Form 10-Q
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-33118
ORBCOMM INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
41-2118289 |
|
|
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.) |
2115 Linwood Avenue, Fort Lee, New Jersey 07024
(Address of principal executive offices)
(201) 363-4900
(Registrants telephone number)
N/A
(Former name, former address and formal fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer þ
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of shares outstanding of the registrants common stock as of August 3, 2010 is
42,601,950.
ORBCOMM Inc.
Condensed Consolidated Balance Sheets
(in thousands, except
share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
15,629 |
|
|
$ |
65,292 |
|
Restricted cash |
|
|
1,000 |
|
|
|
1,000 |
|
Marketable securities |
|
|
72,491 |
|
|
|
26,145 |
|
Accounts receivable, net of allowances for doubtful
accounts of $602 and $835 |
|
|
3,945 |
|
|
|
3,742 |
|
Inventories |
|
|
69 |
|
|
|
78 |
|
Prepaid expenses and other current assets |
|
|
1,449 |
|
|
|
1,253 |
|
Current assets held for sale |
|
|
77 |
|
|
|
575 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
94,660 |
|
|
|
98,085 |
|
|
|
|
|
|
|
|
|
|
Satellite network and other equipment, net |
|
|
74,662 |
|
|
|
73,208 |
|
Intangible assets, net |
|
|
1,857 |
|
|
|
2,600 |
|
Restricted cash |
|
|
3,030 |
|
|
|
2,980 |
|
Other investment |
|
|
2,250 |
|
|
|
|
|
Other assets |
|
|
1,086 |
|
|
|
1,354 |
|
Long term assets held for sale |
|
|
|
|
|
|
2,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
177,545 |
|
|
$ |
181,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,767 |
|
|
$ |
2,696 |
|
Accrued liabilities |
|
|
4,914 |
|
|
|
5,889 |
|
Current portion of deferred revenue |
|
|
4,143 |
|
|
|
3,849 |
|
Current liabilities related to assets held for sale |
|
|
33 |
|
|
|
79 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
11,857 |
|
|
|
12,513 |
|
Note payable related party |
|
|
1,225 |
|
|
|
1,398 |
|
Deferred revenue, net of current portion |
|
|
5,833 |
|
|
|
6,230 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
18,915 |
|
|
|
20,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
ORBCOMM Inc. stockholders equity |
|
|
|
|
|
|
|
|
Common stock, par value $0.001; 250,000,000 shares
authorized; 42,563,617 and 42,455,531
shares issued and outstanding |
|
|
43 |
|
|
|
42 |
|
Additional paid-in capital |
|
|
231,550 |
|
|
|
230,512 |
|
Accumulated other comprehensive income |
|
|
448 |
|
|
|
76 |
|
Accumulated deficit |
|
|
(75,446 |
) |
|
|
(71,415 |
) |
|
|
|
|
|
|
|
Total ORBCOMM Inc. stockholders equity |
|
|
156,595 |
|
|
|
159,215 |
|
Noncontrolling interests in ORBCOMM Japan |
|
|
2,035 |
|
|
|
1,703 |
|
|
|
|
|
|
|
|
Total equity |
|
|
158,630 |
|
|
|
160,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
177,545 |
|
|
$ |
181,059 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
3
ORBCOMM Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
|
$ |
7,277 |
|
|
$ |
6,720 |
|
|
$ |
14,159 |
|
|
$ |
13,342 |
|
Product sales |
|
|
560 |
|
|
|
50 |
|
|
|
1,095 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
7,837 |
|
|
|
6,770 |
|
|
|
15,254 |
|
|
|
13,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services |
|
|
3,060 |
|
|
|
3,292 |
|
|
|
6,196 |
|
|
|
6,513 |
|
Costs of product sales |
|
|
349 |
|
|
|
36 |
|
|
|
672 |
|
|
|
96 |
|
Selling, general and administrative |
|
|
4,020 |
|
|
|
4,398 |
|
|
|
8,182 |
|
|
|
9,201 |
|
Product development |
|
|
159 |
|
|
|
152 |
|
|
|
323 |
|
|
|
341 |
|
Impairment charge-satellite network |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
7,588 |
|
|
|
7,878 |
|
|
|
15,373 |
|
|
|
23,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
249 |
|
|
|
(1,108 |
) |
|
|
(119 |
) |
|
|
(9,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
55 |
|
|
|
23 |
|
|
|
92 |
|
|
|
64 |
|
Other income |
|
|
39 |
|
|
|
388 |
|
|
|
(81 |
) |
|
|
339 |
|
Interest expense |
|
|
(48 |
) |
|
|
(48 |
) |
|
|
(96 |
) |
|
|
(96 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
46 |
|
|
|
363 |
|
|
|
(85 |
) |
|
|
307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
295 |
|
|
|
(745 |
) |
|
|
(204 |
) |
|
|
(9,392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
(3,479 |
) |
|
|
412 |
|
|
|
(3,570 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(3,184 |
) |
|
|
(333 |
) |
|
|
(3,774 |
) |
|
|
(9,432 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the noncontrolling interests |
|
|
112 |
|
|
|
29 |
|
|
|
257 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(3,296 |
) |
|
$ |
(362 |
) |
|
$ |
(4,031 |
) |
|
$ |
(9,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
183 |
|
|
$ |
(774 |
) |
|
$ |
(461 |
) |
|
$ |
(9,457 |
) |
Income (loss) from discontinued operations |
|
|
(3,479 |
) |
|
|
412 |
|
|
|
(3,570 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(3,296 |
) |
|
$ |
(362 |
) |
|
$ |
(4,031 |
) |
|
$ |
(9,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information-basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.22 |
) |
Income (loss) from discontinued operations |
|
|
(0.08 |
) |
|
|
0.01 |
|
|
|
(0.08 |
) |
|
|
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(0.08 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information-diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.00 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.22 |
) |
Income (loss) from discontinued operations |
|
|
(0.08 |
) |
|
|
0.01 |
|
|
|
(0.08 |
) |
|
|
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(0.08 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
42,563 |
|
|
|
42,407 |
|
|
|
42,561 |
|
|
|
42,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
42,613 |
|
|
|
42,407 |
|
|
|
42,561 |
|
|
|
42,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Stock-based compensation included in costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services |
|
$ |
29 |
|
|
$ |
14 |
|
|
$ |
43 |
|
|
$ |
34 |
|
Selling, general and administrative |
|
|
557 |
|
|
|
330 |
|
|
|
973 |
|
|
|
757 |
|
Product development |
|
|
6 |
|
|
|
|
|
|
|
