UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549




FORM10-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 September30,
2010





OR





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





For the transition period
fromto





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,
Louisiana70433


(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. YesoNox





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





Indicate by check mark
whether the registrant (1)has filed all reports
required to be filed by Section13 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.YesxNoo





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 Rule405 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).YesoNoo





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 Rule12b-2 of the Exchange
Act.





Large
      accelerated filer o
              
              Accelerated
      filer xNon-accelerated
      filer o
              
              Smaller
      reporting
                company  x(Do
      not check if a smaller reporting company)





Indicate by check mark
whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).YesoNox





As of October 29, 2010,289,998,586shares of voting common
stock and19,275,750shares of nonvoting common
stock were outstanding. Unless the context otherwise requires, references to
common stock in this Report mean Registrant’s voting common
stock.










TABLE
OF CONTENTS





PagePART
      I -  Financial Information
                      
                      3Item
      1.
                      Financial
      Statements
                      
                      3Consolidated
      Statements of Operations for the three and nine months ended September 30,
      2010 and 2009 (unaudited)
                      
                      3Consolidated
      Balance Sheets as of September 30, 2010 (unaudited) and December 31,
      2009
                      
                      4Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2010 and
      2009 (unaudited)
                      
                      5Notes
      to Unaudited Interim Consolidated Financial Statements
                      
                      6Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      27Item
      3.
                      Quantitative
      and Qualitative Disclosures about Market Risk
                      
                      38Item
      4.
                      Controls
      and Procedures
                      
                      39PART
      II -  Other Information
                      
                      39Item
      1.
                      Legal
      Proceedings
                      
                      39Item
      1A.
                      Risk
      Factors
                      
                      39Item
      5.
                      Other
      Information
                      
                      40Item
      6.
                      Exhibits
                      
                      40Signatures
                      
                      41


2
  PARTI. FINANCIAL
INFORMATION





Item 1. Financial
Statements





GLOBALSTAR,
INC.


CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per
share data)


(Unaudited)





Three
      Months Ended
                                        
                                        
                                        Nine
      Months EndedSeptember
      30,
                                        
                                        
                                        September
      30,
                                        
                                        
                                        September
      30,
                                        
                                        
                                        September
      30,2010
                                        
                                        
                                        2009
                                        
                                        
                                        2010
                                        
                                        
                                        2009As
      Adjusted –
                                        
                                        
                                        
                                        
                                        
                                        As
      Adjusted –Note
      1
                                        
                                        
                                        
                                        
                                        
                                        Note
      1Revenue:Service
      revenue
                                        
                                        $
                                        13,389
                                        
                                        
                                        $
                                        13,260
                                        
                                        
                                        $
                                        38,751
                                        
                                        
                                        $
                                        36,953Subscriber
      equipment sales
                                        
                                        
                                        4,834
                                        
                                        
                                        
                                        4,261
                                        
                                        
                                        
                                        12,665
                                        
                                        
                                        
                                        11,447Total
      revenue
                                        
                                        
                                        18,223
                                        
                                        
                                        
                                        17,521
                                        
                                        
                                        
                                        51,416
                                        
                                        
                                        
                                        48,400Operating
      expenses:Cost
      of services (exclusive of depreciation and amortization shown separately
      below)
                                        
                                        
                                        7,995
                                        
                                        
                                        
                                        9,403
                                        
                                        
                                        
                                        22,587
                                        
                                        
                                        
                                        27,772Cost
      of subscriber equipment sales:Cost
      of subscriber equipment sales
                                        
                                        
                                        3,329
                                        
                                        
                                        
                                        1,987
                                        
                                        
                                        
                                        9,317
                                        
                                        
                                        
                                        7,814Cost
      of subscriber equipment sales — impairment of assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7
                                        
                                        
                                        
                                        61
                                        
                                        
                                        
                                        655Total
      cost of subscriber equipment sales
                                        
                                        
                                        3,329
                                        
                                        
                                        
                                        1,994
                                        
                                        
                                        
                                        9,378
                                        
                                        
                                        
                                        8,469Marketing,
      general, and administrative
                                        
                                        
                                        12,911
                                        
                                        
                                        
                                        12,328
                                        
                                        
                                        
                                        31,245
                                        
                                        
                                        
                                        37,713Depreciation,
      amortization, and accretion
                                        
                                        
                                        7,301
                                        
                                        
                                        
                                        5,473
                                        
                                        
                                        
                                        19,164
                                        
                                        
                                        
                                        16,365Total
      operating expenses
                                        
                                        
                                        31,536
                                        
                                        
                                        
                                        29,198
                                        
                                        
                                        
                                        82,374
                                        
                                        
                                        
                                        90,319Operating
      loss
                                        
                                        
                                        (13,313
                                        )
                                        
                                        
                                        (11,677
                                        )
                                        
                                        
                                        (30,958
                                        )
                                        
                                        
                                        (41,919
                                        )Other
      income (expense):Interest
      income
                                        
                                        
                                        63
                                        
                                        
                                        
                                        181
                                        
                                        
                                        
                                        402
                                        
                                        
                                        
                                        365Interest
      expense
                                        
                                        
                                        (1,202
                                        )
                                        
                                        
                                        (1,763
                                        )
                                        
                                        
                                        (3,794
                                        )
                                        
                                        
                                        (5,144
                                        )Derivative
      gain (loss)
                                        
                                        
                                        (9,150
                                        )
                                        
                                        
                                        5,993
                                        
                                        
                                        
                                        (42,185
                                        )
                                        
                                        
                                        5,196Other
                                        
                                        
                                        (883
                                        )
                                        
                                        
                                        1,839
                                        
                                        
                                        
                                        (2,742
                                        )
                                        
                                        
                                        393Total
      other income (expense)
                                        
                                        
                                        (11,172
                                        )
                                        
                                        
                                        6,250
                                        
                                        
                                        
                                        (48,319
                                        )
                                        
                                        
                                        810Loss
      before income taxes
                                        
                                        
                                        (24,485
                                        )
                                        
                                        
                                        (5,427
                                        )
                                        
                                        
                                        (79,277
                                        )
                                        
                                        
                                        (41,109
                                        )Income
      tax expense (benefit)
                                        
                                        
                                        8
                                        
                                        
                                        
                                        92
                                        
                                        
                                        
                                        107
                                        
                                        
                                        
                                        (70
                                        )Net
      loss
                                        
                                        $
                                        (24,493
                                        )
                                        
                                        $
                                        (5,519
                                        )
                                        
                                        $
                                        (79,384
                                        )
                                        
                                        $
                                        (41,039
                                        )Loss
      per common share:Basic
                                        
                                        $
                                        (0.09
                                        )
                                        
                                        $
                                        (0.04
                                        )
                                        
                                        $
                                        (0.28
                                        )
                                        
                                        $
                                        (0.35
                                        )Diluted
                                        
                                        
                                        (0.09
                                        )
                                        
                                        
                                        (0.04
                                        )
                                        
                                        
                                        (0.28
                                        )
                                        
                                        
                                        (0.35
                                        )Weighted-average
      shares outstanding:Basic
                                        
                                        
                                        287,502
                                        
                                        
                                        
                                        127,527
                                        
                                        
                                        
                                        281,701
                                        
                                        
                                        
                                        118,531Diluted
                                        
                                        
                                        287,502
                                        
                                        
                                        
                                        127,527
                                        
                                        
                                        
                                        281,701
                                        
                                        
                                        
                                        118,531





See accompanying notes to
unaudited interim consolidated financial
statements.


3


GLOBALSTAR,
INC.


CONSOLIDATED BALANCE
SHEETS


(In thousands, except par
value and share data)


(Unaudited)


September
      30,
                                          2010
                                        
                                        
                                        December
      31,
                                          2009As
      Adjusted –
                                          Note
      1ASSETSCurrent
      assets:Cash
      and cash equivalents
                                        
                                        $
                                        57,452
                                        
                                        
                                        $
                                        67,881Accounts
      receivable, net of allowance of $5,754 (2010) and $5,735
      (2009)
                                        
                                        
                                        12,873
                                        
                                        
                                        
                                        9,392Inventory
                                        
                                        
                                        63,228
                                        
                                        
                                        
                                        61,719Advances
      for inventory
                                        
                                        
                                        9,551
                                        
                                        
                                        
                                        9,332Prepaid
      expenses and other current assets
                                        
                                        
                                        4,310
                                        
                                        
                                        
                                        5,404Total
      current assets
                                        
                                        
                                        147,414
                                        
                                        
                                        
                                        153,728Property
      and equipment, net
                                        
                                        
                                        1,091,406
                                        
                                        
                                        
                                        964,921Other
      assets:Restricted
      cash
                                        
                                        
                                        38,412
                                        
                                        
                                        
                                        40,473Deferred
      financing costs
                                        
                                        
                                        63,772
                                        
                                        
                                        
                                        69,647Other
      assets, net
                                        
                                        
                                        28,562
                                        
                                        
                                        
                                        37,871Total
      assets
                                        
                                        $
                                        1,369,566
                                        
                                        
                                        $
                                        1,266,640LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                                        
                                        $
                                        20,300
                                        
                                        
                                        $
                                        76,661Accrued
      expenses
                                        
                                        
                                        50,279
                                        
                                        
                                        
                                        30,520Payables
      to affiliates
                                        
                                        
                                        690
                                        
                                        
                                        
                                        541Deferred
      revenue
                                        
                                        
                                        17,747
                                        
                                        
                                        
                                        19,911Current
      portion of long term debt
                                        
                                        
                                        —
                                        
                                        
                                        
                                        2,259Total
      current liabilities
                                        
                                        
                                        89,016
                                        
                                        
                                        
                                        129,892Long
      term debt
                                        
                                        
                                        625,501
                                        
                                        
                                        
                                        463,551Employee
      benefit obligations
                                        
                                        
                                        4,479
                                        
                                        
                                        
                                        4,499Derivative
      liabilities
                                        
                                        
                                        72,352
                                        
                                        
                                        
                                        49,755Other
      non-current liabilities
                                        
                                        
                                        29,479
                                        
                                        
                                        
                                        23,151Total
      non-current liabilities
                                        
                                        
                                        731,811
                                        
                                        
                                        
                                        540,956Stockholders’
      equity:Preferred
      Stock, $0.0001 par value; 100,000,000 shares authorized; none issued and
      outstanding:Series
      A Preferred Convertible Stock, $0.0001 par value: one share authorized;
      none issued and outstanding
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —Voting
      Common Stock, $0.0001 par value; 865,000,000  shares authorized
      at September 30, 2010 and December 31, 2009; 288,059,000 and 274,384,000
      shares issued and outstanding at September 30, 2010 and December 31, 2009,
      respectively
                                        
                                        
                                        29
                                        
                                        
                                        
                                        27Nonvoting
      Common Stock, $0.0001 par value; 135,000,000  shares authorized
      at September 30, 2010 and December 31, 2009; 19,276,000 and 16,750,000
      shares issued and outstanding at September 30, 2010 and December 31, 2009,
      respectively
                                        
                                        
                                        2
                                        
                                        
                                        
                                        2Additional
      paid-in capital
                                        
                                        
                                        732,668
                                        
                                        
                                        
                                        700,814Accumulated
      other comprehensive loss
                                        
                                        
                                        (1,243
                                        )
                                        
                                        
                                        (1,718
                                        )Retained
      deficit
                                        
                                        
                                        (182,717
                                        )
                                        
                                        
                                        (103,333
                                        )Total
      stockholders’ equity
                                        
                                        
                                        548,739
                                        
                                        
                                        
                                        595,792Total
      liabilities and stockholders’ equity
                                        
                                        $
                                        1,369,566
                                        
                                        
                                        $
                                        1,266,640





See accompanying notes to
unaudited interim consolidated financial
statements.


4


GLOBALSTAR,
INC.


CONSOLIDATED STATEMENTS OF
CASH FLOWS


(In
thousands)


(Unaudited)





Nine
      Months EndedSeptember
      30,
                                        2010
                                      
                                      
                                      September
      30,
                                        2009Cash
      flows from operating activities:Net
      loss
                                      
                                      $
                                      (79,384
                                      )
                                      
                                      $
                                      (41,039
                                      )Adjustments
      to reconcile net loss to net cash from operating
    activities:Depreciation,
      amortization, and accretion
                                      
                                      
                                      19,164
                                      
                                      
                                      
                                      16,365Change
      in fair value of derivative assets and liabilities
                                      
                                      
                                      42,185
                                      
                                      
                                      
                                      (5,196
                                      )Stock-based
      compensation expense
                                      
                                      
                                      43
                                      
                                      
                                      
                                      8,042Amortization
      of deferred financing costs
                                      
                                      
                                      2,536
                                      
                                      
                                      
                                      3,583Loss
      and impairment on equity method investee
                                      
                                      
                                      2,627
                                      
                                      
                                      
                                      1,001Other,
      net
                                      
                                      
                                      691
                                      
                                      
                                      
                                      1,755Changes
      in operating assets and liabilities:Accounts
      receivable
                                      
                                      
                                      (2,960)
                                      
                                      
                                      
                                      (598)Inventory
                                      
                                      
                                      (164)
                                      
                                      
                                      
                                      2,406Prepaid
      expenses and other current assets
                                      
                                      
                                      232
                                      
                                      
                                      
                                      493Other
      assets
                                      
                                      
                                      921
                                      
                                      
                                      
                                      (8,389
                                      )Accounts
      payable
                                      
                                      
                                      1,596
                                      
                                      
                                      
                                      (7,116
                                      )Payables
      to affiliates
                                      
                                      
                                      142
                                      
                                      
                                      
                                      (2,485
                                      )Accrued
      expenses and employee benefit obligations
                                      
                                      
                                      2,837
                                      
                                      
                                      
                                      661Other
      non-current liabilities
                                      
                                      
                                      750
                                      
                                      
                                      
                                      1,734Deferred
      revenue
                                      
                                      
                                      1,096
                                      
                                      
                                      
                                      1,315Net
      cash from operating activities
                                      
                                      
                                      (7,688)
                                      
                                      
                                      
                                      (27,468)Cash
      flows from investing activities:Second-generation
      satellites, ground and related launch costs
                                      
                                      
                                      (157,383)
                                      
                                      
                                      
                                      (250,326
                                      )Property
      and equipment additions
                                      
                                      
                                      (5,473)
                                      
                                      
                                      
                                      (1,807
                                      )Investment
      in businesses
                                      
                                      
                                      (1,110)
                                      
                                      
                                      
                                      (145
                                      )Restricted
      cash
                                      
                                      
                                      2,064
                                      
                                      
                                      
                                      12,165Net
      cash from investing activities
                                      
                                      
                                      (161,902)
                                      
                                      
                                      
                                      (240,113
                                      )Cash
      flows from financing activities:Borrowings
      from revolving credit loan
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,750Borrowings
      from $55M Senior Convertible Notes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      55,000Borrowings
      under subordinated loan agreement
                                      
                                      
                                      -
                                      
                                      
                                      
                                      25,000Borrowings
      under short term loan
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,260Proceeds
      from equity contributions
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,000Proceeds
      from exercise of warrants
                                      
                                      
                                      6,249
                                      
                                      
                                      
                                      -Borrowings
      from Facility Agreement
                                      
                                      
                                      153,055
                                      
                                      
                                      
                                      371,219Deferred
      financing cost payments
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (62,748
                                      )Payments
      for the interest rate cap instrument
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (12,425
                                      )Net
      cash from financing activities
                                      
                                      
                                      159,304
                                      
                                      
                                      
                                      387,056Effect
      of exchange rate changes on cash
                                      
                                      
                                      (143)
                                      
                                      
                                      
                                      (133
                                      )Net
      increase in cash and cash equivalents
                                      
                                      
                                      (10,429)
                                      
                                      
                                      
                                      119,342Cash
      and cash equivalents, beginning of period
                                      
                                      
                                      67,881
                                      
                                      
                                      
                                      12,357Cash
      and cash equivalents, end of period
                                      
                                      $
                                      57,452
                                      
                                      
                                      $
                                      131,699Supplemental
      disclosure of cash flow information:Cash
      paid for:Interest
                                      
                                      $
                                      14,761
                                      
                                      
                                      $
                                      11,628Income
      taxes
                                      
                                      $
                                      108
                                      
                                      
                                      $
                                      92Supplemental
      disclosure of non-cash financing and investing activities:Conversion
      of debt to Series A Convertible Preferred Stock
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      180,177Accrued
      launch costs and second-generation satellites costs
                                      
                                      $
                                      30,748
                                      
                                      
                                      $
                                      28,539Capitalization
      of accrued interest for second-generation satellites and launch
      costs
                                      
                                      $
                                      11,501
                                      
                                      
                                      $
                                      8,662Debt
      assumed to fund restricted cash
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      25,778Conversion
      of debt to Common Stock
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      7,500Capitalization
      of the accretion of debt discount and amortization of prepaid finance
      costs
                                      
                                      $
                                      17,099
                                      
                                      
                                      $
                                      5,627Conversion
      of convertible notes into Common Stock
                                      
                                      $
                                      4,239
                                      
                                      
                                      $
                                      5,033





See accompanying notes to
unaudited interim consolidated financial
statements.


5


GLOBALSTAR,
INC.





NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS





1. The Company and Summary of
Significant Accounting Policies





Nature of
Operations





Globalstar, Inc.
(“Globalstar” or the “Company”) was formed as a Delaware limited liability
company in November 2003, and was converted into a Delaware corporation on March
17, 2006.





Globalstar is a leading
provider of mobile voice and data communications services via satellite.
Globalstar’s network, originally owned by Globalstar, L.P. (“Old Globalstar”),
was designed, built and launched in the late 1990s by a technology partnership
led by Loral Space and Communications (“Loral”) and QUALCOMM Incorporated
(“QUALCOMM”). On February 15, 2002, Old Globalstar and three of its subsidiaries
filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code.
In 2004, Thermo Capital Partners L.L.C., together with its affiliates
(“Thermo”), became Globalstar’s principal owner, and Globalstar completed the
acquisition of the business and assets of Old Globalstar. Thermo remains
Globalstar’s largest stockholder. Globalstar’s Chairman controls Thermo and its
affiliates. Two other members of Globalstar’s Board of Directors are also
directors, officers or minority equity owners of various Thermo
entities.





Globalstar offers satellite
services to commercial and recreational users in more than 120 countries around
the world. The Company’s voice and data products include mobile and fixed
satellite telephones, simplex and duplex satellite data modems and flexible
service packages. Many land based and maritime industries benefit from
Globalstar with increased productivity from remote areas beyond cellular and
landline service. Globalstar’s customers include those in the following
industries: oil and gas, government, mining, forestry, commercial fishing,
utilities, military, transportation, heavy construction, emergency preparedness,
and business continuity, as well as individual recreational
users.





