is seeking such financing
and is continuing to address requirements with contractors, there is no guarantee that these efforts will be successful given the
scope, complexity, cost and risk of completing the construction of the space and ground components of its second-generation constellation
and the development of marketable new products. Accordingly, the Company is not in a position to estimate when, or if, these longer-term
plans will be completed and the effect this will have on the Company’s performance and liquidity.



3. 
PROPERTY AND EQUIPMENT



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



|                                            |  | June 30, |           |   | December 31, |  
|------------------------------------------- |  | -------- | --------- | - | ------------ | -
|                                            |  | 2012     |           |   | 2011         |  
|Globalstar System:                          |  |          |           |   |              |  
|Space component                             |  | $        | 703,576   |   |              | $
|Ground component                            |  |          | 48,875    |   |              |  
|Construction in progress:                   |  |          |           |   |              |  
|Space component                             |  |          | 510,056   |   |              |  
|Ground component                            |  |          | 84,160    |   |              |  
|Prepaid long-lead items and other           |  |          | 18,134    |   |              |  
|Total Globalstar System                     |  |          | 1,364,801 |   |              |  
|Internally developed and purchased software |  |          | 13,953    |   |              |  
|Equipment                                   |  |          | 12,394    |   |              |  
|Land and buildings                          |  |          | 3,974     |   |              |  
|Leasehold improvements                      |  |          | 1,406     |   |              |  
|                                            |  |          | 1,396,528 |   |              |  
|Accumulated depreciation and amortization   |  |          | (165,137  | ) |              |  
|                                            |  | $        | 1,231,391 |   |              | $



Contracts



The
following table presents the contract prices for the construction of the Company’s second-generation satellites and ground
upgrades (in thousands):



|                                                    |  | Contract |          
|--------------------------------------------------- |  | -------- | ---------
|                                                    |  | Price    |          
|Thales second-generation satellites (Phase 1 and 2) |  | $        | 622,690  
|Arianespace launch services                         |  |          | 216,000  
|Launch insurance                                    |  |          | 39,903   
|Hughes next-generation ground component             |  |          | 104,597  
|Ericsson next-generation ground network             |  |          | 29,036   
|Total                                               |  | $        | 1,012,226



As
of June 30, 2012, the Company had incurred $945.6 million of costs under these contracts, including contracts payable and accrued
expenses of $26.5 million, excluding interest.  Of the amounts incurred, the Company had capitalized $940.1 million and
expensed $5.5 million of research and development costs. The table above does not include any amounts for the cost of six additional
second-generation satellites, as discussed further below.



7







Second-Generation
Satellites



In
June 2009, the Company and Thales entered into an amended and restated contract for the construction of the Company’s second-generation
low-earth orbit satellites and related services, to incorporate prior amendments and acceleration requests, and to make other non-material
changes to the contract entered into in November 2006. The Company has launched 18 of the 24 second-generation satellites and plans
to launch the remaining six satellites in 2012; however, this plan is subject to numerous circumstances that are outside of the
Company’s control.



In
June 2012, the Company and Thales agreed to settle their prior commercial disputes including those disputes which were the subject
of a May 2012 arbitration award. In addition, the Company and Thales agreed to the principal terms relating to the Company’s
purchase from Thales of six additional second-generation satellites at a fixed price of approximately €25 million per satellite,
payable over an approximately three-year period after commencement of manufacturing. The Company and Thales expect to enter into
a commercial contract, which will be subject to various conditions, including the receipt by the Company of necessary third-party
financing. See Note 9 for further discussion.



The
Company’s second-generation satellites were designed with four momentum wheels each. Each satellite requires three functioning
momentum wheels for normal operation. The fourth momentum wheel acts as a non-operating spare. Momentum wheels are high precision
flywheels used to provide attitude control and stability of the spacecraft. Momentum wheels on certain satellites launched in October
2010 and July 2011 have exhibited anomalous behavior necessitating the removal of such wheels from service. To date, this
has not had a significant impact on the Company’s overall service levels. The satellites launched in December 2011 have
not experienced any similar behavior associated with their momentum wheels. The Company and Thales are currently working together
to develop a software-based solution that the Company plans to upload to certain satellites to permit such satellites to operate
on as few as two momentum wheels. Although Thales has successfully conducted computer simulations of the proposed software
solution, the Company can provide no assurance that a solution will be developed and implemented successfully. The Company remains
confident at this time that a software upgrade of the AOCS system is achievable; however if Thales and the Company are unable successfully
to develop and implement this solution, or otherwise resolve the anomalous behavior, the Company’s investment in the affected
satellites may be impaired.



For
assets that are no longer providing service, the estimated cost and accumulated depreciation are removed from property and equipment.
During the second quarter of 2012, the Company reduced the carrying value of its first-generation constellation by approximately
$7.1 million. This loss is recorded in operating expenses for the three and six months ended June 30, 2012.



In
March 2010, the Company and Arianespace entered into an amended and restated contract to incorporate prior amendments to the contract
executed in September 2007 for the launch of the Company’s second-generation satellites and certain pre and post-launch services
under which Arianespace agreed to make four launches of six satellites each and one optional launch of six satellites. Notwithstanding
the one optional launch, the Company may contract separately with Arianespace or another provider of launch services after Arianespace’s
firm launch commitments are fulfilled. In addition, the Company is currently negotiating with Arianespace regarding certain additional
costs related to prior launches and the cost of the fifth launch. The Company has accrued its best estimate of the amounts owed
for prior launch costs. This amount is included in accounts payable and accrued expenses. The Company has communicated to Arianespace
that it does not agree with the amounts invoiced based on the Company’s interpretation of the contract. In August 2012, the
Company received notification of payment default from Arianespace. Based on the terms and conditions of the amended and restated
contract, Arianespace is entitled to suspend any and all of its activities in preparation of the fourth launch if the Company does
not make payment in full within 15 days. If payment is not made within 60 days, Arianespace is entitled to terminate the contract,
which would be an event of default under the Facility Agreement. Both the Company and Arianespace are working together to reach
a mutually beneficial resolution.



Next-Generation
Gateways and Other Ground Facilities



In
May 2008, the Company and Hughes entered into an agreement under which Hughes agreed to design, supply and implement (a) 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 (b) satellite interface chips to be a part of the User Terminal Subsystem (UTS) in various next-generation
Globalstar devices. The Company and Hughes have amended this agreement extending the performance, revising certain payment milestones
and adding new features. The Company has the option to purchase additional RANs and other software and hardware improvements at
pre-negotiated prices. The Company and Hughes have also amended their agreement to extend the deadline to make certain scheduled
payments previously due under the contract. See Note 8 for further discussion.



In
October 2008, the Company entered into an agreement with Ericsson, a leading global provider of technology and services to telecom
operators. The Company and Ericsson have amended this contract to increase the Company’s obligations for additional deliverables
and features. According to the contract, Ericsson will work with the Company to develop, implement and maintain a ground interface,
or core network, system that will be installed at the Company’s satellite gateway ground stations. The Company has the option
to purchase additional core networks at pre-negotiated prices. The Company and Ericsson have amended their agreement to extend
the deadline to make certain scheduled payments previously due under the contract. See Note 8 for further discussion.



Capitalized
Interest and Depreciation Expense



The
following tables summarize capitalized interest for the periods indicated below (in thousands):



|                           |  | As of         |        
|-------------------------- |  | ------------- | -------
|                           |  | June 30, 2012 |        
|                           |  |               |        
|Total Interest Capitalized |  | $             | 201,299



|                                    |  | Three Months Ended |        |  | Six Months Ended |  
|----------------------------------- |  | ------------------ | ------ |  | ---------------- | -
|                                    |  | June 30, 2012      |        |  | June 30, 2011    |  
|                                    |  |                    |        |  |                  |  
|Current Period Interest Capitalized |  | $                  | 12,027 |  |                  | $





8







The
following table summarizes depreciation expense for the periods indicated below (in thousands):



|                     |  | Three Months Ended |        |  | Six Months Ended |  
|-------------------- |  | ------------------ | ------ |  | ---------------- | -
|                     |  | June 30, 2012      |        |  | June 30, 2011    |  
|                     |  |                    |        |  |                  |  
|Depreciation Expense |  | $                  | 15,111 |  |                  | $



4.
BORROWINGS



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



|                                         |  | June 30, 2012 |         |  | December 31, 2011 |  
|---------------------------------------- |  | ------------- | ------- |  | ----------------- | -
|                                         |  | Principal     |         |  | Carrying          |  
|                                         |  | Amount        |         |  | Value             |  
|                                         |  |               |         |  |                   |  
|Facility Agreement                       |  | $             | 583,303 |  |                   | $
|Subordinated Loan                        |  |               | 50,332  |  |                   |  
|5.0% Convertible Senior Unsecured Notes  |  |               | 39,922  |  |                   |  
|8.00% Convertible Senior Unsecured Notes |  |               | 48,846  |  |                   |  
|5.75% Convertible Senior Unsecured Notes |  |               | 71,804  |  |                   |  
|Total debt                               |  |               | 794,207 |  |                   |  
|Less: current portion                    |  |               | 88,515  |  |                   |  
|Long-term debt                           |  | $             | 705,692 |  |                   | $



Facility
Agreement



The
Company has a $586.3 million Facility Agreement, as amended, that is scheduled to mature 84 months after the first repayment date.
Scheduled semi-annual principal repayments will begin on the earlier of eight months after the fourth launch of the second-generation
constellation or June 30, 2013. The facility bears interest at a floating LIBOR rate, plus a margin of 2.07% through December 2012,
increasing to 2.25% through December 2017 and 2.40% thereafter. 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 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 nonfinancial
covenants.



During
the second quarter of 2012, the Company received two reservation of rights letters from the COFACE Agent identifying potential
existing defaults of certain non-financial provisions of the Facility Agreement that may have occurred as a result of the Thales
arbitration ruling and the subsequent agreements reached with Thales related to the arbitration. The letters indicated that the
lenders are evaluating their position in respect to the potential existing defaults. During this evaluation process, the lenders
do not permit funding of the remaining $3.0 million available under the Facility Agreement. Management believes that the events
cited by the agent to the Facility Agreement are not events of default as defined by the Facility Agreement.  However, to
eliminate any uncertainty regarding these events, the Company and the lenders are working on an amendment and waiver with respect
to each of the potential events cited which is expected to be completed promptly.  As of the date these financial statements
were issued, the COFACE Agent had not declared an event of default under the Facility Agreement, and accordingly the borrowings
have been shown as non-current on the June 30, 2012 balance sheet.





On August 1, 2012, the Company had not
achieved in-orbit acceptance of the 18 previously launched second generation satellites as required under the Facility Agreement. 
On August 9, 2012, the Company entered into Waiver Letter No. 10, which extends the provision to require in-orbit acceptance of
the 18 satellites to December 31, 2012.



Due to the launch delays, the Company
expects that it may not be in compliance with certain financial covenants specified in the Facility Agreement during the next
12 months. As a result, the Company expects to seek amended covenant levels. If the Company cannot obtain either a waiver
or an amendment, the failure to comply would represent an event of default. An event of default under the Facility Agreement would
permit acceleration of indebtedness under the Facility. That acceleration would permit acceleration of the Company’s obligations
under other agreements that contain cross-acceleration provisions.



As
a result of the delivery delays discussed in the previous paragraph, the Company was required to enter into Amendment Letters
No. 8 and 9 to the Facility Agreement.



On
January 23, 2012, the Company entered into Amendment Letter No. 8 to the Facility Agreement, which extended to June 14, 2012 the
period in which the Company may draw the remaining funds under the Facility Agreement.



On
March 6, 2012, the Company entered into Amendment Letter No. 9 to the Facility Agreement, which extends the availability period
to December 31, 2012; delays to April 30, 2013 the last date for final in-orbit acceptance of 24 second-generation satellites;
delays the first repayment date for principal payments to the earlier of eight months after the fourth launch of second-generation
satellites or June 30, 2013; and amends certain covenants including (a) adjusted consolidated EBITDA, (b) debt service coverage
ratio and (c) net debt to adjusted consolidated EBITDA.



9







Contingent
Equity Agreement



The
Company has a Contingent Equity Agreement with Thermo whereby Thermo agreed to deposit $60 million into a contingent equity account
to fulfill a condition precedent for borrowing under the Facility Agreement. Under the terms of the Facility Agreement, the Company
has the right to make draws from this account if and to the extent it has an actual or projected deficiency in its ability to meet
obligations due within a forward-looking 90-day period. Thermo has pledged the contingent equity account to secure the Company’s
obligations under the Facility Agreement.



The
Contingent Equity Agreement provides that the Company will pay Thermo an availability fee of 10% per year for maintaining funds
in the contingent equity account. This annual fee is payable solely in warrants entitling the holder to purchase shares of the
Company’s common stock at $0.01 per share during a five-year exercise period from issuance. The number of shares issuable
under the warrants is calculated by taking the outstanding funds available in the contingent equity account multiplied by 10% divided
by the lower of the Company’s common stock price on the issuance date or $1.37, but not to be lower than $0.20. Prior to
June 19, 2012, the common stock price was subject to a reset provision on certain valuation dates subsequent to issuance whereby
the warrant price used in the calculation was the lower of the warrant price on the issuance date or the Company’s common
stock price on the valuation date. The Company determined that the warrants issued in conjunction with the availability fee were
derivatives and recorded the value of the derivatives as a component of other non-current liabilities at issuance. The offset was
recorded in other assets and was amortized over the one-year availability period. The warrants issued on June 19, 2012 are not
subject to a reset provision subsequent to issuance. The value of the warrants issued was recorded as equity and the offset was
recorded in other assets and is being amortized over the one-year availability period.



When
the Company draws on the contingent equity account, it issues Thermo a number of shares of common stock calculated using a price
per share equal to 80% of the average closing price of the common stock for the 15 trading days immediately preceding the draw.
The 20% discount on the value of the shares issued to Thermo is recognized as a deferred financing cost and is amortized over the
remaining term of the Facility Agreement. Amounts can only be withdrawn from the account provided that no default has occurred
and is continuing under the Facility Agreement. Thermo may withdraw undrawn amounts in the account after December 31, 2014.



The
following table summarizes the balance of and the draws on the contingent equity account (dollars in thousands) and the related
warrants and shares issued to Thermo since origination of the agreement as of June 30, 2012:



|                       |  | Available |        |  |       |   |        | Warrants |  |  | Shares     | 
|---------------------- |  | --------- | ------ |  | ----- | - | ------ | -------- |  |  | ---------- | 
|                       |  | Amount    |        |  | Draws |   |        | Issued   |  |  | Issued     | 
|June 19, 2009 (1)      |  | $         | 60,000 |  |       | $ | —      |          |  |  | 4,379,562  | 
|December 31, 2009 (2)  |  |           | 60,000 |  |       |   | —      |          |  |  | 2,516,990  | 
|June 19, 2010 (1)      |  |           | 60,000 |  |       |   | —      |          |  |  | 4,379,562  | 
|June 19, 2011 (2)      |  |           | 60,000 |  |       |   | —      |          |  |  | 620,438    | 
|June 19, 2011 (1)      |  |           | 60,000 |  |       |   | —      |          |  |  | 5,000,000  | 
|November 4, 2011(3)    |  |           | 54,600 |  |       |   | 5,400  |          |  |  | —          | 
|November 30, 2011 (3)  |  |           | 45,800 |  |       |   | 8,800  |          |  |  | —          | 
|January 11, 2012 (3)   |  |           | 36,000 |  |       |   | 9,800  |          |  |  | —          | 
|March 23, 2012 (3)     |  |           | 27,300 |  |       |   | 8,700  |          |  |  | —          | 
|May 30, 2012 (3)       |  |           | 22,800 |  |       |   | 4,500  |          |  |  | —          | 
|June 19, 2012 (2)      |  |           | 22,800 |  |       |   | —      |          |  |  | 16,428,571 | 
|June 19, 2012 (1), (4) |  |           | 22,800 |  |       |   | —      |          |  |  | 8,142,857  | 
|June 30, 2012          |  |           | 22,800 |  |       | $ | 37,200 |          |  |  | 41,467,980 | 



| | (1) | Warrants to purchase common stock were issued to Thermo for the annual availability fee pursuant
to the terms of the Contingent Equity Agreement.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Additional warrants were issued to Thermo due to the reset provisions in the Contingent Equity Agreement.
| | --- | ---------------------------------------------------------------------------------------------------------

| | (3) | Nonvoting shares of common stock were issued to Thermo with respect to the Company’s draws
on the contingent equity account pursuant to the terms of the Contingent Equity Agreement.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Warrants issued on June 19, 2012 are not subject to the reset provisions in the Contingent Equity Agreement.
| | --- | ------------------------------------------------------------------------------------------------------------



On
June 19, 2010, the warrants issued on June 19, 2009 and on December 31, 2009 were no longer variable and the related $11.9 million
liability was reclassified to equity. On June 19, 2011, the warrants issued on June 19, 2010 were no longer variable and the
related $6.0 million liability was reclassified to equity. On June 19, 2012, the warrants issued on June 19, 2011 were no longer
variable and the related $5.9 million liability was reclassified to equity.



As
of June 30, 2012, no warrants issued in connection with the Contingent Equity Agreement had been exercised.



No
voting common stock is issuable if it would cause Thermo and its affiliates to own more than 70% of the Company’s outstanding
voting stock. The Company may issue nonvoting common stock in lieu of common stock to the extent issuing common stock would cause
Thermo and its affiliates to exceed this 70% ownership level. The Company issued nonvoting shares to Thermo as a result of the
draws made during 2011 and the first two quarters of 2012.



Subordinated
Loan Agreement



The
Company has a Loan Agreement with Thermo whereby Thermo loaned the Company $25 million for the purpose of funding the debt service
reserve account required under the Facility Agreement. This loan is subordinated to, and the debt service reserve account is pledged
to secure, all of the Company’s obligations under the Facility Agreement. Amounts deposited in the debt service reserve
account are restricted to payments due under the Facility Agreement.