8 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
592 |
|
|
$ |
344 |
|
|
$ |
1,024 |
|
|
$ |
799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
ORBCOMM Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,774 |
) |
|
$ |
(9,432 |
) |
Adjustments to reconcile net loss to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Change in allowance for doubtful accounts |
|
|
(232 |
) |
|
|
452 |
|
Depreciation and amortization |
|
|
2,301 |
|
|
|
2,580 |
|
Accretion on note payable related party |
|
|
66 |
|
|
|
66 |
|
Stock-based compensation |
|
|
1,024 |
|
|
|
799 |
|
Foreign
exchange losses (gains) |
|
|
83 |
|
|
|
(337 |
) |
Amortization of premium on marketable securities |
|
|
384 |
|
|
|
|
|
Gain on settlement of vendor liabilities |
|
|
(220 |
) |
|
|
|
|
Impairment charge-net assets held for sale |
|
|
3,261 |
|
|
|
|
|
Impairment charge-satellite network |
|
|
|
|
|
|
7,045 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(621 |
) |
|
|
(360 |
) |
Inventories |
|
|
11 |
|
|
|
35 |
|
Prepaid expenses and other assets |
|
|
(50 |
) |
|
|
876 |
|
Accounts payable and accrued liabilities |
|
|
(803 |
) |
|
|
(8 |
) |
Deferred revenue |
|
|
(359 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing operations |
|
|
1,071 |
|
|
|
1,528 |
|
Net cash provided by operating activities of discontinued operations |
|
|
23 |
|
|
|
464 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,094 |
|
|
|
1,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(2,655 |
) |
|
|
(14,051 |
) |
Purchases of marketable securities |
|
|
(91,800 |
) |
|
|
|
|
Proceeds from maturities of marketable securities |
|
|
45,070 |
|
|
|
|
|
Purchase of other investment |
|
|
(1,356 |
) |
|
|
|
|
Increase in restricted cash |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations |
|
|
(50,791 |
) |
|
|
(14,051 |
) |
Net cash used in investing activities of discontinued operations |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(50,791 |
) |
|
|
(14,054 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
34 |
|
|
|
(374 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(49,663 |
) |
|
|
(12,436 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
65,292 |
|
|
|
75,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
15,629 |
|
|
$ |
62,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
Noncash investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures incurred not yet paid |
|
$ |
1,260 |
|
|
$ |
1,126 |
|
|
|
|
|
|
|
|
Stock-based compensation included in capital expenditures |
|
$ |
14 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Accounts receivable exchanged and deferred credit issued as part of
consideration for other investment |
|
$ |
894 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Gateway and components recorded in inventory in prior years which were used for
construction under satellite network and other equipment in 2010 |
|
$ |
129 |
|
|
$ |
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
5
ORBCOMM Inc.
Condensed Consolidated Statements of Equity
Six months ended June 30, 2010 and 2009
(in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
other |
|
|
|
|
|
|
interests |
|
|
|
|
|
|
Common stock |
|
|
paid-in |
|
|
comprehensive |
|
|
Accumulated |
|
|
in ORBCOMM |
|
|
Total |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income |
|
|
deficit |
|
|
Japan |
|
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2010 |
|
|
42,455,531 |
|
|
$ |
42 |
|
|
$ |
230,512 |
|
|
$ |
76 |
|
|
$ |
(71,415 |
) |
|
$ |
1,703 |
|
|
$ |
160,918 |
|
Vesting of restricted stock units |
|
|
108,086 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
1,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,038 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,031 |
) |
|
|
257 |
|
|
|
(3,774 |
) |
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372 |
|
|
|
|
|
|
|
75 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2010 |
|
|
42,563,617 |
|
|
$ |
43 |
|
|
$ |
231,550 |
|
|
$ |
448 |
|
|
$ |
(75,446 |
) |
|
$ |
2,035 |
|
|
$ |
158,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2009 |
|
|
42,101,834 |
|
|
$ |
42 |
|
|
$ |
229,001 |
|
|
$ |
381 |
|
|
$ |
(67,976 |
) |
|
$ |
1,603 |
|
|
$ |
163,051 |
|
Vesting of restricted stock units |
|
|
321,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
799 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,497 |
) |
|
|
65 |
|
|
|
(9,432 |
) |
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(464 |
) |
|
|
|
|
|
|
(85 |
) |
|
|
(549 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2009 |
|
|
42,423,373 |
|
|
$ |
42 |
|
|
$ |
229,800 |
|
|
$ |
(83 |
) |
|
$ |
(77,473 |
) |
|
$ |
1,583 |
|
|
$ |
153,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
6
1. Overview
ORBCOMM Inc. (ORBCOMM or the Company), a Delaware corporation, is a satellite-based data
communications company that operates a two-way global wireless data messaging system optimized
for narrowband data communication. The Company also provides terrestrial-based cellular
communication services through reseller agreements with major cellular wireless providers. The
Company provides services through a constellation of 28 owned and operated low-Earth orbit
satellites and accompanying ground infrastructure through which small, low power, fixed or
mobile satellite subscriber communicators (Communicators) and cellular wireless subscriber
identity modules, or SIMS, connected to the cellular wireless providers network, that can be
connected to other public or private networks, including the Internet (collectively, the
ORBCOMM System). The ORBCOMM System is designed to enable businesses and government agencies
to track, monitor, control and communicate with fixed and mobile assets.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules of the Securities and Exchange Commission (the SEC). Certain information
and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been condensed or
omitted pursuant to SEC rules. These financial statements should be read in conjunction with the
Companys Annual Report on Form 10-K for the year ended December 31, 2009.