Basis of
Presentation





The accompanying unaudited
interim consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America
(“GAAP”) for interim financial information. These unaudited interim consolidated
financial statements include the accounts of Globalstar and its majority owned
or otherwise controlled subsidiaries. All significant intercompany transactions
and balances have been eliminated in the consolidation. In the opinion of
management, such information includes all adjustments, consisting of normal
recurring adjustments, that are necessary for a fair presentation of the
Company’s consolidated financial position, results of operations, and cash flows
for the periods presented. The results of operations for the three and nine
months ended September 30, 2010 are not necessarily indicative of the results
that may be expected for the full year or any future
period.





The preparation of
consolidated financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company evaluates its estimates on an ongoing
basis, including those related to revenue recognition, allowance for doubtful
accounts, inventory valuation, deferred tax assets, property and equipment,
derivatives, contingent consideration, warranty obligations, contingencies and
litigation. Actual results could differ from these
estimates.





These unaudited interim
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the Company’s
Form 10-K for the year ended December 31, 2009, as amended by Form 8-K filed
June 17, 2010. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with GAAP have been condensed or
omitted. Certain reclassifications have been made to prior year consolidated
financial statements to conform to current year
presentation.





Globalstar operates in one
segment, providing voice and data communication services via
satellite.





Issued Accounting
Pronouncements Recently Adopted





Accounting for Own-Share
Lending Arrangements in Contemplation of Convertible Debt
Issuance





Effective January 1, 2010,
the Company adopted the Financial Accounting Standards Board’s (“FASB’s”)
updated guidance on accounting for share loan facilities. This guidance requires
that share-lending arrangements be measured at fair value at the date of
issuance and recognized as debt issuance cost with an offset to paid-in-capital.
The issuance cost is required to be amortized as interest expense over the life
of the financing arrangement. In accordance with Company policy, this amortized
debt issuance cost was capitalized as construction in process related to the
Company’s second generation satellite constellation and, therefore, included in
property and equipment, net on the Company’s Consolidated Balance Sheets. The
standard also requires additional disclosures including a description of the
terms of the arrangement and the reason for entering into the arrangement.Globalstar was
obligated to lend up to 36.1 million shares of its common stock in conjunction
with its 2008 $150.0 million convertible debt issuance that is subject to the
provisions of this updated guidance.


6


The Company has
retrospectively revised the Consolidated Statements of Operations for the three
and nine months ended September 30, 2009 and the Consolidated Balance Sheet as
of December 31, 2009 to reflect the adoption of this updated guidance. In
addition, the Company revisedNotes 2, 4, and5, included
herein,to
reflect the retrospective adoption.





The following table
illustrates the impact of this adoption on the Company’s Consolidated Balance
Sheet as of December 31, 2009 and the Consolidated Statements of Operations for
the three and nine months ended September 30, 2009:





As
      of December 31, 2009As
      Originally
                          Reported
                        
                        
                        Effect
                          of
      Change
                        
                        
                        As
      Revised(In
      thousands)Property
      and equipment, net
                        
                        $
                        961,768
                        
                        
                        $
                        3,153
                        
                        
                        $
                        964,921Deferred
      financing costs
                        
                        $
                        64,156
                        
                        
                        $
                        5,491
                        
                        
                        $
                        69,647Additional
      paid-in capital
                        
                        $
                        684,539
                        
                        
                        $
                        16,275
                        
                        
                        $
                        700,814Retained
      deficit
                        
                        $
                        (95,702
                        )
                        
                        $
                        (7,631
                        )
                        
                        $
                        (103,333
                        )





Three
      Months Ended September 30, 2009As
      Originally
                              Reported
                            
                            Effect
                              of
      Change
                            
                            As
      Revised(In
      thousands)Weighted
      average shares outstanding – basic
                            
                            
                            144,827
                            
                            
                            
                            (17,300
                            )
                            
                            
                            127,527Weighted
      average shares outstanding – diluted
                            
                            
                            144,827
                            
                            
                            
                            (17,300
                            )
                            
                            
                            127,527Basic
      loss per share
                            
                            $
                            (0.04
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.04
                            )Diluted
      loss per share
                            
                            $
                            (0.04
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.04
                            )





Nine
      Months Ended September 30, 2009As
      Originally
                                        Reported
                                      
                                      Effect
                                        of
      Change
                                      
                                      As
      Revised(In
      thousands)Weighted
      average shares outstanding – basic
                                      
                                      
                                      135,831
                                      
                                      
                                      
                                      (17,300
                                      )
                                      
                                      
                                      118,531Weighted
      average shares outstanding – diluted
                                      
                                      
                                      135,831
                                      
                                      
                                      
                                      (17,300
                                      )
                                      
                                      
                                      118,531Basic
      loss per share
                                      
                                      $
                                      (0.30
                                      )
                                      
                                      $
                                      (0.05
                                      )
                                      
                                      $
                                      (0.35
                                      )Diluted
      loss per share
                                      
                                      $
                                      (0.30
                                      )
                                      
                                      $
                                      (0.05
                                      )
                                      
                                      $
                                      (0.35
                                      )


Fair Value Measurements and
Disclosures





Effective January 1, 2010,
the Company adopted the FASB’s updated guidance related to fair value
measurements and disclosures, which requires a reporting entity to disclose
separately the amounts of significant transfers in and out of Level 1 and Level
2 fair value measurements and to describe the reasons for the transfers. In
addition, in the reconciliation for fair value measurements using significant
unobservable inputs, or Level 3, a reporting entity is required to disclose
separately information about purchases, sales, issuances and settlements (that
is, on a gross basis rather than one net number). The updated guidance also
requires that an entity should provide fair value measurement disclosures for
each class of assets and liabilities and disclosures about the valuation
techniques and inputs used to measure fair value for both recurring and
non-recurring fair value measurements for Level 2 and Level 3 fair value
measurements. The guidance is effective for interim or annual financial
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances and settlements in the roll forward activity
in Level 3 fair value measurements, which are effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal
years. Therefore, the Company has not yet adopted the guidance with respect to
the roll forward activity in Level 3 fair value measurements. Adoption of the
updated guidance did not have an impact on the Company’s consolidated results of
operations or financial condition.


7


Consolidation of Variable
Interest Entities





Effective January 1, 2010,
the Company adopted the FASB’s updated guidance related to consolidation of
variable interest entities (VIE’s), for determining whether an entity is a VIE.
This guidance requires an enterprise to perform an analysis to determine whether
the enterprise's variable interest or interests give it a controlling financial
interest in a VIE. The guidance also requires ongoing assessments of whether an
enterprise is the primary beneficiary of a VIE, requires enhanced disclosures
and eliminates the scope exclusion for qualifying special-purpose entities. The
adoption did not have a significant impact on the Company’s results of
operations and financial position.





Issued Accounting
Pronouncements Not Yet Adopted





In October 2009, the FASB
issued new guidance related to multiple-deliverable revenue arrangements. The
new guidance changed the requirements for establishing separate units of
accounting in a multiple element arrangement and requires the allocation of
arrangement consideration to each deliverable based on the relative selling
price. The selling price for each deliverable is based on vendor-specific
objective evidence (VSOE) if available, third-party evidence if VSOE is not
available, or estimated selling price if neither VSOE nor third-party evidence
is available. The new standard is effective for revenue arrangements
entered into in fiscal years beginning on or after June 15, 2010. The Company is
currently evaluating the impact, if any, the adoption of this standard will have
on its results of operations and financial position.





In October 2009, the FASB
issued new guidance for the accounting for certain revenue arrangements that
include software elements. These new standards amend the scope of pre-existing
software revenue guidance by removing from the guidance non-software components
of tangible products and certain software components of tangible products. These
new standards are effective for the Company beginning in the first quarter of
fiscal year 2011; however early adoption is permitted.The Company
currentlyisevaluating
the financial impact thatthe adoption ofthis accounting standard
will have on itsconsolidatedfinancialstatements.





In October 2009, the FASB
issued updated guidance which eliminates the use of the residual method and
incorporates the use of an estimated selling price to allocate arrangement
consideration. In addition, the revenue recognition guidance amends the scope to
exclude tangible products that contain software and non-software components that
function together to deliver the product’s essential functionality. The
amendments to the accounting standards related to revenue recognition are
effective for fiscal years beginning after June 15, 2010. Upon adoption, the
Company may apply the guidance retrospectively or prospectively for new or
materially modified arrangements. The Company is currently evaluating the
financial impact that this accounting standard will have on itsconsolidatedfinancialstatements.





2.Basic and Diluted 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.





The following table sets
forth the computations of basic and diluted loss per share (in thousands, except
per share data):





Three
      Months Ended September 30, 2010
                                                                                
                                                                                
                                                                                Nine
      Months Ended September 30, 2010Income
                                                                                  (Numerator)
                                                                                
                                                                                
                                                                                Weighted
                                                                                  Average
      Shares
                                                                                  Outstanding
                                                                                  (Denominator)
                                                                                
                                                                                
                                                                                Per-Share
                                                                                  Amount
                                                                                
                                                                                
                                                                                Income
                                                                                  (Numerator)
                                                                                
                                                                                
                                                                                Weighted
                                                                                  Average
      Shares
                                                                                  Outstanding
                                                                                  (Denominator)
                                                                                
                                                                                
                                                                                Per-Share
                                                                                  AmountBasic
      and Dilutive loss per
      common shareNet
      loss
                                                                                
                                                                                $
                                                                                (24,493
                                                                                )
                                                                                
                                                                                
                                                                                287,502
                                                                                
                                                                                
                                                                                $
                                                                                (0.09
                                                                                )
                                                                                
                                                                                $
                                                                                (79,384
                                                                                )
                                                                                
                                                                                
                                                                                281,701
                                                                                
                                                                                
                                                                                $
                                                                                (
      0.28
                                                                                )





Three
      Months Ended September 30, 2009 (As Adjusted – Note 1)
                                                                
                                                                
                                                                Nine
      Months Ended September 30, 2009 (As Adjusted – Note 1)Income
                                                                  (Numerator)
                                                                
                                                                Weighted
                                                                  Average
      Shares
                                                                  Outstanding
                                                                  (Denominator)
                                                                
                                                                
                                                                Per-Share
                                                                  Amount
                                                                
                                                                
                                                                Income
                                                                  (Numerator)
                                                                
                                                                Weighted
                                                                  Average
      Shares
                                                                  Outstanding
                                                                  (Denominator)
                                                                
                                                                
                                                                Per-Share
                                                                  AmountBasic
      and Dilutive loss per
      common shareNet
      loss
                                                                
                                                                $
                                                                (5,519
                                                                )
                                                                
                                                                
                                                                127,527
                                                                
                                                                
                                                                $
                                                                (0.04
                                                                )
                                                                
                                                                $
                                                                (41,039
                                                                )
                                                                
                                                                118,531
                                                                
                                                                
                                                                $
                                                                (0.35
                                                                )





For the three and nine month
periods ended September 30, 2010 and 2009, diluted net loss per share of Common
Stock is the same as basic net loss per share of Common Stock, because the
effects of potentially dilutive securities are
anti-dilutive.


At September 30, 2010 and
2009, 17.3 million Borrowed Shares related to the Company’s Share Lending
Agreement(See
Note 5)remained
outstanding.The
Company does not consider the Borrowed Shares to be
outstanding for the purposes of computing and reporting its earnings per
share.


8


3.
Acquisition





On December 18, 2009,
Globalstar entered into an agreement with Axonn L.L.C. (“Axonn”) pursuant to
which one of the Company’s wholly-owned subsidiaries acquired certain assets and
assumed certain liabilities of Axonn in exchange for payment at closing of $1.5
million in cash and $5.5 million in shares of the Company’s voting common stock.
Of these amounts, $500,000 in cash was held in an escrow account to cover
expenses related to the voluntary replacement of first production models of the
Company’s second-generation SPOT satellite GPS messenger devices. Additionally,
2,750,000 shares of stock were held in escrow for any pre-acquisition
contingencies not disclosed during the transaction.


Globalstar is also 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. The Company’s estimate of the total earnout expected to be paid was
100%, or $10.8 million. Changes in the fair value of the earnout payments due to
the passage of time will be recorded as accretion expense in the Consolidated
Statement of Operations under operating expenses. As of September 30, 2010, the
estimated earnout payments have not changed and no stock has been issued or cash
payments made. The earnouts for the three month periods ended March 31, 2010 and
June 30, 2010 were $292,000 and $178,000, respectively. The Company has not yet
finalized calculating the earnout for the three months ended September 30, 2010.
At September 30, 2010, the Company has accrued the fair value of the aggregate
expected earnout of approximately $7.1 million.


The Company will make
earnout payments
principally in stock (not to exceed 10% of the Company’s pre-transaction
outstanding common stock), butat its optionmaypay the earnout in cash after
13 million shares have been issued. Prior to the acquisition, Axonn was the
principal supplier of the Company’s SPOT satellite GPS messenger
products.





In connection with the
transaction described above, the Company issued 6,298,058 shares of voting
common stock to Axonn and certain of its lenders.The recipients may not sell
any of these shares until the first anniversary of the
closing.





The following tablesummarizes the
Company’sallocation of the purchase price to the assets acquired and liabilities assumed
in the acquisition (in thousands):





December
      18,
                                        2009Accounts
      receivable
                                      
                                      $
                                      1,176Inventory
                                      
                                      
                                      2,897Property
      and equipment
                                      
                                      
                                      931Intangible
      Assets
                                      
                                      
                                      7,600Goodwill
                                      
                                      
                                      2,703Total
      assets acquired
                                      
                                      $
                                      15,307Accounts
      payable and other accrued liabilities
                                      
                                      
                                      2,311Total
      liabilities assumed
                                      
                                      $
                                      2,311Net
      assets acquired
                                      
                                      $
                                      12,996





The Company
accountedfor
the acquisition using the purchase method of accounting. The Company allocated
the total estimated purchase prices to net tangible assets and identifiable
intangible assets based on their fair values as of the date of the acquisition,
recording the excess of the purchase price over those fair values as
goodwill.


The Company has included the
results of operations of Axonn in its consolidated financial statements from the
date of acquisition. The results of Axonn prior to the acquisition are not
material.


9


4.Property
and Equipment





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





September
      30,
                          
                          
                          December
      31,2010
                          
                          
                          2009As
      Adjusted –Note
      1Globalstar
      System:Space
      component
                          
                          $
                          130,676
                          
                          
                          $
                          132,982Ground
      component
                          
                          
                          32,018
                          
                          
                          
                          31,623Construction
      in progress:Second-generation
      satellites, ground and related launch costs
                          
                          
                          988,421
                          
                          
                          
                          852,466Other
                          
                          
                          3,701
                          
                          
                          
                          1,223Furniture
      and office equipment
                          
                          
                          23,662
                          
                          
                          
                          20,316Land
      and buildings
                          
                          
                          4,311
                          
                          
                          
                          4,308Leasehold
      improvements
                          
                          
                          998
                          
                          
                          
                          8231,183,787
                          
                          
                          
                          1,043,741Accumulated
      depreciation
                          
                          
                          (92,381
                          )
                          
                          
                          (78,820
                          )$
                          1,091,406
                          
                          
                          $
                          964,921





Property and equipment
consist of an in-orbit satellite constellation (including eight spare satellites
launched in 2007), ground equipment,second-generation satellites
under construction and related launch costs, second-generation ground component
and support equipment located in various countries around the
world.





In June 2009, the Company and
Thales Alenia Space entered into an amended and restated contract for the
construction of 24 second-generation low-earth orbit satellites to incorporate
prior amendments and acceleration requests and to make other non-material
changes to the contract entered into in November 2006. The total contract price,
including subsequent additions, is approximately €678.9
million.


In March 2007, the Company
and Thales Alenia Space entered into an agreement for the construction of the
Satellite Operations Control Centers, Telemetry Command Units and In Orbit Test
Equipment (collectively, the Control Network Facility) for the Company’s
second-generation satellite constellation. The total contract price for the
construction and associated services is €10.5 million, consisting primarily of
€4.1 million for the Satellite Operations Control Centers, €4.3 million for the
Telemetry Command Units and €2.1 million for the In Orbit Test Equipment, with
payments to be made on a quarterly basis through completion of the Control
Network Facility.TheControl Network Facility
achieved the final acceptance milestone in October
2010.





In March 2010, the Company
and Arianespace (the Launch Provider) entered into an amended and restated
contract to incorporate prior amendments to the contract entered into in
September 2007for the launch
of the Company’s second-generation satellites and certain pre and post-launch
services under which the Launch Provider agreed to make four launches of six
satellites each and one optional launch of six satellites each. The total
contract price for the first four launches is approximately $216.0 million.Notwithstanding
the one optional launch, the Company is free to contract separately with the
Launch Provider or another provider of launch services after the Launch
Provider’s firm launch commitments are fulfilled.





In October 2010, six new
second-generation Globalstar satellites were launched successfully from the
Baikonur Cosmodrome in Kazakhstan, using the Soyuz launch vehicle. Globalstar
has initiated in-orbit testing, and the performance of all six satellites is
currently under review at this time.


In May 2008, the Company and
Hughes Network Systems, LLC (Hughes) entered into an agreement under which
Hughes will 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. In August 2009, the Company and
Hughes amended their agreement extending the performance schedule by 15 months
and revising certain payment milestones. In March 2010, the Company and Hughes
further amended their agreement adding $2.7 million of new features which
resulted in a revised total contract purchase price of approximately $103.7
million, payable in various increments over a period of 57 months. The Company
has the option to purchase additional RANs and other software and hardware
improvements at pre-negotiated prices. The Company has begun capitalizing costs
based upon reaching technological feasibility of the project. As ofSeptember 30, 2010, the
Company had made payments of $46.4 millionunder this
contract. Of the
payments made, the Companyexpensed $5.5 million, capitalized $38.4 millionunder second-generation
satellites, ground and related launch costs andclassified$2.5 millionas a prepayment in other
assets,net.


10


In October 2008, the Company
signed an agreement with Ericsson Federal Inc., a
leading global provider of technology and services to telecom operators. In
December 2009 and March 2010, the Company amended this contract to increase its
obligations by $5.1 million for additional deliverables and features. According
to the $27.8 million 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.