The
loan 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 under the Facility Agreement. The loan becomes due and payable six months
after the obligations under the Facility Agreement have been paid in full, the Company has a change in control or any acceleration
of the maturity of the loans under the Facility Agreement occurs. As additional consideration for the loan, the Company issued
Thermo a warrant to purchase 4,205,608 shares of common stock at $0.01 per share with a five-year exercise period. No voting common
stock is issuable upon such exercise if the issuance would cause Thermo and its affiliates to own more than 70% of the Company’s
outstanding voting stock. The Company may issue nonvoting common stock in lieu of common stock to the extent issuing common stock
would cause Thermo and its affiliates to exceed this 70% ownership level.



10







The
Company determined that the warrant was an equity instrument and recorded it as a part of stockholders’ equity with a corresponding
debt discount of $5.2 million, which is netted against the principal amount of the loan. The Company is accreting the debt discount
associated with the warrant to interest expense over the term of the loan agreement using an effective interest method. As of June
30, 2012, the remaining debt discount was $3.9 million and $12.8 million of interest was outstanding; these are included in long-term
debt on the Company’s consolidated balance sheet.



In
2009, Thermo borrowed $20 million of the $25 million it loaned to the Company under the Loan Agreement from two Company vendors
and also agreed to reimburse another Company vendor if its guarantee of a portion of the debt service reserve account were called.
During 2011, this Company vendor funded the debt service reserve account in the amount of $12.5 million, for a total of $37.5 million
under the subordinated loan.



Pursuant
to the terms of the Facility Agreement, the Company was required to fund a total of $46.8 million in the debt service reserve account.
The funds in this account are restricted to making principal and interest payments on the Facility Agreement. The minimum required
balance, not to exceed $46.8 million, fluctuates over time based on the timing of principal and interest payment dates. As of June
30, 2012, the entire amount of $46.8 million is recorded in restricted cash.



5.00%
Convertible Senior Notes



In
2011, the Company issued $38 million in aggregate principal amount of the 5.0% Convertible Senior Unsecured Notes (the “5.0%
Notes”) and warrants (the “5.0% Warrants”) to purchase 15,200,000 shares of voting common stock of the Company
at an exercise price of $1.25 per share. The 5.0% Notes are convertible into shares of common stock at an initial conversion price
of $1.25 per share of common stock, or 800 shares of the Company’s common stock per $1,000 principal amount of the 5.0% Notes,
subject to adjustment in the manner set forth in the Indenture. The 5.0% Notes are guaranteed on a subordinated basis by substantially
all of the Company’s domestic subsidiaries (the “Guarantors”), on an unconditional joint and several basis, pursuant
to a Guaranty Agreement (the “Guaranty”). The 5.0% Warrants are exercisable until five years after their issuance. The
5.0% Notes and 5.0% Warrants have anti-dilution protection in the event of certain stock splits or extraordinary share distributions,
and a reset of the conversion and exercise price on April 15, 2013 if the Company’s common stock is below the initial conversion
and exercise price at that time. The 5.0% Notes are senior unsecured debt obligations of the Company and rank pari passu with the
Company’s existing 5.75% and 8.00% Convertible Senior Notes and are subordinated to the Company’s obligations pursuant
to its Facility Agreement. There is no sinking fund for the 5.0% Notes. The 5.0% Notes will mature at the earlier to occur of (i)
December 14, 2021, or (ii) six months following the maturity date of the Facility Agreement and bear interest at a rate of 5.0%
per annum. Interest on the 5.0% Notes will be payable in-kind semi-annually in arrears on June 15 and December 15 of
each year. Under certain circumstances, interest on the 5.0% Notes will be payable in cash at the election of the holder if such
payments are permitted under the Facility Agreement. The indenture governing the 5.0% Notes contains customary events of default
with which the Company was in compliance as of June 30, 2012.



No
5.0% Notes were converted and no 5.0% Warrants were exercised during the first two quarters of 2012.



8.00%
Convertible Senior Notes



In
2009, the Company issued $55 million in aggregate principal amount of 8.00% Convertible Senior Unsecured Notes (the “8.00%
Notes”) and warrants (the “8.00% Warrants”) to purchase shares of the Company’s common stock. The 8.00%
Notes mature at the later of the tenth anniversary of closing (June 19, 2019) or six months following the maturity date of the
Facility Agreement and bear interest at a rate of 8.00% per annum. Interest on the 8.00% Notes is payable in the form of additional
8.00% Notes or, subject to certain restrictions, in common stock at the option of the holder. Interest is payable semi-annually
in arrears on June 15 and December 15 of each year. The 8.00% Notes are subordinated to all of the Company’s obligations
under the Facility Agreement. The 8.00% Notes are the Company’s senior unsecured debt obligations and rank pari passu with
the Company’s existing 5.0% and 5.75% Notes. The indenture governing the 8.00% Notes contains customary events of default
with which the Company was in compliance as of June 30, 2012.



The
current exercise price of the 8.00% Warrants is $0.32 and the base conversion price of the 8.00% Notes is $1.60.



No
8.00% Notes were converted during the first two quarters of 2012. 8.00% Warrants were exercised during the first two quarters of
2012 to purchase approximately 0.6 million common shares with a fair value of approximately $0.4 million.



5.75%
Convertible Senior Notes



In
2008, the Company issued $150.0 million aggregate principal amount of 5.75% Notes, which, subject to certain exceptions set forth
in the related indenture, are subject to repurchase by the Company for cash at the option of the holders in whole or part (i) on
each of April 1, 2013, April 1, 2018 and April 1, 2023 or (ii) upon a fundamental change, both at a purchase price equal to 100%
of the principal amount of the 5.75% Notes, plus accrued and unpaid interest, if any. A fundamental change will occur upon
certain changes in the ownership of the Company, or certain events relating to the trading of the Company’s common stock.
Holders may convert their 5.75% Notes into shares of common stock at their option at any time prior to maturity, subject to the
Company’s option to deliver cash in lieu of all or a portion of the shares. The indenture governing the 5.75% Notes
contains customary events of default with which the Company was in compliance as of June 30, 2012. The 5.75% Notes are subordinated
to all of the Company’s obligations under the Facility Agreement. The 5.75% Notes are the Company’s senior unsecured
debt obligations and rank pari passu with the Company’s existing 8.00% and 5.0% Notes. The 5.75% Notes mature on April 1,
2028 and bear interest at a rate of 5.75% per annum. Interest on the 5.75% Notes is payable semi-annually in arrears on April 1
and October 1 of each year. The base conversion price of the 5.75% Notes is $6.02. As of June 30, 2012, the carrying value of the
5.75% Notes is classified as a current because the first put option is within the next 12 months.



No
5.75% Notes were converted during the first two quarters of 2012.



Share
Lending Agreement



Concurrently
with the offering of the 5.75% Notes, the Company entered into a share lending agreement (the “Share Lending Agreement”)
with Merrill Lynch International (the “Borrower”), pursuant to which the Company agreed to lend up to 36,144,570 shares
of common stock (the “Borrowed Shares”) to the Borrower, subject to certain adjustments, for a period ending on the
earliest of (i) at the Company’s option, at any time after the entire principal amount of the 5.75% Notes ceases to be outstanding,
(ii) the written agreement of the Company and the Borrower to terminate, (iii) the occurrence of a Borrower default, at the option
of Lender, and (iv) the occurrence of a Lender default, at the option of the Borrower. Pursuant to the Share Lending Agreement,
upon the termination of the share loan, the Borrower must return the Borrowed Shares to the Company. Upon the conversion of 5.75%
Notes (in whole or in part), a number of Borrowed Shares proportional to the conversion rate for such notes must be returned to
the Company. At the Company’s election, the Borrower may deliver cash equal to the market value of the corresponding Borrowed
Shares instead of returning to the Company the Borrowed Shares otherwise required by conversions of 5.75% Notes.



11







Pursuant
to and upon the terms of the Share Lending Agreement, the Company will issue and lend the Borrowed Shares to the Borrower as a
share loan. The Borrowing Agent also is acting as an underwriter with respect to the Borrowed Shares, which are being offered to
the public. The Borrowed Shares included approximately 32.0 million shares of common stock initially loaned by the Company to the
Borrower on separate occasions, delivered pursuant to the Share Lending Agreement and the Underwriting Agreement, and an additional
4.1 million shares of common stock that, from time to time, may be borrowed from the Company by the Borrower pursuant to the Share
Lending Agreement and the Underwriting Agreement and subsequently offered and sold at prevailing market prices at the time of sale
or negotiated prices. The Borrowed Shares are free trading shares. At each of June 30, 2012 and December 31, 2011, approximately
17.3 million Borrowed Shares remained outstanding.  As of June 30, 2012 and December 31, 2011, the unamortized amount of issuance
costs associated with the Share Lending Agreement was $1.4 million and $2.3 million, respectively. As of June 30, 2012, the unamortized
issuance costs are classified as a current asset on the Company’s consolidated balance sheet, which is consistent with the
classification of the related 5.75% Notes as a current debt obligation, as further discussed above.



Warrants
Outstanding



As
of June 30, 2012 and December 31, 2011, warrants were outstanding to purchase 122.5 million shares and 76.8 million shares, respectively,
of the Company’s common stock as shown in the table below:



|                                |  | Outstanding Warrants |             |  | Strike Price      | 
|------------------------------- |  | -------------------- | ----------- |  | ----------------- | 
|                                |  | June 30, 2012        |             |  | December 31, 2011 | 
|Contingent Equity Agreement (1) |  |                      | 41,467,980  |  |                   | 
|Subordinated Loan               |  |                      | 4,205,608   |  |                   | 
|5.0% Notes (2)                  |  |                      | 15,200,000  |  |                   | 
|8.00% Notes (3)                 |  |                      | 61,606,706  |  |                   | 
|5.75% Notes                     |  |                      | —           |  |                   | 
|                                |  |                      | 122,480,294 |  |                   | 



| | (1) | On certain valuation dates, additional warrants were issued due to reset provisions in the agreement.
| | --- | -----------------------------------------------------------------------------------------------------

| | (2) | According to the terms of the 5.0% Notes, the 5.0% Warrants are subject to reset on April 15, 2013,
if the price of the Company’s common stock is below the initial conversion and exercise price at that date.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | According to the terms of the 8.00% Notes, additional 8.00% Warrants may be issued to holders if
shares of common stock are issued below the then current warrant reset price ($0.32 as of June 30, 2012). During the first quarter
of 2012, no additional warrants were issued. During the second quarter, the Company issued stock at $0.32 per share, which is below
the previous strike price of $0.49, in connection with the contingent consideration paid as part of the acquisition of Axonn. Given
this transaction and the related provisions in the warrant agreements, the holders of the 8.00% Warrants received additional 8.00%
Warrants to purchase 21.7 million more shares of common stock.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5.
DERIVATIVES



The
following tables disclose the fair value and locations of the derivative instruments on the Company’s condensed consolidated
balance sheets and condensed consolidated statements of operations (in thousands):



|                                                                |  | June 30, 2012 |         |   | December 31, 2011 |  
|--------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | -
|Intangible and other assets:                                    |  |               |         |   |                   |  
|Interest rate cap                                               |  | $             | 133     |   |                   | $
|Total intangible and other assets                               |  | $             | 133     |   |                   | $
|                                                                |  |               |         |   |                   |  
|Derivative liabilities:                                         |  |               |         |   |                   |  
|Compound embedded conversion option with 8.00% Notes            |  | $             | (3,407  | ) |                   | $
|Warrants issued with 8.00% Notes                                |  |               | (12,321 | ) |                   |  
|Warrants issued in conjunction with contingent equity agreement |  |               | —       |   |                   |  
|Contingent put feature embedded in the 5.0% Notes               |  |               | (2,961  | ) |                   |  
|Total derivative liabilities                                    |  | $             | (18,689 | ) |                   | $



|                                                                |  | Three Months Ended |       
|--------------------------------------------------------------- |  | ------------------ | ------
|                                                                |  | June 30, 2012      |       
|Interest rate cap                                               |  | $                  | (93   
|Compound embedded conversion option with 8.00% Notes            |  |                    | 5,887 
|Warrants issued with 8.00% Notes                                |  |                    | 14,412
|Warrants issued in conjunction with contingent equity agreement |  |                    | 263   
|Contingent put feature embedded in the 5.0% Notes               |  |                    | (37   
|Total derivative gain                                           |  | $                  | 20,432



|                                                                |  | Six Months Ended |       
|--------------------------------------------------------------- |  | ---------------- | ------
|                                                                |  | June 30, 2012    |       
|Interest rate cap                                               |  | $                | (122  
|Compound embedded conversion option with 8.00% Notes            |  |                  | 3,704 
|Warrants issued with 8.00% Notes                                |  |                  | 9,932 
|Warrants issued in conjunction with contingent equity agreement |  |                  | 301   
|Contingent put feature embedded in the 5.0% Notes               |  |                  | 96    
|Total derivative gain                                           |  | $                | 13,911



12







None
of the derivative instruments is designated as a hedge.



Interest
Rate Cap



In
June 2009, in connection with entering into the Facility Agreement, which provides for interest 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 of 4.00% from the date of issuance
through December 2012. Thereafter, the Base Rate 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 statement of operations.



Compound
Embedded Conversion Option with 8.00% Notes



The
Company recorded the conversion rights and features embedded within the 8.00% Notes as a compound embedded derivative liability
on its condensed consolidated balance sheet with a corresponding debt discount which is netted against the principal amount of
the 8.00% Notes. The Company is accreting the debt discount associated with the compound embedded derivative liability to interest
expense over the term of the 8.00% Notes using the 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 determined the fair value of the compound embedded derivative using a Monte Carlo simulation
model.



Warrants
Issued with 8.00% Notes



Due
to the cash settlement provisions and reset features in the 8.00% Warrants issued with the 8.00% Notes, the Company recorded the
8.00% Warrants as an embedded derivative liability on its condensed consolidated balance sheet with a corresponding debt discount
which is netted against the principal amount of the 8.00% Notes. The Company is accreting the debt discount associated with the
warrant liability to interest expense over the term of the 8.00% Warrants using the effective interest rate method. The fair value
of the warrant 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 determined the fair value of the warrant derivative using a Monte Carlo simulation
model.



Warrants
Issued in Conjunction with Contingent Equity Agreement



Prior
to June 19, 2012, the Company determined that the warrants issued in conjunction with the availability fee for the Contingent Equity
Agreement were a liability at issuance. The offset was recorded in other non-current assets and was amortized over the one-year
availability period. The fair value of the warrant liability was 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 determined the principal amount of
the warrant derivative using a Monte Carlo simulation model.



On
June 19, 2012, the Company issued additional warrants in conjunction with the availability fee for the Contingent Equity Agreement.
This tranche of warrants is not subject to a reset provision and therefore is not marked-to-market at the end of each reporting
period. The Company determined that the warrant was an equity instrument and recorded it as equity. The offset is recorded in other
non-current assets and is being amortized over the one-year availability period.



Contingent
Put Feature Embedded in the 5.0% Notes



The
Company evaluated the embedded derivative resulting from the contingent put feature within the Indenture for bifurcation from the
5.0% Notes. The contingent put feature was not deemed clearly and closely related to the 5.0% Notes and was bifurcated as a standalone
derivative. The Company recorded this embedded derivative liability as a non-current liability on its condensed consolidated balance
sheets with a corresponding debt discount which is netted against the principal amount of the 5.0% Notes. The fair value of
the contingent put feature liability is marked-to-market at the end of each reporting period. The Company determined the fair value
of the contingent put feature derivative using a Monte Carlo simulation model based upon a risk-neutral stock price model.



6.
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 as of June
30, 2012 and December 31, 2011 (in thousands):



13







|                                                         |  | Fair Value Measurements at
    June 30, 2012: |  
|-------------------------------------------------------- |  | --------------------------------------------- | -
|                                                         |  | (Level 1)                                     |  
|Other assets:                                            |  |                                               |  
|Interest rate
    cap                                    |  | $                                             | —
|Total
    other assets measured at fair value            |  | $                                             | —
|                                                         |  |                                               |  
|Other liabilities:                                       |  |                                               |  
|Liability for contingent consideration                   |  | $                                             | —
|Compound embedded conversion option with 8.00%
    Notes |  |                                               | —
|Warrants issued with 8.00% Notes                         |  |                                               | —
|Contingent put feature embedded
    in 5.0% Notes        |  |                                               | —
|Total
    other liabilities measured at fair value       |  | $                                             | —



|                                                         |  | Fair Value Measurements at December 31, 2011: |  
|-------------------------------------------------------- |  | --------------------------------------------- | -
|                                                         |  | (Level 1)                                     |  
|Other assets:                                            |  |                                               |  
|Interest rate
    cap                                    |  | $                                             | —
|Total
    other assets measured at fair value            |  | $                                             | —
|                                                         |  |                                               |  
|Other liabilities:                                       |  |                                               |  
|Liability for contingent consideration                   |  | $                                             | —
|Compound embedded conversion option with 8.00%
    Notes |  |                                               | —
|Warrants issued with 8.00% Notes                         |  |                                               | —
|Warrants issued with contingent equity agreement         |  |                                               | —
|Contingent put feature embedded
    in 5.0% Notes        |  |                                               | —
|Total
    other liabilities measured at fair value       |  | $                                             | —



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 5 for further discussion.



Liability
for Contingent Consideration



In
connection with the acquisition of Axonn in December 2009, the Company is obligated to pay up to an additional $10.8 million in
contingent consideration for earnouts based on sales of existing and new products over a five-year earnout period beginning January
1, 2010. The Company will make earnout payments in stock (not to exceed 10% of the Company’s pre-transaction outstanding
common stock), but at its option may make payments in cash after 13 million shares have been issued. The Company’s initial
estimate of the total earnout expected to be paid was $10.8 million. Since the earnout period started, the Company has made revisions
to this estimate, which is currently $10.1 million. Through June 30, 2012, the Company had made $3.9 million in earnout payments
by issuing 10,242,247 shares of voting common stock.



