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Fair Value Measurements
3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements
7. FAIR VALUE MEASUREMENTS

The Company follows the authoritative guidance for fair value measurements relating to financial and non-financial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

All of the Company's derivatives are classified as Level 3. The Company marks-to-market these derivatives at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s condensed consolidated statements of operations. During the first quarter of 2022, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock; accordingly, the associated derivative is no longer outstanding See Note 5: Long-Term Debt and Other Financing Arrangements and Note 6: Derivatives for further discussion.

Recurring Fair Value Measurements 

The following tables provide a summary of the assets and liabilities measured at fair value on a recurring basis (in thousands): 
 March 31, 2022
(Level 1)(Level 2)(Level 3)Total
 Balance
Liabilities:    
Compound embedded derivative with the 2019 Facility Agreement$— $— $(218)$(218)
Total liabilities measured at fair value$— $— $(218)$(218)
 
 December 31, 2021
(Level 1)(Level 2)(Level 3)Total
 Balance
Assets:    
Compound embedded derivative with the 2019 Facility Agreement$— $— $484 $484 
Total assets measured at fair value$— $— $484 $484 
Liabilities:    
Compound embedded derivative with the 2013 8.00% Notes
$— $— $(1,364)$(1,364)
Total liabilities measured at fair value$— $— $(1,364)$(1,364)

2013 8.00% Notes
The significant quantitative Level 3 inputs utilized in the valuation models are shown in the tables below:

 December 31, 2021
 Stock Price
Volatility
Risk-Free
Interest
Rate
Note
Conversion
Price
Discount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
120% - 139%
0.5 %$0.6918 %$1.16

Fluctuation in the Company’s stock price was a significant driver of the changes in the compound embedded derivative with the 2013 8.00% Notes during each reporting period. As the stock price increased, the value to the holder of the instrument generally increased, thereby increasing the liability on the Company’s condensed consolidated balance sheet. Stock price volatility was also a significant input used in the fair value measurement of the compound embedded derivative with the 2013 8.00% Notes. The simulated fair value of this liability was sensitive to changes in the expected volatility of the Company's stock price. Increases in expected volatility generally resulted in a higher fair value measurement.

2019 Facility Agreement

 The compound embedded derivative with the 2019 Facility Agreement is valued using a probability weighted discounted cash flow model. The most significant observable input used in the fair value measurement is the discount yield, which was 15% and 13% at March 31, 2022 and December 31, 2021, respectively. When the discount yield utilized in the valuation is higher than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in a liability for the Company. Conversely, when the discount yield is lower than the blended interest rate of the underlying debt, the features embedded in the underlying debt result in an asset for the Company. The unobservable inputs used in the fair value measurement include the probability of change of control and the estimated timing and amounts of cash flows associated with certain mandatory prepayments within the debt agreement.

Rollforward of Recurring Level 3 Assets and Liabilities

The following table presents a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
Balance at beginning of period, January 1, 2022 and 2021, respectively$(880)$163 
Derivative adjustment related to conversions1,148 — 
Unrealized loss, included in derivative loss(486)(1,043)
Balance at end of period, March 31, 2022 and December 31, 2021, respectively
$(218)$(880)
Fair Value of Debt Instruments
The Company believes it is not practicable to determine the fair value of the 2019 Facility Agreement without incurring significant additional costs. Unlike typical long-term debt, certain terms for this instrument are not readily available and generally involve a variety of factors, including due diligence by the debt holders. As previously disclosed, the remaining principal amount of the 2013 8.00% Notes was converted into shares of Globalstar common stock during the first quarter of 2022; accordingly, there is no value in the table below as of March 31, 2022. The following table sets forth the carrying value and estimated fair value of the Company's Level 3 financial instrument (in thousands):
 March 31, 2022December 31, 2021
Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
2013 8.00% Notes
$— $— $1,407 $1,265 
See Note 5: Long-Term Debt and Other Financing Arrangements for further discussion of the Company's debt instruments.
Nonrecurring Fair Value Measurements

The Company follows the authoritative guidance regarding non-financial assets and non-financial liabilities that are remeasured at fair value on a nonrecurring basis. On February 17, 2022 and March 9, 2022, the remaining principal balance of the 2013 8.00% Notes was converted into shares of Globalstar common stock, eliminating the entire principal balance outstanding. See further discussion in Note 5: Long-Term Debt and Other Financing Arrangements. As a result of the conversion, the Company wrote off the proportionate fair value of the compound embedded derivative liability with the 2013 8.00% Notes based on the value of the derivative on each conversion date. As of each conversion date, the fair value of the compound embedded derivative liability with the 2013 8.00% Notes was $0.8 million. The significant quantitative Level 3 inputs utilized in the valuation models as of the conversion date are shown in the table below:
 February 17, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
0.06 %$0.6918 %$1.00
 March 9, 2022
Risk-Free Interest RateNote Conversion PriceDiscount RateMarket Price of Common Stock
Compound embedded derivative with the 2013 8.00% Notes
0.18 %$0.6919 %$1.21