Globalstar Inc

Previous wording

Our constellation of Low Earth Orbit ("LEO") satellites were designed to maximize the probability that at least one satellite is visible from any point on the Earth's surface between the latitudes 70° north and 70° south. Our goal is to provide service levels and call or message success rates equal to or better than our MSS competitors so our products and services are attractive to potential customers.

Current wording

Our constellation of Low Earth Orbit ("LEO") satellites was designed to maximize the probability that at least one satellite is visible from any point on the Earth's surface between the latitudes 70° north and 70° south. Our goal is to provide service levels and call or message success rates equal to or better than our MSS competitors so our products and services are attractive to potential customers.

Previous wording

In 2022, we entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA") pursuant to which we expect to acquire at least 17 and up to 26 satellites. We filed an application with the Federal Communications Commission (the "FCC") to replenish our HIBLEO-4 U.S.-licensed system with these satellites and operate them under an additional fifteen-year license term to provide long-term continuity of our MSS. The technical specifications and design of these replacement satellites are similar to our current satellites. The satellite procurement agreement requires delivery of the 17 new satellites by 2025. In 2023, we entered into a Launch Services Agreement with Space Exploration Technologies Corp. (“SpaceX”) and certain related ancillary agreements (the “Launch Services Agreements”), providing for the launch of the first set of these satellites during 2025. Under the Service Agreements, subject to certain terms and conditions, we will receive payments equal to 95% of the approved capital expenditures under the satellite procurement agreement and Launch Services Agreements (to be paid on a straight-line basis over the useful life of the satellites) beginning with the commencement of the Phase 2 Service Period (the "Approved Capital Expenditure Payments").

Current wording

In 2022, we entered into a satellite procurement agreement with Macdonald, Dettwiler and Associates Corporation ("MDA") pursuant to which we expect to acquire at least 17 and up to 26 satellites. In August 2024, the Federal Communications Commission (the "FCC") issued an order granting our application to replenish our HIBLEO-4 U.S.-licensed system with up to 26 satellites and operate them under an additional fifteen-year license term to provide long-term continuity of our MSS. The technical specifications and design of these replacement satellites are similar to our current satellites. The satellite procurement agreement requires delivery of the first 17 new satellites by 2025. In 2023, we entered into a Launch Services Agreement with Space Exploration Technologies Corp. (“SpaceX”) and certain related ancillary agreements (the “Launch Services Agreements”), providing for the launch of the first set of new satellites during 2025. Under the Service Agreements, subject to certain terms and conditions, we expect to receive payments equal to 95% of the approved capital expenditures under the satellite procurement agreement and Launch Services Agreements (to be paid on a straight-line basis over the design life of the satellites) beginning with the commencement of the Phase 2 Service Period (the "Approved Capital Expenditure Payments").

Previous wording

We benefit from a worldwide allocation of radio frequency spectrum in the international radio frequency tables administered by the International Telecommunications Union ("ITU"). Access to this globally harmonized spectrum enables us to design satellites, networks and terrestrial infrastructure enhancements more cost effectively because the products and services can be deployed and sold worldwide. In addition, this broad spectrum assignment enhances our ability to capitalize on existing and emerging wireless and broadband applications.

Current wording

We benefit from a worldwide allocation of radio frequency spectrum in the international radio frequency tables administered by the International Telecommunications Union ("ITU"). Access to this globally harmonized spectrum enables us to design satellites, networks and terrestrial infrastructure enhancements more cost effectively because the products and services can be deployed and sold worldwide. In addition, this broad spectrum allocation enhances our ability to capitalize on existing and emerging wireless and broadband applications.

Previous wording

Wholesale satellite capacity services include satellite network access and related services using our satellite spectrum and network of satellites and gateways. For instance, we are the operator for certain satellite-enabled services offered by our Partner pursuant to the Service Agreements. The Service Agreements generally require us to allocate network capacity to support the Services and Partner to enable Band 53/n53 for use in cellular-enabled devices designated by Partner for use with the Services. As consideration for the Services provided by us, payments to us include a fixed service fee, payments relating to certain service-related operating expenses and capital expenditures, additional fees related to enhanced services, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria. Wholesale satellite capacity services also include services performed pursuant to an agreement with a government services company to utilize our satellite network for a mission critical service for government applications.