In the opinion of management, the financial statements as of June 30, 2010 and for the three and
six-month periods ended June 30, 2010 and 2009 include all adjustments (including normal
recurring accruals) necessary for a fair presentation of the consolidated financial position,
results of operations and cash flows for the periods presented. The results of operations for
the interim periods are not necessarily indicative of the results to be expected for the full
year.
The financial statements include the accounts of the Company, its wholly-owned and
majority-owned subsidiaries, and investments in variable interest entities in which the Company
is determined to be the primary beneficiary. All significant intercompany accounts and
transactions have been eliminated in consolidation. The portions of majority-owned subsidiaries
that the Company does not own are reflected as noncontrolling interests in the condensed
consolidated balance sheets.
Investments in entities over which the Company has the ability to exercise significant influence
but does not have a controlling interest are accounted for under the equity method of
accounting. The Company considers several factors in determining whether it has the ability to
exercise significant influence with respect to investments, including, but not limited to,
direct and indirect ownership level in the voting securities, active participation on the board
of directors, approval of operating and budgeting decisions and other participatory and
protective rights. Under the equity method, the Companys proportionate share of the net income
or loss of such investee is reflected in the Companys consolidated results of operations.
Although the Company owns interests in companies that it accounts for pursuant to the equity
method, the investments in those entities had no carrying value as of June 30, 2010 and December
31, 2009. The Company has no guarantees or other funding obligations to those entities. The
Company had no equity or losses of those investees for the three and six months ended June 30,
2010 and June 30, 2009.
Noncontrolling interests in companies are accounted for by the cost method where the Company
does not exercise significant influence over the investee. The Companys cost basis investment
is carried at cost (See Note 7).
Certain
prior year amounts have been reclassified to conform to the current
period presentation.
7
The Company has incurred losses from inception and through June 30, 2010, the Company has an accumulated deficit of $75,446.
As of June 30, 2010, the Companys primary source of liquidity consisted of cash, cash
equivalents, restricted cash and marketable securities totaling $92,150 which the Company
believes will be sufficient to provide working capital and milestone payments for its
next-generation satellites for the next twelve months.
Fair Value of Financial instruments
The
Company has no financial assets or liabilities that are measured at fair value on a recurring basis. However, if
certain triggering events occur the Company is required to evaluate the non-financial assets for
impairment, a resulting asset impairment would require that a non-financial asset be recorded
at the fair value. FASB Topic ASC 820 Fair Value Measurement Disclosures, prioritizes inputs
used in measuring fair value into a hierarchy of three levels: Level 1- unadjusted quoted prices
for identical assets or liabilities traded in active markets, Level 2- inputs other than quoted
prices included within Level 1 that are either directly or indirectly observable; and Level 3-
unobservable inputs in which little or no market activity exists, therefore requiring an entity
to develop its own assumptions that market participants would use in pricing (See Note 3).
The carrying value of the Companys financial instruments, including cash, accounts receivable,
accounts payable and accrued expenses approximated their fair value due to the short-term nature
of these items. The fair value of the Note payable-related party is de minimis.
Marketable securities
Marketable securities consist of debt securities including U.S. government and agency
obligations, corporate obligations and FDIC-insured certificates of deposit, which have stated
maturities ranging from three months to less than one year. The Company classifies these
securities as held-to-maturity since it has the positive intent and ability to hold until
maturity. These securities are carried at amortized cost. The changes in the value of these
marketable securities, other than impairment charges, are not reported in the condensed
consolidated financial statements (See Note 7).
Concentration of credit risk
The Companys customers are primarily commercial organizations headquartered in the United
States. Accounts receivable are generally unsecured.
Accounts receivable are due in accordance with payment terms included in contracts negotiated
with customers. Amounts due from customers are stated net of an allowance for doubtful accounts.
Accounts that are outstanding longer than the contractual payment terms are considered past due.
The Company determines its allowance for doubtful accounts by considering a number of factors,
including the length of time accounts are past due, the customers current ability to pay its
obligations to the Company, and the condition of the general economy and the industry as a
whole. The Company writes-off accounts receivable when they are deemed uncollectible.
The following table presents customers with revenues greater than 10% of the Companys
consolidated total revenues for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended |
|
|
Six Months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Caterpillar Inc. |
|
|
13.8 |
% |
|
|
16.7 |
% |
|
|
13.5 |
% |
|
|
16.1 |
% |
Komatsu Ltd. |
|
|
15.4 |
% |
|
|
11.2 |
% |
|
|
13.7 |
% |
|
|
11.0 |
% |
AI, formerly a
division of General
Electric |
|
|
14.6 |
% |
|
|
14.6 |
% |
|
|
14.6 |
% |
|
|
14.9 |
% |
Hitachi Construction
Machinery Co., Ltd. |
|
|
11.8 |
% |
|
|
|
|
|
|
12.8 |
% |
|
|
|
|
8
The following table presents customers with accounts receivable greater than 10% of the
Companys
consolidated accounts receivable for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Caterpillar Inc. |
|
|
11.3 |
% |
|
|
13.9 |
% |
AI, formerly a division of General Electric |
|
|
10.5 |
% |
|
|
10.9 |
% |
Hitachi Construction Machinery Co., Ltd. |
|
|
10.7 |
% |
|
|
|
|
Komatsu Ltd. |
|
|
12.1 |
% |
|
|
|
|
Inventories
Inventories are stated at the lower of fair value or market, determined on a first-in, first-out
basis. Inventory consists primarily of finished goods available for sale to customers. The
Company reviews inventory quantities on hand and evaluates the realizability of inventories and
adjusts the carrying value as necessary based on forecasted product demand. Inventories in
excess of one years supply are classified as long-term.
Income taxes
As of June 30, 2010, the Company had unrecognized tax benefits of $775. There were no changes to
the Companys
unrecognized tax benefits during the three and six months ended June 30, 2010. The Company is
subject to U.S. federal and state examinations by tax authorities from 2006. The Company does
not expect any significant changes to its unrecognized tax positions during the next twelve
months.
The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. No interest and penalties related to uncertain tax positions were recognized during the
three and six months ended June 30, 2010.
A valuation allowance has been provided for all of the Companys deferred tax assets because it
is more likely than not that the Company will not recognize the tax benefits of these deferred
tax assets.