As of September 30, 2010 and
December 31, 2009,the Company has recordedcapitalized
interestof$109.4 millionand $75.1 million,
respectively.The following table
summarizes interest capitalized during the three and nine month periods ended
September 30,
2010and
2009(in
thousands):





Three
      Months Ended
                                
                                
                                Nine
      Months EndedSeptember
      30,
                                
                                
                                September
      30,
                                
                                
                                September
      30,
                                
                                
                                September
      30,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009As
      Adjusted –
                                
                                
                                
                                
                                
                                As
      Adjusted –Note
      1
                                
                                
                                
                                
                                
                                Note
      1$
                                12,208
                                
                                
                                $
                                10,153
                                
                                
                                $
                                35,310
                                
                                
                                $
                                23,625


The following table
summarizes depreciation expense for the three and nine month periods ended
September 30, 2010 and 2009 (in thousands):





Three
      Months Ended
                          
                          
                          Nine
      Months EndedSeptember
      30,
                          
                          
                          September
      30,
                          
                          
                          September
      30,
                          
                          
                          September
      30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009$
                          5,588
                          
                          
                          $
                          5,459
                          
                          
                          $
                          16,618
                          
                          
                          $
                          16,323


5.Borrowings





Current portion of long term
debt:





The current portion of long
term debt at December 31, 2009 consisted of a loan of approximately $2.3 million
from Thermo. In January 2010, Thermo converted its short term debt of
approximately $2.3 million (plus accrued interest) into 2,525,750 shares of
nonvoting common stock.





Long Term
Debt:





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





September
      30,
                            2010
                          
                          
                          December
      31,
                            20095.75%
      Convertible Senior Notes due 2028
                          
                          $
                          57,134
                          
                          
                          $
                          53,3598.00%
      Convertible Senior Unsecured Notes
                          
                          
                          19,676
                          
                          
                          
                          17,396Facility
      Agreement
                          
                          
                          524,274
                          
                          
                          
                          371,219Subordinated
      loan
                          
                          
                          24,417
                          
                          
                          
                          21,577Total
      long term debt
                          
                          $
                          625,501
                          
                          
                          $
                          463,551





Borrowings under Facility
Agreement





On June 5, 2009, the Company
entered into a $586.3 million senior secured facility agreement (the “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. Ninety-five percent of the
Company’s obligations under the Facility Agreement are guaranteed by COFACE, the
French export credit agency.The initial funding process
of the Facility Agreement began on June 29, 2009 and was completed on
July 1, 2009.
The facility is comprised of:





•a $563.3 million
tranche for future payments and to reimburse the Company for amounts it
previously paid to Thales Alenia Space for construction of its second-generation
satellites. Such reimbursed amounts will be used by the Company (a) to make
payments to the Launch Provider for launch services,Hughes for ground network
equipment, software and satellite interface chips and Ericsson for ground system
upgrades, (b) to provide up to $150 million for the Company’s working capital and
general corporate purposes and (c) to pay a portion of the insurance premium to
COFACE; and


11


•a $23 million
tranche that will be used to make payments to the Launch Provider for launch
services and to pay a portion of the insurance premium to
COFACE.





The facility will mature 96
months after the first repayment date. Scheduled semi-annual principal
repayments will begin the earlier of eight months after the last launch of the
first 24 satellites from the second generation constellation or December 15,
2011. The facility will bear 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 beginning January
2010.





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 Globalstar and its domestic subsidiaries (other than its
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 Company may prepay the
borrowings without penalty on the last day of each interest period after the
full facility has been borrowed or the earlier of seven months after the launch
of the second generation constellation or November 15, 2011, but amounts repaid
may not be reborrowed. The Company 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. The Facility Agreement includes covenants that (a)
require the Company to maintain a minimum liquidity amount after the second
repayment date, a minimum adjusted consolidated EBITDA, a minimum debt service
coverage ratio and a maximum net debt to adjusted consolidated EBITDA ratio, (b)
place limitations on the ability of the Company and its subsidiaries to incur
debt, create liens, dispose of assets, carry out mergers and acquisitions, make
loans, investments, distributions or other transfers or enter into certain
transactions with affiliates and (c) limit capital expenditures, as defined in
the Facility Agreement, incurred by the Company to no more than $391.0 million
in 2009 and $234.0 million in 2010. The Company is permitted to make cash
payments under the terms of its 5.75% Notes.


By letter
dated September 16, 2010, the COFACE Agent notified the Company that it had
failed to deliver to the COFACE Agent a certified copy of the relevant license
not later than twenty-five (25) business days prior to the first launch of the
satellites, constituting a “breach” that had triggered a default. As such, the
COFACE Agent instituted a draw stop, prohibiting the Company from utilizing the
Facility Agreement until the default has been remediated or waived, but did not
take any action to accelerate the debt. The COFACE Agent provided a remedy
period to cure the breach by September 30, 2010. On October 28, 2010, the
Company entered into an amendment and cancelation agreement with the COFACE bank
syndicate, which canceled the original notification of default entirely and
amended the Facility Agreement so that the Company is required to provide (1) a
satellite communication license issued by French regulatory authorities no later
than November 30, 2010, and (2) a satellite communication license issued by U.S.
regulatory authorities no later than February 28, 2011. Under the amendment, the
Company is prohibited from borrowing under the Facility Agreement until the
Company provides the required license issued by the French regulatory
authorities, and once that is provided, may resume borrowing while pursuing the
license from the U.S. authorities. The amendment also includes a provision that
the Company and the COFACE bank syndicate agent agree that failing to provide
either of the licenses would constitute an event of default. On October 28,
2010, the Company obtained authorization for the required license from the
French authorities, ending the prohibition on borrowings under the Facility
Agreement. Management believes that the Company will be able to provide the
required U.S. license within the designated period, and that the Company will be
able to meet its other debt covenants for at least the next 12 months.
Accordingly, borrowings under the Facility Agreement have been classified as
noncurrent on the Company’s Consolidated Balance Sheet at September 30,
2010.


Subordinated Loan
Agreement





On June 25, 2009, the Company
entered into a Loan Agreement with Thermo whereby Thermo agreed to lend 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. The loan accrues interest at 12% per
annum, which will be 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 common stock is issuable
upon such exercise if such issuance would cause Thermo and its affiliates to own
more than 70% of the Company’s outstanding voting
stock.





Thermo borrowed $20 million
of the $25 million 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. The debt
service reserve account is included in restricted cash. The Company agreed to
grant one of these vendors a one-time option to convert its debt into equity of
the Company on the same terms as Thermo at the first call (if any) by the
Company for funds under the Contingent Equity Agreement (described
below).


12


The Company determined that
the warrant was an equity instrument and recorded it as a part of its
stockholders’ equity with a corresponding debt discount of $5.2 million, which
is netted against the face value 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 rate method. At issuance, the
Company allocated the proceeds under the
subordinated loan agreement to the underlying debt and the warrants based upon
their relative fair values.





Contingent Equity
Agreement





On June 19, 2009, the Company
entered into 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 will be required to make drawings from this
account if and to the extent it has an actual or projected deficiency in its
ability to meet indebtedness 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. If the Company makes any drawings from
the contingent equity account, it will issue Thermo shares of common stock
calculated using a price per share equal to 80% of the volume-weighted average
closing price of the common stock for the 15 trading days immediately preceding
the draw. Thermo may withdraw undrawn amounts in the account after the Company
has made the second scheduled repayment under the Facility Agreement, which the
Company currently expects to be no later than June 15,
2012.





The Contingent Equity
Agreement also provides that the Company will pay Thermo an availability fee of
10% per year for maintaining funds in the contingent equity account. This fee is
payable solely in warrants to purchase common stock at $0.01 per share with a
five-year exercise period from issuance. The number of shares subject to the
warrants issuable is calculated by taking the outstanding funds available in the
contingent equity account multiplied by 10% divided by the Company’s common
stock price on valuation dates. The common stock price is
subject to a reset provision on certain valuation dates subsequent to issuance
whereby the common stock price used in the calculation will be the lower of the
Company’s common stock price on the issuance date and the valuation dates. The
Company issued Thermo a warrant to purchase 4,379,562 shares of common stock for
this fee at origination of the agreement and on December 31, 2009 issued an
additional warrant to purchase an additional 2,516,990 shares of common stock
due to the reset provisions in the agreement. On December 31, 2009, the exercise
price of the first tranche of warrants issued on June 19, 2009 was reset to
$0.87. The price was subject to another reset on June 19, 2010 if the common
stock price was lower than $0.87 per common share; due to the price at that date
being $1.74, there was no further reset of the exercise price of this
tranche.





On June 19, 2010,the Company
issuedwarrantswith respect
to3,448,276
additional shares (equal to 10% of the outstanding balance in the contingent
equity account divided by the Company’s common stock price on that
date); these
warrants will besubject to the reset provision one year after initial issuance. On June 19,
2011,the
Company will issueadditional warrantswith respect
toa number of
shares equal to 10% of the outstanding balance in the contingent equity account
divided by the Company’s common stock price on that date; the exercise price of these
warrantswill be
subject to the reset provision one year after initial
issuance.





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 determined
that the warrants issued in conjunction with the availability fee were a
liability and recorded this liability as a component of other non-current
liabilities, at issuance. The corresponding benefit is recorded in other assets,
net and will be amortized over the one year of the availability period. As of
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.





8.00% Convertible Senior
Notes





On June 19, 2009, the Company
sold $55 million in aggregate principal amount of 8.00% Notes and warrants
(Warrants) to purchase 15,277,771 shares of the Company’s common stock at an
initial exercise price of $1.80 per share to selected institutional investors
(including an affiliate of Thermo) in a direct offering registered under the
Securities Act of 1933.





The Warrants have full
ratchet anti-dilution protection, and the exercise price of the Warrants is
subject to adjustment under certain othercircumstances.In the event of certain
transactions that involve a change of control, the holders of the Warrants have
the right to make the Company purchase the Warrants for cash, subject to certain
conditions. The exercise period for the Warrants began on December 19, 2009 and
will end on June 19, 2014.





In December 2009, the Company
issued stock at $0.87 per share, which was below the initial exercise price of
$1.80 per share, in connection with its acquisition of the assets of Axonn.
Given this transaction and the related provisions in the warrant agreements, the
holders of the Warrants received warrants to purchase an additional 16.2 million
shares of common stock. Additionally, the conversion price of the 8.00% Notes,
which are convertible into shares of common stock, was reset to $1.78 per share
of common stock.





On September 19, 2010, the
closing price of the common stock was less than the exercise price of the
Warrants then in effect, causing the exercise price of the Warrants to be reset
to $1.61, equal to the volume-weighted average closing price of the common stock
for the 15 previous trading days.


13


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, except
as described in the preceding sentence, rank pari passu with its existing
unsecured, unsubordinated obligations, including its 5.75% Notes. The 8.00%
Notes mature at the later of the tenth anniversary of closing 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, commencing December 15,
2009.





Holders may convert their
8.00% Notes at any time. The current base conversion pricefor the 8.00% Notes is $1.61
per share or 621.1shares of the Company’s
common stock per $1,000 principal amount of the 8.00% Notes, subject to certain
adjustments and limitations. In addition,if the Company issues or sells shares of
its common stock at a price per share less than the base conversion price on the
trading day immediately preceding such issuance or sale subject to certain
limitations, the base conversion rate will be adjusted lower based on a formula
described in the supplemental indenture governing the 8.00% Notes. However, no
adjustment to the base conversion rate shall be made if it would cause the Base
Conversion Price to be less than $1.00. If at any time the closing price of the
common stock exceeds 200% of the conversion price of the 8.00% Notes then in
effect for 30 consecutive trading days, all of the outstanding 8.00% Notes will
be automatically converted into common stock. Upon certain automatic and
optional conversions of the 8.00% Notes, the Company will pay holders of the
8.00% Notes a make-whole premium by increasing the number of shares of common
stock delivered upon such conversion. The number of additional shares per $1,000
principal amount of 8.00% Notes constituting the make-whole premium shall be
equal to the quotient of (i) the aggregate principal amount of the 8.00% Notes
so converted multiplied by 32.00%,lessthe aggregate interest paid
on the 8.00% Notes prior to the applicable Conversion Datedivided
by(ii) 95% of
the volume-weighted average Closing Price of the common stock for the 10 trading
days immediately preceding the Conversion Date. As ofSeptember 30, 2010,
approximately$12.5 millionof the 8.00% Notes had been
converted,resulting in the issuance of
approximately11.7 millionshares of common stock. At
September 30, 2010and December 31,
2009,$45.8
millionand $44.3 millionof8.00% Notes remained
outstanding, respectively.





Subject to certain exceptions
set forth in the supplemental indenture, if certain changes of control of the Company or events
relating to the listing of the common stock occur (a “fundamental change”), the
8.00% Notes are subject to repurchase for cash at the option of the holders of
all or any portion of the 8.00% Notes at a purchase price equal to 100% of the
principal amount of the 8.00% Notes, plus a make-whole payment and accrued and
unpaid interest, if any. Holders that require the Company to repurchase 8.00%
Notes upon a fundamental change may elect to receive shares of common stock in
lieu of cash. Such holders will receive a number of shares equal to (i) the
number of shares they would have been entitled to receive upon conversion of the
8.00% Notes, plus (ii) a make-whole premium of 12% or 15%, depending on the date
of the fundamental change and the amount of the consideration, if any, received
by the Company’s stockholders in connection with the fundamental
change.





The indenture governing the
8.00% Notes contains customary financial reporting requirements. The indenture
also provides that upon certain events of default, including without limitation
failure to pay principal or interest, failure to deliver a notice of fundamental
change, failure to convert the 8.00% Notes when required, acceleration of other
material indebtedness and failure to pay material judgments, either the trustee
or the holders of 25% in aggregate principal amount of the 8.00% Notes may
declare the principal of the 8.00% Notes and any accrued and unpaid interest
through the date of such declaration immediately due and payable. In the case of
certain events of bankruptcy or insolvency relating to the Company or its
significant subsidiaries, the principal amount of the 8.00% Notes and accrued
interest automatically becomes due and payable.





The Company evaluated the
various embedded derivatives resulting from the conversion rights and features
within the Indenture for bifurcation from the 8.00% Notes. Based upon its
detailed assessment, the Company concluded that the conversion rights and
features could not be excluded from bifurcation as a result of being clearly and
closely related to the 8.00% Notes or were not indexed to the Company’s common
stock and could not be classified in stockholders’ equity if freestanding. The
Company recorded this compound embedded derivative liability as a component of
Other Non-Current Liabilities on its Consolidated Balance Sheets with a
corresponding debt discount which is netted against the face value 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 an effective interest
rate method. The fair value of the compound embedded derivative liability is
being marked-to-market at the end of each reporting period, with any changes in
value reported as “Derivative gain (loss)” in the Consolidated Statements of
Operations. The Company determined the fair value of the compound embedded
derivative using a Monte Carlo simulation model based upon a risk-neutral stock
price model.





Due to the cash settlement
provisions and reset features in the Warrants, the Company recorded the Warrants
as a component of Other Non-Current Liabilities on its Consolidated Balance
Sheets with a corresponding debt discount which is netted with the face value of
the 8.00% Notes. The Company is accreting the debt discount associated with the
Warrants liability to interest expense over the term of the 8.00% Notes using an
effective interest rate method. The fair value of the Warrants liability is
marked-to-market at the end of each reporting period, with any changes in value
reported as “Derivative loss, net” in the Consolidated Statements of Operations.
The Company determined the fair value of the Warrants derivative using a Monte
Carlo simulation model based upon a risk-neutral stock price
model.


14


The Company allocated the
proceeds received from the 8.00% Notes among the conversion rights and features,
the detachable Warrants and the remainder to the underlying debt. The Company
netted the debt
discount associated with the conversion rights and features and Warrants against
the face value of the 8.00% Notes to determine the carrying amount of the 8.00%
Notes. The accretion of debt discount will increase the carrying amount of the
debt over the term of the 8.00% Notes. The Company allocated the proceeds at
issuance as follows (in thousands):





Fair
      value of compound embedded derivative
                        
                        $
                        23,542Fair
      value of Warrants
                        
                        
                        12,791Debt
                        
                        
                        18,667Face
      Value of 8.00% Notes
                        
                        $
                        55,000





Amended and restated credit
agreement





On August 16, 2006, the
Company entered into an amended and restated credit agreement with Wachovia
Investment Holdings, LLC, as administrative agent and swingline lender, and
Wachovia Bank, National Association, as issuing lender, which was subsequently
amended on September 29 and October 26, 2006. On December 17, 2007, Thermo was
assigned all the rights (except indemnification rights) and assumed all the
obligations of the administrative agent and the lenders under the amended and
restated credit agreement and the credit agreement was again amended and
restated. On December 18, 2008, the Company entered into a First Amendment to
the Second Amended and Restated Credit Agreement with Thermo, as lender and
administrative agent, to increase the amount available to Globalstar under the
revolving credit facility from $50.0 million to $100.0 million. In May 2009,
$7.5 million outstanding under the $200 million credit agreement was converted
into 10 million shares of the Company’s common stock. As of December 31, 2008,
the Company had drawn $66.1 million of the revolving credit facility and the
entire $100.0 million delayed draw term loan facility was
outstanding.





On June 19, 2009, Thermo
exchanged all of the outstanding secured debt (including accrued interest) owed
to it by the Company under the credit agreement, which totaled approximately
$180.2 million, for one share of Series A Convertible Preferred Stock (the
Series A Preferred), and the credit agreement was terminated. In December 2009,
the one share of Series A Preferred was converted into 109,424,034 shares of
voting common stock and 16,750,000 shares of non-voting common
stock.





The Company determined that
the exchange of debt for Series A Preferred was a capital transaction and did
not record any gain as a result of this exchange.





The delayed draw term loan
under the Wachovia facility bore an annual commitment fee of 2.0% until drawn or
terminated. Commitment fees related to the loans, incurred during 2009 and 2008
were not material. To hedge a portion of the interest rate risk with respect to
the delayed draw term loan, the Company entered into a five-year interest rate
swap agreement. The Company terminated this interest rate swap agreement on
December 10, 2008.





5.75% Convertible Senior
Notes due 2028





The Company issued $150.0
million aggregate principal amount of 5.75% Notes pursuant to a Base Indenture
and a Supplemental Indenture each dated as of April 15,
2008.





The Company placed
approximately $25.5 million of the proceeds of the offering of the 5.75% Notes
in an escrow account that is being used to make the first six scheduled
semi-annual interest payments on the 5.75% Notes. The Company pledged its
interest in this escrow account to the Trustee as security for these interest
payments. AtSeptember 30, 2010and December 31,
2009,the
balance in the escrow account was$4.1 millionand $6.2 million,
respectively. Except for the pledge of the escrow account, the 5.75% Notes are
senior unsecured
debt obligations of the Company. 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.