Current wording

Wholesale satellite capacity services include satellite network access and related services using the Globalstar System. For instance, we provide certain services to Customer’s end users pursuant to the Service Agreements. The Service Agreements generally require us to allocate network capacity to support the Services and also for Customer to enable Band 53/n53 for use in cellular-enabled devices designated by Customer for use with the Services. As consideration for the Services provided by us, payments to us include a fixed service fee, payments relating to certain service-related operating expenses and capital expenditures, additional fees related to expanded services, and potential bonus payments subject to satisfaction of certain licensing, service and related criteria.

Previous wording

For the six months ended June 30, 2024 and 2023, our wholesale capacity customer under the Service Agreements was responsible for 56% and 49%, respectively, of our revenue; except for this customer, no other customer was responsible for more than 10% of our revenue.

Current wording

For the nine months ended September 30, 2024 and 2023, our Customer under the Service Agreements was responsible for 57% and 49%, respectively, of our total revenue; except for this customer, no other customer was responsible for more than 10% of our revenue.

Previous wording

•data transmissions using a mobile or fixed device that transmits its location and other information to a central monitoring station, including our commercial IoT products ("Commercial IoT").

Current wording

•data transmissions using a mobile or fixed device that transmits the location of the devices and other information to a central monitoring station, including our commercial IoT products ("Commercial IoT").

Previous wording

As of June 30, 2024, we had approximately 785,000 subscribers worldwide. For our subscriber driven revenue, the specialized needs of our global customers span many industries. The number of Commercial IoT devices on our network has increased 9% over the last twelve months. Satellite IoT connectivity has become more critical to a growing number of sectors and use cases, and we plan to continue to evolve and develop our IoT initiatives.

Current wording

As of September 30, 2024, we had approximately 778,000 subscribers worldwide. For our subscriber driven revenue, the specialized needs of our global customers span many industries. The number of Commercial IoT devices on our network has increased 7% over the last twelve months. Satellite IoT connectivity has become more critical to a growing number of sectors and use cases, and we plan to continue to evolve and develop our IoT products and services.

Previous wording

We compete aggressively on price and strive for differentiation in the solutions that we offer to our customers. As technological advancements are made, we continue to explore opportunities to develop new products and provide new services over our network to meet the needs of our existing and prospective customers.

Current wording

We compete aggressively on price and strive for differentiation in the solutions that we offer to our customers. As technological advancements are made, we continue to explore opportunities to develop new products and provide new services over the Globalstar System to meet the needs of our existing and prospective customers.

Previous wording

We are authorized to provide terrestrial broadband services over 11.5 MHz of our licensed MSS spectrum at 2483.5 to 2495 MHz throughout the United States of America and its Territories. The Third Generation Partnership Project (“3GPP”) has designated the 11.5 MHz terrestrial band as Band 53 with 5G variant of our Band 53, known as n53.

Current wording

We are authorized to provide terrestrial broadband services over 11.5 MHz of our licensed MSS spectrum at 2483.5 to 2495 MHz throughout the United States of America and its territories. The Third Generation Partnership Project (“3GPP”), an organization that produces technical specifications and reports for 3GPP technologies, has designated the 11.5 MHz terrestrial band as Band 53 with 5G variant of our Band 53, known as n53 (collectively "Band 53/n53").

Previous wording

We have terrestrial licenses in 11 countries, resulting in approximately 10.3 billion MHz-POPs (megahertz of our spectrum authority in each country multiplied by a total population of approximately 821 million over the covered area). Prospective spectrum partners, including cable companies, wireless carriers, system integrators, utilities and other infrastructure operators, are able to benefit from access to uniform and increasingly “borderless” spectrum working across geographies. Our expanding portfolio of terrestrial spectrum represents a substantial opportunity for us. The Service Agreements significantly enhance the device ecosystem for Band 53/n53.

Current wording

We have terrestrial licenses in 11 countries, resulting in approximately 10.4 billion MHz-POPs (megahertz of our spectrum authority in each country multiplied by a total population of approximately 823.4 million over the covered area) as of September 30, 2024. Prospective spectrum partners, including cable companies, wireless carriers, system integrators, utilities and other infrastructure operators, are able to benefit from access to uniform and increasingly “borderless” spectrum working across geographies. Our expanding portfolio of terrestrial spectrum represents a substantial opportunity for us. The Service Agreements significantly enhance the device ecosystem for Band 53/n53 by enabling access to our terrestrial spectrum band in certain of our customer's devices.