The
fair value of the accrued contingent consideration was determined using a probability-weighted discounted cash flow approach at
the acquisition date and reporting date. The approach is based on significant inputs that are not observable in the market,
which are referred to as Level 3 inputs. The fair value is based on the Company reaching specific performance metrics over the
next three years of operations. The change in fair value of the contingent consideration is recorded through accretion expense
in the Company’s results of operations.



The
significant unobservable inputs used in the fair value measurement of the Company’s liability for contingent consideration
are projected future sales of existing and new products as well as earnout payments made each quarter determined by actual product
sales. Decreases in forecasted sales would result in a lower fair value measurement.



Compound
Embedded Conversion Options with 8.00% Notes



The
derivative liabilities in Level 3 include the compound embedded conversion option in the 8.00% Notes. See Note 5 for further discussion.
The Company marks-to-market this liability at each reporting date with the changes in fair value recognized in the Company’s
results of operations.



As
of June 30, 2012, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the compound embedded conversion option, including payment in kind interest payments, make whole
premiums, automatic conversions, and future equity issuances; (ii) stock price volatility ranges from 35% - 106%; (iii) risk-free
interest rates ranges from 0.04% - 1.67%; (iv) base conversion price of $1.60; and (v) market price of common stock at the valuation
date of $0.32.



As
of December 31, 2011, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the compound embedded conversion option, including payment in kind interest payments, make whole
premiums, automatic conversions, and future equity issuances; (ii) stock price volatility ranges from 35% - 103%; (iii) risk-free
interest rates ranges from 0.01% - 1.89%; (iv) base conversion price of $1.61; and (v) market price of common stock at the valuation
date of $0.54.



The
significant unobservable inputs used in the fair value measurement of the Company’s compound embedded conversion option within
the Company’s 8.00% Notes are future equity issuances and expected volatility. In connection with the acquisition of Axonn
in December 2009, the Company will make future earnout payments in stock. Certain issuances of common stock may cause the base
conversion rate to be adjusted, which will increase the fair value of the conversion option liability. The simulated fair value
of this liability is also sensitive to changes in the Company’s expected volatility. Decreases in expected volatility would
result in a lower fair value measurement.



14







Warrants
Issued with 8.00% Notes



The
derivative liabilities in Level 3 include the 8.00% Warrants issued with the 8.00% Notes. See Note 5 for further discussion. The
Company marks-to-market this liability at each reporting date with the changes in fair value recognized in the Company’s
results of operations.



As
of June 30, 2012, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the warrants issued, including reset features and future equity issuances; (ii) stock price volatility
ranges from 35% - 106%; (iii) risk-free interest rates ranges from 0.04% - 1.67%; (iv) warrant exercise price of $0.32; and (v)
market price of common stock at the valuation date of $0.32.



As
of December 31, 2011, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the warrants issued, including reset features and future equity issuances; (ii) stock price volatility
ranges from 35% - 103%; (iii) risk-free interest rates ranges from 0.01% - 1.89%; (iv) warrant exercise price of $0.49; and (v)
market price of common stock at the valuation date of $0.54.



The
significant unobservable inputs used in the fair value measurement of the Company’s 8.00% Warrants are future equity issuances
and expected volatility. In connection with the acquisition of Axonn in December 2009, the Company will make future earnout payments
in stock. If the stock price on the issuance date is less than the current exercise price of the outstanding 8.00 % Warrants, additional
warrants may be issued, which will increase the fair value of the warrant liability. The simulated fair value of this liability
is also sensitive to changes in the Company’s expected volatility. Decreases in expected volatility would result in a lower
fair value measurement.



Warrants
Issued with Contingent Equity Agreement



Prior
to June 19, 2012, the derivative liabilities in Level 3 included the warrants issued with the contingent equity account. See Note
5 for further discussion. The Company marked-to-market this liability at each reporting date with the changes in fair value recognized
in the Company’s results of operations.



On
June 19, 2012, the Company issued warrants in conjunction with the availability fee for the Contingent Equity Agreement. This tranche
of warrants is not subject to a reset provision and is not marked-to-market at the end of each reporting period.



As
of December 31, 2011, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the warrants issued; (ii) stock price volatility of 108%; (iii) risk-free interest rates ranges
from 0.01% - 0.83%; (iv) warrant price of $1.20; and (v) market price of common stock at the valuation date of $0.54.



The
significant unobservable inputs used in the fair value measurement of the Company’s warrants issued with the contingent equity
agreement were the intrinsic value of the warrants and the Company’s expected volatility. The intrinsic value of the warrants
was sensitive to the Company’s stock price on the issuance date and subsequent valuation dates. The closing stock price on
June 19, 2012 was $0.28, which was lower than $1.20 per share, the price of the warrants issued on June 19, 2011. The lower price
resulted in the Company issuing additional warrants on June 19, 2012. The simulated fair value of this liability was also sensitive
to changes in the Company’s expected volatility. Decreases in expected volatility resulted in a lower fair value measurement.



Contingent
Put Feature Embedded in 5.0% Notes



The
derivative liabilities in Level 3 include the contingent put feature embedded in the 5.0% Notes. See Note 5 for further discussion.
The Company marks-to-market this liability at each reporting date with the changes in fair value recognized in the Company’s
results of operations.



As
of June 30, 2012, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the warrants issued including the probability of change of control of the Company, payment in kind
interest and reset features; (ii) stock price volatility ranges from 35% - 106%; (iii) risk-free interest rates ranges from 0.04%
- 1.67%; (iv) base conversion price of $1.25; and (v) market price of common stock at the valuation date of $0.32.



As
of December 31, 2011, the Company utilized valuation models that rely exclusively on Level 3 inputs including, among other things:
(i) the underlying features of the warrants issued including the probability of change of control of the Company, payment in kind
interest and reset features; (ii) stock price volatility ranges from 35% - 103%; (iii) risk-free interest rates ranges from 0.01%
- 1.89%; (iv) base conversion price of $1.25; and (v) market price of common stock at the valuation date of $0.54.



The
significant unobservable inputs used in the fair value measurement of the Company’s contingent put feature embedded in the
Company’s 5.0% Notes are the assumed probability of a change of control occurring within each year through maturity of the
5.0% Notes and the Company’s expected volatility. Significant increases or decreases in assumed probability of a change in
control would result in a significant change in the fair value measurement. As the probability of change of control increases,
the value of the liability also increases. The simulated fair value of this liability is also sensitive to changes in the Company’s
expected volatility. Decreases in expected volatility would result in a lower fair value measurement.



Level
3 Reconciliation



The
following tables present a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for the three and six months ended June 30, 2012 and 2011 as follows (in thousands):



15







|Balance at March 31, 2012                                               |  | $ | (49,894 | )
|----------------------------------------------------------------------- |  | - | ------- | -
|Derivative adjustment related to conversions and exercises              |  |   | 212     |  
|Earnout payments made related to liability for contingent consideration |  |   | 572     |  
|Change in fair value of contingent consideration                        |  |   | (437    | )
|Contingent equity warrant liability reclassed to equity                 |  |   | 5,853   |  
|Unrealized gain, included in derivative gain (loss)                     |  |   | 20,525  |  
|Balance at June 30, 2012                                                |  | $ | (23,169 | )
|                                                                        |  |   |         |  
|Balance at December 31, 2011                                            |  | $ | (43,959 | )
|Derivative adjustment related to conversions and exercises              |  |   | 420     |  
|Earnout payments made related to liability for contingent consideration |  |   | 853     |  
|Change in fair value of contingent consideration                        |  |   | (369    | )
|Contingent equity warrant liability reclassed to equity                 |  |   | 5.853   |  
|Unrealized gain, included in derivative gain (loss)                     |  |   | 14,033  |  
|Balance at June 30, 2012                                                |  | $ | (23,169 | )



|Balance at March 31, 2011                                               |  | $ | (59,725 | )
|----------------------------------------------------------------------- |  | - | ------- | -
|Issuance of contingent equity warrant liability                         |  |   | (8,313  | )
|Issuance of contingent put feature embedded in 5.0% Notes               |  |   | (1,503  | )
|Derivative adjustment related to conversions and exercises              |  |   | 564     |  
|Earnout payments made related to liability for contingent consideration |  |   | —       |  
|Change in fair value of contingent consideration                        |  |   | (542    | )
|Contingent equity warrant liability reclassed to equity                 |  |   | 5,955   |  
|Unrealized gain, included in derivative gain (loss)                     |  |   | 4,268   |  
|Balance at June 30, 2011                                                |  | $ | (59,296 | )
|                                                                        |  |   |         |  
|Balance at December 31, 2010                                            |  | $ | (66,838 | )
|Issuance of contingent equity warrant liability                         |  |   | (8,313  | )
|Issuance of contingent put feature embedded in 5.0% Notes               |  |   | (1,503  | )
|Derivative adjustment related to conversions and exercises              |  |   | 1,100   |  
|Earnout payments made related to liability for contingent consideration |  |   | 489     |  
|Change in fair value of contingent consideration                        |  |   | (742    | )
|Contingent equity warrant liability reclassed to equity                 |  |   | 5,955   |  
|Unrealized gain, included in derivative gain (loss)                     |  |   | 10,556  |  
|Balance at June 30, 2011                                                |  | $ | (59,296 | )



7.
ACCRUED EXPENSES AND NON-CURRENT LIABILITIES



Accrued
expenses consist of the following (in thousands):



|                                                     |  | June 30, 2012 |        |  | December 31, 2011 |  
|---------------------------------------------------- |  | ------------- | ------ |  | ----------------- | -
|Accrued interest                                     |  | $             | 4,604  |  |                   | $
|Accrued compensation and benefits                    |  |               | 3,577  |  |                   |  
|Accrued property and other taxes                     |  |               | 5,272  |  |                   |  
|Accrued customer liabilities and deposits            |  |               | 3,002  |  |                   |  
|Accrued professional and other service provider fees |  |               | 995    |  |                   |  
|Accrued liability for contingent consideration       |  |               | 2,296  |  |                   |  
|Accrued commissions                                  |  |               | 616    |  |                   |  
|Accrued telecommunications expenses                  |  |               | 721    |  |                   |  
|Accrued satellite and ground construction costs      |  |               | 13,551 |  |                   |  
|Other accrued expenses                               |  |               | 2,663  |  |                   |  
|                                                     |  | $             | 37,297 |  |                   | $



Other
accrued expenses primarily include outsourced logistics services, storage, inventory in transit, warranty reserve and maintenance.



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



|                                                                                                |  | June 30, 2012 |        |  | December 31, 2011 |  
|----------------------------------------------------------------------------------------------- |  | ------------- | ------ |  | ----------------- | -
|Long-term accrued interest                                                                      |  | $             | 263    |  |                   | $
|Asset retirement obligation                                                                     |  |               | 962    |  |                   |  
|Deferred rent                                                                                   |  |               | 653    |  |                   |  
|Long-term liabilities related to the Cooperative Endeavor Agreement with the State of Louisiana |  |               | 2,337  |  |                   |  
|Long-term portion of liability for contingent consideration                                     |  |               | 2,185  |  |                   |  
|Uncertain income tax positions                                                                  |  |               | 5,488  |  |                   |  
|Foreign tax contingencies                                                                       |  |               | 4,151  |  |                   |  
|                                                                                                |  | $             | 16,039 |  |                   | $



8.
COMMITMENTS



Contractual
Obligations



The
Company has purchase commitments with Thales, Arianespace, Ericsson, Hughes and other vendors related to the procurement and deployment
of its second-generation constellation and ground infrastructure.



16







In
June 2012, the Company and Hughes entered into an agreement to extend to September 28, 2012 the deadline for the Company to make
payments previously due under the contract, provided the Company makes a payment of $0.5 million in July 2012 and $0.5 million
in August 2012. The Company has made the July 2012 payment. The deferred payments continue to incur interest at the rate of 10%
per annum. As of June 30, 2012, the Company had recorded $19.9 million in accounts payable related to these required payments and
had incurred and capitalized $73.2 million of costs related to this contract. The costs are recorded as an asset in property and
equipment. If the Company is unable to modify successfully the contract payment terms, the contract may be terminated, and the
Company may be required to record an impairment charge. If the contract is terminated for convenience, the Company must make a
final payment of $20.0 million in either cash or Company common stock at the Company’s election.  If the Company
elects to make payment in common stock, Hughes will have the option either to accept the common stock or instruct the Company to
complete a block sale of the common stock and deliver the proceeds to Hughes. If Hughes chooses to accept common stock, the number
of shares it will receive will be calculated based on the final payment amount plus 5%.



In
July 2012, the Company entered into an agreement with Ericsson which deferred to February 1, 2013 approximately $4.2 million in
milestone payments scheduled under the contract, provided the Company makes a payment of $0.9 million in July 2012 and $0.7 million
in September 2012. The Company has made the July payment. The remaining milestones previously due under the contract in 2012 were
deferred to 2013 and beyond. The deferred payments will continue to incur interest at a rate of 6.5% per annum. As of June 30,
2012, the Company had recorded $4.2 million in accounts payable and accrued expenses related to these required payments and has
incurred and capitalized $6.8 million of costs related to this contract. The costs are recorded as an asset in property and equipment.
If the Company is unable to modify successfully the contract payment terms, the contract may be terminated, and the Company may
be required to record an impairment charge. If the contract is terminated for convenience, the Company must make a final payment
of $10.0 million in either cash or Company common stock at the Company’s election.  If the Company elects to make
payment in common stock, Ericsson will have the option either to accept the common stock or instruct the Company to complete a
block sale of the common stock and deliver the proceeds to Ericsson. If Ericsson chooses to accept common stock, the number
of shares it will receive will be calculated based on the final payment amount plus 5%.



The
Company issued separate purchase orders for additional phone equipment and accessories under the terms of executed commercial agreements
with Qualcomm. Within the terms of the commercial agreements, the Company paid Qualcomm approximately 7.5% to 25% of the total
order price as advances for inventory. As of June 30, 2012 total advances to Qualcomm for inventory were $9.2 million, and the
Company had outstanding commitment balances of $8.8 million for inventory held by Qualcomm. The Company and Qualcomm are interested
in terminating the purchase orders and are negotiating to do so.



9.
CONTINGENCIES



Arbitration



On
June 3, 2011, the Company filed a demand for arbitration against Thales before the American Arbitration Association to enforce
certain rights to order additional satellites under the Amended and Restated Contract for the construction of the Company’s
satellites for its second-generation constellation.  Specifically, the Company sought a declaration that Thales was obligated
to manufacture and deliver Phase 3 satellites (additional second-generation satellites beyond the first 25 satellites) in amounts
timely ordered by the Company at the contract price calculable in accordance with the Amended and Restated Contract, along with
additional declaratory relief and specific performance.



Thales
claimed that the Company was not entitled to the fixed pricing for Phase 3 satellites provided under the Amended and Restated Contract
and that the price of any Phase 3 satellites ordered by the Company was subject to equitable adjustment.  Thales also
claimed that the Company terminated all further rights under the Contract to order additional satellites. Thales delivered to the
Company an invoice for termination costs under the contract of approximately €51.5 million.  The Company claimed that
it has previously paid Thales €12.0 million for the procurement of certain Long Lead Items for six of these satellites and
prepaid €53.0 million for these satellites, which Thales disputed claiming that the €53.0 prepaid was for the construction
of the first 25 second-generation satellites and not Phase 3 satellites.  The Company disputed that it terminated any
portion of the contract for convenience and under the unambiguous language of the contract, even if it had terminated any portion
of the contract for convenience, management believed the Company would not owe any termination charges as no work had been performed
under Phase 3 of the contract. Additionally, the Company claimed that even if the Company terminated all rights to order Phase
3 satellites, the Company nevertheless may exercise its option under the contract to order additional spacecraft at the contractually
fixed pricing and delivery schedule provided therein. Finally, the Company has claimed up to €395 million would be due to
the Company from Thales if the arbitration panel finds that a termination for convenience has occurred.



An
evidentiary hearing was held during the last full week of January 2012. The parties filed post-hearing briefs in March 2012. On
May 10, 2012, the arbitration tribunal determined that, absent further agreement between the parties, Thales has no further obligation
to manufacture or deliver satellites under Phase 3 of the 2009 satellite construction contract. The arbitrators’ ruling also
required the Company to pay Thales approximately €53 million in termination charges and interest by June 9, 2012.



On
June 24, 2012, the Company and Thales agreed to the principal terms relating to the Company’s purchase from Thales of six
additional second-generation satellites at a fixed price of approximately €25 million per satellite, payable over an approximately
three-year period after commencement of manufacturing. In the near future, the Company and Thales expect to enter into a commercial
contract based upon these terms, which will become effective subject to various conditions being met, including the receipt by
the Company of necessary third-party financing, including from the Thermo Companies.



In
addition, 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, Settlement Agreement and Submission Agreement. Under the terms of the Release Agreement, Thales agreed unconditionally
and irrevocably to release and forever discharge the Company of any obligation to pay €35,623,770 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 the additional six 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 related
to Thales’ work under Phase 2 of 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 the additional six
second-generation satellites. The Company represented to Thales that it would obtain the consent of its lenders under the Facility,
which the Company expects to receive in the near future. In connection with the Release Agreement, the Company recorded a contract
termination charge of approximately $22.0 million which is recorded in operating expenses for the three and six months ended June
30, 2012.



Under
the terms of the Settlement Agreement, Globalstar agreed to pay €17,530,000 to Thales, representing one-third of the termination
charges awarded to Thales in the arbitration, on the later of the effective date of the new contract for the purchase of the six
additional second-generation satellites and the effective date of the financing for the purchase of these satellites. The Company
represented to Thales that it would obtain the consent of its lenders under the Facility, which the Company expects to receive
in the near future and to the payment by the Thermo Companies of $12.5 million to Thales on the earlier of December 31, 2012 and
the effective date of the new contract to reimburse Thales for funds it deposited in the Company’s debt service reserve account
under the Facility. Either Thales or the Company may terminate the Settlement Agreement if the effective date of the new contract
for the purchase of the six additional second-generation satellites does not occur on or prior to February 28, 2013. Termination
of the Settlement Agreement by either the Company or Thales would not terminate the Release Agreement.