Accounting Pronouncements
In October 2009, FASB issued ASU No. 2009-13, Revenue Recognition FASB Topic ASC 605-25 (ASC
605-25), Multiple Deliverable Revenue Arrangements. ASU No. 2009-13 requires an entity to
allocate the revenue at the inception of an arrangement to all of its deliverables based on
their relative selling prices. This guidance eliminates the residual method of allocation of
revenue in multiple deliverable arrangements and requires the allocation of revenue based on the
relative-selling-price method. The determination of the selling price for each deliverable
requires the use of a hierarchy designed to maximize the use of available objective evidence
including, vendor-specific objective evidence of fair value (VSOE), third party evidence of
selling price (TPE), or estimated selling price (ESP). ASU No. 2009-13 will be effective for the
Company on January 1, 2011 and early adoption is allowed and may be adopted either under the
prospective method, whereby all revenue arrangements entered into, or materially modified after
the effective date or under the retrospective application to all revenue arrangements for all
periods presented. The Company may elect to adopt ASU No. 2009-13 prior to January 1, 2011 under
the prospective method but must adjust the revenue of prior reported periods such that all new
revenue arrangements entered into, or materially modified, during the fiscal year of adoption
are accounted for under this guidance. The Company is currently evaluating the impact of
adopting ASC No. 2009-13 on its consolidated financial statements.
9
3. Discontinued Operations
The Company is focused on continuing
the growth and expansion of its network services business and, in 2009, began
discussing with interested parties about a sale of its subsidiary, Stellar
Satellite Communications, Ltd. (“Stellar”). In 2009, as a result,
the Company classified the assets and liabilities of Stellar as assets held for
sale in its condensed consolidated balance sheets and Stellar’s results
of operations as discontinued operations in its condensed consolidated
statements of operations for the periods presented.
During the three and six months ended
June 30, 2010, the Company recorded an impairment charge of $3,261 to write
down the net assets held for sale in anticipation of selling Stellar as
discussed below.
On August 5, 2010, Stellar entered
into an Asset Purchase Agreement with Quake Global, Inc. (“Quake”),
a manufacturer of satellite communicators. Under the terms of the Asset
Purchase Agreement, Quake purchased inventory, equipment, intellectual property
and assumed certain liabilities. The Company received a cash payment of $48 at closing. In addition, the Company will receive royalty payments contingent
on future product sales of inventory as defined in the Asset Purchase Agreement. The Company will recognize the future royalty payments when they are received and the contingency is resolved in accordance with FASB Topic ASC 450 Contingencies.
The table below summarizes the fair value measurements of the Company's net assets held for sale at June 30, 2010 and losses for the six months ended June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
Balance |
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
as of |
|
|
Identical Assets |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
June 30, |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
Total |
|
|
|
2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets held
for sale |
|
$ |
44 |
|
|
|
|
|
|
|
|
|
|
$ |
44 |
|
|
$ |
3,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of discontinued operations for the three and six months ended June 30, 2010 and 2009 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues- Product sales |
|
$ |
184 |
|
|
$ |
375 |
|
|
$ |
429 |
|
|
$ |
1,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
discontinued
operations |
|
$ |
(3,479 |
) |
|
$ |
412 |
|
|
$ |
(3,570 |
) |
|
$ |
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 and December 31, 2009, the major classes of assets and liabilities of
Stellar held for sale were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Inventories, current |
|
$ |
77 |
|
|
$ |
575 |
|
|
|
|
|
|
|
|
Current assets |
|
|
77 |
|
|
|
575 |
|
|
|
|
|
|
|
|
Other equipment, net |
|
|
|
|
|
|
707 |
|
|
|
|
|
|
|
|
Inventories, long term |
|
|
|
|
|
|
2,125 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
33 |
|
|
|
79 |
|
|
|
|
|
|
|
|
4. Comprehensive Loss
The components of comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net loss |
|
$ |
(3,184 |
) |
|
$ |
(333 |
) |
|
$ |
(3,774 |
) |
|
$ |
(9,432 |
) |
Foreign currency translation adjustment |
|
|
281 |
|
|
|
(411 |
) |
|
|
447 |
|
|
|
(549 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
(2,903 |
) |
|
|
(744 |
) |
|
|
(3,327 |
) |
|
|
(9,981 |
) |
Comprehensive income (loss) attributable to
noncontrolling interests |
|
|
200 |
|
|
|
(19 |
) |
|
|
332 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to ORBCOMM Inc. |
|
$ |
(3,103 |
) |
|
$ |
(725 |
) |
|
$ |
(3,659 |
) |
|
$ |
(9,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Stock-based Compensation
The Companys share-based compensation plans consist of its 2006 Long-Term Incentives Plan (the
2006 LTIP) and its 2004 Stock Option Plan. As of June 30, 2010, there were 823,471 shares
available for grant under the 2006 LTIP and no shares available for grant under the 2004 Stock
Option Plan.
For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $592 and $344 respectively. For the six months ended June
30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing
operations of $1,024 and $799, respectively. The Companys stock-based compensation expense in
discontinued operations for the three and six months ended June 30, 2010 and 2009 was nil. For
the three months ended June 30, 2010 and 2009, the Company capitalized stock-based compensation
of $11 and nil, respectively. For the six months ended June 30, 2010 and 2009, the Company
capitalized stock-based compensation of $14 and nil, respectively. The components of the
Companys stock-based compensation expense are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Stock appreciation
rights |
|
$ |
454 |
|
|
$ |
226 |
|
|
$ |
766 |
|
|
$ |
476 |
|
Restricted stock units |
|
|
138 |
|
|
|
118 |
|
|
|
258 |
|
|
|
299 |
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
592 |
|
|
$ |
344 |
|
|
$ |
1,024 |
|
|
$ |
799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010, the Company had an aggregate of $2,465 of unrecognized compensation costs
for all share-based payment arrangements.
Time-Based Stock Appreciation Rights
During the six months ended June 30, 2010, the Company granted 828,000 time-based SARs. These
SARs vest in three equal installments on December 31, 2010, 2011 and 2012. The weighted-average
grant date fair value of these SARs was $1.77 per share.