Subject to certain exceptions
set forth in the Indenture, the 5.75% Notes are subject to repurchase for cash
at the option of the holders of all or any portion of the 5.75% Notes (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 share. The 5.75% Notes are convertible at an initial conversion
rate of 166.2 shares of common stock per $1,000 principal amount of 5.75% Notes,
subject to adjustment. In addition to receiving the applicable amount of shares
of common stock or cash in lieu of all or a portion of the shares, holders of
5.75% Notes who convert them prior to April 1, 2011 will receive the cash
proceeds from the sale by the Escrow Agent of the portion of the government
securities in the escrow account that are remaining with respect to any of the
first six interest payments that have not been made on the 5.75% Notes being
converted.


15


Holders who convert their
5.75% Notes in connection with certain events occurring on or prior to April 1,
2013 constituting a “make whole fundamental change” (as defined below) will be
entitled to an increase in the conversion rate as specified in the indenture
governing the 5.75% Notes. The number of additional shares by which the
applicable base conversion rate will be increased will be determined by
reference to the applicable table below and is based on the date on which the
make whole fundamental change becomes effective (the effective date) and the
price (the stock price) paid, or deemed paid, per share of the Company’s common
stock in the make whole fundamental change, subject to adjustment as described
below. If the holders of common stock receive only cash in a make whole
fundamental change, the stock price will be the cash amount paid per share of
the Company’s common stock. Otherwise, the stock price will be the average of
the closing sale prices of the Company’s common stock for each of the 10
consecutive trading days prior to, but excluding, the relevant effective
date.





The events that constitute a
make whole fundamental change are as follows:





•      Any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
beneficial ownership of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of voting stock representing 50% of more (or if
such person is Thermo Capital Partners LLC, 70% or more) of the total voting
power of all outstanding voting stock of the Company;





•      The
Company consolidates with, or merges with or into, another person or the Company
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person;





•      The
adoption of a plan of liquidation or dissolution of the Company;
or





•      The
Company’s common stock (or other common stock into which the Notes are then
convertible) is not listed on a United States national securities exchange or
approved for quotation and trading on a national automated dealer quotation
system or established automated over-the-counter trading market in the United
States.





The stock prices set forth in
the first column of the Make Whole Table below will be adjusted as of any date
on which the base conversion rate of the notes is otherwise adjusted. The
adjusted stock prices will equal the stock prices applicable immediately prior
to the adjusted multiplied by a fraction, the numerator of which is the base
conversion rate immediately prior to the adjustment giving rise to the stock
price adjustment and the denominator of which is the base conversion rate as so
adjusted. The base conversion rate adjustment amounts set forth in the table
below will be adjusted in the same manner as the base conversion
rate.





Effective
      Date
                          Make
      Whole Premium (Increase in Applicable Base Conversion
Rate)Stock
      Price
                          on
      Effective
                          Date
                        
                        
                        April
      15,
                          2008
                        
                        
                        April
      1,
                          2009
                        
                        
                        April
      1,
                          2010
                        
                        
                        April
      1,
                          2011
                        
                        
                        April
      1,
                          2012
                        
                        
                        April
      1,
                          2013$
                        4.15
                        
                        
                        
                        74.7818
                        
                        
                        
                        74.7818
                        
                        
                        
                        74.7818
                        
                        
                        
                        74.7818
                        
                        
                        
                        74.7818
                        
                        
                        
                        74.7818$
                        5.00
                        
                        
                        
                        74.7818
                        
                        
                        
                        64.8342
                        
                        
                        
                        51.4077
                        
                        
                        
                        38.9804
                        
                        
                        
                        29.2910
                        
                        
                        
                        33.8180$
                        6.00
                        
                        
                        
                        74.7818
                        
                        
                        
                        63.9801
                        
                        
                        
                        51.4158
                        
                        
                        
                        38.2260
                        
                        
                        
                        24.0003
                        
                        
                        
                        0.4847$
                        7.00
                        
                        
                        
                        63.9283
                        
                        
                        
                        53.8295
                        
                        
                        
                        42.6844
                        
                        
                        
                        30.6779
                        
                        
                        
                        17.2388
                        
                        
                        
                        0.0000$
                        8.00
                        
                        
                        
                        55.1934
                        
                        
                        
                        46.3816
                        
                        
                        
                        36.6610
                        
                        
                        
                        26.0029
                        
                        
                        
                        14.2808
                        
                        
                        
                        0.0000$
                        10.00
                        
                        
                        
                        42.8698
                        
                        
                        
                        36.0342
                        
                        
                        
                        28.5164
                        
                        
                        
                        20.1806
                        
                        
                        
                        11.0823
                        
                        
                        
                        0.0000$
                        20.00
                        
                        
                        
                        18.5313
                        
                        
                        
                        15.7624
                        
                        
                        
                        12.4774
                        
                        
                        
                        8.8928
                        
                        
                        
                        4.9445
                        
                        
                        
                        0.0000$
                        30.00
                        
                        
                        
                        10.5642
                        
                        
                        
                        8.8990
                        
                        
                        
                        7.1438
                        
                        
                        
                        5.1356
                        
                        
                        
                        2.8997
                        
                        
                        
                        0.0000$
                        40.00
                        
                        
                        
                        6.6227
                        
                        
                        
                        5.5262
                        
                        
                        
                        4.4811
                        
                        
                        
                        3.2576
                        
                        
                        
                        1.8772
                        
                        
                        
                        0.0000$
                        50.00
                        
                        
                        
                        4.1965
                        
                        
                        
                        3.5475
                        
                        
                        
                        2.8790
                        
                        
                        
                        2.1317
                        
                        
                        
                        1.2635
                        
                        
                        
                        0.0000$
                        75.00
                        
                        
                        
                        1.4038
                        
                        
                        
                        1.1810
                        
                        
                        
                        0.9358
                        
                        
                        
                        0.6740
                        
                        
                        
                        0.4466
                        
                        
                        
                        0.0000$
                        100.00
                        
                        
                        
                        0.4174
                        
                        
                        
                        0.2992
                        
                        
                        
                        0.1899
                        
                        
                        
                        0.0985
                        
                        
                        
                        0.0663
                        
                        
                        
                        0.0000





The actual stock price and
effective date may not be set forth in the table above, in which
case:





•      If
the actual stock price on the effective date is between two stock prices in the
table or the actual effective date is between two effective dates in the table,
the amount of the base conversion rate adjustment will be determined by
straight-line interpolation between the adjustment amounts set forth for the
higher and lower stock prices and the earlier and later effective dates, as
applicable, based on a 365-day year;





•If the actual stock price on
the effective date exceeds $100.00 per share of the Company’s common stock
(subject to adjustment), no adjustment to the base conversion rate will be made;
and





•      If
the actual stock price on the effective date is less than $4.15 per share of the
Company’s common stock (subject to adjustment), no adjustment to the base
conversion rate will be made.


16


Notwithstanding the
foregoing, the base conversion rate will not exceed 240.9638 shares of common
stock per $1,000 principal amount of 5.75% Notes, subject to adjustment in the
same manner as the base conversion rate.





Except as described above
with respect to holders of 5.75% Notes who convert their 5.75% Notes prior to
April 1, 2013, there is no circumstance in which holders could receive cash in
addition to the maximum number of shares of common stock issuable upon
conversion of the 5.75% Notes.





If the Company makes at least
10 scheduled semi-annual interest payments, the 5.75% Notes are subject to
redemption at the Company’s option at any time on or after April 1, 2013, at a
price equal to 100% of the principal amount of the 5.75% Notes to be redeemed,
plus accrued and unpaid interest, if any.





The indenture governing the
5.75% Notes contains customary financial reporting requirements and also
contains restrictions on mergers and asset sales. The indenture also provides
that upon certain events of default, including without limitation failure to pay
principal or interest, failure to deliver a notice of fundamental change,
failure to convert the 5.75% Notes when required, acceleration of other material
indebtedness and failure to pay material judgments, either the trustee or the
holders of 25% in aggregate principal amount of the 5.75% Notes may declare the
principal of the 5.75% Notes and any accrued and unpaid interest through the
date of such declaration immediately due and payable. In the case of certain
events of bankruptcy or insolvency relating to the Company or its significant
subsidiaries, the principal amount of the 5.75% Notes and accrued interest
automatically becomes due and payable.





Conversion of 5.75%
Notes





In 2008, $36.0 million
aggregate principal amount of 5.75% Notes, or 24% of the 5.75% Notes originally
issued, were converted into common stock. The Company also exchanged an
additional $42.2 million aggregate principal amount of 5.75% Notes, or 28% of
the 5.75% Notes originally issued,for a combination of common
stock and cash. The Company has issued approximately 23.6 million shares of its
common stock and paid a nominal amount of cash for fractional shares in
connection with the conversions and exchanges. In addition, the holders whose
5.75% Notes were converted or exchanged received an early conversion make whole
amount of approximately $9.3 million,representing the next five
semi-annual interest payments that would have become due on the converted 5.75%
Notes, which was paid from funds in an escrow account maintained for the benefit
of the holders of 5.75% Notes. In the exchanges, 5.75% Note holders received
additional consideration in the form of cash payments or additional shares of
the Company’s common stock in the amount of approximately $1.1 million to induce
exchanges. After these transactions,$71.8 millionaggregate principal amount
of 5.75% Notes remained outstanding at September 30, 2010andDecember 31, 2009,
respectively.





Common Stock Offering and
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.





Pursuant to and upon the
terms of the Share Lending Agreement, the Company issued and lent the Borrowed
Shares to the Borrower as a share loan. The Borrowing Agent acted 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. Upon adoption of the FASB’s updated guidance on
accounting forown-share lending arrangements, the share loan agreement was valued at
$16.3 million and was classified as deferred financing costs to be amortized
utilizing the effective interest rate method over a period of five years. The
fair value of the Share Loan was estimated using significant unobservable inputs
as the difference between the fair value of the shares loaned to the Borrower
and the present value of the shares to be returned and other consideration
provided to the Company, pursuant to the Share Lending Agreement. A
Black-Scholes Option Pricing model was used to estimate the value of the note
holders’ right to convert the 5.75% Notes into shares of common stock under
certain scenarios. A risk neutral binomial model was also used to simulate
possible stock price outcomes and the probabilities thereof. In the fourth
quarter of 2008, in accordance with the conversion of a portion of the 5.75%
Notes as described above, $7.6 million of the unamortized deferred financing
costs were written off reducing the gain from extinguishment of debt in the
Consolidated Statement of Operations for that period. For each of the three
month periods endedSeptember 30, 2010and
2009,approximately $0.4 millionof deferred financing costs
were amortized and included in the capitalized interest. For the nine month
periods ended September 30, 2010 and 2009, approximately$1.1 millionand $1.0 million,
respectively, of deferred financing costs were amortized and included in the
capitalized interest. At September 30, 2010, $4.4 millionof the deferred financing
costs remain unamortized,and approximately17.3
millionBorrowed
Shares valued at approximately $30.1 millionremained
outstanding.


17


On the date on which the
Borrower is required to return Borrowed Shares, the purchase of Common Stock by
the Borrower in an amount equal to all or any portion of the number of Borrowed
Shares to be delivered to the Company shall (i) be prohibited by any law, rules
or regulation of any governmental authority to which it is or would be subject,
(ii) violate, or would upon such purchase likely violate, any order or
prohibition of any court, tribunal or other governmental authority, (iii)
require the prior consent of any court, tribunal or governmental authority prior
to any such repurchase or (iv) subject the Borrower, in the commercially
reasonable judgment of the Borrower, to any liability or potential liability
under any applicable federal securities laws (other than share transfers
pursuant to the Share Lending Agreement and Section 16(b) of the Exchange Act or
illiquidity in the market for Common Stock, each of (i), (ii), (iii) and (iv), a
“Legal Obstacle”), then, in each case, the Borrower shall immediately notify the
Company of the Legal Obstacle and the basis therefore, whereupon the Borrower’s
obligation to deliver Loaned Shares to the Company shall be suspended until such
time as no Legal Obstacle with respect to such obligations shall exist (a
“Repayment Suspension”). Following the occurrence of and during the continuation
of any Repayment Suspension, the Borrower shall use its reasonable best efforts
to remove or cure the Legal Obstacle as soon as practicable;providedthat, the Company shall
promptly reimburse all costs and expenses (including legal counsel to the
Borrower) incurred or, at the Borrower’s election, provide reasonably adequate
surety or guarantee for any such costs and expenses that may be incurred by the
Borrower, in each case in removing or curing such Legal Obstacle. If the
Borrower is unable to remove or cure the Legal Obstacle within a reasonable
period of time under the circumstances, the Borrower shall pay the Company, in
lieu of the delivery of Borrowed Shares otherwise required to be delivered, an
amount in immediately available funds equal to the product of the Closing Price
as of the Business Day immediately preceding the date the Borrower makes such
payment and the number of Borrowed Shares otherwise required to be
delivered.





The Company did not receive
any proceeds from the sale of the Borrowed Shares pursuant to the Share Lending
Agreement, and it will not reserve any proceeds from any future sale. The
Borrower has received all of the proceeds from the sale of Borrowed Shares
pursuant to the Share Lending Agreement and will receive all of the proceeds
from any future sale. At the Company’s election, the Borrower may remit cash
equal to the market value of the corresponding Borrowed Shares instead of
returning the Borrowed Shares due back to the Company as a result of conversions
by 5.75% Note holders.





The Borrowed Shares are
treated as issued and outstanding for corporate law purposes, and accordingly,
the holders of the Borrowed Shares will have all of the rights of a holder of
the Company’s outstanding shares, including the right to vote the shares on all
matters submitted to a vote of the Company’s stockholders and the right to
receive any dividends or other distributions that the Company may pay or makes
on its outstanding shares of common stock. However, under the Share Lending
Agreement, the Borrower has agreed:





•      To
pay, within one business day after the relevant payment date, to the Company an
amount equal to any cash dividends that the Company pays on the Borrowed Shares;
and





•      To
pay or deliver to the Company, upon termination of the loan of Borrowed Shares,
any other distribution, in liquidation or otherwise, that the Company makes on
the Borrowed Shares.





To the extent the Borrowed
Shares the Company initially lent under the share lending agreement and offered
in the common stock offering have not been sold or returned to it, the Borrower
has agreed that it will not vote any such Borrowed Shares. The Borrower has also
agreed under the Share Lending Agreement that it will not transfer or dispose of
any Borrowed Shares, other than to its affiliates, unless the transfer or
disposition is pursuant to a registration statement that is effective under the
Securities Act. However, investors that purchase the shares from the Borrower
(and any subsequent transferees of such purchasers) will be entitled to the same
voting rights with respect to those shares as any other holder of the Company’s
common stock.





On December 18, 2008, the
Company entered into Amendment No. 1 to the Share Lending Agreement with the
Borrower and the Borrowing Agent. Pursuant to Amendment No.1, the Company has
the option to request the Borrower to deliver cash instead of returning Borrowed
Shares upon any termination of loans at the Borrower’s option, at the
termination date of the Share Lending Agreement or when the outstanding loaned
shares exceed the maximum number of shares permitted under the Share Lending
Agreement. The consent of the Borrower is required for any cash settlement,
which consent may not be unreasonably withheld, subject to the Borrower’s
determination of applicable legal, regulatory or self-regulatory requirements or
other internal policies. Any loans settled in shares of Company common stock
will be subject to a return fee based on the stock price as agreed by the
Company and the Borrower. The return fee will not be less than $0.005 per share
or exceed $0.05 per share.





The Company evaluated the
various embedded derivatives within the Indenture for bifurcation from the 5.75%
Notes. Based upon its detailed assessment, the Company concluded that these
embedded derivatives were either excluded from bifurcation as a result of being
clearly and closely related to the 5.75% Notes or are indexed to the Company’s
common stock and would be classified in stockholders’ equity if
freestanding.


18


In May 2008, the FASB issued
guidance regarding accounting for convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement). The
guidance requires the liability and equity components of convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) to be separately accounted for in a manner that reflects the
issuer’s nonconvertible debt borrowing rate. As such, the initial debt proceeds
from the sale of the Company’s 5.75% Notes are required to be allocated between
a liability component and an equity component as of the debt issuance date. The
resulting debt discount is amortized over the instrument’s expected life as
additional non-cash interest expense.





Upon adoption of the
accounting guidance the Company recorded a decrease in long-term debt of
approximately $23.1 million; an increase in its stockholders’ equity of
approximately $28.3 million; and an increase in its net property, plant and
equipment of approximately $5.9 million as of December 31, 2008. This adoption
changed the Company’s full year 2008 Consolidated Statement of Operations,
because the gains associated with conversions and exchanges of 5.75% Notes in
2008 were recorded in stockholders’ equity prior to adoption of this standard.
This adoption impacted the Company’s Consolidated Statement of Operations for
2008 by reducing the net loss by approximately $52.9 million. At September 30,
2010and
2009,the
remaining term for amortization associated with debt discount was
approximately30and42 months, respectively. The
annual effective interest rate utilized for the amortization of debt discount
during the three andnine months ended September
30, 2010 and 2009 was 9.14% The interest cost associated with the coupon rate on
the 5.75% Notes plus the corresponding debt discount amortized during the three
months ended September 30, 2010and 2009,was $2.4 millionand$2.2 million respectively,
all of which was capitalized. The interest cost associated with the coupon rate
on the 5.75% Notes plus the corresponding debt discount amortized during thenine months
ended September 30, 2010and 2009,was $6.9 millionand$6.6 million respectively,
all of which was capitalized. The carrying amount of the equity and liability
component, as ofSeptember 30, 2010and December 31,
2009, is presented below (in
thousands):





September
      30,
                              2010
                            
                            
                            December
      31,
                              2009Equity
                            
                            $
                            54,675
                            
                            
                            $
                            54,675Liability:Principal
                            
                            
                            71,804
                            
                            
                            
                            71,804Unamortized
      debt discount
                            
                            
                            (14,670
                            )
                            
                            
                            (18,445
                            )Net
      carrying amount of liability
                            
                            $
                            57,134
                            
                            
                            $
                            53,359





VendorFinancing





In July 2008 the Company
amended the agreement with the Launch Provider for the launch of the Company’s
second-generation satellites and certain pre and post-launch services. Under the
amended terms, the Company could defer payment on up to 75% of certain amounts
due to the Launch Provider. The deferred payments incurred annual interest at
8.5% to 12%.In
June 2009, the Company and the Launch Provider again amended their agreement
modifying the agreement in certain respects including cancellingthe deferred payment
provisions. The Company paid all deferred amounts to the vendor in July
2009.