17







Under
the terms of the Submission Agreement, the Company and Thales have agreed to participate in an ad hoc arbitration proceeding to
seek clarification of the award with respect to a €3,864,000 claim by Thales related to the Phase 2 satellites. If the arbitrator
determines the Company must pay that amount, payment may be deferred or subject to escrow, based on the timing of delivery of the
last Phase 2 satellite. If the arbitral decision is not received by the commercial contract effective date, the Company will place
that amount in escrow until the decision is received.



The
Company has recorded the agreed termination charge, approximately €17.5 million, in accrued expenses. The outcome of the €3,864,000
claim by Thales related to the Phase 2 satellites is unknown, and therefore no adjustments have been made to the financial statements
with respect to that claim.



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, none of the pending litigation, disputes or claims are expected to have a material adverse effect on the
Company's financial condition, results of operations or liquidity.



10.
RELATED PARTY TRANSACTIONS



Payables
to Thermo and other affiliates relate to normal purchase transactions and were $0.2 million and $0.4 million at June 30, 2012 and
December 31, 2011, respectively.



Transactions
with Thermo



Thermo
incurs certain expenses on behalf of the Company. The table below summarizes the total expense for the periods indicated below
(in thousands):



|                                   |  | Three Months Ended June 30, |     |  | Six Months Ended June 30, |  
|---------------------------------- |  | --------------------------- | --- |  | ------------------------- | -
|                                   |  | 2012                        |     |  | 2011                      |  
|                                   |  |                             |     |  |                           |  
|General and administrative expense |  | $                           | 200 |  |                           | $
|Non-cash expenses                  |  |                             | 132 |  |                           |  
|Total                              |  | $                           | 332 |  |                           | $



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 executive officers of Thermo (who are also directors of the Company) who
receive no cash compensation from the Company which are accounted for as a contribution to capital. The Thermo expense charges
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, provided a $2.3 million short-term loan to the Company (which was subsequently converted
into nonvoting common stock), and loaned $37.5 million to the Company to fund the debt service reserve account.



11.
INCOME TAXES



The
Company follows authoritative guidance surrounding accounting for uncertainty in income taxes. It is the Company's policy to recognize
interest and applicable penalties, if any, related to uncertain tax positions in income tax expense. For the periods ending June
30, 2012 and December 31, 2011, the net deferred tax assets were fully reserved.



A
tax authority has previously notified the Company that the Company (formerly known as Globalstar LLC), one of its subsidiaries,
and its predecessor, Globalstar L.P., were under audit for the taxable periods ending December 31, 2005, December 31, 2004, and
June 29, 2004, respectively. During the taxable years at issue, the Company, its predecessor, and its subsidiary were treated as
partnerships for U.S. income tax purposes. In December 2009, the Internal Revenue Service ("IRS") issued Notices of Final
Partnership Administrative Adjustments related to each of the taxable years at issue. The Company disagreed with the proposed adjustments,
and pursued the matter through applicable IRS and judicial procedures as appropriate.



In
February 2012, a Closing Agreement was reached with respect to this matter. The position reached in the Closing Agreement had no
impact on the cost basis of the assets of the Company or the Company’s net operating loss position. In addition, there is
no impact for the Company on deductions in future years. In previous years, the potential outcome of this audit was considered
and the gross deferred tax asset before valuation allowance adjusted to a tax position that was thought to be more likely than
not to be sustained. The impact of this Closing Agreement was considered in the Company’s analysis at December 31, 2011,
and the adjustment to the tax position in previous years was reversed.



In
January 2012, the Company’s Canadian subsidiary was notified that its income tax returns for the years ended October 31,
2008 and 2009 had been selected for audit. The Company’s Canadian subsidiary is in the process of collecting the information
required by the Canada Revenue Agency.



Except
for the audits noted above, neither the Company nor any of its subsidiaries is currently under audit by the IRS or by any state
jurisdiction in the United States. The Company's corporate U.S. tax returns for 2008 and subsequent years remain subject to examination
by tax authorities. State income tax returns are generally subject to examination for a period of three to five years after filing
of the respective return. The state impact of any federal changes remains subject to examination by various states for a period
of up to one year after formal notification to the states.



Through
a prior foreign acquisition the Company acquired a tax liability for which the Company has been indemnified by the previous owners.
As of June 30, 2012 and December 31, 2011, the Company had recorded a tax liability of $1.9 million to the foreign tax authorities
with an offsetting tax receivable from the previous owners.



18







12.
ACCUMULATED OTHER COMPREHENSIVE LOSS



Accumulated
other comprehensive loss includes all changes in equity during a period from non-owner sources. The change in accumulated other
comprehensive income for all periods presented resulted from foreign currency translation adjustments.



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



|                                                                                                           |  | Three months ended |        |   | Six months ended |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | -
|                                                                                                           |  | June 30,           |        |   | June 30,         |  
|                                                                                                           |  | 2012               |        |   | 2011             |  
|Accumulated other comprehensive loss, March 31, 2012 and 2011 and December 31, 2011 and 2010, respectively |  | $                  | (2,641 | ) |                  | $
|Other comprehensive income (loss):                                                                         |  |                    |        |   |                  |  
|Foreign currency translation adjustments                                                                   |  |                    | 90     |   |                  |  
|Accumulated other comprehensive loss, June 30, 2012 and 2011, respectively                                 |  | $                  | (2,551 | ) |                  | $



13.
STOCK COMPENSATION



The
Company’s 2006 Equity Incentive Plan (the “Equity Plan”) provides long-term incentives to the Company’s
key employees, including officers, directors, consultants and advisers (“Eligible Participants”) and 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 establishes the terms and conditions of any awards granted under the plans.  In
January 2012, 5,943,516 shares of the Company’s common stock were added to the shares available for issuance under the Equity
Plan.



Grants
to Eligible Participants of incentive stock options, restricted stock awards, and restricted stock units during the period are
indicated in the table below (in thousands):



|                                                             |  | Three months ended |    |  | Six months ended | 
|------------------------------------------------------------ |  | ------------------ | -- |  | ---------------- | 
|                                                             |  | June 30,           |    |  | June 30,         | 
|                                                             |  | 2012               |    |  | 2011             | 
|Grants of restricted stock awards and restricted stock units |  |                    | 50 |  |                  | 
|Grants of options to purchase common stock                   |  |                    | 40 |  |                  | 
|Total                                                        |  |                    | 90 |  |                  | 



Employee
Stock Purchase Plan



The
Company’s Employee Stock Purchase Plan (the “Plan”) provides eligible employees of the Company and its subsidiaries
with an opportunity to acquire shares of its common stock at a discount. The Plan permits eligible employees to purchase shares
of common stock during two semi-annual offering periods beginning on June 15 and December 15, unless adjusted by the Board or one
of its designated committees (the “Offering Periods”). Eligible employees may purchase shares in an amount of up to
15% of their total compensation per pay period, but may purchase no more than the lesser of $25,000 of the fair market value of
common stock or 500,000 shares of common stock in any calendar year, as measured as of the first day of each applicable Offering
Period. The price an employee pays is 85% of the fair market value of the common stock.  Fair market value is equal to
the lesser of the closing price of a share of common stock on either the first or last day of the Offering Period.



For the three and six months ended June
30, 2012, the Company recorded expense for the fair value of the grant of approximately $0 and $0.1 million, respectively, which
are reflected in marketing, general and administrative expenses. For the three and six months ended June 30, 2011 there was no
expense. Through June 30, 2012 the Company issued 805,690 shares pursuant to this stock purchase plan.



14.
HEADQUARTERS RELOCATION



During
2010 the Company announced the relocation of its corporate headquarters to Covington, Louisiana. In addition, the Company relocated
its product development center, international customer care operations, call center and other global business functions including
finance, accounting, sales, marketing and corporate communications. The Company completed the relocation in 2011.



In
connection with its relocation, the Company entered into a Cooperative Endeavor Agreement with the Louisiana Department of Economic
Development (“LED”) whereby the Company would be reimbursed for certain qualified relocation costs and lease expenses.
In accordance with the terms of the agreement, these reimbursement costs, not to exceed $8.1 million, will be reimbursed to the
Company as incurred provided the Company maintains required annual payroll levels in Louisiana through 2019.



Since
announcing its relocation, the Company has incurred qualifying relocation expenses. Under the terms of the agreement, the Company
was reimbursed a total of $3.9 million through December 31, 2011 by LED. The Company has not been reimbursed for any expenses in
2012. The Company accounted for these reimbursements as reductions to the relocation expenses incurred. Through December 31, 2011,
the Company also incurred $1.3 million for facility improvements and replacement equipment in connection with the relocation. These
costs were also reimbursed by LED. Reimbursements related to facility improvements and replacement equipment were recorded as deferred
costs and are offset by depreciation expense as the related assets are used in service. LED will also reimburse the Company approximately
$352,000 per year through 2019 for certain qualifying lease expenses, provided the Company meets the required payroll levels set
forth in the agreement.



If
the Company fails to meet the required payroll in any project year, the Company will reimburse LED for a portion of the shortfall
not to exceed the total reimbursement received from LED. Due to a plan to improve its cost structure by reducing headcount, the
Company projected that it would not meet the required payroll levels set forth in the agreement and recorded a liability of $1.7
million at June 30, 2012 for the estimated impact of the payroll shortfall in future years. This liability is included in current
and non-current liabilities in the Company’s condensed consolidated balance sheet.



19







15. 
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 June 30, |        |  | Six months ended June 30, |  
|---------------------------------- |  | --------------------------- | ------ |  | ------------------------- | -
|                                   |  | 2012                        |        |  | 2011                      |  
|Revenues:                          |  |                             |        |  |                           |  
|Service:                           |  |                             |        |  |                           |  
|United States                      |  | $                           | 10,099 |  |                           | $
|Canada                             |  |                             | 2,634  |  |                           |  
|Europe                             |  |                             | 691    |  |                           |  
|Central and South America          |  |                             | 643    |  |                           |  
|Others                             |  |                             | 83     |  |                           |  
|Total service revenue              |  | $                           | 14,150 |  |                           | $
|Subscriber equipment:              |  |                             |        |  |                           |  
|United States                      |  |                             | 4,182  |  |                           |  
|Canada                             |  |                             | 1,045  |  |                           |  
|Europe                             |  |                             | 386    |  |                           |  
|Central and South America          |  |                             | 198    |  |                           |  
|Others                             |  |                             | 20     |  |                           |  
|Total subscriber equipment revenue |  | $                           | 5,831  |  |                           | $
|Total revenue                      |  | $                           | 19,981 |  |                           | $



|                          |  | June 30, |           |  | December 31, |  
|------------------------- |  | -------- | --------- |  | ------------ | -
|                          |  | 2012     |           |  | 2011         |  
|Long-lived assets:        |  |          |           |  |              |  
|United States             |  | $        | 1,225,849 |  |              | $
|Canada                    |  |          | 295       |  |              |  
|Europe                    |  |          | 149       |  |              |  
|Central and South America |  |          | 3,427     |  |              |  
|Others                    |  |          | 1,671     |  |              |  
|Total long-lived assets   |  | $        | 1,231,391 |  |              | $



16.
LOSS PER SHARE



The
Company is required to present basic and diluted earnings per share. Basic earnings per share is computed based on the weighted
average number of common shares 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.



For
the three and six months ended June 30, 2012 and 2011, diluted net loss per share of common stock were the same as basic net loss
per share of common stock, because the effects of potentially dilutive securities are anti-dilutive.



As
of June 30, 2012 and 2011, 17.3 million Borrowed Shares related to the Company’s Share Lending Agreement remained outstanding.
The Company does not consider the Borrowed Shares to be outstanding for the purposes of computing and reporting its earnings per
share.



20







17.
SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION



In
connection with the Company’s issuance of the 5.0% Notes and 5.0% Warrants, certain of the Company’s domestic subsidiaries
(the “Guarantor Subsidiaries”), fully, unconditionally, jointly, and severally guaranteed the payment obligations under
the 5.0% Notes.  The following supplemental 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
supplemental 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.

Supplemental
Condensed Consolidating Statement of Operations

Three
Months Ended June 30, 2012

(Unaudited)



|                                                                                                     |  |                |         |   |              |   |        | Non-         |  |   |              |   |  |              |        
|---------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | ------------ | -------
|                                                                                                     |  | Parent         |         |   | Guarantor    |   |        | Guarantor    |  |   |              |   |  |              |        
|                                                                                                     |  | Company        |         |   | Subsidiaries |   |        | Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|                                                                                                     |  | (In thousands) |        
|Revenue:                                                                                             |  |                |         |   |              |   |        |              |  |   |              |   |  |              |        
|Service revenues                                                                                     |  | $              | 11,081  |   |              | $ | 15,661 |              |  | $ | 3,956        |   |  | $            | (16,548
|Subscriber equipment sales                                                                           |  |                | 393     |   |              |   | 5,119  |              |  |   | 1,365        |   |  |              | (1,046 
|Total revenue                                                                                        |  |                | 11,474  |   |              |   | 20,780 |              |  |   | 5,321        |   |  |              | (17,594
|Operating expenses:                                                                                  |  |                |         |   |              |   |        |              |  |   |              |   |  |              |        
|Cost of services (exclusive
    of depreciation, amortization, and accretion shown separately below) |  |                | 1,175   |   |              |   | 2,406  |              |  |   | 1,930        |   |  |              | 286    
|Cost of subscriber equipment sales                                                                   |  |                | 122     |   |              |   | 2,437  |              |  |   | 353          |   |  |              | 789    
|Cost of subscriber equipment
    sales – reduction in the value of inventory                         |  |                | —       |   |              |   | —      |              |  |   | 49           |   |  |              | —      
|Marketing, general and administrative                                                                |  |                | 4,889   |   |              |   | 1,616  |              |  |   | 3,227        |   |  |              | (969   
|Reduction in the value of
    long-lived assets                                                      |  |                | —       |   |              |   | 7,139  |              |  |   | —            |   |  |              | —      
|Contract termination charge                                                                          |  |                | 22,048  |   |              |   | —      |              |  |   | —            |   |  |              | —      
|Depreciation, amortization,
    and accretion                                                        |  |                | 10,291  |   |              |   | 16,832 |              |  |   | 4,310        |   |  |              | (15,545
|Total operating expenses                                                                             |  |                | 38,525  |   |              |   | 30,430 |              |  |   | 9,869        |   |  |              | (15,439
|Loss from operations                                                                                 |  |                | (27,051 | ) |              |   | (9,650 | )            |  |   | (4,548       | ) |  |              | (2,155 
|Other income (expense):                                                                              |  |                |         |   |              |   |        |              |  |   |              |   |  |              |        
|Interest income and expense,
    net of amounts capitalized                                          |  |                | (3,364  | ) |              |   | (4     | )            |  |   | (409         | ) |  |              | (4     
|Derivative gain                                                                                      |  |                | 20,432  |   |              |   | —      |              |  |   | —            |   |  |              | —      
|Equity in subsidiary earnings                                                                        |  |                | (17,336 | ) |              |   | 2,627  |              |  |   | —            |   |  |              | 14,709 
|Other                                                                                                |  |                | (126    | ) |              |   | 235    |              |  |   | (787         | ) |  |              | 46     
|Total other income (loss)                                                                            |  |                | (394    | ) |              |   | 2,858  |              |  |   | (1,196       | ) |  |              | 14,751 
|Loss before income taxes                                                                             |  |                | (27,445 | ) |              |   | (6,792 | )            |  |   | (5,744       | ) |  |              | 12,596 
|Income tax expense                                                                                   |  |                | 88      |   |              |   | 40     |              |  |   | 20           |   |  |              | —      
|Net loss                                                                                             |  | $              | (27,533 | ) |              | $ | (6,832 | )            |  | $ | (5,764       | ) |  | $            | 12,596 
|                                                                                                     |  |                |         |   |              |   |        |              |  |   |              |   |  |              |        
|Comprehensive loss                                                                                   |  | $              | (27,533 | ) |              | $ | (6,832 | )            |  | $ | (5,674       | ) |  | $            | 12,596 



21













Globalstar,
Inc.