11
A summary of the Companys time-based SARs for the six months ended June 30, 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Weighted-Average |
|
|
Contractual |
|
|
Intrinsic Value |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Term (years) |
|
|
(In thousands) |
|
Outstanding at January 1,
2010 |
|
|
1,166,667 |
|
|
$ |
5.23 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
828,000 |
|
|
|
2.46 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
1,994,667 |
|
|
$ |
4.08 |
|
|
|
8.51 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010 |
|
|
755,000 |
|
|
$ |
5.46 |
|
|
|
7.63 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
at June 30, 2010 |
|
|
1,994,667 |
|
|
$ |
4.08 |
|
|
|
8.51 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2010 and 2009, the Company recorded stock-based
compensation expense in continuing operations of $360 and $226 relating to the time-based SARs,
respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based
compensation expense in continuing operations of $627 and $448 relating to the time-based SARs,
respectively. As of June 30, 2010, $1,737 of total unrecognized compensation cost related to the
time-based SARs is expected to be recognized through December 2012.
Performance-Based Stock Appreciation Rights
During the six months ended June 30, 2010, 306,000 performance-based SARs were granted when the
Compensation Committee established financial and operational performance targets for fiscal 2010.
These SARs are expected to vest in the first quarter of 2011. The weighted-average grant date
fair value of these SARs was $1.72 per share. As of June 30, 2010, the Company estimates that 83%
of the performance targets will be achieved.
A summary of the Companys performance-based SARs for the six months ended June 30, 2010 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Weighted-Average |
|
|
Contractual |
|
|
Intrinsic Value |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Term (years) |
|
|
(In thousands) |
|
Outstanding at January 1,
2010 |
|
|
280,146 |
|
|
$ |
9.59 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
306,000 |
|
|
|
2.46 |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(21,000 |
) |
|
|
1.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
565,146 |
|
|
$ |
6.02 |
|
|
|
8.45 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010 |
|
|
259,146 |
|
|
$ |
10.22 |
|
|
|
7.01 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
at June 30, 2010 |
|
|
513,783 |
|
|
$ |
6.37 |
|
|
|
8.33 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $94 and nil relating to the performance-based SARs,
respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based
compensation expense in continuing operations of $139 and $28 relating to the performance-based
SARs, respectively. As of June 30, 2010, $301 of total unrecognized compensation cost related to
the performance-based SARs is expected to be recognized through the first quarter of 2011.
12
The fair value of each time and performance-based SAR award is estimated on the date of grant
using the Black-Scholes option pricing model with the assumptions described below for the periods
indicated. For the six months ended June 30, 2010, the expected volatility was based on an
average of the Companys historical volatility over the expected terms of the SAR awards and the
comparable publicly traded companies historical volatility. For the six months ended June 30,
2009, the expected volatility was based on the historical volatility for comparable publicly
traded companies, due to the Companys own insufficient trading history. The Company uses the simplified method to determine the expected terms of SARs due to
insufficient history of exercises. Estimated forfeitures were based on voluntary and involuntary
termination behavior as well as analysis of actual forfeitures. The risk-free interest rate was
based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR
grants.
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
Risk-free interest rate |
|
2.27% and 2.65% |
|
|
2.34% |
|
Expected life (years) |
|
5.50 and 6 |
|
|
6 |
|
Estimated volatility |
|
85.95% and 83.67% |
|
|
55.03% |
|
Expected dividends |
|
None |
|
|
None |
|
Time-Based Restricted Stock Units
During the six months ended June 30, 2010, the Company granted 79,290 time-based RSUs. These
RSUs vest in January 2011.
A summary of the Companys time-based RSUs for the six months ended June 30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Shares |
|
|
Grant Date Fair Value |
|
Balance at January 1, 2010 |
|
|
238,753 |
|
|
$ |
3.18 |
|
Granted |
|
|
79,290 |
|
|
|
2.27 |
|
Vested |
|
|
(78,086 |
) |
|
|
1.59 |
|
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
|
239,957 |
|
|
$ |
3.40 |
|
|
|
|
|
|
|
|
For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $138 and $113 related to the time-based RSUs, respectively.
For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $258 and $214 related to the time-based RSUs, respectively.
As of June 30, 2010, $427 of total unrecognized compensation cost related to the time-based RSUs
is expected to be recognized through September 2011.
The fair value of the time-based RSU awards is based upon the closing stock price of the
Companys common stock on the date of grant.
Performance-Based Restricted Stock Units
As of June 30, 2010, the Company has no outstanding performance-based RSUs.
For the three months ended June 30, 2010 and 2009, the Company recorded stock-based
compensation expense in continuing operations of nil and $5 related to the performance-based
RSUs, respectively. For the six months ended June 30, 2010 and 2009, the Company recorded
stock-based compensation expense in continuing operations of nil and $85 related to the
performance-based RSUs, respectively.
13
2004 Stock Option Plan
A summary of the status of the Companys stock options as of June 30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Weighted-Average |
|
|
Contractual |
|
|
Intrinsic Value |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Term (years) |
|
|
(In thousands) |
|
Outstanding at January 1, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.68 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.68 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at
June 30, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.68 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Net Income (Loss) per Common Share
Basic net loss per common share is calculated by dividing net loss attributable to ORBCOMM Inc.
by the weighted-average number of common shares outstanding for the period. Diluted net loss per
common share is the same as basic net loss per common share, because potentially dilutive
securities such as RSUs, SARs, stock options and stock warrants would have an antidilutive
effect as the Company incurred a net loss from continuing operations for the three months ended
June 30, 2009 and for the six months ended June 30, 2010 and 2009. For the three months ended
June 30 2010, the Company reported income from continuing operations and included the effect of
1,035 SARs and 48,462 RSUs in its diluted weighted average common shares outstanding.
The potentially dilutive securities excluded from the determination of diluted loss per share,
as their effect is antidilutive, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Six Months ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
SARs |
|
|
2,559,813 |
|
|
|
1,416,813 |
|
RSUs |
|
|
239,957 |
|
|
|
232,411 |
|
Stock options |
|
|
782,079 |
|
|
|
782,079 |
|
Common stock warrants |
|
|
|
|
|
|
56,724 |
|
|
|
|
|
|
|
|
|
|
|
3,581,849 |
|
|
|
2,488,027 |
|
|
|
|
|
|
|
|
14
7. Investments
The Company investments consist of marketable securities and a cost method investment.