In September 2008 the Company
amended its agreement with Hughes for the construction of its RAN ground network
equipment and software upgrades for installation at a number of the Company’s
satellite gateway ground stations and satellite interface chips to be a part of
the UTS in various next-generation Globalstar devices. Under the amended terms,
the Company deferred certain payments due under the contract in 2008 and 2009 to
December 2009. The deferred payments incurred annual interest at 10%. In June 2009, the Company
and Hughes further amended their agreement modifying the agreement in certain
respects including cancelling the deferred payment provisions.The Company paid all
deferred amounts to the vendor in July 2009.





6.Derivative
Instruments





In June 2009, in connection
with entering into the Facility Agreement (See Note 5),which provides for interest
at a variable rate, the Company entered into ten-year interest rate cap
agreements. The
interest rate cap agreements reflect a variable notional amount ranging from
$586.3 million to $14.8 millionat 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 “Derivative gain
(loss)” in the
accompanying Consolidated Statement of Operations.





The Company recorded the
conversion rights and features embedded within the 8.00% Convertible Senior
Unsecured Notes (“8.00% Notes”) as a compound embedded derivative liability
within Other Non-Current Liabilities on its Consolidated Balance Sheets with a
corresponding debt discount which is netted against the face value 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 will be
marked-to-market at the end of each reporting period, with any changes in value
reported as “Derivative gain (loss)” in the Consolidated Statements of
Operations. The Company determined the fair value of the compound embedded
derivative using a Monte Carlo simulation model based upon a risk-neutral stock
price model.


19


Due to the cash settlement
provisions and reset features in the warrants issued with the 8.00% Notes (See
Note 5), the
Company recorded the warrants as Other Non-Current Liabilities on its
Consolidated Balance Sheet with a corresponding debt discount which is netted
against the face value 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
warrants using the effective interest rate method. The fair value of the warrant
liability will be marked-to-market at the end of each reporting period, with any
changes in value reported as “Derivative gain (loss)” in the Consolidated
Statements of Operations. The Company determined the fair value of the Warrant
derivative using a Monte Carlo simulation model based upon a risk-neutral stock
price model.





The Company determined that
the warrants issued in conjunction with the availability fee for the Contingent
Equity Agreement (See Note 5), were a liability and
recorded it as a component of Other Non-Current Liabilities, at issuance. The
corresponding
benefit is recorded in prepaid and other non-current assets and is being
amortized over the one-year availability period. The fair value of the warrant
liability will be marked-to-market at the end of each reporting period, with any
changes in value reported as “Derivative gain (loss)” in the Consolidated
Statements of Operations. The Company determined the fair value of the Warrant
derivative using a risk-neutral binomial model.





None of the derivative
instruments described above was designated as a hedge. The following tables
disclose the fair value of the derivative instruments and their impact on the
Company’s Consolidated Statements of Operations (in
thousands):





September
      30, 2010
                                          
                                          
                                          December
      31, 2009Balance
      Sheet
                                            Location
                                          
                                          Fair
      Value
                                          
                                          
                                          Balance
      Sheet
                                            Location
                                          
                                          Fair
      ValueInterest
      rate cap derivative
                                          
                                          Other
      assets, net
                                          
                                          $
                                          788
                                          
                                          
                                          Other
      assets, net
                                          
                                          $
                                          6,801Compound
      embedded conversion option
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (28,485
                                          )
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (14,235
                                          )Warrants
      issued with 8.00% Notes
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (35,768
                                          )
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (27,711
                                          )Warrants
      issued with contingent equity agreement
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (8,099
                                          )
                                          
                                          Derivative
      liabilities
                                          
                                          
                                          (7,809
                                          )Total
                                          
                                          
                                          
                                          $
                                          (71,564
                                          )
                                          
                                          
                                          
                                          $
                                          (42,954
                                          )





Three
      months ended September 30,2010
                                                            
                                                            
                                                            2009Location
      of Gain
                                                              (loss)
      recognized
                                                              in
      Statement of
                                                              Operations
                                                            
                                                            Amount
      of Gain
                                                              (loss)
      recognized
                                                              on
      Statement of
                                                              Operations
                                                            
                                                            
                                                            Location
      of Gain
                                                              (loss)
      recognized in
                                                              Statement
      of
                                                              Operations
                                                            
                                                            Amount
      of Gain
                                                              (loss)
      recognized
                                                              on
      Statement of
                                                              OperationsInterest
      rate cap derivative
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            (728
                                                            )
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            (2,193
                                                            )Compound
      embedded conversion option
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            (4,303
                                                            )
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            3,997Warrants
      issued with 8.00% Notes
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            (4,013
                                                            )
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            4,189Warrants
      issued with contingent equity agreement
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            (106
                                                            )
                                                            
                                                            Derivative
      gain (loss)
                                                            
                                                            
                                                            —Total
                                                            
                                                            
                                                            
                                                            $
                                                            (9,150
                                                            )
                                                            
                                                            
                                                            
                                                            $
                                                            5,993





Nine
      months ended September 30,2010
                                                  
                                                  
                                                  2009Location
      of Gain
                                                    (loss)
      recognized
                                                    in
      Statement of
                                                    Operations
                                                  
                                                  Amount
      of Gain
                                                    (loss)
      recognized
                                                    on
      Statement of
                                                    Operations
                                                  
                                                  
                                                  Location
      of Gain
                                                    (loss)
      recognized in
                                                    Statement
      of
                                                    Operations
                                                  
                                                  Amount
      of Gain
                                                    (loss)
      recognized
                                                    on
      Statement of
                                                    OperationsInterest
      rate cap derivative
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  (6,013
                                                  )
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  (6,287
                                                  )Compound
      embedded conversion option
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  (15,412
                                                  )
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  6,267Warrants
      issued with 8.00% Notes
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  (17,041
                                                  )
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  5,216Warrants
      issued with contingent equity agreement
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  (3,719
                                                  )
                                                  
                                                  Derivative
      gain (loss)
                                                  
                                                  
                                                  —Total
                                                  
                                                  
                                                  
                                                  $
                                                  (42,185
                                                  )
                                                  
                                                  
                                                  
                                                  $
                                                  5,196





7.Payables to
Affiliates





Thermo incurs certain
expenses on behalf of the Company, which are charged to the Company.The table below
summarizes total expenses for the three and nine month periods ended September
30, 2010 and 2009:


20





Three
      Months Ended
                      
                      
                      Nine
      Months EndedSeptember
      30,
                      
                      
                      September
      30,
                      
                      
                      September
      30,
                      
                      
                      September
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009General
      and administrative expenses
                      
                      $
                      271,000
                      
                      
                      $
                      21,000
                      
                      
                      $
                      352,000
                      
                      
                      $
                      109,000Non-cash
      expenses
                      
                      $
                      28,000
                      
                      
                      $
                      42,000
                      
                      
                      $
                      112,000
                      
                      
                      $
                      295,000





Non-cash expensesduring 2010are expensesrelated to services provided
by an executive officer of Thermo (who is also a Director of the Company) who
received no cash compensation from the Company, which was accounted for as a
contribution to capital.During 2009, the Company also
recorded non-cash expenses related to services provided by two executive
officers of Thermo (who are also Directors of the Company) who receive no cash
compensation from the Company, which were accounted for as a contribution to
capital. The Thermo expense charges are based on actual amounts incurred or upon
allocated employee time.


8.Other Related Party
Transactions





Since 2005, Globalstar has
issued separate purchase orders for additional phone equipment and accessories
under the terms of previously 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 as advances for inventory. As of September 30,
2010and
December 31, 2009,total advances to
Qualcomm for
inventory were $9.2 million. As ofSeptember 30, 2010and December 31,
2009,the
Company had outstanding commitment balances of approximately $48.9
millionand $49.4 million,
respectively.Effective February
24, 2010, the
Company amended its agreement with Qualcomm to extend the term and defer
delivery of mobile phones and related equipment until June 2011 through February
2013.





On August 16, 2006, the
Company entered into an amended and restated credit agreement with Wachovia
Investment Holdings, LLC, as administrative agent and swingline lender, and
Wachovia Bank, National Association, as issuing lender, which was subsequently
amended on September 29 and October 26, 2006. On December 17, 2007, Thermo was
assigned all the rights (except indemnification rights) and assumed all the
obligations of the administrative agent and the lenders under the amended and
restated credit agreement, and the credit agreement was again amended and
restated. In connection with fulfilling the conditions precedent to funding
under the Company’s Facility Agreement, in June 2009, Thermo converted the loans
outstanding under the credit agreement into equity and terminated the credit
agreement.In
addition, Thermo and its affiliates deposited $60.0 million in a contingent
equity account to fulfill a condition precedent for borrowing under the Facility
Agreement,purchased $11.4 million of
the Company’s 8% Notes, provided a $2.3 million short-term loan to the Company
(which was subsequently converted to nonvoting common stock), and loaned $25.0 million
to the Company to fund its debt service reserve account (See Note5“Borrowings”).





During the threeand ninemonthperiodsended September 30, 2010and
2009, the
Company purchasedservices and equipment from a
company whose non-executive chairman served as a member of the Company’s board
of directors. The following table summarizes these purchases (in
thousands):





Three
      Months Ended
                      
                      
                      Nine
      Months EndedSeptember
      30,
                      
                      
                      September
      30,
                      
                      
                      September
      30,
                      
                      
                      September
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009$
                      300
                      
                      
                      $
                      1,000
                      
                      
                      $
                      1,900
                      
                      
                      $
                      3,200





9. Income
Taxes





For the period ending
December 31, 2009, the net deferred tax assets were $0. For the period endedSeptember 30,
2010, the deferred tax assets continue to be fully
reserved.





The Internal Revenue Service
("IRS") 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 years 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 IRS issued Notices of Final Partnership
Administrative Adjustments related to each of the taxable years at issue. The
Company disagrees with the proposed adjustments and is pursuing the matter
through applicable IRS and judicial procedures as
appropriate.





During April 2010, the
Company received notification from the IRS that the Company's 2007 and 2008
returns were selected for examination.The fieldwork for this audit
has commenced.The Company is not aware of
any taxes that it may be required to pay as a result of the examination.In the Company's
international tax jurisdictions, numerous tax years remain subject to
examination by tax authorities, including tax returns for 2001 and subsequent
years.


21


Except for the IRS 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. But, the
Company's corporate U.S. tax return for 2006 and subsequent years and its U.S.
partnership tax returns filed for years prior to 2006 remain open and 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.





Except for the matters noted
above, the Company is not aware of any audits or other pending tax
matters.




Through a prior foreign
acquisitionthe
Companyacquired
a tax liabilityforwhich theCompany has been indemnified
by the previous owners.As of September 30, 2010 and
December 31, 2009, the Company had recorded a tax liability and receivable of
$10.2 million to the foreign tax authorities and from the previous owners,
respectively.





10. Comprehensive
Loss





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
comprehensive loss were as follows (in thousands):





Three
      months ended
                            
                            
                            Nine
      months endedSeptember
      30,
                            
                            
                            September
      30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009Net
      loss
                            
                            $
                            (24,493
                            )
                            
                            $
                            (5,519
                            )
                            
                            $
                            (79,384
                            )
                            
                            $
                            (41,039
                            )Other
      comprehensive income:Foreign
      currency translation adjustments
                            
                            
                            43
                            
                            
                            
                            1,604
                            
                            
                            
                            475
                            
                            
                            
                            3,188Total
      comprehensive loss
                            
                            $
                            (24,450
                            )
                            
                            $
                            (3,915
                            )
                            
                            $
                            (78,909
                            )
                            
                            $
                            (37,851
                            )





11.Equity Incentive
Plan





The Company’s 2006 Equity
Incentive Plan (the “Equity Plan”) is a broad based, long-term retention program
intended to attract and retain talented employees and align stockholder and
employee interests. Including grants to both employees and executives, 0.2
million and 8.5 millionrestricted stock awards and
restricted stock units were granted during the three month periodsended September 30,
2010and 2009,
respectively.Including grants
to both employees and executives, 1.5 millionand 8.6 millionrestricted stock awards and
restricted stock units were granted during thenine month periods ended
September 30, 2010and 2009, respectively.The Company also
granted options topurchase approximately 1.5
million and 3.6 millionshares of common stock
during theninemonths ended September 30,
2010and
September 30, 2009, respectively. In March 2010, the Company added 2.5 million
shares of its common stock to the shares available for issuance under the Equity
Plan.





12. Headquarter
Relocation





On July 13, 2010 the Company
announced that it would be relocating its corporate headquarters to Covington,
Louisiana. In addition, Globalstar’s product development center, the Company’s
international customer care operations, call center and other global business
functions including finance, accounting, sales, marketing and corporate
communications will move to Louisiana.


In connection with the
relocation, the Company expects to incur expenses, including but not limited to,
severance, travel expenses, moving expenses, temporary housing, and lease
termination payments. As of September 30, 2010, Globalstar had incurred expenses
of $0.8 million. As of September 30, 2010, the Company also recorded in property
and equipment $1.2 million of facility improvements and replacement equipment in
connection with the relocation.


The Company entered into a
Cooperative Endeavor Agreement with the Louisiana Department of Economic
Development (LED) to be reimbursed to relocate equipment and personnel from
other Company locations to the facility in Covington, Louisiana.The Company records a
receivable from the State as reimbursable costs are incurred or as capital
expenditures are made. Reimbursements for relocation expenses offset those
expenses in the period incurred. Reimbursements for capital expenditures are
recorded as deferred costs and offset depreciation expense as the related assets
are used in service. These reimbursements, not to
exceed $8.1 million, are contingent upon meeting required payroll thresholds.
The Company has committed to the State to maintain required payroll amounts for
each year covered by the terms of the agreement through 2019. If the Company
fails to meet the required payroll in any project year, the Company will
reimburse the State for a portion of the shortfall not to exceed the total
reimbursement received by the Company from the State. The Company will assess
the probability of reimbursement to the state and will record a liability when
the amounts are probable and estimable. As of September 30, 2010, the Company
has recorded a receivable of $2.0 million from the State of Louisiana related to
these reimbursements.As of September 30,
2010, the Company expects to meet the minimum payroll thresholds required under
the contract, and therefore has no provision for contingent payroll
reimbursements.


22


13. Commitments and
Contingencies





From time to time, the
Company is involved in various litigation matters involving ordinary and routine
claims incidental to its business. Management currently believes that the
outcome of these proceedings, either individually or in the aggregate, will not
have a material adverse effect on the Company’s business, results of operations
or financial condition. The Company is involved in certain litigation matters as
discussed below.





Walsh and
Kesler v. Globalstar, Inc. (formerly Stickrath v. Globalstar, Inc.).On April 7,
2007, Kenneth Stickrath and Sharan Stickrath filed a purported class action
complaint against the Company in the U.S. District Court for the Northern
District of California, Case No. 07-cv-01941. The complaint is based on alleged
violations of California Business & Professions Code § 17200 and California
Civil Code § 1750, et seq., the Consumers’ Legal Remedies Act. In July 2008, the
Company filed a motion to deny class certification and a motion for summary
judgment. The court deferred action on the class certification issue but granted
the motion for summary judgment on December 22, 2008. The court did not,
however, dismiss the case with prejudice but rather allowed counsel for
plaintiffs to amend the complaint and substitute one or more new class
representatives. On January 16, 2009, counsel for the plaintiffs filed a Third
Amended Class Action Complaint substituting Messrs. Walsh and Kesler as the
named plaintiffs. A joint notice of settlement was filed with the court on March
9, 2010. The court heard the motion for settlement on March 29, 2010 and the
parties subsequently submitted a first amendment to the stipulated class
settlement agreement on April 2, 2010. The court entered an order approving the
settlement on October 14, 2010, and the Company has proceeded to implement it.
The Company had a liability of $1.3 million for this settlement as of September
30, 2010.





Appeal of
FCC S-Band Sharing Decision.This case is
Sprint Nextel Corporation’s petition in the U.S. Court of Appeals for the
District of Columbia Circuit for review of, among others, the FCC’s April 27,
2006, decision regarding sharing of the 2495 – 2500 MHz portion of the
Company’s radiofrequency spectrum. This is known as “The S-band Sharing
Proceeding.” The Court of Appeals has granted the FCC’s motion to hold the case
in abeyance while the FCC considers the petitions for reconsideration pending
before it. The Court has also granted the Company’s motion to intervene as a
party in the case. The Company cannot determine when the FCC might act on the
petitions for reconsideration.





Canadian Employment
Litigation.The Company and its Canadian subsidiary,
Globalstar Canada Satellite Co. are in litigation with a certain former
employee seeking damages for breach of contract plus associated costs.  The
Company intends to defend this litigation in the Canadian courts where
the lawsuit was commenced.  The Company has accrued an estimated
amount for this litigation that it considers to be immaterial to its
consolidated financial statements.





14.  Geographic
Information





Revenue by geographic
location, presented net of eliminations for intercompany sales, was as follows
for the three and nine month periods ended September 30, 2010 and 2009 (in
thousands):





Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Service:United
      States
                  
                  $
                  8,398
                  
                  
                  $
                  8,003
                  
                  
                  $
                  24,160
                  
                  
                  $
                  21,899Canada
                  
                  
                  3,126
                  
                  
                  
                  3,654
                  
                  
                  
                  8,947
                  
                  
                  
                  9,610Europe
                  
                  
                  791
                  
                  
                  
                  302
                  
                  
                  
                  2,295
                  
                  
                  
                  1,548Central
      and South America
                  
                  
                  966
                  
                  
                  
                  1,211
                  
                  
                  
                  3,050
                  
                  
                  
                  3,646Others
                  
                  
                  108
                  
                  
                  
                  90
                  
                  
                  
                  299
                  
                  
                  
                  250Total
      service revenue
                  
                  
                  13,389
                  
                  
                  
                  13,260
                  
                  
                  
                  38,751
                  
                  
                  
                  36,953Subscriber
      equipment:United
      States
                  
                  
                  3,711
                  
                  
                  
                  1,188
                  
                  
                  
                  9,066
                  
                  
                  
                  4,116Canada
                  
                  
                  568
                  
                  
                  
                  367
                  
                  
                  
                  1,940
                  
                  
                  
                  2,469Europe
                  
                  
                  188
                  
                  
                  
                  139
                  
                  
                  
                  788
                  
                  
                  
                  607Central
      and South America
                  
                  
                  345
                  
                  
                  
                  364
                  
                  
                  
                  843
                  
                  
                  
                  1,341Others
                  
                  
                  22
                  
                  
                  
                  2,203
                  
                  
                  
                  28
                  
                  
                  
                  2,914Total
      subscriber equipment revenue
                  
                  
                  4,834
                  
                  
                  
                  4,261
                  
                  
                  
                  12,665
                  
                  
                  
                  11,447Total
      revenue
                  
                  $
                  18,223
                  
                  
                  $
                  17,521
                  
                  
                  $
                  51,416
                  
                  
                  $
                  48,400


23
  15. Fair Value of Financial
Instruments





The Company follows the
authoritative guidance for fair value measurements relating to financial and
nonfinancial 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:Observable
inputs other than those included in Level 1 such as quoted prices for similar
assets and liabilities in active markets; quoted prices for identical assets or
liabilities in inactive markets or model- derived valuations or other inputs
that can be corroborated by observable market data;


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).