Supplemental
Condensed Consolidating Statement of Operations

Three
Months Ended June 30, 2011

(Unaudited)





|                                                                                                     |  |                |         |   |              |   |        | Non-         |  |   |              |   |  |              |       
|---------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | ------------ | ------
|                                                                                                     |  | Parent         |         |   | Guarantor    |   |        | Guarantor    |  |   |              |   |  |              |       
|                                                                                                     |  | Company        |         |   | Subsidiaries |   |        | Subsidiaries |  |   | Eliminations |   |  | Consolidated |       
|                                                                                                     |  | (In thousands) |        
|Revenue:                                                                                             |  |                |         |   |              |   |        |              |  |   |              |   |  |              |       
|Service
    revenues                                                                                 |  | $              | 6,843   |   |              | $ | 10,035 |              |  | $ | 4,177        |   |  | $            | (7,678
|Subscriber equipment
    sales                                                                       |  |                | 138     |   |              |   | 4,703  |              |  |   | 2,130        |   |  |              | (1,349
|Total revenue                                                                                        |  |                | 6,981   |   |              |   | 14,738 |              |  |   | 6,307        |   |  |              | (9,027
|Operating expenses:                                                                                  |  |                |         |   |              |   |        |              |  |   |              |   |  |              |       
|Cost of services (exclusive of depreciation,
    amortization, and accretion shown separately below) |  |                | 2,690   |   |              |   | 2,430  |              |  |   | 3,161        |   |  |              | (990  
|Cost of subscriber equipment sales                                                                   |  |                | 800     |   |              |   | 3,083  |              |  |   | 1,150        |   |  |              | (1,366
|Cost of subscriber equipment sales –
    reduction in the value of inventory                         |  |                | —       |   |              |   | 331    |              |  |   | —            |   |  |              | —     
|Marketing, general and administrative                                                                |  |                | 2,582   |   |              |   | 6,306  |              |  |   | 2,684        |   |  |              | —     
|Reduction in the value of long-lived assets                                                          |  |                | —       |   |              |   | 161    |              |  |   | —            |   |  |              | —     
|Contract termination charge                                                                          |  |                | —       |   |              |   | —      |              |  |   | —            |   |  |              | —     
|Depreciation, amortization, and accretion                                                            |  |                | 5,690   |   |              |   | 9,889  |              |  |   | 3,953        |   |  |              | (6,737
|Total operating expenses                                                                             |  |                | 11,762  |   |              |   | 22,200 |              |  |   | 10,948       |   |  |              | (9,093
|(Loss) gain from operations                                                                          |  |                | (4,781  | ) |              |   | (7,462 | )            |  |   | (4,641       | ) |  |              | 66    
|Other income (expense):                                                                              |  |                |         |   |              |   |        |              |  |   |              |   |  |              |       
|Interest income and expense, net of amounts
    capitalized                                          |  |                | (664    | ) |              |   | —      |              |  |   | (496         | ) |  |              | 5     
|Derivative gain                                                                                      |  |                | 3,861   |   |              |   | —      |              |  |   | —            |   |  |              | —     
|Equity in subsidiary earnings                                                                        |  |                | (12,882 | ) |              |   | (2,119 | )            |  |   | —            |   |  |              | 15,001
|Other                                                                                                |  |                | 400     |   |              |   | (183   | )            |  |   | (34          | ) |  |              | (58   
|Total other income (expense)                                                                         |  |                | (9,285  | ) |              |   | (2,302 | )            |  |   | (530         | ) |  |              | 14,948
|Loss before income taxes                                                                             |  |                | (14,066 | ) |              |   | (9,764 | )            |  |   | (5,171       | ) |  |              | 15,014
|Income tax expense                                                                                   |  |                | 2       |   |              |   | 24     |              |  |   | 55           |   |  |              | —     
|Net (loss) gain                                                                                      |  | $              | (14,068 | ) |              | $ | (9,788 | )            |  | $ | (5,226       | ) |  | $            | 15,014
|                                                                                                     |  |                |         |   |              |   |        |              |  |   |              |   |  |              |       
|Comprehensive loss                                                                                   |  | $              | (14,068 | ) |              | $ | (9,788 | )            |  | $ | (5,479       | ) |  | $            | 15,014









22







Globalstar,
Inc.

Supplemental
Condensed Consolidating Statement of Operations

Six
Months Ended June 30, 2012

(Unaudited)



|                                                                                                     |  |                |         |   |              |   |         | Non-         |  |   |              |   |  |              |        
|---------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | ------------ | -------
|                                                                                                     |  | Parent         |         |   | Guarantor    |   |         | Guarantor    |  |   |              |   |  |              |        
|                                                                                                     |  | Company        |         |   | Subsidiaries |   |         | Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|                                                                                                     |  | (In thousands) |        
|Revenue:                                                                                             |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Service revenues                                                                                     |  | $              | 21,313  |   |              | $ | 19,695  |              |  | $ | 7,607        |   |  | $            | (21,838
|Subscriber equipment sales                                                                           |  |                | 554     |   |              |   | 8,191   |              |  |   | 2,735        |   |  |              | (1,538 
|Total revenue                                                                                        |  |                | 21,867  |   |              |   | 27,886  |              |  |   | 10,342       |   |  |              | (23,376
|Operating expenses:                                                                                  |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Cost of services (exclusive of depreciation,
    amortization, and accretion shown separately below) |  |                | 3,894   |   |              |   | 2,645   |              |  |   | 3.905        |   |  |              | 712    
|Cost of subscriber equipment sales                                                                   |  |                | 150     |   |              |   | 4.678   |              |  |   | 1.597        |   |  |              | —      
|Cost of subscriber equipment sales –
    reduction in the value of inventory                         |  |                | 2       |   |              |   | 247     |              |  |   | 49           |   |  |              | —      
|Marketing, general and administrative                                                                |  |                | 10,257  |   |              |   | 3,052   |              |  |   | 6,047        |   |  |              | (2,072 
|Reduction in the value of long-lived assets                                                          |  |                | 79      |   |              |   | 7,139   |              |  |   | —            |   |  |              | —      
|Contract termination charge                                                                          |  |                | 22,048  |   |              |   | —       |              |  |   | —            |   |  |              | —      
|Depreciation, amortization, and accretion                                                            |  |                | 19,476  |   |              |   | 23,035  |              |  |   | 8,005        |   |  |              | (19,893
|Total operating expenses                                                                             |  |                | 55,906  |   |              |   | 40,796  |              |  |   | 19,603       |   |  |              | (21,253
|Loss from operations                                                                                 |  |                | (34,039 | ) |              |   | (12,910 | )            |  |   | (9,261       | ) |  |              | (2,123 
|Other income (expense):                                                                              |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Interest income and expense, net of amounts
    capitalized                                          |  |                | (5,954  | ) |              |   | (6      | )            |  |   | (867         | ) |  |              | (4     
|Derivative gain                                                                                      |  |                | 13,911  |   |              |   | —       |              |  |   | —            |   |  |              | —      
|Equity in subsidiary earnings                                                                        |  |                | (25,617 | ) |              |   | 4,498   |              |  |   | —            |   |  |              | 21,119 
|Other                                                                                                |  |                | (231    | ) |              |   | 104     |              |  |   | (381         | ) |  |              | 8      
|Total other income                                                                                   |  |                | (17,891 | ) |              |   | 4,596   |              |  |   | (1,248       | ) |  |              | 21,123 
|Loss before income taxes                                                                             |  |                | (51,930 | ) |              |   | (8,314  | )            |  |   | (10,509      | ) |  |              | 19,000 
|Income tax expense                                                                                   |  |                | 128     |   |              |   | 48      |              |  |   | 129          |   |  |              | —      
|Net loss                                                                                             |  | $              | (52,058 | ) |              | $ | (8,362  | )            |  | $ | (10,638      | ) |  | $            | 19,000 
|                                                                                                     |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Comprehensive loss                                                                                   |  | $              | (52,058 | ) |              | $ | (8,362  | )            |  | $ | (10,087      | ) |  | $            | 18,998 



23







Globalstar,
Inc.

Supplemental
Condensed Consolidating Statement of Operations

Six
Months Ended June 30, 2011

(Unaudited)





|                                                                                                     |  |                |         |   |              |   |         | Non-         |  |   |              |   |  |              |        
|---------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | ------------ | -------
|                                                                                                     |  | Parent         |         |   | Guarantor    |   |         | Guarantor    |  |   |              |   |  |              |        
|                                                                                                     |  | Company        |         |   | Subsidiaries |   |         | Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|                                                                                                     |  | (In thousands) |        
|Revenue:                                                                                             |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Service revenues                                                                                     |  | $              | 13,573  |   |              | $ | 19,632  |              |  | $ | 8,130        |   |  | $            | (13,759
|Subscriber equipment
    sales                                                                       |  |                | 409     |   |              |   | 7,662   |              |  |   | 3,642        |   |  |              | (2,036 
|Total revenue                                                                                        |  |                | 13,982  |   |              |   | 27,294  |              |  |   | 11,772       |   |  |              | (15,795
|Operating expenses:                                                                                  |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Cost of services (exclusive of depreciation,
    amortization, and accretion shown separately below) |  |                | 5,007   |   |              |   | 4,841   |              |  |   | 6,498        |   |  |              | (1,993 
|Cost of subscriber equipment sales                                                                   |  |                | 1,887   |   |              |   | 5,338   |              |  |   | 1,285        |   |  |              | (2,060 
|Cost of subscriber equipment sales –
    reduction in the value of inventory                         |  |                | —       |   |              |   | 422     |              |  |   | —            |   |  |              | —      
|Marketing, general and administrative                                                                |  |                | 4,863   |   |              |   | 11,490  |              |  |   | 5,401        |   |  |              | —      
|Reduction in the value of long-lived assets                                                          |  |                | 285     |   |              |   | 161     |              |  |   | —            |   |  |              | —      
|Contract termination charge                                                                          |  |                | —       |   |              |   | —       |              |  |   | —            |   |  |              | —      
|Depreciation, amortization, and accretion                                                            |  |                | 10,021  |   |              |   | 18,225  |              |  |   | 7,065        |   |  |              | (11,905
|Total operating expenses                                                                             |  |                | 22,063  |   |              |   | 40,477  |              |  |   | 20,249       |   |  |              | (15,958
|(Loss) gain from operations                                                                          |  |                | (8,081  | ) |              |   | (13,183 | )            |  |   | (8,477       | ) |  |              | 163    
|Other income (expense):                                                                              |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Interest income and expense, net of amounts
    capitalized                                          |  |                | (1,405  | ) |              |   | —       |              |  |   | (970         | ) |  |              | 8      
|Derivative gain                                                                                      |  |                | 10,296  |   |              |   | —       |              |  |   | —            |   |  |              | —      
|Equity in subsidiary earnings                                                                        |  |                | (21,914 | ) |              |   | (3,844  | )            |  |   | —            |   |  |              | 25,758 
|Other                                                                                                |  |                | 598     |   |              |   | (364    | )            |  |   | 1,229        |   |  |              | (159   
|Total other income (expense)                                                                         |  |                | (12,425 | ) |              |   | (4,208  | )            |  |   | 259          |   |  |              | 25,607 
|Loss before income taxes                                                                             |  |                | (20,506 | ) |              |   | (17,391 | )            |  |   | (8,218       | ) |  |              | 25,770 
|Income tax expense                                                                                   |  |                | 28      |   |              |   | 23      |              |  |   | 138          |   |  |              | —      
|Net (loss) gain                                                                                      |  | $              | (20,534 | ) |              | $ | (17,414 | )            |  | $ | (8,356       | ) |  | $            | 25,770 
|                                                                                                     |  |                |         |   |              |   |         |              |  |   |              |   |  |              |        
|Comprehensive loss                                                                                   |  | $              | (20,534 | ) |              | $ | (17,414 | )            |  | $ | (8,363       | ) |  | $            | 25,770 







24







Globalstar,
Inc.

Supplemental
Condensed Consolidating Balance Sheet

As
of June 30, 2012

(Unaudited)



|                                               |  | Parent
    Company |           |   | Guarantor
    Subsidiaries |   |         | Non-
     Guarantor  Subsidiaries |  |   | Eliminations |   |  | Consolidated |           
|---------------------------------------------- |  | ------------------ | --------- | - | -------------------------- | - | ------- | --------------------------------- |  | - | ------------ | - |  | ------------ | ----------
|                                               |  | (In thousands)     |          
|ASSETS                                         |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Current assets:                                |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Cash and cash equivalents                      |  | $                  | 2,072     |   |                            | $ | 699     |                                   |  | $ | 2,049        |   |  | $            | —         
|Restricted cash                                |  |                    | 700       |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Accounts receivable                            |  |                    | 2,785     |   |                            |   | 4,721   |                                   |  |   | 4,275        |   |  |              | —         
|Intercompany receivables                       |  |                    | 569,087   |   |                            |   | 380,933 |                                   |  |   | 23,164       |   |  |              | (973,184  
|Inventory                                      |  |                    | —         |   |                            |   | 4,484   |                                   |  |   | 36,670       |   |  |              | —         
|Prepaid expenses and other
    current assets  |  |                    | 4,161     |   |                            |   | 509     |                                   |  |   | 8,302        |   |  |              | —         
|Total current assets                           |  |                    | 578,805   |   |                            |   | 391,346 |                                   |  |   | 74,460       |   |  |              | (973,184  
|                                               |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Property and equipment, net                    |  |                    | 1,102,266 |   |                            |   | 41,957  |                                   |  |   | 87,251       |   |  |              | (83       
|Restricted cash                                |  |                    | 46,776    |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Intercompany notes receivable                  |  |                    | 38,728    |   |                            |   | —       |                                   |  |   | 1,800        |   |  |              | (40,528   
|Investment in subsidiaries                     |  |                    | (119,084  | ) |                            |   | (8,639  | )                                 |  |   | —            |   |  |              | 127,723   
|Deferred financing costs                       |  |                    | 50,717    |   |                            |   | —       |                                   |  |   | 72           |   |  |              | —         
|Advances for inventory                         |  |                    | 9,158     |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Intangible and other assets, net               |  |                    | 3,311     |   |                            |   | 2,385   |                                   |  |   | 1,862        |   |  |              | (15       
|Total assets                                   |  | $                  | 1,710,677 |   |                            | $ | 427,049 |                                   |  | $ | 165,445      |   |  | $            | (886,087  
|                                               |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|LIABILITIES AND STOCKHOLDERS’ EQUITY           |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Current liabilities:                           |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Current maturities of long-term debt           |  | $                  | 83,755    |   |                            | $ | —       |                                   |  | $ | —            |   |  | $            | —         
|Accounts payable                               |  |                    | 5,549     |   |                            |   | 3,418   |                                   |  |   | 23,016       |   |  |              | —         
|Accrued contract termination charge            |  |                    | 22,048    |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Accrued expenses                               |  |                    | 19,170    |   |                            |   | 8,584   |                                   |  |   | 9,543        |   |  |              | —         
|Intercompany payables                          |  |                    | 365,548   |   |                            |   | 458,411 |                                   |  |   | 187,538      |   |  |              | (1,011,497
|Payables to affiliates                         |  |                    | 170       |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Deferred revenue                               |  |                    | 1,314     |   |                            |   | 12,935  |                                   |  |   | 770          |   |  |              | —         
|Total current liabilities                      |  |                    | 497,554   |   |                            |   | 483,348 |                                   |  |   | 220,867      |   |  |              | (1,011,497
|                                               |  |                    |           |   |                            |   |         |                                   |  |   |              |   |  |              |           
|Long-term debt, less current maturities        |  |                    | 655,208   |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Employee benefit obligations                   |  |                    | 7,375     |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Intercompany notes payable                     |  |                    | —         |   |                            |   | —       |                                   |  |   | 39,628       |   |  |              | (39,628   
|Derivative liabilities                         |  |                    | 18,689    |   |                            |   | —       |                                   |  |   | —            |   |  |              | —         
|Deferred revenue                               |  |                    | 7,439     |   |                            |   | 358     |                                   |  |   | —            |   |  |              | —         
|Other non-current liabilities                  |  |                    | 2,708     |   |                            |   | 3,083   |                                   |  |   | 10,248       |   |  |              | —         
|Total non-current
    liabilities              |  |                    | 691,419   |   |                            |   | 3,441   |                                   |  |   | 49,876       |   |  |              | (39,628   
|Stockholders’ equity                           |  |                    | 521,704   |   |                            |   | (59,740 | )                                 |  |   | (105,298     | ) |  |              | 165,038   
|Total liabilities and stockholders’
    equity |  | $                  | 1,710,677 |   |                            | $ | 427,049 |                                   |  | $ | 165,445      |   |  | $            | (886,087  



25







Globalstar,
Inc.

Supplemental
Condensed Consolidating Balance Sheet

As
of December 31, 2011

(Audited)



|                                               |  | ParentCompany  |           |   | Guarantor Subsidiaries |   |         | Non-
    Guarantor  Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|---------------------------------------------- |  | -------------- | --------- | - | ---------------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | ------------ | --------
|                                               |  | (In thousands) |          
|ASSETS                                         |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Current assets:                                |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Cash and cash equivalents                      |  | $              | 7,343     |   |                        | $ | 587     |                                  |  | $ | 2,021        |   |  | $            | —       
|Restricted cash                                |  |                | —         |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Accounts receivable                            |  |                | 3,363     |   |                        |   | 4,322   |                                  |  |   | 4,708        |   |  |              | —       
|Intercompany receivables                       |  |                | 538,876   |   |                        |   | 351,510 |                                  |  |   | 13,923       |   |  |              | (904,309
|Inventory                                      |  |                | 1         |   |                        |   | 4,564   |                                  |  |   | 37,283       |   |  |              | —       
|Prepaid expenses and other
    current assets  |  |                | 2,846     |   |                        |   | 303     |                                  |  |   | 2,132        |   |  |              | —       
|Total current assets                           |  |                | 552,429   |   |                        |   | 361,286 |                                  |  |   | 60,067       |   |  |              | (904,309
|                                               |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Property and equipment, net                    |  |                | 1,070,543 |   |                        |   | 60,872  |                                  |  |   | 87,624       |   |  |              | (1,321  
|Restricted cash                                |  |                | 46,776    |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Intercompany notes receivable                  |  |                | 40,456    |   |                        |   | —       |                                  |  |   | 1,800        |   |  |              | (42,256 
|Investment in subsidiaries                     |  |                | (106,377  | ) |                        |   | (18,629 | )                                |  |   | —            |   |  |              | 125,006 
|Deferred financing costs                       |  |                | 53,409    |   |                        |   | —       |                                  |  |   | 73           |   |  |              | —       
|Advances for inventory                         |  |                | 9,158     |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Intangible and other assets, net               |  |                | 12,773    |   |                        |   | 2,988   |                                  |  |   | 8,052        |   |  |              | (15     
|Total assets                                   |  | $              | 1,679,167 |   |                        | $ | 406,517 |                                  |  | $ | 157,616      |   |  | $            | (822,895
|                                               |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|LIABILITIES AND STOCKHOLDERS’ EQUITY           |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Current liabilities:                           |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Current maturities of long-term debt           |  | $              | —         |   |                        | $ | —       |                                  |  | $ | —            |   |  | $            | —       
|Accounts payable                               |  |                | 19,346    |   |                        |   | 1,953   |                                  |  |   | 26,509       |   |  |              | —       
|Accrued contract termination charge            |  |                | —         |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Accrued expenses                               |  |                | 11,558    |   |                        |   | 8,459   |                                  |  |   | 8,789        |   |  |              | —       
|Intercompany payables                          |  |                | 333,201   |   |                        |   | 427,852 |                                  |  |   | 142,966      |   |  |              | (904,019
|Payables to affiliates                         |  |                | 378       |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Deferred revenue                               |  |                | 1,043     |   |                        |   | 12,740  |                                  |  |   | 805          |   |  |              | —       
|Total current liabilities                      |  |                | 365,526   |   |                        |   | 451,004 |                                  |  |   | 179,069      |   |  |              | (904,019
|                                               |  |                |           |   |                        |   |         |                                  |  |   |              |   |  |              |         
|Long-term debt, less current maturities        |  |                | 723,888   |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Employee benefit obligations                   |  |                | 7,407     |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Intercompany notes payable                     |  |                | —         |   |                        |   | —       |                                  |  |   | 41,356       |   |  |              | (41,356 
|Derivative liabilities                         |  |                | 38,996    |   |                        |   | —       |                                  |  |   | —            |   |  |              | —       
|Deferred revenue                               |  |                | 6,695     |   |                        |   | 600     |                                  |  |   | —            |   |  |              | —       
|Other non-current liabilities                  |  |                | 2,860     |   |                        |   | 3,837   |                                  |  |   | 10,747       |   |  |              | —       
|Total non-current
    liabilities              |  |                | 779,846   |   |                        |   | 4,437   |                                  |  |   | 52,103       |   |  |              | (41,356 
|Stockholders’ equity                           |  |                | 533,795   |   |                        |   | (48,924 | )                                |  |   | (73,556      | ) |  |              | 122,480 
|Total liabilities and stockholders’
    equity |  | $              | 1,679,167 |   |                        | $ | 406,517 |                                  |  | $ | 157,616      |   |  | $            | (822,895



26







Globalstar,
Inc.