Previous wording

We have an Intellectual Property License Agreement (the “License Agreement”) with Virewirx, Inc. (formerly XCOM Labs, Inc.) (“Licensor” or “XCOM”). Under the License Agreement, we purchased an exclusive right and license (the “License”) as well as certain Intellectual Property Assets (as defined in the License Agreement) relating to the development and commercialization of XCOM’s key novel technologies for wireless spectrum innovations, including XCOM Radio Access Network (XCOM RAN) systems, XCOM’s commercially available coordinated multi-point radio system. Bringing together Globalstar’s terrestrial spectrum and relationships with leading partners around the world with XCOM’s differentiated technology, which we believe is well suited for high-performance applications, creates a significant opportunity to deliver for private network customers with mission-critical needs.

Current wording

We have an Intellectual Property License Agreement (the “License Agreement”) with Virewirx, Inc. (formerly XCOM Labs, Inc.) (“Licensor” or “XCOM”). Under the License Agreement, we purchased an exclusive right and license (the “License”) as well as certain Intellectual Property Assets (as defined in the License Agreement) relating to the development and commercialization of XCOM’s key novel technologies for wireless spectrum innovations, including XCOM Radio Access Network (XCOM RAN) systems, XCOM’s commercially available coordinated multi-point radio system. We believe bringing together Globalstar’s terrestrial spectrum and relationships with leading partners around the world with XCOM’s differentiated technology creates a significant opportunity to deliver private network for mission critical needs of customers.

Previous wording

Comparison of the Results of Operations for the three and six months ended June 30, 2024 and 2023

Current wording

Comparison of the Results of Operations for the three and nine months ended September 30, 2024 and 2023

Previous wording

Our revenue is categorized as service revenue and equipment revenue. We provide services to customers using technology from our satellite and ground network. Equipment revenue is generated from the sale of devices that work over our network. For the three months ended June 30, 2024, total revenue increased 10% to $60.4 million from $55.1 million for the same period in 2023. For the six months ended June 30, 2024, total revenue increased 3% to $116.9 million from $113.7 million for the same period in 2023. See below for a discussion of the main fluctuations in revenue.

Current wording

Our revenue is categorized as service revenue and equipment revenue. We provide MSS services to customers using technology from the Globalstar System and equipment revenue is generated from the sale of MSS devices that work over the Globalstar System. We also generate service and equipment revenue from the sale of XCOM RAN systems and associated services that support the systems. For the three months ended September 30, 2024, total revenue increased 26% to $72.3 million from $57.7 million for the same period in 2023. For the nine months ended September 30, 2024, total revenue increased 10% to $189.2 million from $171.4 million for the same period in 2023. See below for a discussion of the main fluctuations in revenue.

Previous wording

We count "subscribers" based on the number of devices that are subject to agreements that entitle them to use our voice or data communications services rather than the number of persons or entities who own or lease those devices.

Current wording

We count "subscribers" based on the number of devices that are subject to agreements that entitle them to use our voice or data communications services rather than the number of persons or entities who own or lease those devices. Other providers of comparable services may count their subscribers differently.

Previous wording

Wholesale capacity service revenue includes revenue generated from satellite network access and related services. Engineering and other service revenue includes revenue generated primarily from terrestrial spectrum and network solutions as well as certain governmental and engineering service contracts; none of these service revenue items are subscriber driven. Accordingly, we do not present ARPU for wholesale capacity service revenue and engineering and other service revenue reflected in the table above.

Current wording

Wholesale capacity services includes revenue generated from satellite network access and related services. Government and other services includes revenue generated primarily from terrestrial spectrum and network solutions as well as certain governmental and engineering service contracts. None of these service revenue items are subscriber driven. Accordingly, we do not present ARPU for wholesale capacity services revenue and government or other services revenue reflected in the table above.

Previous wording

Duplex service revenue decreased $1.4 million, or 22%, and $2.4 million, or 20%, respectively, for the three and six month periods ended June 30, 2024, compared to the same periods in 2023. For both periods, the decrease in revenue was due to fewer average subscribers resulting from churn exceeding gross activations over the last twelve months as we no longer manufacture and sell Duplex devices in favor of other use cases for our network assets, including wholesale capacity services.

Current wording

Duplex service revenue decreased $2.0 million, or 25%, and $4.4 million, or 22%, respectively, for the three and nine month periods ended September 30, 2024, compared to the same periods in 2023. For both periods, the decrease in revenue was due to fewer average subscribers resulting from churn exceeding gross activations over the last twelve months as we no longer manufacture and sell Duplex devices in favor of other use cases for the Globalstar System, including wholesale capacity services.