The following table provides
a summary of the financial assets and liabilities measured at fair value on a
recurring basis as of September 30, 2010 and December 31, 2009 (In
thousands):





Fair Value Measurements at September 30, 2010 usingQuoted
      Pricesin Active
                      
                      
                      SignificantMarkets for
                      
                      
                      Other
                      
                      
                      SignificantIdentical
                      
                      
                      Observable
                      
                      
                      UnobservableInstruments
                      
                      
                      Inputs
                      
                      
                      Inputs(Level 1)
                      
                      
                      (Level 2)
                      
                      
                      (Level 3)
                      
                      
                      Total BalanceOther
      assets:Interest
      rate cap derivative
                      
                      $
                      —
                      
                      
                      $
                      788
                      
                      
                      $
                      —
                      
                      
                      $
                      788Total
      other assets measured at fair value
                      
                      
                      —
                      
                      
                      $
                      788
                      
                      
                      
                      —
                      
                      
                      
                      788Other
      liabilities:Liability
      for contingent consideration
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (7,092
                      )
                      
                      
                      (7,092
                      )Compound
      embedded conversion option
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (28,485
                      )
                      
                      
                      (28,485
                      )Warrants
      issued with 8.00% Notes
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (35,768
                      )
                      
                      
                      (35,768
                      )Warrants
      issued with contingent equity agreements
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (8,099
                      )
                      
                      
                      (8,099
                      )Total
      liabilities measured at fair value
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      (79,444
                      )
                      
                      $
                      (79,444
                      )


24





Fair Value Measurements at December 31, 2009 usingQuoted
                                                                Prices in
                                                                Active
                                                                Markets for
                                                                Identical
                                                                Instruments
                                                                (Level 1)
                                                              
                                                              
                                                              Significant
                                                                Other
                                                                Observable
                                                                Inputs
                                                                (Level 2)
                                                              
                                                              
                                                              Significant
                                                                Unobservable
                                                                Inputs
                                                                (Level 3)
                                                              
                                                              
                                                              TotalBalanceOther
      assets:Interest
      rate cap derivative
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              6,801
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              6,801Total
      other assets measured at fair value
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              $
                                                              6,801
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              6,801Other
      liabilities:Compound
      embedded conversion option
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (14,235
                                                              )
                                                              
                                                              
                                                              (14,235
                                                              )Warrants
      issued with 8.00% Notes
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (27,711
                                                              )
                                                              
                                                              
                                                              (27,711
                                                              )Warrants
      issued with contingent equity agreements
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              —
                                                              
                                                              
                                                              
                                                              (7,809
                                                              )
                                                              
                                                              
                                                              (7,809
                                                              )Total
      liabilities measured at fair value
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              —
                                                              
                                                              
                                                              $
                                                              (49,755
                                                              )
                                                              
                                                              $
                                                              (49,755
                                                              )





Interest Rate Cap
Derivatives





The fair value of the
interest rate cap derivatives is determined using observable pricing inputs
including benchmark yields, reported trades, and broker/dealer quotes at the
reporting date.





Derivative
Liabilities





The derivative liabilities in
Level 3 include the compound embedded conversion option in the 8.00% Notes and
warrants issued with the 8.00% Notes and contingent equity agreement. The
Company marks-to-market these liabilities at each reporting date with the
changes in fair value recognized in the Company’s results of operations. The
Company utilizes valuation models that rely exclusively on Level 3 inputs
including, among other things: (i) the underlying features of each item,
including reset features, make whole premiums, etc. (see Note 6); (ii) stock price
volatility ranges from 33% – 109%; (iii) risk-free interest
rates ranges from 0.14% –2.53%; (iv) dividend yield of 0%;
(v) conversion prices of $1.61; and (vi) market price at the
valuation date of $1.74.





Contingent
Consideration





Thefair value of the accrued
contingent consideration was determined using a probability-weighted discounted
cash flow approach at the acquisition date and reporting date.  That
approach is based on significant inputs that are not observable in the market,
which are referred to as level 3 inputs.  As of September 30, 2010 the
Company has accrued a liability of $7.1 million for the estimated fair value of
contingent considerations expected to be payable upon the acquired company
reaching specific performance metrics over the next five years of
operations.  From the acquisition date through September 30, 2010, the
recognized amount of liability for contingent consideration increased by $1.1
million as a result of the change in the fair value from the passage of
time.





The following tables present
a reconciliation for all assets and liabilities measured at fair value on a
recurring basis, excluding accrued interest components, using significant
unobservable inputs (Level 3) for the three and nine months ended September 30,
2010 as follows (in thousands):





Balance
      at June 30, 2010
                    
                    $
                    (66,618
                    )Issuance
      of contingent equity warrant liability
                    
                    
                    -Derivative
      adjustment related to conversions and exercises
                    
                    
                    2,448Contingent
      equity liability reclassed to equity
                    
                    
                    -Contingent
      consideration
                    
                    
                    (7,092
                    )Unrealized
      loss, included in derivative gain (loss), net
                    
                    
                    (8,182
                    )Balance
      at September 30, 2010
                    
                    $
                    (79,444
                    )Balance
      at December 31, 2009
                    
                    $
                    (49,755
                    )Issuance
      of contingent equity warrant liability
                    
                    
                    (8,510
                    )Derivative
      adjustment related to conversions and exercises
                    
                    
                    9,451Contingent
      equity liability reclassed to equity
                    
                    
                    11,940Contingent
      consideration
                    
                    
                    (7,092
                    )Unrealized
      loss, included in derivative gain (loss), net
                    
                    
                    (35,478
                    )Balance
      at September 30, 2010
                    
                    $
                    (79,444
                    )





The following table presents
a reconciliation for all assets and liabilities measured at fair value on a
recurring basis, excluding accrued interest components, using significant
unobservable inputs (Level 3) for the three months ended September 30, 2009 as
follows (amounts in thousands):


25





Balance
      at June 30, 2009
                    
                    $
                    (39,036
                    )Issuance
      of compound embedded conversion option and warrants
      liabilities
                    
                    
                    3,058Unrealized
      gain, included in derivative gain (loss), net
                    
                    
                    8,186Balance
      at September 30, 2009
                    
                    $
                    (27,792
                    )





In 2009, the Company adopted
the authoritative guidance regarding non-financial assets and non-financial
liabilities that are remeasured at fair value on a non-recurring
basis.  Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable.





Investment in Open Range
Communications





The Company owns an equity
method investment in Open Range Communications. The Company’s total cash
contribution for its investment in Open Range Communications was
approximately $3.0 million.On September 14, 2010, the FCC
issued an Order denying the Company’s requested relief and suspended the
Company’s authority to operate WiMAX ATC stations in the 2483.5-2495 MHz
frequency band. As a result of this Order, the Company has ceased use of its ATC
spectrum and is unable to continue leasing spectrum to Open Range. Open Range was grantedSpecial
Temporary Authority (STA) in a limited set of markets for a period of 60 days to
provide Open Range additional time to obtain access to other spectrum and to
minimize disruption to its customers. On September 23, 2010, the FCC modified
the STA granted to Open Range, and the authorization was extended until January
31, 2011.





As a result of the regulatory
rulings by the FCC, the Company wrote off the remaining carrying value of its
equity method investment in Open Range Communications.  During the
nine months ended September 30, 2010, the Company recorded $0.5 million in
losses and a $1.9 million charge to write off its remaining investment in Open
Range Communications. During the nine months ended September 30, 2009, the
Company did not record any gains or losses on its investment in Open Range
Communications.





The following table reflects
the fair value measurements used in testing the impairment of equity method
investments and fixed assets during the nine months ended September 30, 2010 (In
thousands):





Fair Value Measurements for
      the nine months
      ended September 30, 2010 usingQuoted
                                                    Pricesin Active
                                                  
                                                  
                                                  SignificantMarkets for
                                                  
                                                  
                                                  Other
                                                  
                                                  
                                                  SignificantIdentical
                                                  
                                                  
                                                  Observable
                                                  
                                                  
                                                  UnobservableInstruments
                                                  
                                                  
                                                  Inputs
                                                  
                                                  
                                                  Inputs(Level 1)
                                                  
                                                  
                                                  (Level 2)
                                                  
                                                  
                                                  (Level 3)
                                                  
                                                  
                                                  Total LossesOther
      assets:Investment
      in Open Range Communications
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  1,903Total
      other assets measured at fair value
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  $
                                                  —
                                                  
                                                  
                                                  
                                                  1,903


26


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





Forward-Looking
Statements





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 our new simplex products, including our SPOT
satellite GPS messengerTMproducts, 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, 2009,as amended by Form 8-K filed
June 17, 2010.





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, 2009,
as amended by our Current Report on Form 8-K filed June 17,
2010.





Overview





We are a
provider of mobile voice and data communication services via satellite. Our
communications platform extends telecommunications beyond the boundaries of
terrestrial wireline and wireless telecommunications networks to serve our
customers’ desire for connectivity. Using in-orbit satellites and ground
stations, which we call gateways, we offer voice and data communications
services to government agencies, businesses and other customers in over 120
countries.





We
currently provide the following telecommunications services:





·
            two-way voice communication and
      data transmissions (which we call duplex) between mobile or fixed
      devices;





·
            one-way data transmissions (which
      we call simplex) between a mobile or fixed device that transmits its
      location or other telemetry information and a central monitoring station
      (which includes SPOT Satellite GPS Messenger
    products).





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


27


Duplex





All of our satellites launched
prior to 2007 have experienced a degradation in the performance of the
solid-state power amplifiers of the S-band communications antenna subsystem (our
“two-way communication issues”). We expect to experience the same
degradation on our 8 spare satellites launched in 2007. The S-band antenna
provides the downlink from the satellite to a subscriber’s phone or data
terminal. Degraded performance of the S-band antenna amplifiers reduces the
availability of two-way voice and data communication between the affected
satellites and the subscriber and may reduce the duration of a call. When the
S-band antenna on a satellite ceases to be functional, two-way communication is
impossible over that satellite, but not necessarily over the constellation as a
whole. We continue to provide two-way subscriber service because some of our
satellites are fully functional but at certain times in any given location it
may take longer to establish calls and the average duration of calls may be
reduced. There are periods of time each day during which no two-way voice and
data service is available at any particular location. The root cause of our
two-way communication issues is unknown, although we believe it may result from
irradiation of the satellites in orbit caused by the space environment at the
altitude that our satellites operate.





We
believe that customer reaction to the S-band antenna amplifier degradation and
our related price reductions have been the primary causes of the reductions in
duplex service revenue. If we are unable to maintain our customer base for
two-way communications service, our business and profitability may be further
materially and adversely affected. In addition, after our second-generation
satellite constellation becomes operational, we may face challenges in
maintaining our current subscriber base for two-way communications service
because we plan then to increase prices, consistent with market conditions, to
reflect our improved two-way service and coverage.





The first of four launches of
six second-generation satellites took place on October 19, 2010.  We
currently expect that the fourth launch will be completed in the summer of
2011.





28




SPOT and
Simplex


The decline in the quality of
two-way communications does not affect adversely our one-way simplex data
transmission services, including our SPOT satellite GPS messenger products and
services, which utilize only the L-band uplink from a subscriber’s simplex
terminal to the satellites. The signal is transmitted back down from the
satellites on our C-band feeder links, which are functioning normally, not on
our S-band service downlinks.





The SPOT satellite GPS
messenger is aimed at attracting both the recreational and commercial markets
that require personal tracking, emergency location and messaging solutions for
users that require these services beyond the range of traditional terrestrial
and wireless communications. Using the Globalstar simplex network and web-based
mapping software, this device provides consumers with the capability to trace or
map the location of the user on Google MapsTM. The product enables users
to transmit messages to specific preprogrammed email addresses, phone or data
devices, and to request assistance in the event of an emergency. We are
continuing to work on additional SPOT-like
applications.





Currently
we are voluntarily replacing a few thousand of the first production models of
our second-generation SPOT satellite GPS messenger device; which we believe a
portion of the cost of these replacements will be borne by the previous owners
of Axonn pursuant to the terms of our acquisition agreement with Axonn. Actual
costs of this replacement and any future product replacement or recall will
depend upon several factors, including the number of units that require repair
and administrative costs, whether the cost of any corrective action is borne
initially by us or the supplier, and, if initially borne by us, whether we will
be successful in recovering our costs from the supplier.





We work
continuously with the manufacturers of the products we sell to offer our
customers innovative and improved products. Prior to our acquisition of Axonn’s
assets, virtually all engineering, research and development costs of these new
products have been paid by the manufacturers. However, to the extent the costs
are reflected in increased inventory costs to us, and we are unable to raise our
prices to our subscribers correspondingly, our margins and profitability would
be reduced.





We introduced the SPOT
Communicator GPS Messenger product in September 2010. The DeLorme Earthmate
PN-60w is a product developed by DeLorme that has an application developed by
DeLorme and Globalstar which allows the DeLorme Earthmate to connect wirelessly
with the SPOT Communicator GPS Messenger to send custom type and text messages,
as well as, provide navigation capabilities. DeLorme is responsible for
distributing the two products together in North America. We intend the pricing
for DeLorme with SPOT Communicator GPS Messenger products and services and
equipment to be very attractive in the consumer marketplace. Annual service fees
are $99.99 for our basic level plan and $149.98 with additional tracking
capability. The equipment is sold by DeLorme to end users at $550.00 per
unit.





Independent
Gateway Operators





Our
wholesale operations encompass primarily bulk sales of wholesale minutes to the
independent gateway operators (IGO) around the globe. These IGO’s maintain their
own subscriber bases that are mostly exclusive to us and promote their own
service plans. The IGO system has allowed us to expand in regions that hold
significant growth potential but are harder to serve without sufficient
operational scale or where local regulatory requirements or business or cultural
norms do not permit us to operate directly. Our wholesale efforts also include
our simplex and duplex data tracking devices.





Currently, 13 of the 27
gateways in our network are owned and operated by unaffiliated companies, which
we call independent gateway operators, some of whom operate more than one
gateway. We have no financial interest in theseIGO’sother than arms’ length
contracts for wholesale minutes of service. Some of theseIGO’shave been unable to grow
their businesses adequately due in part to limited resources.Old Globalstar initially
developed theIGOacquisition strategy to
establish operations in multiple territories with reduced demands on its
capital. In addition, there are territories inwhich for political or other
reasons, it is impractical for us to operate directly. We sell services to theIGO’son a
wholesale basis and they resell them to their customers on a retail
basis.





We have acquired, and
intendto
continue to pursue the acquisition of, independent gateway operators when we
believe we can do so on favorable terms and the current independent operator has
expressed a desire to sell its assets to us, subject to capital availability. We
believe that these acquisitions can enhance our results of operations in three
respects. First, we believe that, with our greater financial and technical
resources, we can grow our subscriber base and revenue faster than some of the
independent gateway operators. Second, we realize greater margin on retail sales
to individual subscribers than we do on wholesale sales to independent gateway
operators. Third, we believe expanding the territory we serve directly will
better position us to market our services directly to multinational customers
who require a global communications provider.





However, acquisitions ofIGO’sdo require
us to commit capital for acquisition of their assets, as well as management
resources and working capital to support the gateway operations, and therefore
increase our risk in operating in these territories directly rather than through
the independent gateway operators. In addition, operating the acquired gateways
increases our marketing, general and administrative expenses. Our Facility
Agreement limits to $25.0 million the aggregate amount of cash we may
invest in foreign acquisitions without the consent of our lenders and requires
us to satisfy certain conditions in connection with any
acquisition.


29


In June 2009, we entered into
a business transfer agreement (BTA Agreement) with LG Dacom, the independent
gateway operator in Korea, to acquire its gateway and other Globalstar assets
for approximately $1.0million in cash. In January
2010, we entered into a joint venture agreement with Arion Communications Co.
This joint venture assumed the BTA Agreement and completed the Korean
acquisition in the second quarter of 2010.





We are unable to predict the
timing or cost of further acquisitions because independent gateway operations
vary in size and value.





Ancillary
Terrestrial Component (ATC)





We are
licensed to use approximately 25 MHz of global satellite
spectrum.  Within the United States, we are authorized to utilize
8.725 MHz of spectrum within the L-Band (1610.0 to 1618.725) and 16.5 MHz of
spectrum within the S-Band (2483.5 to 2500.0) to operate a mobile satellite
service (MSS) system.




In 2003,
the Federal Communications Commission adopted rules to permit ATC operations,
concluding that authorizing ATC would advance the public interest by
facilitating increased network capacity, more efficient use of spectrum,
extension of coverage to places where MSS operators have previously been unable
to offer reliable service, improved emergency communications, enhanced
competition, and economies of scale in handset
manufacture.  Specifically, ATC consists of terrestrial base stations
and mobile terminals that are licensed to an MSS operator such as
us.




In order
for us to obtain the authority to utilize the ATC of our spectrum
assignment, we must meet certain “gating criteria” prescribed by the
Commission.  Specifically, we must be able to provide continuously
available satellite service in specified geographic areas, maintain an in-orbit
spare satellite, and make MSS commercially available throughout the required
coverage area.   We must also provide an integrated service
offering that includes both ATC and MSS services.




In 2006,
the Commission granted us the authority to operate ATC base stations and
dual-mode MSS/ATC mobile terminals over a limited portion of our domestic
spectrum.  In 2008, the Commission expanded our ATC frequency
assignment to include the full 19.275 MHz of domestic spectrum assigned
exclusively to us.




In 2008,
the Commission granted authority for us to lease a portion of our ATC spectrum
to Open Range Communications, Inc. (Open Range), permitting Open Range to
construct and operate a two-way ATC network using the WiMAX air interface
protocol.  In this decision, the Commission noted that we were not in
compliance with certain gating criteria but concluded that it would grant
temporary waivers of the ATC gating criteria, subject to our meeting
certain specified conditions.  The first such condition required that
we come into compliance with the MSS coverage and spare satellite gating
criteria no later than July 1, 2010.  On December 14, 2009, we filed a
modification application requesting that the Commission extend the July 1, 2010
deadline by sixteen (16) months due to delays experienced in the launch
of our second generation constellation.  We also requested a
16-month extension of the deadline to have high-speed MSS chipsets in production
quantities and the deadline to commence provision of two-way MSS to users with
dual-mode MSS/ATC terminals.