Supplemental
Condensed Consolidating Statement of Cash Flows

Six
Months Ended June 30, 2012

(Unaudited)



|                                                                  |  |                |         |   |              |   |     | Non-         |  |   |              |   |  |              |  
|----------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | --- | ------------ |  | - | ------------ | - |  | ------------ | -
|                                                                  |  | Parent         |         |   | Guarantor    |   |     | Guarantor    |  |   |              |   |  |              |  
|                                                                  |  | Company        |         |   | Subsidiaries |   |     | Subsidiaries |  |   | Eliminations |   |  | Consolidated |  
|                                                                  |  | (In thousands) |        
|                                                                  |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Net cash provided by (used in) operating activities               |  | $              | 1,439   |   |              | $ | 186 |              |  | $ | 183          |   |  | $            | —
|                                                                  |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Cash flows from investing activities:                             |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Second-generation satellites, ground and related
    launch costs |  |                | (33,562 | ) |              |   | —   |              |  |   | —            |   |  |              | —
|Property and equipment additions                                  |  |                | (107    | ) |              |   | (74 | )            |  |   | (14          | ) |  |              | —
|Investment in businesses                                          |  |                | (200    | ) |              |   | —   |              |  |   | —            |   |  |              | —
|Restricted cash                                                   |  |                | (700    | ) |              |   | —   |              |  |   | —            |   |  |              | —
|                                                                  |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Net cash used in investing activities                             |  |                | (34,569 | ) |              |   | (74 | )            |  |   | (14          | ) |  |              | —
|                                                                  |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Cash flows from financing activities:                             |  |                |         |   |              |   |     |              |  |   |              |   |  |              |  
|Proceeds from issuance of common stock and stock
    options      |  |                | 100     |   |              |   | —   |              |  |   | —            |   |  |              | —
|Borrowings from Facility Agreement                                |  |                | 5,008   |   |              |   | —   |              |  |   | —            |   |  |              | —
|Proceeds from contingent equity account                           |  |                | 23,000  |   |              |   | —   |              |  |   | —            |   |  |              | —
|Payment of deferred financing
    costs                           |  |                | (250    | ) |              |   | —   |              |  |   | —            |   |  |              | —
|Net cash from by financing activities                             |  |                | 27,858  |   |              |   | —   |              |  |   | —            |   |  |              | —
|Effect of exchange rate changes on cash and
    cash equivalents  |  |                | —       |   |              |   | —   |              |  |   | (140         | ) |  |              | —
|Net increase (decrease) in cash and cash equivalents              |  |                | (5,272  | ) |              |   | 112 |              |  |   | 29           |   |  |              | —
|Cash and cash equivalents at beginning of
    period              |  |                | 7,343   |   |              |   | 587 |              |  |   | 2,021        |   |  |              | —
|Cash and cash equivalents at end of period                        |  | $              | 2,071   |   |              | $ | 699 |              |  | $ | 2,050        |   |  | $            | —



27







Globalstar,
Inc.

Supplemental
Condensed Consolidating Statement of Cash Flows

Six
Months Ended June 30, 2011

(Unaudited)



|                                                                       |  |                |         |   |              |   |       | Non-         |  |   |              |   |  |              |  
|---------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ----- | ------------ |  | - | ------------ | - |  | ------------ | -
|                                                                       |  | Parent         |         |   | Guarantor    |   |       | Guarantor    |  |   |              |   |  |              |  
|                                                                       |  | Company        |         |   | Subsidiaries |   |       | Subsidiaries |  |   | Eliminations |   |  | Consolidated |  
|                                                                       |  | (In thousands) |        
|                                                                       |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Net cash provided by (used in) operating activities                    |  | $              | (7,313  | ) |              | $ | 2,290 |              |  | $ | (462         | ) |  | $            | —
|                                                                       |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Cash flows used in investing activities:                               |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Second-generation satellites, ground and related
    launch costs      |  |                | (57,907 | ) |              |   | —     |              |  |   | —            |   |  |              | —
|Property and equipment additions                                       |  |                | (113    | ) |              |   | (990  | )            |  |   | (139         | ) |  |              | —
|Investment in businesses                                               |  |                | (500    | ) |              |   | —     |              |  |   | —            |   |  |              | —
|Restricted cash                                                        |  |                | (5,579  | ) |              |   | —     |              |  |   | —            |   |  |              | —
|                                                                       |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Net cash used in investing activities                                  |  |                | (64,099 | ) |              |   | (990  | )            |  |   | (139         | ) |  |              | —
|                                                                       |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Cash flows from financing activities:                                  |  |                |         |   |              |   |       |              |  |   |              |   |  |              |  
|Proceeds from issuance of common stock and stock
    options           |  |                | 525     |   |              |   | —     |              |  |   | —            |   |  |              | —
|Borrowings from Facility Agreement                                     |  |                | 16,330  |   |              |   | —     |              |  |   | —            |   |  |              | —
|Proceeds from the issuance of 5.0% convertible
    notes               |  |                | 38,000  |   |              |   | —     |              |  |   | —            |   |  |              | —
|Proceeds from the contribution to the debt service
    reserve account |  |                | 7,643   |   |              |   | —     |              |  |   | —            |   |  |              | —
|Payment of deferred financing
    costs                                |  |                | (1,044  | ) |              |   | —     |              |  |   | —            |   |  |              | —
|Net cash from by financing activities                                  |  |                | 61,454  |   |              |   | —     |              |  |   | —            |   |  |              | —
|Effect of exchange rate changes on cash and
    cash equivalents       |  |                | —       |   |              |   | —     |              |  |   | 330          |   |  |              | —
|Net increase (decrease) in cash and cash equivalents                   |  |                | (9,958  | ) |              |   | 1,300 |              |  |   | (271         | ) |  |              | —
|Cash and cash equivalents at beginning of
    period                   |  |                | 32,288  |   |              |   | (766  | )            |  |   | 1,495        |   |  |              | —
|Cash and cash equivalents at end of period                             |  | $              | 22,330  |   |              | $ | 534   |              |  | $ | 1,224        |   |  | $            | —



28







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



Certain
statements contained in or incorporated by reference into this Report, other than purely historical information, including, but
not limited to, estimates, projections, statements relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements generally are identified by the words "believe," "project,"
"expect," "anticipate," "estimate," "intend," "strategy," "plan," "may,"
"should," "will," "would," "will be," "will continue," "will likely result,"
and similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements
are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. Forward-looking statements, such as the statements regarding our ability
to develop and expand our business, our anticipated capital spending (including for future satellite procurements and launches),
our ability to manage costs, our ability to exploit and respond to technological innovation, the effects of laws and regulations
(including tax laws and regulations) and legal and regulatory changes, the opportunities for strategic business combinations and
the effects of consolidation in our industry on us and our competitors, our anticipated future revenues, our anticipated financial
resources, our expectations about the future operational performance of our satellites (including their projected operational lives),
the expected strength of and growth prospects for our existing customers and the markets that we serve, commercial acceptance of
new products, problems relating to the ground-based facilities operated by us or by independent gateway operators, worldwide economic,
geopolitical and business conditions and risks associated with doing business on a global basis and other statements contained
in this Report regarding matters that are not historical facts, involve predictions. Risks and uncertainties that could cause or
contribute to such differences include, without limitation, those described in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2011.



Although
we believe that the forward-looking statements contained or incorporated by reference in this Report are based upon reasonable
assumptions, the forward-looking events and circumstances discussed in this Report may not occur, and actual results could differ
materially from those anticipated or implied in the forward-looking statements.



New
risk factors emerge from time to time, and it is not possible for us to predict all risk factors, nor can we assess the impact
of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any
forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance.
We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. These
cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.



This
"Management's Discussion and Analysis of Financial Condition" should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition" and information included in our Annual Report on Form 10-K for the year ended
December 31, 2011.



Overview



We
are a leading provider of mobile voice and data communications services globally via satellite. By providing wireless services
in areas not served or underserved by terrestrial wireless and wireline networks, we seek to address our customers' increasing
desire for connectivity. We offer voice and data communication services over our network of in-orbit satellites and our active
ground stations (or gateways), which we refer to as the Globalstar System.



Beginning
in 2006 we started the process of designing, manufacturing and deploying a second-generation satellite constellation. This constellation
is designed to last twice as long in space, have 40% greater capacity and be built at a significantly lower cost compared to our
first-generation constellation. This effort resulted in the launch of our first six second-generation satellites in late 2010 followed
by two additional launches of six satellites each in 2011. We plan to launch the remaining six satellites in 2012; however, this
plan is subject to numerous circumstances that are outside our control. We are integrating the new second-generation satellites
with the first-generation satellites that were launched in 2007 to form our second-generation constellation. Our new satellites
operate seamlessly with our existing constellation, therefore, with each new satellite that we place into service, our service
level increases for our voice and Duplex data customers. During 2012, we have placed and expect to place several additional satellites
into service, which will continue to increase our service levels. This increase in service level should result in our products
and services becoming more desirable to existing and potential customers. In 2011 and the first half of 2012, existing subscribers
began to utilize our services more, measured by minutes of use on the Globalstar System, a trend that we expect to continue. For
our existing customers, increases in usage on the Globalstar System may not directly correlate with increased revenue due to the
number of subscribers on unlimited usage rate plans. As our coverage level improves, we expect to gain new customers, which will
result in increased Duplex revenue in the future. We continue to offer a range of new and price competitive products to the industrial,
governmental and consumer markets. Due to the unique design of the Globalstar System (and based on customer input), we believe
that we offer the best voice quality among our peer group.



We
define a successful level of service for our customers as measured by their ability to make uninterrupted calls of average duration
for a system-wide average number of minutes per month. Our goal is to provide service levels and call success rates equal to or
better than our Mobile Satellite Service (“MSS”) competitors so our products and services are attractive to potential
customers. We define voice quality as the ability easily to hear, recognize and understand callers with limited recognizable delay
in the transmission. Due to the unique design of the Globalstar System, we outperform on this measure versus geostationary satellite
(“GEO”) competitors due to the difference in signal travel distance, approximately 44,000 additional miles for GEO
satellites, which introduces considerable delay and signal degradation to GEO calls. For our competitors using cross-linked satellite
architectures, which require multiple inter-satellite connections to complete a call, signal degradation and delay can result in
compromised call quality as compared to that experienced over the Globalstar System.



We
also compete aggressively on price. In 2004 we were the first in the MSS industry to offer bundled pricing plans that we adapted
from the terrestrial wireless industry. We expect to continue to innovate and retain our position as a low cost, high quality leader
in the MSS industry.



We
designed our second-generation constellation to support our current lineup of Duplex, SPOT family (SPOT Satellite GPS MessengerTM
and SPOT Connect) and Simplex data products. With the improvement in both coverage and service quality for our Duplex product offerings
resulting from the deployment of our second-generation constellation, we anticipate an expansion of our subscriber base and increases
in our average revenue per user, or “ARPU.”



Our
satellite communications business, by providing critical mobile communications to our subscribers, serves principally the following
markets: recreation and personal; government; public safety and disaster relief; oil and gas; maritime and fishing; natural resources,
mining and forestry; construction; utilities; and transportation.



At
June 30, 2012, we served approximately 530,000 subscribers. We increased our net subscribers by 17% from June 30, 2011 to June
30, 2012. We count "subscribers" based on the number of devices that are subject to agreements which entitle them to
use our voice or data communications services rather than the number of persons or entities who own or lease those devices.



29







We
currently provide the following communications services:

| | • | two-way voice communication and data transmissions, which we call “Duplex,” between mobile or fixed devices; and                                                                                                                                   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | one-way data transmissions between a mobile or fixed device that transmits its location and other information to a central monitoring station, which includes the SPOT family of consumer market products (“SPOT”) and commercial Simplex products.



Our
services are available only with equipment designed to work on our network. The equipment we offer to our customers consists principally
of:

| | • | Duplex two-way transmission products;            
| | - | -------------------------------------------------
| | • | Consumer retail SPOT products; and               
| | • | Commercial Simplex one-way transmission products.



Performance
Indicators



Our
management reviews and analyzes several key performance indicators in order to manage our business and assess the quality of and
potential variability of our earnings and cash flows. These key performance indicators include:



| | • | total revenue, which is an indicator of our overall business growth;                                                                                                                                                                                                    
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | subscriber growth and churn rate, which are both indicators of the satisfaction of our customers;                                                                                                                                                                       
| | • | average monthly revenue per unit, or ARPU, which is an indicator of our pricing and ability to obtain effectively long-term, high-value customers. We calculate ARPU separately for each of our Duplex, Simplex, SPOT, and independent gateway operator (“IGO”) revenue;
| | • | operating income and adjusted EBITDA, which is an indication of our financial performance; and                                                                                                                                                                          
| | • | capital expenditures, which are an indicator of future revenue growth potential and cash requirements.                                                                                                                                                                  



Results
of Operations for the three and six months ended June 30, 2012 and 2011



Revenue



Three
Months:



Total
revenue increased by $1.0 million, or approximately 5%, to $20.0 million for the three months ended June 30, 2012 from total revenue
of $19.0 million for the three months ended June 30, 2011. We experienced an increase in subscriber equipment sales driven primarily
by sales of Simplex equipment, while our SPOT subscriber equipment sales decreased compared to the three months ended June 30,
2011 due to product shortages in 2012 resulting from a change in manufacturers. We also experienced increased service revenue from
out SPOT and Simplex lines of business as a result of growth in these subscriber bases. These increases were offset by decreases
in service revenue in our Duplex business, which continues to be affected by our two-way communication issues resulting in a decrease
in the number of subscribers using our network.



Six
Months:



Total
revenue decreased by $0.5 million, or approximately 1%, to $36.7 million for the six months ended June 30, 2012 from $37.2 million
for the six months ended June 30, 2011. Upon termination of our Open Range contract in the first quarter of 2011, we recognized
a nonrecurring increase to revenue of approximately $2.0 million, which represented the December 31, 2010 balance of deferred revenue
related to the contract.  Excluding the revenue recorded from Open Range, revenue increased $1.4 million, which is due
primarily to higher sales of Simplex equipment and increased service revenue as a result of growth in our SPOT and Simplex subscriber
base. These increases were offset by decreases in service revenue in our Duplex business, which continues to be affected by our
two-way communication issues, resulting in a decrease in the number of subscribers using our network.