Previous wording

Commercial IoT service revenue increased 25% for both the three and six months ended June 30, 2024 compared to the same periods in 2023. This increase was due to higher average subscribers and ARPU. Gross subscriber additions were up 20% from the first quarter of 2024 to the second quarter of 2024 and up 24% compared to the second quarter of 2023. The increase in ARPU was due to higher usage on the network as well as the mix of subscribers on various rate plans.

Current wording

Commercial IoT service revenue increased 5% and 17%, respectively, for the three and nine months ended September 30, 2024 compared to the same periods in 2023. For both periods, the increase in revenue was due to higher average subscribers. For the nine month period, higher ARPU also contributed to the increase in revenue. Average subscribers are up 7% year over year, due to gross activation momentum experienced over the last year. The increase in ARPU was due to higher usage on the network as well as an improvement in the mix of subscribers on various rate plans.

Previous wording

Wholesale capacity service revenue increased $9.2 million and $10.4 million, respectively, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The vast majority of wholesale capacity revenue reflects fixed service fees under the Service Agreements, including fees related to enhanced services beginning in 2024. Additionally, we signed an agreement in the first quarter of 2024 with a government services company to utilize our satellite network for a mission critical service for government applications. The $2.5 million proof of concept phase commenced in February 2024 and is progressing as planned. Revenue associated with this contract is currently included in "Wholesale capacity service revenue." This agreement has a five-year term and, if the project is implemented, contains annual minimum revenue commitments escalating to $20 million during the fifth year, with potential for further upside through the agreement's revenue share arrangement.

Current wording

Government and other services revenue includes fees earned from various service contracts. We signed an agreement in the first quarter of 2024 with a government services company to utilize the Globalstar System for a mission critical service for government applications. The $2.5 million proof of concept phase commenced in February 2024 and is progressing as planned. This agreement has a five-year term, if the project is implemented, and contains annual minimum revenue commitments escalating to $20 million during the fifth year, with potential for further upside through the agreement's revenue share arrangement.

Previous wording

Total operating expenses increased to $61.8 million from $52.5 million and to $123.0 million from $103.9 million for the three and six months ended June 30, 2024 compared to the same periods in 2023. The main contributors to the variances in operating expenses are explained in detail below.

Current wording

Total operating expenses increased to $62.9 million from $55.7 million and to $185.9 million from $159.6 million for the three and nine months ended September 30, 2024 compared to the same periods in 2023. The main contributors to the variances in operating expenses are explained in detail below.

Previous wording

Cost of services increased $5.9 million and $10.8 million for the three and six months ended June 30, 2024 compared to the same periods in 2023, respectively. These increases are due in part to network expansion in connection with services provided under the Service Agreements; a substantial portion of network-related costs are reimbursed thereunder and this consideration is recognized as revenue in accordance with the terms of the contract. In line with our new and upgraded ground infrastructure, for the three and six month periods, gateway operating costs, such as maintenance and personnel costs, increased $2.5 million and $6.3 million, respectively. We do not expect the operating costs that support existing Phase 1 services to increase meaningfully beyond current levels. In connection with the August 2023 License Agreement with XCOM, we entered into a Support Services Agreement (the “SSA”). During the three and six months ended June 30, 2024, we recognized $2.1 million and $3.3 million, respectively, in expense associated with the SSA and other ancillary costs, of which the majority were noncash. Costs to support new product development also contributed to the increase in the three and six months ended June 30, 2024.

Current wording

Cost of services increased $5.3 million and $16.1 million, respectively, for the three and nine months ended September 30, 2024 compared to the same periods in 2023. These increases are due primarily to network expansion in connection with services provided under the Service Agreements; a substantial portion of network-related costs are reimbursed thereunder and this consideration is recognized as revenue in accordance with the terms of the Service Agreements. As expected with our new and upgraded ground infrastructure, for the three and nine month periods, gateway operating costs, such as maintenance and personnel costs, increased $2.6 million and $8.9 million, respectively. We do not expect the operating costs that support existing services under the Service Agreements during the Phase 1 Service Period to increase meaningfully beyond current levels. In connection with the August 2023 License Agreement with XCOM, we entered into a Support Services Agreement (the “SSA”). During the three and nine months ended September 30, 2024, we recognized $0.5 million and $3.3 million, respectively, in expense associated with the SSA and other ancillary costs, of which the majority were noncash. Costs to support new product development also contributed to the increase in the three and nine months ended September 30, 2024.