Marketable securities
As of June 30, 2010 and December 31, 2009, the marketable securities are recorded at amortized cost
which approximates fair value. As of June 30, 2010 all
marketable securities mature in one year or
less.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
Fair |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
Value |
|
|
Losses |
|
|
Gains |
|
|
Value |
|
|
Losses |
|
|
Gains |
|
|
|
|
|
|
|
|
U.S. government and
agency obligations |
|
$ |
42,121 |
|
|
$ |
2 |
|
|
$ |
6 |
|
|
$ |
13,009 |
|
|
$ |
|
|
|
$ |
1 |
|
Corporate obligations |
|
|
25,039 |
|
|
|
55 |
|
|
|
|
|
|
|
11,211 |
|
|
|
7 |
|
|
|
|
|
FDIC-insured
certificates of
deposit |
|
|
5,274 |
|
|
|
6 |
|
|
|
|
|
|
|
1,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
72,434 |
|
|
$ |
63 |
|
|
$ |
6 |
|
|
$ |
26,139 |
|
|
$ |
7 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company would recognize an impairment loss when the decline in the estimated fair value of a
marketable security below the amortized cost is determined to be other-than-temporary. The Company
considers various factors in determining whether to recognize an impairment charge, including the
duration of time and the severity to which the fair value has been less than the amortized cost,
any adverse changes in the issuers financial conditions and the Companys intent to sell or
whether it is more likely than not that it would be required to sell the marketable security before
its anticipated recovery. Investments with unrealized losses have been in an unrealized loss
position for less than a year.
At June 30, 2010, the gross unrealized losses of $63 were primarily due to changes in interest
rates and not credit quality of the issuer. Accordingly, the Company has determined that the gross
unrealized losses are not other-than-temporary at June 30, 2010 and there has been no recognition
of impairment losses in its condensed consolidated statements of operations for the three and six
months ended June 30, 2010.
Cost method investment
On April 5, 2010, the Company entered into a stock purchase agreement with Alanco Technologies,
Inc., (Alanco), the parent company of a terrestrial VAR, StarTrak Systems, LLC (StarTrak).
Under the terms of the stock purchase agreement, the Company purchased 500,000 shares of Series E
Convertible Preferred Stock (Series E preferred
stock) from Alanco for consideration totaling $2,250. The
consideration consists of: (1) $1,356 cash payment, (2) exchange of outstanding accounts receivable
balance of $644 in lieu of receiving payment from StarTrak and (3) a $250 credit against future
accounts receivable for satellite usage fees. The Series E preferred stock is an equity security
that does not have a readily determinable fair value. The Company periodically assesses whether
the investment is other-than-temporary impaired. If the Company determines that an other-than
temporary impairment has occurred, the Company will write down the investment to its fair value.
The fair value of cost method investment is not evaluated if there are no identified events or
changes in circumstances that may have a significant adverse effect on the investments fair value.
As of June 30, 2010, the carrying amount of the Companys cost method investment was $2,250.
15
8. Satellite Network and Other Equipment
Satellite network and other equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful life |
|
|
June 30, |
|
|
December 31, |
|
|
|
(years) |
|
|
2010 |
|
|
2009 |
|
Land |
|
|
|
|
|
$ |
381 |
|
|
$ |
381 |
|
Satellite network |
|
|
3-10 |
|
|
|
28,249 |
|
|
|
27,814 |
|
Capitalized software |
|
|
3-5 |
|
|
|
1,355 |
|
|
|
1,318 |
|
Computer hardware |
|
|
5 |
|
|
|
1,208 |
|
|
|
1,144 |
|
Other |
|
|
5-7 |
|
|
|
1,259 |
|
|
|
1,105 |
|
Assets under construction |
|
|
|
|
|
|
68,772 |
|
|
|
66,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,224 |
|
|
|
98,212 |
|
Less: accumulated depreciation and amortization |
|
|
|
|
|
|
(26,562 |
) |
|
|
(25,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
74,662 |
|
|
$ |
73,208 |
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2010 and 2009, the Company capitalized costs attributable to
the design and development of internal-use software in the amount of $107 and $112, respectively.
Depreciation and amortization expense for the three months ended June 30, 2010 and 2009 was $533
and $925, respectively. This includes amortization of internal-use software of $72 and $74 for the
three months ended June 30, 2010 and 2009, respectively. Depreciation and amortization expense for
the six months ended June 30, 2010 and 2009 was $1,558 and $1,837, respectively. This includes
amortization of internal-use software of $183 and $146 for the six months ended June 30, 2010 and
2009, respectively.
Assets under construction primarily consist of milestone payments pursuant to procurement
agreements which includes, the design, development, launch and other direct costs relating to the
construction of the next-generation satellites (See Note 16) and upgrades to its infrastructure and
ground segment.
On June 22, 2010, one of the two remaining quick-launch satellites experienced a power system
anomaly which resulted in loss of contact with the satellite by the Companys ground control
systems. This satellite was fully depreciated as of December 31,
2009 and its loss had no effect on the results of
operations during the three and six months ended June 30, 2010.
This satellite was covered as a part of the Companys insurance settlement
received in December 2009 as it was considered a constructive total
loss under the Companys insurance policy. The remaining quick-launch satellite is currently providing worldwide AIS and no ORBCOMM messaging services.
9. Restricted Cash
Restricted cash consists of the remaining cash collateral of $3,000 for a performance bond required
by the FCC in connection with the Company obtaining expanded FCC authorization to construct, launch
and operate an additional 24 next-generation satellites. Under the terms of the performance bond,
the cash collateral will be reduced in increments of $1,000 upon completion of specified
milestones. The Company certified completion of a third milestone. The FCC has not yet issued a
ruling on the certification of the third milestone. The Company has classified $1,000 of restricted
cash for the third milestone as a current asset at June 30, 2010 and December 31, 2009.
Restricted cash also includes $680 deposited into an escrow account under the terms of a
procurement agreement for the quick-launch satellites.