The
following table sets forth amounts and percentages of our revenue by type of service for the three and six months ended June 30,
2012 and 2011 (in thousands):



|                       |  | Three months ended
    June 30, 2012 |        |  | Three months ended
    June 30, 2011 |  |    | Six months ended
    June 30, 2012 |  |   | Six months ended
    June 30, 2011 | 
|---------------------- |  | ------------------------------------ | ------ |  | ------------------------------------ |  | -- | ---------------------------------- |  | - | ---------------------------------- | 
|                       |  | Revenue                              |        |  | % of Total
    Revenue               |  |    | Revenue                            |  |   | % of Total
    Revenue             | 
|                       |  |                                      |        |  |                                      |  |    |                                    |  |   |                                    | 
|Service Revenues:      |  |                                      |        |  |                                      |  |    |                                    |  |   |                                    | 
|Duplex                 |  | $                                    | 4,490  |  |                                      |  | 22 | %                                  |  | $ | 5,351                              | 
|SPOT                   |  |                                      | 6,496  |  |                                      |  | 33 |                                    |  |   | 4,902                              | 
|Simplex                |  |                                      | 1,354  |  |                                      |  | 7  |                                    |  |   | 1,203                              | 
|IGO                    |  |                                      | 195    |  |                                      |  | 1  |                                    |  |   | 503                                | 
|Other                  |  |                                      | 1,615  |  |                                      |  | 8  |                                    |  |   | 1,418                              | 
|Total Service Revenues |  | $                                    | 14,150 |  |                                      |  | 71 | %                                  |  | $ | 13,377                             | 



The
following table sets forth amounts and percentages of our revenue for equipment sales for the three and six months ended June 30,
2012 and 2011 (in thousands):



|                         |  | Three months ended
    June 30, 2012 |       |  | Three months ended
    June 30, 2011 |  |    | Six months ended
    June 30, 2012 |  |   | Six months ended
    June 30, 2011 |  
|------------------------ |  | ------------------------------------ | ----- |  | ------------------------------------ |  | -- | ---------------------------------- |  | - | ---------------------------------- | -
|                         |  | Revenue                              |       |  | % of Total
    Revenue               |  |    | Revenue                            |  |   | % of Total
    Revenue             |  
|                         |  |                                      |       |  |                                      |  |    |                                    |  |   |                                    |  
|Equipment  Revenues:     |  |                                      |       |  |                                      |  |    |                                    |  |   |                                    |  
|Duplex                   |  | $                                    | 498   |  |                                      |  | 3  | %                                  |  | $ | 511                                |  
|SPOT                     |  |                                      | 1,640 |  |                                      |  | 8  |                                    |  |   | 2,491                              |  
|Simplex                  |  |                                      | 2,992 |  |                                      |  | 15 |                                    |  |   | 2,479                              |  
|IGO                      |  |                                      | 285   |  |                                      |  | 1  |                                    |  |   | 160                                |  
|Other                    |  |                                      | 416   |  |                                      |  | 2  |                                    |  |   | (19                                | )
|Total Equipment Revenues |  | $                                    | 5,831 |  |                                      |  | 29 | %                                  |  | $ | 5,622                              |  



30







The
following table sets forth our average number of subscribers, ARPU, and ending number of subscribers by type of revenue for the
three and six months ended June 30, 2012 and 2011. The following numbers are subject to immaterial rounding inherent to calculating
averages.



|                                                                           |  | Three months ended |         |  | Six months ended |  
|-------------------------------------------------------------------------- |  | ------------------ | ------- |  | ---------------- | -
|                                                                           |  | June 30,           |         |  | June 30,         |  
|                                                                           |  | 2012               |         |  | 2011             |  
|Average number of subscribers for the period (three and six months ended): |  |                    |         |  |                  |  
|Duplex                                                                     |  |                    | 89,433  |  |                  |  
|SPOT                                                                       |  |                    | 218,522 |  |                  |  
|Simplex                                                                    |  |                    | 156,519 |  |                  |  
|IGO                                                                        |  |                    | 42,325  |  |                  |  
|                                                                           |  |                    |         |  |                  |  
|ARPU (monthly):                                                            |  |                    |         |  |                  |  
|Duplex                                                                     |  | $                  | 16.74   |  |                  | $
|SPOT                                                                       |  |                    | 9.91    |  |                  |  
|Simplex                                                                    |  |                    | 2.88    |  |                  |  
|IGO                                                                        |  |                    | 1.54    |  |                  |  
|                                                                           |  |                    |         |  |                  |  
|Number of subscribers (end of period):                                     |  |                    |         |  |                  |  
|Duplex                                                                     |  |                    | 88,500  |  |                  |  
|SPOT                                                                       |  |                    | 226,726 |  |                  |  
|Simplex                                                                    |  |                    | 165,445 |  |                  |  
|IGO                                                                        |  |                    | 42,043  |  |                  |  
|Other                                                                      |  |                    | 7,436   |  |                  |  
|Total                                                                      |  |                    | 530,150 |  |                  |  



Other
service revenue includes revenue generated from engineering services and our former Open Range partnership, which is not subscriber
driven. Accordingly, we do not present average subscribers or ARPU for other revenue in the above charts.



Service
Revenue



Three
Months:



Duplex
revenue decreased approximately 16% for the three months ended June 30, 2012 compared to the second quarter of 2011. Our two-way
communication issues continue to affect our Duplex revenue. Despite our efforts to maintain our Duplex subscriber base by lowering
prices for our Duplex products, our subscriber base decreased by approximately 6% from June 30, 2011 to June 30, 2012. As we launch
and place into service our remaining second-generation satellites, our two-way communication reliability will improve, and we expect
Duplex service revenue to increase.



SPOT
revenue increased approximately 33% for the three months ended June 30, 2012 compared to the second quarter of 2011.  We
generated increased service revenue from our SPOT satellite GPS messenger and added additional service revenue from the release
of other SPOT consumer retail products. Our SPOT subscriber base increased by approximately 27% from June 30, 2011 to June 30,
2012.  Our subscriber count includes suspended subscribers, which are subscribers who have activated their devices, have
access, but no service revenue is being recognized for their fees while we are in the process of collecting payment.  These
suspended accounts represented 26% and 19% of our total SPOT subscribers as of June 30, 2012 and 2011, respectively.



Simplex
revenue increased approximately 13% for the three months ended June 30, 2012 compared to the second quarter of 2011.  We
generated increased service revenue due to a 33% increase in our Simplex subscribers from June 30, 2011 to June 30, 2012.



Other
revenue increased approximately 14% for the three months ended June 30, 2012 compared to the second quarter of 2011 due to engineering
services revenue recognized in 2012 that did not occur in 2011.



Six
Months:



Duplex
revenue decreased approximately 17% for the six months ended June 30, 2012 compared to the first six months of 2011. Our two-way
communication issues continue to affect our Duplex revenue. Despite our efforts to maintain our Duplex subscriber base by lowering
prices for our Duplex products, our subscriber base decreased by approximately 6% from June 30, 2011 to June 30, 2012. As we launch
and place into service our remaining second-generation satellites, our two-way communication reliability will improve, and we expect
Duplex service revenue to increase.



SPOT
revenue increased approximately 30% for the six months ended June 30, 2012 compared to the first six months of 2011.  We
generated increased service revenue from our SPOT satellite GPS messenger and added additional service revenue from the release
of other SPOT consumer retail products, which led to a 27% increase in our SPOT subscriber base from June 30, 2011 to June 30,
2012.



Simplex
revenue increased approximately 10% for the six months ended June 30, 2012 compared to the first six months of 2011.  We
generated increased service revenue due to a 33% increase in our Simplex subscribers from June 30, 2011 to June 30, 2012.



Other
revenue decreased approximately 32% for the six months ended June 30, 2012 compared to the first six months of 2011.  The
decrease was related to revenue recognized as a result of the termination of our Open Range contract in the first quarter of 2011.
Excluding the recognition of Open Range revenue of approximately $2.0 million, other revenue increased approximately 16% which
was due primarily to engineering services revenue recognized in 2012 that did not occur in 2011.



31







Equipment
Revenue



Three
Months:



Duplex
equipment sales remained consistent at $0.5 million for the three months ended June 30, 2012 from the second quarter of 2011.  Although
we initiated competitive pricing programs after the first launch of our second-generation satellites in 2010, our two-way communication
issues continue to affect our Duplex revenue. As we launch and place into service our remaining second-generation satellites, our
two-way communication reliability will improve, and we expect Duplex equipment revenue to increase.



Our
inventory and advances for inventory balances were $41.2 million and $9.2 million, respectively, as of June 30, 2012, compared
with total subscriber equipment sales of $5.8 million for the three months ended June 30, 2012. A significant portion of our inventory
consists of Duplex products which are able to operate with both our first-generation constellation and our second-generation constellation.
Our advances for inventory relate to our commitment with Qualcomm to purchase additional Duplex products. We have not entered into
any other purchase commitments to produce or purchase the next generation of Duplex products.



We
sold a limited number of Duplex products in 2011 and the first half of 2012, compared to the high level of inventory on hand. However,
we have several initiatives underway to increase our future sales of subscriber equipment for Duplex products, which depend upon
our successfully completing the deployment of our second-generation constellation. With the improvement of both coverage and quality
for our Duplex services resulting from the deployment of our second-generation constellation, we expect an increase in the sale
of Duplex products which would result in a reduction in the inventory currently on hand.



SPOT
equipment sales decreased approximately 34% for the three months ended June 30, 2012 from the second quarter of 2011. The decrease
is related primarily to higher sales during 2011 related to the release of certain SPOT consumer retail products in early 2011.



Simplex
equipment sales increased approximately 21% for the three months ended June 30, 2012 from the second quarter of 2011. The increase
is due to increased demand for our M2M products.



Six
Months:



Duplex
equipment sales decreased by approximately 7%, for six months ended June 30, 2012 from the first six months of 2011. Although we
initiated competitive pricing programs after the first launch of our second-generation satellites in 2010, our two-way communication
issues continue to affect our Duplex revenue. As we launch and place into service our remaining second-generation satellites, our
two-way communication reliability will improve, and we expect Duplex equipment revenue to increase.



Our
inventory and advances for inventory balances were $41.2 million and $9.2 million, respectively, as of June 30, 2012, compared
with total subscriber equipment sales of $9.9 million for the six months ended June 30, 2012. A significant portion of our inventory
consists of Duplex products which are able to operate with both our first-generation constellation and our second-generation constellation.
Our advances for inventory relate to our commitment with Qualcomm to purchase additional Duplex products. We have not entered into
any other purchase commitments to produce or purchase the next generation of Duplex products.



We
sold a limited number of Duplex products in 2011 and the first half of 2012, compared to the high level of inventory on hand. However,
we have several initiatives underway to increase our future sales of subscriber equipment for Duplex products, which depend upon
our successfully completing the deployment of our second-generation constellation. With the improvement of both coverage and quality
for our Duplex services resulting from the deployment of our second-generation constellation, we expect an increase in the sale
of Duplex products which would result in a reduction in the inventory currently on hand.



SPOT
equipment sales decreased approximately 37% for the six months ended June 30, 2012 from the first six months of 2011. The decrease
is related primarily to higher sales of certain SPOT consumer retail products in early 2011.



Simplex
equipment sales increased approximately 37% for the six months ended June 30, 2012 from the first six months of 2011. The increase
is due to increased demand for our M2M products.



Operating
Expenses:



Three
and Six Months:



Total
operating expenses increased $27.6 million, or approximately 77%, to $63.4 million for the three months ended June 30, 2012 from
$35.8 million for the second quarter of 2011 and increased $28.2 million, or approximately 42%, to $95.0 million for the six months
ended June 30, 2012 from $66.8 million for the first six months of 2011. This increase is due to the $22.0 million agreed
termination charge related to the settlement with Thales regarding the construction of Phase 3 satellites, as well as the recognition
of a loss of approximately $7.1 million relating to an adjustment made to the carrying value of our first-generation constellation.
Excluding these one-time items, total operating expenses decreased $1.6 million, or 5%, for the three months ended June 30, 2012
from the second quarter of 2011 and $1.0 million, or 1%, for the six months ended June 20, 2012 from the first six months of 2011
due to decreases in various components of operating expenses, partially offset by higher depreciation expense as a result of additional
second-generation satellites coming into service throughout 2011 and the first half of 2012.





Cost
of Services



Three
and Six Months:



Cost
of services decreased $1.5 million, or approximately 20%, to $5.8 million for the three months ended June 30, 2012 from $7.3 million
during the second quarter of 2011 and decreased $3.2 million, or approximately 22%, to $11.2 million for the six months ended June
30, 2012 from $14.4 million during the first six months of 2011. Cost of services is comprised primarily of network operating costs,
which are generally fixed in nature. The decreases were due primarily to implementation of our plan to lower costs by reducing
headcount and monitoring operating expenses.





32











Cost
of Subscriber Equipment Sales



Three
and Six Months:



Cost
of subscriber equipment sales remained consistent at $3.7 million for the three months ended June 30, 2012 from the second quarter
of 2011 and remained consistent at $6.4 million from the first six months of 2011 to for the six months ended June 30, 2012. We
experienced decreases due to lower manufacturing costs for our SPOT and Simplex products. These decreases were offset by increases
in equipment revenue of 4% and 3% for the three and six months ended June 30, 2012 as compared to the same periods in 2011, respectively.



Marketing,
General and Administrative



Three
and Six Months:



Marketing,
general and administrative expenses decreased $2.8 million, or approximately 24%, to $8.8 million for the three months ended June
30, 2012 from $11.6 million for the second quarter of 2011 and decreased $4.4 million, or approximately 21%, to $17.3 million for
the six months ended June 30, 2012 from $21.7 million for the first six months of 2011.  This decrease was due primarily
to improvements in our cost structure from reducing headcount and monitoring operating costs.



Contract
Termination Charge



Three
and Six Months:



During
the second quarter of 2012, we recorded a contract termination charge of $22.0 million. This charge resulted from the agreement
between us and Thales regarding the termination charge related to the construction of Phase 3 second-generation satellites. See
Note 9 for further discussion.



Reduction
in the Value of Long-Lived Assets



Three
and Six Months:



During
the second quarter of 2012, we recorded a loss of approximately $7.1 million. This loss was related to an adjustment made to the
carrying value of our first-generation constellation. See Note 3 for further discussion.



Depreciation,
Amortization and Accretion



Three
and Six Months:



Depreciation,
amortization, and accretion expense increased $3.1 million, or approximately 24%, to $15.9 million for the three months ended June
30, 2012 from $12.8 million for the second quarter of 2011 and increased $7.2 million, or approximately 31%, to $30.6 million for
the six months ended June 30, 2012 from $23.4 million for the first six months of 2011. The increase relates primarily to additional
depreciation expense for the second-generation satellites placed into service throughout 2011 and the first half of 2012.



Other
Income (Expense):



Interest
Income and Expense



Three
and Six Months:



Interest
income and expense, net increased $2.6 million to $3.8 million for the three months ended June 30, 2012 from $1.2 million for the
second quarter of 2011 and increased $4.4 million to $6.8 million for the six months ended June 30, 2012 from $2.4 million for
the first six months of 2011. This increase was due primarily to a reduction in our capitalized interest due to the status of our
construction in progress. As we place satellites into service, our construction in progress balance related to our second-generation
satellites decreases. As a result of this decrease in our construction in progress balance, we recorded approximately $1.9 million
and $2.8 million in interest expense during the first and second quarters of 2012, respectively.



Derivative
Gain (Loss)



Three
and Six Months:



Derivative
gain (loss) fluctuated by $16.6 million to a gain of $20.4 million for the three months ended June 30, 2012 compared to the second
quarter of 2011 and fluctuated by $3.6 million to a gain of $13.9 million for the six months ended June 30, 2012 compared to the
first six months of 2011. The derivative gain was due primarily to decreases in our stock price during the respective periods.



Other



Three
and Six Months:



Other
income (expense) fluctuated by $0.7 million to expense of $0.6 million for the three months ended June 30, 2012 compared to income
of $0.1 million for the second quarter of 2011 and fluctuated by $1.8 million to expense of $0.5 million for the six months ended
June 30, 2012 compared to income of $1.3 million for the first six months of 2011.  These decreases are due primarily
to foreign currency losses during the three and six months ended June 30, 2012.



Liquidity
and Capital Resources



Our
principal liquidity requirements are to meet capital expenditure needs, including procuring and deploying our second-generation
constellation, next-generation ground upgrades, repayment of our current and long-term debt, operating costs, and working capital.
Our principal sources of liquidity are the remaining funds in our contingent equity account, cash on hand, cash flows from
operations, the remaining funds available under our Facility Agreement, and funds from financing not yet arranged.



33







Cash
Flows for the Six Months Ended June 30, 2012 Compared with the Six Months Ended June 30, 2011



The
following table shows our cash flows from operating, investing, and financing activities for the six months ended June 30, 2012
and 2011 (in thousands):



|                                                    |  | Six Months Ended June 30, 2012 |         |   | Six Months Ended June 30, 2011 |  
|--------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------ | -
|Net cash provided by (used in) operating activities |  | $                              | 1,808   |   |                                | $
|Net cash used in investing activities               |  |                                | (34,657 | ) |                                |  
|Net cash provided by financing activities           |  |                                | 27,858  |   |                                |  
|Effect of exchange rate changes on cash             |  |                                | (140    | ) |                                |  
|Net decrease in cash and cash equivalents           |  | $                              | (5,131  | ) |                                | $



Cash
Flows Provided by Operating Activities



Net
cash provided by operating activities during the six months ended June 30, 2012 was $1.8 million compared to net cash used of $5.5
million for the first six months of 2011. Favorable changes in operating assets and liabilities during the six months ended June
30, 2012 resulted in positive cash flows from operations for the first six months of 2012.



Cash
Flows Used in Investing Activities



Cash
used in investing activities was $34.7 million for the six months ended June 30, 2012 compared to $65.2 million for the first six
months of 2011. The decrease in cash used during the six months ended June 30, 2012 when compared to the in the first six months
of 2011 resulted primarily from decreased payments related to the construction of our second-generation constellation as the second-generation
satellites neared completion and the deferral of payments to contactors working on the construction of our next-generation ground
upgrades.



We
will continue to incur capital expenditures to complete the construction and launch of our second-generation satellite constellation
and upgrade our gateways and other ground facilities. We have entered into various agreements to design, construct, and launch
our satellites in the normal course of business. These capital expenditures will support our growth and the resiliency of our operations
and will also support the delivery of new revenue streams.



Cash
Flows Provided by Financing Activities



Net
cash provided by financing activities decreased by $33.6 million to $27.9 million for the six months ended June 30, 2012 from $61.5
million for the first six months of 2011. The decrease was due primarily to lower funding needs for operations and for the construction
of our second-generation satellites as we complete the construction and launch of our second-generation satellite constellation.
The decrease from the first six months of 2011to the first six months of 2012 was also attributable to the issuance of $38.0 million
of our 5% Notes during June 2011. These decreases were partially offset by draws on our contingent equity account during the first
six months of 2012. We funded the current year activities by borrowing under our Facility Agreement and drawing from our contingent
equity account.



Cash
Position and Indebtedness



As
of June 30, 2012, cash and cash equivalents were $4.8 million; cash available under our Facility Agreement was $3.0 million; and
cash in our contingent equity account was $22.8 million; compared to cash and cash equivalents, cash available under our Facility
Agreement, and cash in our contingent equity account at December 31, 2011 of $9.9 million, $8.0 million, and $45.8 million, respectively.