Previous wording

Stock-based compensation expense increased $6.6 million and $12.1 million for the three and six months ended June 30, 2024 compared to the same periods in 2023, respectively. These increases were due primarily to restricted stock units ("RSUs") granted to certain executives in connection with the License Agreement in August 2023. We granted 44.5 million RSUs, which are earned over a four-year performance period and vest upon Globalstar common stock trading at various price levels throughout the performance period. The total fair value of the RSUs was $39.5 million and is being recognized over the derived service period of 2.6 years; nearly 60% of the compensation cost for these RSU's will be recognized during 2024.

Current wording

Stock-based compensation expense increased $3.9 million and $16.0 million, respectively, for the three and nine months ended September 30, 2024 compared to the same periods in 2023. These increases were due primarily to restricted stock units ("RSUs") granted to certain executives in connection with the License Agreement in August 2023. We granted 44.5 million RSUs, which are earned over a four-year performance period and vest upon Globalstar common stock trading at various price levels throughout the performance period. The total fair value of the RSUs was $39.5 million and is being recognized over the derived service period of 2.6 years; nearly 60% of the compensation cost for these RSU's is being recognized during 2024.

Previous wording

We recorded a loss on extinguishment of debt of $10.4 million during the first quarter of 2023 following the full pay-off of the 2019 Facility Agreement in March 2023. The extinguishment loss was recognized due to the remaining deferred financing costs and debt discount associated with the instrument at the time of repayment. Similar activity did not occur in 2024.

Current wording

We recorded a loss on extinguishment of debt of $10.4 million during the first quarter of 2023 following the full pay-off of the 2019 Facility Agreement in March 2023. The extinguishment loss was recognized due to the remaining deferred financing costs and debt discount associated with the instrument at the time of repayment.

Previous wording

Interest income and expense, net, decreased $1.4 million and increased $0.3 million during the three and six months ended June 30, 2024 compared to the same periods in 2023, respectively. For the three month period, higher capitalized interest (which decreases interest expense) was offset by higher gross interest costs. For the six month period, higher gross interest costs were offset by higher capitalized interest. Higher capitalized interest was due to a higher construction in progress balance.

Current wording

Interest income and expense, net, decreased $1.1 million and decreased $0.7 million, respectively, during the three and nine months ended September 30, 2024 compared to the same periods in 2023. For the three and nine month periods, higher capitalized interest (which decreases interest expense) of $2.5 million and $7.8 million, respectively, was partially offset by higher gross interest costs of $1.4 million and $7.8 million, respectively. Higher interest income also decreased "interest income and expense, net" for the nine month period.

Previous wording

We recorded net foreign currency losses of $4.5 million and $8.3 million, respectively, during the three and six months ended June 30, 2024. We recorded foreign currency gains of $2.0 million and $3.9 million, respectively, during the three and six months ended June 30, 2023. Many of our foreign subsidiaries have USD-denominated intercompany payable balances, which impact the foreign currency gains and losses recorded each reporting period. In this instance, foreign currency gains result from other currencies strengthening relative to the U.S. dollar; inversely, foreign currency losses result from the U.S. dollar strengthening relative to other currencies.

Current wording

We recorded foreign currency gains of $4.9 million and losses of $3.4 million, respectively, during the three and nine months ended September 30, 2024. We recorded foreign currency losses of $4.2 million and $0.2 million, respectively, during the three and nine months ended September 30, 2023. Many of our foreign subsidiaries have USD-denominated intercompany payable balances, which impact the foreign currency gains and losses recorded each reporting period. In this instance, foreign currency gains result from other currencies strengthening relative to the U.S. dollar; inversely, foreign currency losses result from the U.S. dollar strengthening relative to other currencies.

Previous wording

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds from the Funding Agreements. These liquidity sources are expected to meet our short-term and long-term liquidity needs for funding our operating costs, capital expenditures and financing obligations, including scheduled recoupments under the 2021 Funding Agreement (defined below), interest on our 13% Notes (defined below), and dividends on our perpetual preferred stock. In addition, we have issued warrants under the Service Agreements and to Thermo in connection with its guaranty of the 2023 Funding Agreement (defined below). These warrants could become a source of liquidity if exercised.