Restricted cash also includes $350 placed into certificates of deposit to secure a letter of credit
with a cellular wireless provider to secure terrestrial communications services and to secure a
credit card facility. The interest income earned on the restricted cash balances is unrestricted and included in interest
income in the condensed consolidated statements of operations.
16
10. Intangible Assets
The Companys intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
|
Useful life |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
(years) |
|
|
Cost |
|
|
amortization |
|
|
Net |
|
|
Cost |
|
|
amortization |
|
|
Net |
|
Acquired licenses |
|
|
6 |
|
|
$ |
8,115 |
|
|
$ |
(6,258 |
) |
|
$ |
1,857 |
|
|
$ |
8,115 |
|
|
$ |
(5,515 |
) |
|
$ |
2,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense was $372 for the three months ended June 30, 2010 and 2009 and was $743 for
the six months ended June 30, 2010 and 2009.
Estimated amortization expense for intangible assets subsequent to June 30, 2010 is as follows:
|
|
|
|
|
Years ending December 31, |
|
|
|
|
Remainder of 2010 |
|
$ |
743 |
|
2011 |
|
|
1,114 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,857 |
|
|
|
|
|
11. Accrued Liabilities
The Companys accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Accrued compensation and benefits |
|
$ |
1,527 |
|
|
$ |
1,812 |
|
Accrued interest |
|
|
827 |
|
|
|
797 |
|
Deferred rent payable |
|
|
447 |
|
|
|
919 |
|
Other accrued expenses |
|
|
2,113 |
|
|
|
2,361 |
|
|
|
|
|
|
|
|
|
|
$ |
4,914 |
|
|
$ |
5,889 |
|
|
|
|
|
|
|
|
12. Deferred Revenues
Deferred revenues consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Professional services |
|
$ |
5,995 |
|
|
$ |
6,437 |
|
Service activation fees |
|
|
2,450 |
|
|
|
2,563 |
|
Manufacturing license fees |
|
|
37 |
|
|
|
44 |
|
Prepaid services |
|
|
1,494 |
|
|
|
1,035 |
|
|
|
|
|
|
|
|
|
|
|
9,976 |
|
|
|
10,079 |
|
Less current portion |
|
|
(4,143 |
) |
|
|
(3,849 |
) |
|
|
|
|
|
|
|
Long-term portion |
|
$ |
5,833 |
|
|
$ |
6,230 |
|
|
|
|
|
|
|
|
Deferred professional services represent amounts related to the USCG
Concept Validation Project. On August 6, 2010, the
Company’s AIS data service and maintenance contract with the U.S. Coast
Guard expired. The Company is pursuing a new agreement, and awaits a decision
from the U.S. Coast Guard. The Company is currently evaluating the accounting
impact on the deferred revenue from the expiration of the contract.
13. Note Payable
In connection with the acquisition of a majority interest in Satcom in 2005, the Company recorded
an indebtedness to OHB Technology A.G. (formerly known as OHB Teledata A.G.), a stockholder of the
Company. At June 30, 2010, the principal balance of the note payable was 1,138 ($1,389) and it
had a carrying value of $1,225. At December 31, 2009, the principal balance of the note payable was
1,138 ($1,628) and it had a carrying value of $1,398. The carrying value was based on the
notes estimated fair value at the time of acquisition. The difference between the carrying value
and principal balance is being amortized to interest expense over the estimated life of the note of
six years. Interest expense related to the note for the three and six months ended June 30, 2010
and 2009 was $33 and $66, respectively. This note does not bear interest and has no fixed repayment
term. Repayment will be made from the distribution profits (as defined in the note agreement) of
ORBCOMM Europe LLC. The note has been classified as long-term and the Company does not expect any
repayments to be required prior to June 30, 2011.
17
14. Stockholders Equity
As of June 30, 2010, the Company has reserved 4,405,320 shares of common stock for future issuances
related to employee stock compensation plans.
15. Geographic Information
The Company operates in one reportable segment, satellite data communications. Other than
satellites in orbit, long-lived assets outside of the United States are not significant. The
following table summarizes revenues on a percentage basis by geographic regions, based on the
country in which the customer is located.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
United States |
|
|
79 |
% |
|
|
87 |
% |
|
|
79 |
% |
|
|
86 |
% |
Japan |
|
|
15 |
% |
|
|
10 |
% |
|
|
16 |
% |
|
|
10 |
% |
Other |
|
|
6 |
% |
|
|
3 |
% |
|
|
5 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Commitments and Contingencies
Procurement agreements in connection with next-generation satellites
On May 5, 2008, the Company entered into a procurement agreement with Sierra Nevada Corporation
(SNC) pursuant to which SNC will construct eighteen low-earth-orbit satellites in three sets of
six satellites (shipsets) for the Companys next-generation satellites (the Initial
Satellites). Under the agreement, SNC will also provide launch support services, a test satellite
(excluding the mechanical structure), a satellite software simulator and the associated ground
support equipment. Under the agreement, the Company has
the option, exercisable at any time until the third anniversary of the execution of the agreement,
to order up to thirty additional satellites substantially identical to the Initial Satellites (the
Optional Satellites).
The total contract price for the Initial Satellites is $117,000, subject to reduction upon failure
to achieve certain in-orbit operational milestones with respect to the Initial Satellites or if the
pre-ship reviews of each shipset are delayed more than 60 days after the specified time periods
described below.
The Company has agreed to pay SNC up to $1,500 in incentive payments for the successful operation
of the Initial Satellites five years following the successful completion of in-orbit testing for
the third shipset of six satellites. The price for the Optional Satellites ranges from $5,000 to
$7,700 per satellite depending on the number of satellites ordered and the timing of the exercise
of the option.