On
September 14, 2010, the Commission denied our requested extensions and suspended
our authority to operate WiMAX ATC stations pursuant to the lease with Open
Range.  We will not seek further review of this Commission
decision.




On July
15, 2010, the Commission began a rulemaking proceeding to consider revisions to
the existing gating criteria that would permit more flexibility to MSS operators
in offering ATC services.  We have filed comments and reply comments
in this proceeding and are actively pursuing relief therein.




Once we
complete the launch of our second generation constellation and otherwise come
into compliance with the existing gating criteria, or the revised criteria
resulting from the Commission’s rulemaking, we expect the Commission to
eliminate the ordered suspension, after which we would be able to resume
the ability to lease our spectrum for ATC use.





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 retail, IGO and simplex
  businesses;


30


•
            operating income, which is an
      indication of our
performance;





•
            EBITDA, which is an indicator of
      our financial performance;
and





•
            capital expenditures, which are
      an indicator of future revenue growth potential and cash
      requirements.





Results of
Operations





Executive
Summary





Three
Months:Total revenue increased by
approximately$0.7, million, or
4%, to$18.2
millionfor the
three months ended September 30, 2010,from$17.5 million for the three
months ended September 30, 2009. The primary reason for the increase is the
focus on equipment sales and activations related to our simplex products. This
increase was partially offset by decreases in service revenue in our duplex
business. Our duplex business is being affected by our two-way communication
issues and, despite our efforts to maintain our duplex subscriber base by
lowering prices for our duplex products, our duplex subscriber base decreased
5% during the
three months ended September 30, 2010 compared to the corresponding period in
2009.





Our ARPU forsimplex during the three
months ended September 30, 2010, increased by
9% to $6.68from$6.11 for the same period in
2009. This increase resulted from a shift in product mix to our higher priced
SPOT satellite GPS messenger products compared to other simplex
products.





Total operating expenses
increased $2.3 million, or approximately 8%, to $31.5 million for the three
months ended September 30, 2010, from $29.2 million for the same period in
2009. This increase wasdueprimarily to higher costs of
equipment sold as a result of higher equipment sales related to oursimplexproductscombined with increased
expediting fees paid to suppliers to accelerate the delivery of products
experiencing extended lead time.  There was alsoincreased amortization and
accretionexpense related to the Axonn acquisition in December
2009.





Other income (expense)
decreased by$17.4 million to ($11.2)
millionfor the
three months ended September 30, 2010, as compared to the same period in
2009. This decrease was primarilyduetoour derivative losses,
primarily due to the change in stock prices, and an impairment of our investment
in Open Range Communications.





Nine
Months:Total revenue increased by$3.0
million,or
approximately6%,from$48.4 million for the nine
months ended September 30, 2009 to $51.4 millionfor the nine months ended
September 30, 2010. We attribute this increase to higher service and
equipment revenues as a result of gains in oursimplex subscriber base and
increases in our ARPU forsimplex products. The increase
in oursimplex sales was partially
offset by decreases in service revenue and equipment sales in our duplex
business. Our duplex business is being affected by our two-way communication
issues and, despite our efforts to maintain our duplex subscriber base by
lowering prices for our duplex products, our duplex subscriber base
decreased 6% at
September 30, 2010 compared to September 30, 2009. In contrast, oursimplex subscriber base
increased by31% for the same
period.





Our ARPU forsimplex during the nine months
ended September 30, 2010, increased by18% to $6.66 from
$5.63for the
same period in 2009. This increase resulted from a shift in product mix to our
higher priced SPOT Satellite GPS messenger products compared to othersimplex
products.





Total operating expenses decreased
$7.9million, or
approximately 9%, from $90.3 million for the nine months ended
September 30, 2009 to $82.4 million for the nine months ended
September 30, 2010. This decrease was due primarily to lower costs ofservices,
reductionsofstock-based compensation
expensedue to
forfeitures,
reduced marketing and advertising expenses,andlower employee related
expenses due to reductions in our headcount, which were offset by higher costs
ofequipment
sold as a result of higher equipment sales related to oursimplexproductscombined with increased
expediting fees paid to suppliers to accelerate the delivery of products
experiencing extended lead time.  There was alsoincreased amortization and
accretionexpense related to the Axonn acquisition in December
2009.





Otherincome (expense)decreased by $49.1 million to ($48.3
million)for the
nine months ended September 30, 2010 as compared to the same period in
2009. This
decrease wasprimarilyduetoour derivative losses,
primarily due to the change in stock prices, and animpairment of our investment
in Open Range Communicationsduring the nine months ended
September 30, 2010.





Revenue





Service
Revenue.





The following table sets
forth amounts and percentages of our revenue by type of service for the three
and nine month periods ended September 30, 2010 and 2009 (In
thousands).


31





Three months ended
                    September 30, 2010
                  
                  
                  Three months ended
                    September 30, 2009
                  
                  
                  Nine months ended
                    September 30, 2010
                  
                  
                  Nine months ended
                    September 30, 2009Revenue
                  
                  
                  % of Total
                    Revenue
                  
                  
                  Revenue
                  
                  
                  % of Total
                    Revenue
                  
                  
                  Revenue
                  
                  
                  % of Total
                    Revenue
                  
                  
                  Revenue
                  
                  
                  % of Total
                    RevenueService
      Revenue:Mobile
                  
                  $
                  5,391
                  
                  
                  
                  30
                  %
                  
                  $
                  7,215
                  
                  
                  
                  41
                  %
                  
                  $
                  16,293
                  
                  
                  
                  32
                  %
                  
                  $
                  20,501
                  
                  
                  
                  42
                  %Fixed
                  
                  
                  353
                  
                  
                  
                  2
                  
                  
                  
                  571
                  
                  
                  
                  3
                  
                  
                  
                  1,250
                  
                  
                  
                  2
                  
                  
                  
                  1,821
                  
                  
                  
                  4Data
                  
                  
                  149
                  
                  
                  
                  1
                  
                  
                  
                  160
                  
                  
                  
                  1
                  
                  
                  
                  439
                  
                  
                  
                  1
                  
                  
                  
                  450
                  
                  
                  
                  1Simplex/SPOT
                  
                  
                  5,634
                  
                  
                  
                  31
                  
                  
                  
                  3,684
                  
                  
                  
                  21
                  
                  
                  
                  14,808
                  
                  
                  
                  29
                  
                  
                  
                  9,246
                  
                  
                  
                  19IGO
                  
                  
                  252
                  
                  
                  
                  1
                  
                  
                  
                  (33
                  )
                  
                  
                  —
                  
                  
                  
                  824
                  
                  
                  
                  2
                  
                  
                  
                  803
                  
                  
                  
                  2Other
                  
                  
                  1,610
                  
                  
                  
                  8
                  
                  
                  
                  1,663
                  
                  
                  
                  10
                  
                  
                  
                  5,137
                  
                  
                  
                  9
                  
                  
                  
                  4,132
                  
                  
                  
                  8Total
      Service Revenue
                  
                  $
                  13,389
                  
                  
                  
                  73
                  %
                  
                  $
                  13,260
                  
                  
                  
                  76
                  %
                  
                  $
                  38,751
                  
                  
                  
                  75
                  %
                  
                  $
                  36,953
                  
                  
                  
                  76
                  %





The following table sets
forth our average number of subscribers and ARPU for retail, IGO and simplex
customers for the three and nine month periods ended September 30, 2010 and
2009. The following numbers are subject to immaterial rounding inherent in
calculating averages.





Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  % Net
                    Change
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  % Net
                    ChangeAverage
      number of subscribers for the period:Retail
                  
                  
                  105,992
                  
                  
                  
                  111,203
                  
                  
                  
                  (5
                  )%
                  
                  
                  105,928
                  
                  
                  
                  112,792
                  
                  
                  
                  (6
                  )%IGO
                  
                  
                  60,437
                  
                  
                  
                  67,545
                  
                  
                  
                  (11
                  )
                  
                  
                  62,283
                  
                  
                  
                  72,538
                  
                  
                  
                  (14
                  )Simplex/SPOT
                  
                  
                  255,610
                  
                  
                  
                  198,151
                  
                  
                  
                  29
                  
                  
                  
                  237,723
                  
                  
                  
                  181,026
                  
                  
                  
                  31ARPU
      (monthly):Retail
                  
                  $
                  23.89
                  
                  
                  
                  27.60
                  
                  
                  
                  (13
                  )
                  
                  $
                  23.45
                  
                  
                  
                  25.49
                  
                  
                  
                  (8
                  )IGO
                  
                  
                  1.39
                  
                  
                  
                  (0.16
                  )
                  
                  
                  969
                  
                  
                  
                  1.47
                  
                  
                  
                  1.23
                  
                  
                  
                  20Simplex/SPOT
                  
                  
                  6.68
                  
                  
                  
                  6.11
                  
                  
                  
                  9
                  
                  
                  
                  6.66
                  
                  
                  
                  5.63
                  
                  
                  
                  18





September 30, 2010
                              
                              
                              September 30, 2009
                              
                              % Net ChangeEnding
      number of subscribers:Retail
                              
                              
                              105,301
                              
                              
                              
                              110,293
                              
                              
                              
                              (5
                              )%IGO
                              
                              
                              59,896
                              
                              
                              
                              65,598
                              
                              
                              
                              (9
                              )Simplex/SPOT
                              
                              
                              266,585
                              
                              
                              
                              206,422
                              
                              
                              
                              29Total
                              
                              
                              431,782
                              
                              
                              
                              382,313
                              
                              
                              
                              13
                              %





·
                Three
      Months:Service revenue
      increased $0.1 million, or approximately 1%, to $13.4 million for the
      three months ended September 30, 2010, from $13.3 million for the
      same period in 2009. We attribute this increase to oursimplex subscriber base
      and oursimplex ARPU increasing
      by 29% and 9%, respectively. In particular, we generated increased service
      revenue from our SPOT Satellite GPS messenger services as a result of
      additional SPOT service subscribers and prior year SPOT service
      subscribers’ renewing their annual subscriptions. These gains insimplex were partially
      offset by a decrease in our duplex business resulting from our two-way
      communication issues and, in response, reductions of our prices for duplex
      services.


·
                Nine
      Months:Service
      revenue increased $1.8 million, or approximately 5%, from $37.0 million
      for the nine months ended September 30, 2009 to $38.8 million for the nine
      months ended September 30, 2010. We attribute this increase to oursimplex
      subscriber base and oursimplex
      ARPU increasing
      at 31% and
      18%, respectively. In particular, we generated increased service revenue
      from our SPOT Satellite GPS messenger services as a result of additional
      SPOT service subscribers and prior year SPOT service subscribers’ renewing
      their annual subscriptions. These gains insimplex
      were partially offset by a decrease in our duplex business resulting from
      our two-way communication issues and, in response, reductions of our
      prices for duplex
services.


32


Subscriber Equipment
Sales





The following table sets
forth amounts and percentages of our revenue for equipment sales for the three
and nine month periods ended September 30, 2010 and 2009 (In
thousands).





Three months ended
                      September 30, 2010
                    
                    
                    Three months ended
                      September 30, 2009
                    
                    
                    Nine months ended
                      September 30, 2010
                    
                    
                    Nine months ended
                      September 30, 2009Revenue
                    
                    
                    % of Total
                      Revenue
                    
                    
                    Revenue
                    
                    
                    % of Total
                      Revenue
                    
                    
                    Revenue
                    
                    
                    % of Total
                      Revenue
                    
                    
                    Revenue
                    
                    
                    % of Total
                      RevenueSubscriber
      Equipment Sales:Mobile
                    
                    $
                    498
                    
                    
                    
                    3
                    %
                    
                    $
                    492
                    
                    
                    
                    3
                    %
                    
                    $
                    1,306
                    
                    
                    
                    3
                    %
                    
                    $
                    2,111
                    
                    
                    
                    4
                    %Fixed
                    
                    
                    62
                    
                    
                    
                    —
                    
                    
                    
                    46
                    
                    
                    
                    —
                    
                    
                    
                    141
                    
                    
                    
                    —
                    
                    
                    
                    159
                    
                    
                    
                    —Data
      and Simplex
                    
                    
                    4,164
                    
                    
                    
                    23
                    
                    
                    
                    1,840
                    
                    
                    
                    11
                    
                    
                    
                    11,082
                    
                    
                    
                    22
                    
                    
                    
                    6,136
                    
                    
                    
                    13Accessories/Misc.
                    
                    
                    110
                    
                    
                    
                    1
                    
                    
                    
                    1,883
                    
                    
                    
                    10
                    
                    
                    
                    136
                    
                    
                    
                    —
                    
                    
                    
                    3,041
                    
                    
                    
                    7Total
      Subscriber Equipment Sales
                    
                    $
                    4,834
                    
                    
                    
                    27
                    %
                    
                    $
                    4,261
                    
                    
                    
                    24
                    %
                    
                    $
                    12,665
                    
                    
                    
                    25
                    %
                    
                    $
                    11,447
                    
                    
                    
                    24
                    %





·
              Three
      Months:Subscriber equipment sales increased by approximately $0.5 million, or
      13%, to $4.8 million for the three months ended September 30, 2010,
      from $4.3 million for the same period in 2009. The increase was due
      primarily to a148%
      increase in sales of oursimplex
      products, primarily the SPOT Satellite GPS messenger,during the three months ended September 30, 2010 compared to the
      three months ended September 30, 2009.This
      increase was offset by revenue recognized under the percentage of
      completion method of accounting for the sale and construction of gateway
      assets of $0 million in 2010 and $2.2 million in
    2009.


·
              Nine
      months:Subscriber equipment sales increased by approximately $1.2 million or
      approximately 11% from $11.5 million for the nine months ended
      September 30, 2009 to $12.7 million for the nine months ended
      September 30, 2010. The increase was due primarily to a 90% increase
      in sales of our simplex products, primarily the SPOT Satellite GPS
      messenger during the nine months ended September 30, 2010 compared to
      the nine months ended September 30, 2009. This increase was offsetby
      revenue recognized under the percentage of completion method of accounting
      for the sale and construction of gateway assets of $0 million in 2010 and
      $3.2 million in 2009.


Operating
Expenses





Cost of
Services





·
              Three
      Months:Our
      cost of services for the three months ended September 30, 2010 and2009was
      $8.0 million and $9.4 million,respectively. Our cost of services is comprised primarily of network
      operating costs, which are generally fixed in nature. This decrease was
      due primarily toreductions
      in research and development
costs.


·
              Nine
      Months:Our
      cost of services for the nine months ended September 30, 2010 and
      2009 was $22.6 million and $27.8 million,respectively.  Our cost of services is comprised primarily of
      network operating costs, which are generally fixed in nature. This
      decrease was due primarily toreductions
      ofstock-based compensation expensedue
      to forfeitures.





Cost of
Subscriber Equipment Sales





·
              Threeand
      NineMonths:Cost
      of subscriber equipment sales increased approximately $1.3 million, or
      67%, to $3.3 million for the three months ended September 30, 2009.Additionally,
      Cost of subscriber equipment sales increased $0.9 million, or
      approximately 11%, from $8.5 million for the nine months ended
      September 30, 2009 to $9.4 million.Theseincreasesweredue
      primarily to increasedcosts
      ofequipment
      sold as a result of higher equipment sales related to our simplex products
      combined with increased expediting fees paid to suppliers to accelerate
      the delivery of products experiencing extended lead
      time.





Marketing,
General and Administrative.





·
              Three
      Months:Marketing,
      general and administrative expenses increased approximately
      $0.6million, or 5%, to $12.9 million for the three months ended
      September 30, 2010, from $12.3 million for the same period in 2009.
      This increase was due to employee severance costs and increased legal fees
      relating to FCC rulings and launch
  licenses.


·
              Nine
      Months:Marketing, general and administrative expenses decreased $6.5 million, or
      approximately 17%, from $37.7 million for the nine months ended
      September 30, 2009 to $31.2 million for the nine months ended
      September 30, 2010. This decrease was due primarily to reductions of
      stock-based compensation expense due to forfeitures, lower marketing and
      advertising costs and decreases in payroll and related expenses as our
      average headcount decreased in the nine months ended September 30, 2010,
      compared to the same period in
  2009.


33


Depreciation,Amortization, and
Accretion.





·
              Three
      Months:Depreciation,amortizationand
      accretionexpense increased approximately $1.8 million for the three months ended
      September 30, 2010 from the same period in 2009. The increase
      primarily relates to the amortization of the intangible assets acquired
      from Axonn in December 2009 and the related accretion expense of the fair
      value ofthe
      contingent consideration.


·
              Nine
      Months:Depreciation,amortization, and
      accretionexpense increased approximately $2.8 million, or approximately 17%, from
      $16.4 million for the nine months ended September 30, 2009 to$19.2 million for the
      nine months ended September 30, 2010. The increaserelatesprimarilyto the amortization of
      the intangible assets acquired from Axonn in December 2009 and the related
      accretion expense of the fair value ofcontingent
      consideration.





Other Income
(Expense)





Interest
Expense.





·
              Three
      Months:Interest
      expense decreased by $0.6 million to $1.2 million for the three months
      ended September 30, 2010, from $1.8 million for the same period in
      2009.This
      decrease is due to conversion of notes to Common Stock in prior periods,
      which resulted in a write-off of a portion of the deferred financing costs
      at the time of conversion.  This resulted in less amortization
      in the current period.


·
              NineMonths:Interest
      expense decreased by $1.4 million to $3.8 million for the nine months
      ended September 30, 2010 from $5.1 million for the nine months ended
      September 30, 2009.This
      decrease is due to conversion of notes to Common Stock in prior periods,
      which resulted in a write-off of a portion of the deferred financing costs
      at the time of conversion.  This resulted in less amortization
      in the current period.





Derivative
loss.





·
              Three
      Months:Derivative
      losses increased by $15.1 million for the three months ended
      September 30, 2010 to a loss of $9.2 million as compared to a gain of
      $6.0 million during the same period in 2009. These losses are due
      primarily to the fair value adjustment to our derivativeassets andliabilities.An
      increase in stock price is one input to the fair value calculation of the
      derivative that would increase the fair value.  There are many
      other factors that go into the valuation.We
      record this increase in the derivative liabilities as a loss on ourstatement
      ofoperations;
      however, these expenses related to derivatives are non-cash and do not
      affect our liquidity.