Current wording

Our principal sources of liquidity include cash on hand, cash flows from operations and proceeds from the funding agreements described in Note 4: Long-Term Debt and Other Financing Arrangements in our condensed consolidated financial statements. These liquidity sources are expected to meet our short-term and long-term liquidity needs for funding our operating costs, capital expenditures and financing obligations, including scheduled recoupments under the 2021 Funding Agreement (defined below), interest on our 13% Notes (defined below), and dividends on our perpetual preferred stock. In addition, we have issued warrants under the Service Agreements and to Thermo in connection with its guaranty of the 2023 Funding Agreement (defined below). These warrants could become a source of liquidity if exercised.

Previous wording

As of June 30, 2024 and December 31, 2023, we held cash and cash equivalents of $64.3 million and $56.7 million, respectively.

Current wording

As of September 30, 2024 and December 31, 2023, we held cash and cash equivalents of $51.9 million and $56.7 million, respectively.

Previous wording

The principal amount of our debt outstanding was $425.8 million at June 30, 2024, compared to $398.7 million at December 31, 2023. This increase was due to the following:

Current wording

The principal amount of our debt outstanding was $424.1 million at September 30, 2024, compared to $398.7 million at December 31, 2023. This increase was due to the following:

Previous wording

•PIK interest payment to the lenders of the 2023 13% Notes (as defined below) of $6.7 million; and

Current wording

•PIK interest payment to the lenders of the 2023 13% Notes (as defined below) of $13.6 million; and

Previous wording

•Recoupment under the 2021 Funding Agreement (as defined below) totaling $17.3 million.

Current wording

•Recoupment under the 2021 Funding Agreement (as defined below) totaling $26.0 million.

Previous wording

Cash Flows for the six months ended June 30, 2024 and 2023

Current wording

Cash Flows for the nine months ended September 30, 2024 and 2023

Previous wording

Net cash provided by operating activities during the six months ended June 30, 2024 was $66.5 million compared to $43.0 million during the same period in 2023. This improvement was due to favorable working capital changes as a result of the timing of recognition of accounts receivable and deferred revenue under the Service Agreements, specifically related to the timing of receipt and the amount of service fees.

Current wording

Net cash provided by operating activities during the nine months ended September 30, 2024 was $98.5 million compared to $68.6 million during the same period in 2023. This improvement was due to favorable working capital changes primarily as a result of the timing of accounts receivable under the Service Agreements, specifically related to the timing of receipt and the amount of service fees. An improvement in net income, after adjusting for noncash items, also contributed to the increase in cash flows provided by operating activities.

Previous wording

Net cash used in investing activities was $74.5 million for the six months ended June 30, 2024 compared to $124.6 million for the same period in 2023. Net cash used in investing activities during both periods primarily included network upgrades associated with the Service Agreements and payments of capitalized interest. The timing of milestone payments made to our next-generation satellite vendors was the primary driver of the decrease in cash used during 2024.

Current wording

Net cash used in investing activities was $107.7 million for the nine months ended September 30, 2024 compared to $142.4 million for the same period in 2023. Net cash used in investing activities during both periods primarily included network upgrades associated with the Service Agreements and payments of capitalized interest. The timing of milestone payments made to our next-generation satellite vendors was the primary driver of the decrease in cash used during 2024.

Previous wording

Net cash provided by financing activities was $16.2 million during the six month period ended June 30, 2024 compared to net cash provided by financing activities of $114.8 million for the same period in 2023. In February 2024 and April 2023, we received proceeds from the 2023 Funding Agreement totaling $37.7 million and $87.7 million, respectively, which were used to pay amounts owed to MDA. Pursuant to the terms of the 2021 Funding Agreement, scheduled recoupment payments totaling $17.3 million were made during 2024 (these payments began in the third quarter of 2023). During the first quarter of 2023, we received proceeds from the sale of the 2023 13% Notes, which were used to pay the remaining principal amount due under the 2019 Facility Agreement and financing costs. Finally, during both 2024 and 2023, we paid cash dividends to our preferred equity holders.

Current wording

Net cash provided by financing activities was $4.9 million during the nine month period ended September 30, 2024 compared to net cash provided by financing activities of $105.9 million for the same period in 2023. In February 2024 and April 2023, we received proceeds from the 2023 Funding Agreement totaling $37.7 million and $87.7 million, respectively, which were used to pay amounts owed to MDA. Pursuant to the terms of the 2021 Funding Agreement, scheduled recoupment payments began in the third quarter of 2023 and totaled $26.0 million and $6.3 million during the nine-months ended September 30, 2024 and 2023, respectively. During the first quarter of 2023, we received proceeds from the sale of the 2023 13% Notes, which were used to pay the remaining principal amount due under the 2019 Facility Agreement and financing costs. Finally, during both 2024 and 2023, we paid cash dividends to our preferred equity holders.