Facility
Agreement



On
June 5, 2009, we entered into a $586.3 million senior secured facility agreement with a syndicate of bank lenders, including
BNP Paribas, Natixis, Société Générale, Caylon, Crédit Industriel et Commercial as arrangers
and BNP Paribas as the security agent and COFACE agent. COFACE, the French export credit agency, has provided a 95% guarantee to
the lending syndicate of our obligations under the Facility Agreement.  At the time of closing, the facility was comprised
of:



| | • | a $563.3 million tranche for future payments to Thales and to reimburse us for amounts we previously paid to Thales for construction of our second-generation satellites. Such reimbursed amounts were used by us (a) to make payments to Arianespace for launch services, Hughes Networks Systems LLC for ground network equipment, software and satellite interface chips and Ericsson, Inc. for ground system upgrades, (b) to provide up to $150 million for our working capital and general corporate purposes and (c) to pay a portion of the insurance premium to COFACE; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a $23 million tranche that was used to make payments to Arianespace for launch services and to pay a portion of the insurance premium to COFACE.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



The
facility is scheduled to mature 84 months after the first repayment date. Scheduled semi-annual principal repayments will
begin the earlier of eight months after the fourth launch of the second-generation constellation or June 30, 2013. The facility
bears interest at a floating LIBOR rate, plus a margin of 2.07% through December 2012, increasing to 2.25% through December 2017
and 2.40% thereafter. Interest payments are due on a semi-annual basis.



The
Facility Agreement, as amended, requires that:



| | • | following December 31, 2014, we maintain a minimum liquidity of $5.0 million;
| | - | -----------------------------------------------------------------------------



| | • | we achieve for each period the following minimum adjusted consolidated EBITDA (as defined in the Facility Agreement):
| | - | ---------------------------------------------------------------------------------------------------------------------



34







|Period          |  |   | Minimum Amount | 
|--------------- |  | - | -------------- | 
|                |  |   |                | 
|7/1/11-6/30/12  |  | $ | (5.0) million  | 
|1/1/12-12/31/12 |  | $ | 7.0 million    | 
|7/1/12-6/30/13  |  | $ | 65.0 million   | 
|1/1/13-12/31/13 |  | $ | 78.0 million   | 



| | • | beginning in 2013, we maintain a minimum debt service coverage ratio of 1.00:1:00, gradually increasing to a ratio of 1.50:1:00 through 2019; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | • | beginning in June 2013, we maintain a maximum net debt to adjusted consolidated EBITDA ratio of 7.25:1:00 on a last 12-months basis, gradually decreasing to 2.50:1:00 through 2019.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our
obligations under the Facility Agreement are guaranteed on a senior secured basis by all of our domestic subsidiaries and are secured
by a first priority lien on substantially all of our assets and those of our domestic subsidiaries (other than FCC licenses), including
patents and trademarks, 100% of the equity of our domestic subsidiaries and 65% of the equity of certain foreign subsidiaries.



We
may not re-borrow amounts repaid. We must repay the loans (a) in full upon a change in control or (b) partially (i) if there are
excess cash flows on certain dates, (ii) upon certain insurance and condemnation events and (iii) upon certain asset dispositions.
In addition to the financial covenants described above, the Facility Agreement places limitations on our ability and the ability
of our subsidiaries to incur debt, create liens, dispose of assets, carry out mergers and acquisitions, make loans, investments,
distributions or other transfers and capital expenditures or enter into certain transactions with affiliates.



Pursuant
to the terms of the Facility Agreement, we were required to fund a total of $46.8 million to the debt service reserve account.
The funds in this account are restricted to making principal and interest payments under certain circumstances. The minimum required
balance, not to exceed $46.8 million, fluctuates over time based on the timing of principal and interest payment dates.



During
the second quarter of 2012, we received two reservation of rights letters from the COFACE Agent identifying potential existing
defaults of certain non-financial provisions of the Facility Agreement that may have occurred as a result of the Thales arbitration
ruling and the subsequent agreements reached with Thales related to the arbitration. The letters indicated that the lenders are
evaluating their position in respect to the potential existing defaults. During this evaluation process, the lenders do not permit
funding of the remaining $3.0 million available under the Facility Agreement. We believe that the events cited by the agent to
the Facility Agreement are not events of default as defined by the Facility Agreement.  However, to eliminate any uncertainty
regarding these events, we are working with the lenders on an amendment and waiver with respect to each of the potential events
cited which is expected to be completed promptly.  As of the date these financial statements were issued, the COFACE Agent
had not declared an event of default under the Facility Agreement, and accordingly the borrowings have been shown as non-current
on the June 30, 2012 balance sheet.



On August 1, 2012, we had not achieved
in-orbit acceptance of the 18 previously launched second generation satellites as required under the Facility Agreement. 
On August 9, 2012, we entered into Waiver Letter No. 10, which extends the provision to require in-orbit acceptance of the 18
satellites to December 31, 2012.



Due to the launch delays, we expect that
we may not be in compliance with certain financial covenants specified in the Facility Agreement during the next 12 months. As
a result, we expect to seek amended covenant levels. If we cannot obtain either a waiver or an amendment, the failure to comply
would represent an event of default. An event of default under the Facility Agreement would permit acceleration of indebtedness
under the Facility. That acceleration would permit acceleration of our obligations under other agreements that contain cross-acceleration
provisions.



See
Note 4 for further discussion of the Facility Agreement and other borrowings.



Capital
Expenditures



We
have entered into various contractual agreements related to the procurement and deployment of our second-generation constellation
and next-generation ground upgrades, as summarized below. We are currently in negotiations with certain contractors to defer some
scheduled payments to 2013 and beyond. The discussion below is based on our current contractual obligations to these contractors.



Second-Generation
Satellites



In
June 2009, we entered into an amended and restated contract with Thales for the construction of our second-generation low-earth
orbit satellites and related services, to incorporate prior amendments and acceleration requests, and to make other non-material
changes to the contract entered into in November 2006. We successfully completed three launches of six second-generation satellites
each in October 2010, July 2011, and December 2011. We plan to launch the remaining six satellites in 2012; however, this plan
is subject to numerous circumstances that are outside of our control.



In
March 2010, we entered into an amended and restated contract with Arianespace to incorporate prior amendments to the contract entered
into in September 2007 for the launch of our second-generation satellites and certain pre and post-launch services under which
Arianespace agreed to make four launches of six satellites each and one optional launch of six satellites each. Notwithstanding
the one optional launch, we may contract separately with Arianespace or another provider of launch services after Arianespace’s
firm launch commitments are fulfilled.



35







The
amount of capital expenditures incurred as of June 30, 2012 and estimated future capital expenditures (excluding capitalized interest)
related to the construction and deployment of the first 24 satellites of our second-generation constellation and the launch services
contract is presented in the table below (in thousands):



|                                                 |  | Payments through |         |  | Estimated Future Payments |  
|------------------------------------------------ |  | ---------------- | ------- |  | ------------------------- | -
|Capital Expenditures                             |  | June 30,
2012    |         |  | Remaining 2012            |  
|Thales Second-Generation Satellites              |  | $                | 619,651 |  |                           | $
|Arianespace Launch Services                      |  |                  | 207,375 |  |                           |  
|Launch Insurance                                 |  |                  | 30,693  |  |                           |  
|Other Capital Expenditures and Capitalized Labor |  |                  | 41,001  |  |                           |  
|Total                                            |  | $                | 898,720 |  |                           | $



As
of June 30, 2012, we recorded $12.8 million of these capital expenditures in accounts payable and accrued expenses.



Additional
Second-Generation Satellites



In
May 2012, the arbitration panel determined that Thales has no further obligation to manufacture or deliver satellites under Phase
3 of the 2009 satellite construction contract.



In
June 2012, we and Thales agreed to settle our prior commercial disputes which were the subject of a May 2012 arbitration award.
In addition, we and Thales have agreed to the principal terms relating to our purchase from Thales of six additional second-generation
satellites at a fixed price of approximately €25 million per satellite, payable over an approximately three-year period after
commencement of manufacturing. We and Thales expect to enter into a commercial contract, which will be subject to various conditions,
including the receipt by us of necessary third-party financing. See Note 9 for further discussion. Expected future payments for
the six additional second-generation satellites are not included in the table above. We are seeking additional financing to fund
the purchase of these satellites.



Next-Generation
Gateways and Other Ground Facilities



In
May 2008, we entered into an agreement with Hughes to design, supply and implement (a) the Radio Access Network (“RAN”)
ground network equipment and software upgrades for installation at a number of our satellite gateway ground stations and (b) satellite
interface chips to be a part of the User Terminal Subsystem (“UTS”) in various next-generation Globalstar devices.
In August 2009, we amended this agreement extending the performance schedule by 15 months and revising certain payment milestones.
In March 2010, we amended the contract adding new features, including our option to purchase additional RANs and other software
and hardware improvements at pre-negotiated prices.



In
October 2008, we signed an agreement with Ericsson, a leading global provider of technology and services to telecom operators.
According to the contract, including subsequent additions, Ericsson will work with us to develop, implement and maintain a ground
interface, or core network, system that will be installed at our satellite gateway ground stations.



The
amount of actual and contractual capital expenditures (excluding capitalized interest) related to the construction of the ground
component and related costs are presented in the table below (in thousands):



|                                                                                       |  | Payments through |        |  | Estimated Future Payments |  
|-------------------------------------------------------------------------------------- |  | ---------------- | ------ |  | ------------------------- | -
|Capital Expenditures                                                                   |  | June 30,
2012    |        |  | Remaining 2012            |  
|Hughes second-generation ground component (including research and development expense) |  | $                | 58,777 |  |                           | $
|Ericsson ground network                                                                |  |                  | 2,584  |  |                           |  
|Total                                                                                  |  | $                | 61,361 |  |                           | $



In
June 2012, we entered into an agreement with Hughes to extend to September 28, 2012 our deadline to make payments previously due
under the contract, provided we make a payment of $0.5 million in July 2012 and $0.5 million in August 2012. We made the July 2012
payment. The deferred payments continue to incur interest at the rate of 10% per annum. As of June 30, 2012 we had incurred and
capitalized $73.2 million of costs related to this contract, of which we recorded $19.9 million in accounts payable. If we terminate
the contract for convenience, we must make a final payment of $20.0 million in either cash or our common stock at our election.  If
we elect to pay in our common stock, Hughes will have the option either to accept the common stock or instruct us to complete a
block sale of the stock and deliver the proceeds to Hughes. If Hughes chooses to accept common stock, the number of shares it will
receive will be calculated based on the final payment amount plus 5%.



In
July 2012, we entered into an agreement with Ericsson which deferred to February 1, 2013 approximately $4.2 million in milestone
payments due under the contract, provided we make a payment of $0.9 million in July 2012 and $0.7 million in September 2012. We
made the July 2012 payment. The remaining milestones previously scheduled under the contract in 2012 were deferred to 2013 and
beyond. The deferred payments will continue to incur interest at a rate of 6.5% per annum. As of June 30, 2012 we had incurred
and capitalized $6.8 million of costs related to this contract, of which we recorded $4.2 million in accounts payable and accrued
expenses. If we terminate the contract for convenience, we must make a final payment of $10.0 million in either cash or our common
stock at our election.  If we elect to make payment in common stock, Ericsson will have the option either to accept the
common stock or instruct us to complete a block sale of the common stock and deliver the proceeds to Ericsson. If Ericsson chooses
to accept common stock, the number of shares it will receive will be calculated based on the final payment amount plus 5%.



As
of June 30, 2012, we recorded $24.1 million of these capital expenditures in accounts payable and accrued expenses. In accordance
with the French Ministry’s authorization to operate our second-generation satellite constellation, we are currently on schedule
to enhance the existing gateway operations in Aussaguel, France to include satellite operations and control functions by March
2013. The above table does not include any costs for this facility or any other capital expenditures not yet contracted for or
capitalized labor.



Liquidity



As
discussed in Note 2 to our condensed consolidated financial statements, we have developed a plan to improve operations; complete
the launch of 24 second-generation satellites and to complete the development, construction, and activation of additional second-generation
satellites and next generation ground upgrades.



36







We
plan to fund our short-term liquidity needs from cash on hand ($4.8 million at June 30, 2012), cash from our Facility ($3.0 million
was available at June 30, 2012), cash available in our contingent equity account ($22.8 million was available at June 30, 2012)
and operating cash flows, if any. However, additional external financing and amendments to our existing debt obligations, including
the Facility and the 5.75% Notes, will be required to satisfy the obligations to pay delay costs to our launch provider for prior
launches, to complete the funding of our six additional second-generation satellites and to pay the contract termination fee to
Thales. If the resolution of these uncertainties materially and negatively impacts cash and liquidity, our ability to execute our
business plans will be adversely affected.



Our
principal long-term liquidity needs include acquiring and launching additional second-generation satellites, making major improvements
to our gateways and other ground facilities, funding our working capital and cash operating needs, including any growth in our
business, and to fund repayment of our indebtedness, both principal and interest, when due. We expect sources of long-term liquidity
to include the exercise of warrants and other additional debt and equity financings which have not yet been arranged. We cannot
assure you that we can obtain sufficient additional financing on acceptable terms, if at all.  We also expect cash flows from
operations to be a source of long-term liquidity once we have fully deployed our second-generation satellite constellation. We
are not in a position to estimate when, or if, these longer-term plans will be completed and the effect this will have on our performance
and liquidity.



Contractual
Obligations and Commitments



There
have been no other significant changes to our contractual obligations and commitments since December 31, 2011 except those discussed
above.



Off-Balance
Sheet Transactions



We
have no material off-balance sheet transactions.



37







Item
3. Quantitative and Qualitative Disclosures about Market Risk



Our
services and products are sold, distributed or available in over 120 countries. Our international sales are made primarily in U.S.
dollars, Canadian dollars, Brazilian Reais and Euros. In some cases, insufficient supplies of U.S. currency may require us to accept
payment in other foreign currencies. We reduce our currency exchange risk from revenues in currencies other than the U.S. dollar
by requiring payment in U.S. dollars whenever possible and purchasing foreign currencies on the spot market when rates are favorable.
We currently do not purchase hedging instruments to hedge foreign currencies. We are obligated to enter into currency hedges with
the original lenders no later than 90 days after any fiscal quarter during which more than 25% of revenues is denominated in a
single currency other than U.S. or Canadian dollars. Otherwise, we cannot enter into hedging agreements other than interest rate
cap agreements or other hedges described above without the consent of the COFACE agent, and with that consent the counterparties
may only be the original lenders.



We
have entered into two separate contracts with Thales to construct low earth orbit satellites for our second-generation satellite
constellation and to provide launch-related and operations support services, and to construct the Satellite Operations Control
Centers, Telemetry Command Units and In-Orbit Test Equipment for our second-generation satellite constellation. A substantial majority
of the payments under the Thales Alenia Space agreements are denominated in Euros.



Our
interest rate risk arises from our variable rate debt under our Facility Agreement, under which loans bear interest at a floating
rate based on the LIBOR. In order to minimize the interest rate risk, we completed an arrangement with the lenders under the Facility
Agreement to limit the interest to which we are exposed. The interest rate cap provides limits on the 6-month Libor rate (Base
Rate) used to calculate the coupon interest on outstanding amounts on the Facility Agreement of 4.00% from the date of issuance
through December 2012. Thereafter, the Base Rate is capped at 5.50% should the Base Rate not exceed 6.5%. Should the Base Rate
exceed 6.5%, our base rate will be 1% less than the then 6-month Libor rate. The applicable margin from the Base Rate ranges from
2.07% to 2.4% through the termination date of the facility. Assuming that we borrowed the entire $586.3 million under the Facility
Agreement, a 1.0% change in interest rates would result in a change to interest expense of approximately $5.9 million annually.



Item
4. Controls and Procedures



| | (a) | Evaluation of disclosure controls and procedures.
| | --- | -------------------------------------------------



Our
management, with the participation of our Principal Executive and Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 as of June 30, 2012, the end of the
period covered by this Report. The evaluation included certain internal control areas in which we have made and are continuing
to make changes to improve and enhance controls. This evaluation was based on the guidelines established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In designing and evaluating
the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives.



Based
on this evaluation, our Principal Executive and Financial Officer concluded that as of June 30, 2012 our disclosure controls and
procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities
and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including
our Principal Executive and Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



We
believe that the condensed consolidated financial statements included in this Report fairly present, in all material respects,
our condensed consolidated financial position and results of operations as of and for the three and six months ended June 30, 2012.



| | (b) | Changes in internal control over financial reporting.
| | --- | -----------------------------------------------------



As
of June 30, 2012, our management, with the participation of our Principal Executive and Financial Officer, evaluated our internal
control over financial reporting. Based on that evaluation, our Principal Executive and Financial Officer concluded that no changes
in our internal control over financial reporting occurred during the quarter ended June 30, 2012 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.



38







PART II: OTHER INFORMATION



Item
1A. Risk Factors



You
should carefully consider the risks described in this Report and all of the other reports that we file from time to time with the
Securities and Exchange Commission ("SEC"), in evaluating and understanding us and our business. Additional risks not
presently known or that we currently deem immaterial may also impact our business operations and the risks identified in this Report
may adversely affect our business in ways we do not currently anticipate. Our financial condition or results of operations also
could be materially adversely affected by any of these risks. There have been no material changes to the risk factors disclosed
in Part I. Item 1A."Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with
the SEC on March 13, 2012.



Item
6. Exhibits



|Exhibit
        Number |  | Description                                                                                         
|---------------------- |  | ----------------------------------------------------------------------------------------------------
|10.1†                  |  | Letter Agreement by and between Globalstar, Inc. and Hughes Network Systems, LLC dated June 26, 2012
|                       |  |                                                                                                     
|10.2†                  |  | Letter Agreement by and between Globalstar, Inc. and Ericsson Inc. dated as of July 23, 2012        
|                       |  |                                                                                                     
|31.1                   |  | Section 302 Certification                                                                           
|                       |  |                                                                                                     
|32.1                   |  | Section 906 Certification                                                                           



|† | Portions of the exhibits have been omitted pursuant to a request for confidential treatment filed with the Commission. The omitted portions have been filed with the Commission.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39







SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|                     |  | GLOBALSTAR, INC.                                                   
|-------------------- |  | -------------------------------------------------------------------
|                     |  |                                                                    
|                     |  | By:                                                                
|Date: August 9, 2012 |  | /s/ James Monroe III                                               
|                     |  |                                                                    
|                     |  | James Monroe III                                                   
|                     |  | Chief Executive Officer (Principal Executive and Financial Officer)



40