·
              Nine
      Months:Derivative
      loss increased by $47.4
      millionfor
      the nine months ended September 30, 2010,compared
      to the same period in 2009. These losses are due primarily to the fair
      value adjustment to our derivativeassets
      and liabilities. An increase in stock price is one input to the fair value
      calculation of the derivative that would increase the fair
      value.  There are many other factors that go into the
      valuation.We
      record thisincrease in the derivative liabilitiesasa loss
      on ourstatement
      ofoperations;
      however, these expenses related to derivatives are non-cash costs and do
      not affect our
liquidity.


34


Liquidity and Capital
Resources





Cash Flows for the Nine
Months Ended September 30, 2010 Compared with the Nine Months Ended September
30, 2009





The following table shows our
cash flows from operating, investing, and financing activities for the nine
months ended September 30, 2010 and 2009:





Nine Months Ended
                      September 30, 2010
                    
                    
                    Nine Months Ended
                      September 30, 2009Net
      cash from operating activities
                    
                    $
                    (7,688
                    )
                    
                    $
                    (27,468
                    )Net
      cash from investing activities
                    
                    
                    (161,902
                    )
                    
                    
                    (240,113
                    )Net
      cash from financing activities
                    
                    
                    159,304
                    
                    
                    
                    387,056Effect
      of exchange rate changes on cash
                    
                    
                    (143
                    )
                    
                    
                    (133
                    )Net
      increase in cash and cash equivalents
                    
                    $
                    (10,429
                    )
                    
                    $
                    119,342





Cash Flows Used by Operating
Activities





·
              Net
      cash usedbyoperating activities during the nine months ended September 30, 2010
      was $7.7million,
      compared to $27.5 million in the same period in 2009. Thisdecrease
      in cash used wasprimarilythe
      result of reductions in our net loss from operations andfavorable changes in operating assets and liabilities during the nine
      months ended September 30, 2010, as compared to the same period in
      2009.





Cash Flows Used in Investing
Activities





·
              Cash
      used in investing activities was $161.9millionduring the nine months ended September 30, 2010, compared to $240.1
      million during the same period in 2009. Thisdecrease
      in cash used for the nine months ended September 30, 2010 when compared to
      the nine months ended September 30, 2009 was primarily the result ofdecreased
      payments related to the construction of our second generation
      constellation during the nine months ended September 30,
      2010.


·
              We will incur significant capital
      expenditures to complete the construction and launch our second-generation
      satellite constellationand
      upgradeour
      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.





CashFlows Provided
byFinancing
Activities





·
              Net
      cash provided by financing activities decreased by $227.8 million to
      $159.3 million during the nine months ended September 30, 2010, from
      $387.1 million during the same period in 2009. Thedecrease
      was due primarily to lower funding needs related to the
      construction of our second generation satellite constellation and related
      ground facilities. We funded these activities by borrowing under our
      Facility Agreement. We spent approximately$157.4million on these projects during the nine months ended September 30,
      2010
      compared to approximately $250.3million in the nine months ended September 30, 2009. We also madenonon-recurring debt financing payments in the ninemonths ended September 30, 2010 compared to $62.7 million for the nine
      months ended September 30, 2009.





Capital
Expenditures





First 24 Second-Generation
Satellitesand
Satellite Operations Control Centers





We have entered into various
agreementsrelated to procuring and
deployingthe
first 24 satellites ofour second-generation
constellation and upgrading oursatellite operations control
centers.We have used portions of the
proceeds from sales of common stock to Thermo, the proceeds from our initial
public offering, the net proceeds from the sale of the 5.75% Notes and 8% Notes
and borrowings under our credit facility with Thermo and the Facility Agreement
to fund expenditures incurred through September 30,
2010.





We plan to fund the balance
of the capital expendituresfor the first 24
second-generation satellitesthrough the use of the
remaining funds available under our Facility Agreement, cash on hand,and cash flows from
operations.


35


The amount of actual and
contractual capital expenditures related to the construction of thefirst 24 satellites of oursecond-generation
constellation and satellite operations control centers and the launch services
contract is presented in the table below (in
millions):





Currency
                      
                      Payments
                        through
                        September 30,
                      
                      
                      Estimated Future PaymentsContract
                      
                      of Payment
                      
                      2010
                      
                      
                      2010
                      
                      
                      2011
                      
                      
                      2012
                      
                      
                      Thereafter
                      
                      
                      TotalThales
      Alenia Second Generation Constellation
                      
                      EUR
                      
                      €
                      409
                      
                      
                      €
                      32
                      
                      
                      €
                      12
                      
                      
                      €
                      —
                      
                      
                      €
                      —
                      
                      
                      €
                      453Thales
      Alenia Satellite Operations Control Centers
                      
                      EUR
                      
                      €
                      10
                      
                      
                      €
                      0.7
                      
                      
                      €
                      0.3
                      
                      
                      €
                      —
                      
                      
                      €
                      —
                      
                      
                      €
                      11Arianespace
      Launch Services
                      
                      USD
                      
                      $
                      189
                      
                      
                      $
                      13
                      
                      
                      $
                      14
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      216Launch
      Insurance
                      
                      USD
                      
                      $
                      12
                      
                      
                      $
                      —
                      
                      
                      $
                      28
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      40





Second24 Second-Generation
Satellites,
Gateways, and Other Ground Facilities





We have also entered into
various agreementsrelated to procuringthe second 24
satellites ofour second-generation
constellation and upgrading our gateways and other ground facilities.We plan to fund the balance
of the capital expendituresfor the second 24
second-generation satellites and upgrading our gateways and other ground
facilitiesthrough cash flows from
operationsandadditional debt and equity
financings not yet arranged (if necessary).





The amount of actual and
contractual capital expenditures related to the construction of thesecond 24 satellites of oursecond-generation
constellation,
ground component and related costs, excluding launch services and launch
insurance which has not been finalized at this time, is presented in the
table below (in millions):





Currency
                      
                      Payments
                        through
                        September 30,
                      
                      
                      Estimated Future PaymentsContract
                      
                      of Payment
                      
                      2010
                      
                      
                      2010
                      
                      
                      2011
                      
                      
                      2012
                      
                      
                      Thereafter
                      
                      
                      TotalThales
      Alenia Second Generation Constellation
                      
                      EUR
                      
                      €
                      —
                      
                      
                      €
                      —
                      
                      
                      €
                      17
                      
                      
                      €
                      73
                      
                      
                      €
                      136
                      
                      
                      €
                      226Hughes
      second-generation ground component (including research and development
      expense)
                      
                      USD
                      
                      $
                      46
                      
                      
                      $
                      4
                      
                      
                      $
                      37
                      
                      
                      $
                      16
                      
                      
                      $
                      —
                      
                      
                      $
                      103Ericsson
                      
                      USD
                      
                      $
                      1
                      
                      
                      $
                      1
                      
                      
                      $
                      8
                      
                      
                      $
                      15
                      
                      
                      $
                      3
                      
                      
                      $
                      28


Cash
Position and Indebtedness





As of
September 30, 2010, our total cash and cash equivalents were $57.5 million and
we had total indebtedness of $625.5 million compared to total cash and cash
equivalents and total indebtedness at December 31, 2009 of $67.9 million and
$465.8 million, respectively.




Facility
Agreement





On June 5, 2009, we
entered into a $586.3 million senior secured facility agreement (the “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. Ninety-five percent of our
obligations under the agreement are guaranteed by COFACE, the French export
credit agency.  The initial funding process of the COFACE Facility
Agreement began on June 29, 2009 and was completed on July 1, 2009.
The new facility is comprised of:





•
            a $563.3 million tranche for
      future payments to and to reimburse us for amounts we previously paid to
      Thales Alenia Space for construction of our second-generation satellites.
      Such reimbursed amounts will be 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
      Federal 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 will
      be used to make payments to Arianespace for launch services and to pay a
      portion of the insurance premium to
  COFACE.





The facility will mature 96
months after the first repayment date.  Scheduled semi-annual principal
repayments will begin the earlier of eight months after the first launch of the
first 24 satellites from the second generation constellation or
December 15, 2011. The facility bears interest at a floating LIBOR
rate, capped at 4%, plus 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
requires that:





•
            we not permit our capital
      expenditures (other than those funded with cash proceeds from insurance
      and condemnation events, equity issuances or the issuance of our stock to
      acquire certain assets) to exceed $391.0 million in 2009 and $234.0
      million in 2010 (with unused amounts permitted to be carried over to
      subsequent years)





•
            after the second scheduled
      interest payment, 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):





Period
                              
                              Minimum Amount1/1/09-12/31/09
                              
                              $
                              (25.0) million7/1/09-6/30/10
                              
                              $
                              (21.0) million1/1/10-12/31/10
                              
                              $
                              (10.0) million7/1/10-6/30/11
                              
                              $
                              10.0 million1/1/11-12/31/11
                              
                              $
                              25.0 million7/1/11-6/30/12
                              
                              $
                              35.0 million1/1/12-12/31/12
                              
                              $
                              55.0 million7/1/12-6/30/12
                              
                              $
                              65.0 million1/1/13-12/31/13
                              
                              $
                              78.0 million


36





•
            beginning in 2011, we maintain a
      minimum debt service coverage ratio of 1.00:1, gradually increasing to a
      ratio of 1.50:1 through
2019;





•
            beginning
      in 2012, we maintain a maximum net debt to adjusted consolidated EBITDA
      ratio of 9.90:1, gradually decreasing to 2.50:1 through
    2019;





Our obligations under the
facility 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 are required to pay the
borrowings without penalty on the last day of each interest period after the
full facility has been borrowed or the earlier of seven months after the launch
of the second generation constellation or November 15, 2011, but amounts repaid
may not be reborrowed. 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 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.





By letter
dated September 16, 2010, the COFACE Agent notified us that we had failed to
deliver to the COFACE Agent a certified copy of the relevant license not later
than twenty-five (25) business days prior to the first launch of the satellites,
constituting a “breach” that had triggered a default.  As such, the
COFACE Agent instituted a draw stop, prohibiting us from utilizing the Facility
Agreement until the default has been remediated or waived, but did not take any
action to accelerate the debt.  The COFACE Agent provided a remedy
period to cure the breach by September 30, 2010.  On October 28, 2010,
we entered into an amendment and cancelation agreement with the COFACE bank
syndicate, which canceled the original notification of default entirely and
amended the Facility Agreement so that we are required to provide (1) a
satellite communication license issued by French regulatory authorities no later
than November 30, 2010, and (2) a satellite communication license issued by U.S.
regulatory authorities no later than February 28, 2011.  Under the
amendment, we were prohibited from borrowing under the Facility Agreement until
we provided the required license issued by the French regulatory authorities,
and once that was provided, we could resume borrowing while pursuing the license
from the U.S. authorities.  The amendment also includes a provision
that we and the COFACE bank syndicate agent agree that failing to provide either
of the licenses would constitute an event of default.  On October 28,
2010, we obtained authorization for the required license from the French
authorities, ending the prohibition on borrowings under the Facility
Agreement.  Management believes that we will be able to provide the
required U.S. license within the designated period, and that we will be able to
meet its other debt covenants for at least the next 12
months.  Accordingly, borrowings under the Facility Agreement have
been classified as noncurrent on our consolidated Balance Sheet at September 30,
2010.





SeeNote5of our Unaudited Interim
Consolidated Financial Statements for descriptionsof our other debt
agreements.





Short Term Liquidity
Needs





At October 1, 2010, our
principal short-term liquidity needs were:





·
            to
      make payments to procure our second-generation satellite
      constellation;





·
            to make payments related to our
      launch for the second-generation satellite
      constellation;





·
            to make payments related to the
      construction of our Control Network Facility and second-generation ground
      component; and





·
            to fund our working
      capital.





We plan to fund our
short-term liquidity requirements from the following
sources:





·
              Cash
      from our Facility Agreement ($62.0 million was available at September
      30, 2010); and





·
              Cash
      on hand at September 30, 2010 ($57.5
million).


37


Based on our operating plan
combined with ourcash on hand, ourborrowing
capacity under ourFacility
Agreement, and
our contingent equity account, we believe we will have
sufficient resources to meet our cash obligations for at least the next 12
months.





Long Term Liquidity
Needs





Our principal long-term
liquidity needs are:


·
              To pay the costs of procuring and
      deploying our second-generation satellite constellation and upgrading our
      gateways and other ground
facilities;





·
            to fund our working capital,
      including any growth in working capital required by growth in our
      business;





·
            to
      fund the cash requirements of our independent gateway operator acquisition
      strategy, in an amount not determinable at this time;
  and





·
            to
      fund repayment of our indebtedness when
due.





Sources of long-term
liquidity may include, if necessary, the exercise of warrants and additional
debt and equity financings which have not yet been arranged. We also expect cash
flow from operations to be a source of long-term liquidity once we have deployed
our second-generation satellite constellation.





Contractual Obligations and
Commitments





There have been no
significant changesto our contractual
obligations and commitments since December 31, 2009.





Off-Balance Sheet
Transactions





We have no
materialoff-balance sheet
transactions.





Critical Accounting Policies
and Estimates





There have been no material
changes to our critical accounting policies and estimates described in
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in our Annual Report on Form 10-K for the year ended December 31,
2009.





Recently Issued Accounting
Pronouncements





The information provided
under “Note
1: The Company
and Summary of Significant Accounting Policies — Recent Accounting
Pronouncements”
of the notes to unaudited interim consolidated financial statements in Part I, Item
1 of this Report is incorporated herein by reference.





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 reals 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. However, our Facility Agreement requires us to do so on
terms reasonably acceptable to the COFACE agent not later than 90 days after the
end of any quarter in which more than 25% of our revenue is originally
denominated in a single currency other than U.S. or Canadian
dollars.





We have entered into two
separate contracts with Thales Alenia Space to construct 48 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 is denominated in
Euros.


38


Our exposure toreductionsin currency exchange rates
has decreased as a result of certain portions of our contracts for the
construction of our second-generation constellation satellite and the related
control network facility, which are payableprimarily in Euros, are at a
fixed exchange rate. A 1.0% decline in the relative value of the U.S. dollar, on
the remaining balance not at a fixed exchange rate of approximately €227 million
onSeptember 30,
2010, would result in$3.2 millionof additional payments.See
“Note 4:
Property and Equipment” of the unaudited interim
consolidated financial statements in Part I, Item 1 of this
Report.





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 chief executive officer and chief 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
September 30, 2010, 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 inInternal
Control—Integrated Frameworkissued 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
chief executive officer and chief financial officer concluded that as of
September 30, 2010 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 chief executive
officer and chief financial officer, as appropriate, to allow timely decisions
regarding required disclosure.





We believe that the
consolidated financial statements included in this Report fairly present, in all
material respects, our consolidated financial position and results of operations
as of and for the three and nine months ended September 30,
2010.





(b)           Changes in internal
control over financial reporting.





As of September 30,
2010, our management, with the participation of our chief executive officer and
chief financial officer, evaluated our internal control over financial
reporting. Based on that evaluation, our CEO and CFO concluded that there were
no changes in our internal control over financial reporting that occurred during
the quarter ended September 30, 2010, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





PART II: OTHER
INFORMATION





Item 1. Legal
Proceedings





We are involved in certain
litigation matters as discussed elsewhere in this Report. For more detailed
information on litigation matters outstanding please seeNote 13of the Notes to unaudited
interim
consolidated financial statements in Part I, Item 1 of this Report.
From time to time, we are involved in various other litigation matters involving
ordinary and routine claims incidental to our business. Management currently
believes that the outcome of these proceedings, either individually or in the
aggregate, will not have a material adverse effect on our business, results of
operations or financial conditions.


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. With the exception of the risk outlined below, 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, 2009, as
amended by Form 8-K filed June 17, 2010.


39


The
failure to attract and retain skilled personnel could impair our
operations.





In July 2010, we announced
our intention to relocate substantial portions of our operations to a facility
in Louisiana. This may lead to significant personnel turnover in all areas of
our business. Our performance is substantially dependent on the performance of
our senior management and key scientific and technical personnel.  The
employment of these individuals and our other personnel is terminable at will
with short or no notice.  The loss of the services of any member of
our senior management, scientific or technical staff may significantly delay or
prevent the achievement of business objectives by diverting management’s
attention to transition matters and identification of suitable replacements, and
could have a material adverse effect on our business, operating results and
financial condition.





Changes
in international trade regulations and other risks associated with foreign trade
could adversely affect the Company’s sourcing.




We source
our products primarily from foreign contract manufacturers, with the largest
concentration being in China. The adoption of regulations related to the
importation of product, including quotas, duties, taxes and other charges or
restrictions on imported goods, and changes in U.S. customs procedures could
result in an increase in the cost of our products. Delays in customs clearance
of goods or the disruption of international transportation lines used by us
could result in our being unable to deliver goods to customers in a timely
manner or the potential loss of sales altogether.




Economic
conditions could adversely affect the availability of component parts for
consumer electronics.




Our
manufacturers use significant quantities of component parts for its simplex and
duplex products. Component parts are subject to ongoing price fluctuations
because they are impacted by supply and demand considerations, both domestically
and internationally.




Item
5.  Other Information




As
previously reported, on September 21, 2010, Kenneth E. Jones notified us that he
was resigning from the Board of Directors effective October 1, 2010. Mr. Jones
had been a member of the Board's Audit Committee. We reported the resignation
and pending noncompliance with Listing Rule 5605, which requires that the audit
committee of a Nasdaq listed company be comprised of at least three independent
directors subject to a cure period, to Nasdaq on September 27,
2010.  We received a notice from Nasdaq on October 18, 2010 stating
that we were deficient in meeting the requirement of Listing Rule
5605.  The Board intends to appoint a new independent director to the
Board and the Audit Committee prior to the expiration of the cure period, which
is the earlier of our next annual stockholders meeting or October 1,
2011.





Item 6.
Exhibits





Number
                    
                    Description10.1
                    
                    COFACE
      Facility Agreement between Globalstar, Inc., BNP Paribas, Societe
      Generale, Natixis, Calyon and Credit Industrial et Commercial date June 5,
      2009, conformed to include amendments through October 28,
      2010.31.1
                    
                    Section
      302 Certification of the Chief Executive Officer31.2
                    
                    Section
      302 Certification of the Chief Financial Officer32.1
                    
                    Section
      906
Certifications


40


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:
                        /s/Peter J. DaltonDate: November 9,
                          2010
                        
                        Peter
      J. DaltonChief
      Executive OfficerBy:
                        /s/ Dirk WildDate:
      November 9,
                          2010
                        
                        Dirk
      WildSenior
      Vice President and Chief Financial Officer


41