Previous wording

For further discussion on all of our debt and other financing arrangements, see Note 4: Long-Term Debt and Other Financing Arrangements to our condensed consolidated financial statements.

Current wording

Below is a summary description of our debt and other financing arrangements at September 30, 2024. For more information, see Note 4: Long-Term Debt and Other Financing Arrangements and Note 8: Subsequent Events to our condensed consolidated financial statements.

Previous wording

The amount of the Funding Agreement and fees payable thereon are expected to be recouped from amounts payable for services provided by us under the Service Agreements in installments for a period of 16 quarters beginning no later than the third quarter of 2025. For as long as any portion of the 2023 Funding Agreement is outstanding, we will be subject to certain covenants. Our repayment obligations under the 2023 Funding Agreement are secured by a first-priority lien on substantially all of our assets. Additionally, Thermo guaranteed certain of our obligations under the Funding Agreements. As consideration for Thermo's guarantee, we issued to Thermo warrants to purchase 10.0 million shares of our common stock.

Current wording

The amount of the Funding Agreement and fees payable thereon are expected to be recouped from amounts payable for services provided by us under the Service Agreements in installments for a period of 16 quarters beginning no later than the third quarter of 2025.

Previous wording

During 2021, we received payments totaling $94.2 million (the "2021 Funding Agreement"), which are being recouped as services are performed by us over the Phase 1 Service Period with the last recoupment to be made in the first quarter of 2026. During the first six months June 30, 2024, a total of $17.3 million has been recouped. The outstanding balance under the 2021 Funding Agreement was $58.2 million as of June 30, 2024.

Current wording

During 2021, we received payments totaling $94.2 million (the "2021 Funding Agreement"), which are being recouped as services are performed by us over the Phase 1 Service Period with the last recoupment to be made in the first quarter of 2026. During the first nine months September 30, 2024, a total of $26.0 million has been recouped. The outstanding balance under the 2021 Funding Agreement was $49.5 million as of September 30, 2024.

Previous wording

In 2023, we completed the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the "2023 13% Notes"). The 2023 13% Notes are our senior, unsecured obligations and have a stated maturity of September 15, 2029. The 2023 13% Notes were sold at an issue price of 95% of the principal amount and bear interest at a rate of 13.00% per annum payable semi-annually in arrears. We have agreed under the Service Agreements to pay cash interest on the 2023 13% Notes at a rate of 6.5% per annum and PIK interest at a rate of 6.5% per annum. The Indenture includes customary terms and covenants. The outstanding balance under the 2023 13% Notes was $212.7 million as of June 30, 2024.

Current wording

In 2023, we completed the sale of $200.0 million in aggregate principal amount of non-convertible 13% Senior Notes due 2029 (the "2023 13% Notes"). The 2023 13% Notes are our senior, unsecured obligations and have a stated maturity of September 15, 2029. The 2023 13% Notes were sold at an issue price of 95% of the principal amount and bear interest at a rate of 13.00% per annum payable semi-annually in arrears. We have agreed under the Service Agreements to pay cash interest on the 2023 13% Notes at a rate of 6.5% per annum and PIK interest at a rate of 6.5% per annum. The Indenture includes customary terms and covenants. The outstanding balance under the 2023 13% Notes was $219.6 million as of September 30, 2024. Pursuant to the transaction described in Note 8: Subsequent Events to our condensed consolidated financial statements, we redeemed these notes on November 5, 2024.

Previous wording

In 2022, we issued 149,425 shares of 7.0% Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) and a total fair value of $105.3 million. Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. Through June 30, 2024, we paid dividends totaling $5.3 million.

Current wording

In 2022, we issued 149,425 shares of 7.0% Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) and a total fair value of $105.3 million. Holders of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock, at a fixed rate equal to 7.00% per annum, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year. Through September 30, 2024, we paid dividends totaling $8.0 million.

Previous wording

There have been no material changes in our Critical Accounting Policies and Estimates from the information provided in the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.

Current wording

There have been no material changes in our Critical Accounting Policies and Estimates from the information provided in the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2023 Annual Report.