The agreement also requires SNC to complete the pre-ship review of the Initial Satellites (i) no
later than 24 months after the execution of the agreement for the first shipset of six satellites,
(ii) no later than 31 months after the execution of the agreement for the second shipset of six
satellites and (iii) no later than 36 months after the execution of the agreement for the third
shipset of six satellites. Payments under the agreement will begin upon the execution of the
agreement and will extend into the second quarter of 2012, subject to SNCs successful completion
of each payment milestone. As of June 30, 2010, the Company has made milestone payments of $42,120
under the agreement. The Company anticipates making payments under
the agreement of $9,690 during
the remainder of 2010. Under the agreement, SNC has agreed to provide the Company with an optional
secured credit facility for up to $20,000 commencing 24 months after the execution of the agreement
and maturing 44 months after the effective date. If the Company elects to establish and use the
credit facility it and SNC will enter into a formal credit facility on terms established in the
agreement.
18
On August 28, 2009, the Company and Space Exploration Technologies Corp. (SpaceX) entered into a
Commercial Launch Services Agreement (the Agreement) pursuant to which SpaceX will provide launch
services (the Launch Services) using multiple SpaceX Falcon 1e launch vehicles for the carriage
into low-Earth-orbit for the Companys 18 next-generation commercial communications satellites
currently being constructed by SNC. Under the Agreement, SpaceX will also provide to the Company
launch vehicle integration and support services, as well as certain related optional services.
The Agreement anticipates that the Launch Services will be performed between the first quarter of
2011 and first quarter of 2014, subject to certain rights of the Company and SpaceX to reschedule
any of the particular Launch Services as needed. The Agreement also provides the Company the option
to procure, prior to each Launch Service, reflight launch services whereby in the event the
applicable Launch Service results in a failure due to the SpaceX launch vehicle, SpaceX will
provide comparable reflight launch services at no additional cost to the Company beyond the initial
option price for such reflight launch services.
The total price under the Agreement (excluding any options or additional launch services) is
$46,600, subject to certain adjustments. The amounts due under the Agreement are payable in
periodic installments from the date of execution of the Agreement through the performance of each
Launch Service. The Company may postpone and reschedule the Launch Services for any reason at its
sole discretion, following 12 months of delay for any particular Launch Services. The Company also
has the right to terminate any of the Launch Services subject to the payment of a termination fee
in an amount that would be based on the date the Company exercises its termination right.
As of June 30, 2010, the Company has made milestone payments of $10,080 under the Agreement. The
Company anticipates making the next milestone payment during the first quarter of 2011.
Airtime credits
In 2001, in connection with the organization of ORBCOMM Europe LLC and the reorganization of the
ORBCOMM business in Europe, the Company agreed to grant certain country representatives in Europe
approximately $3,736 in airtime credits. The Company has not recorded the airtime credits as a
liability for the following reasons: (i) the Company has no obligation to pay the unused airtime
credits if they are not utilized; and (ii) the airtime credits are earned by the country
representatives only when the Company
generates revenue from the country representatives. The airtime credits have no expiration date.
Accordingly, the Company is recording airtime credits as services are rendered and these airtime
credits are recorded net of revenues from the country representatives. For the three months ended
June 30, 2010 and 2009, airtime credits used totaled approximately $10 and $15, respectively. For
the six months ended June 30, 2010 and 2009, airtime credits used totaled approximately $22 and
$48, respectively. As of June 30, 2010 and December 31, 2009, unused credits granted by the Company
were approximately $2,230 and $2,208, respectively.
Litigation
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 Companys business, results of operations or financial condition.
19
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Safe Harbor Statement Under the Private Securities Litigation Reform of Act 1995.
Certain statements discussed in Part I, Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form
10-Q constitute forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements generally relate to our plans,
objectives and expectations for future events and include statements about our expectations,
beliefs, plans, objectives, intentions, assumptions and other statements that are not historical
facts. Such forward-looking statements, including those concerning the Companys expectations,
are subject to known and unknown risks and uncertainties, which could cause actual results to
differ materially from the results, projected, expected or implied by the forward-looking
statements, some of which are beyond the Companys control, that may cause the Companys actual
results, performance or achievements, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such forward-looking
statements. These risks and uncertainties include but are not limited to: the impact of global
recession and continued worldwide credit and capital constraints; substantial losses we have
incurred and expect to continue to incur; demand for and market acceptance of our products and
services and the applications developed by our resellers; loss or decline or slowdown in the
growth in business from Asset Intelligence, a subsidiary of I.D. Systems, Inc. (AI) (formerly a
division of General Electric Company (GE or General Electric)), other value-added resellers
or VARs and international value-added resellers or IVARs; loss or decline or slowdown in growth
in business of any of the specific industry sectors the Company serves, such as transportation,
heavy equipment, fixed assets and maritime; litigation proceedings; technological changes,
pricing pressures and other competitive factors; the inability of our international resellers to
develop markets outside the United States; market acceptance and success of our Automatic
Identification System (AIS) business; the inability to provide AIS service due to the in-orbit
satellite failure of the remaining quick-launch satellite; satellite launch and construction
delays and cost overruns of our next-generation satellites; in-orbit satellite failures or
reduced performance of our existing satellites; the failure of our system or reductions in levels
of service due to technological malfunctions or deficiencies or other events; our inability to
renew or expand our satellite constellation; political, legal regulatory, government
administrative and economic conditions and developments in the United States and other countries
and territories in which we operate; and changes in our business strategy. In addition, specific
consideration should be given to various factors described in more detail in Part I, Item 1A.
Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009. The
Company undertakes no obligation to publicly revise any forward-looking statements or cautionary
factors, except as required by law.
Overview
We operate a global commercial wireless messaging system optimized for narrowband communications.
Our system consists of a global network of 28 low-Earth orbit, or LEO, satellites and
accompanying ground infrastructure. Our two-way communications system enables our customers and
end-users, which include large and established multinational businesses and government agencies,
to track, monitor, control and communicate cost-effectively with fixed and mobile assets located
anywhere in the world. We also provide terrestrial-based cellular communication services through
reseller agreements with major cellular wireless providers. Currently, our agreements with major
cellular providers include GSM and CDMA offerings in the United States and GSM services with
significant coverage worldwide. These terrestrial-based communication services enable our
customers who have higher bandwidth requirements to receive and send messages from communication
devices based on terrestrial-based technologies using the cellular providers wireless networks
as well as from dual-mode devices combining our satellite subscriber communicators with devices
for terrestrial-based technologies. As a result, our customers are now able to integrate into
their applications a terrestrial communications device that will allow them to add messages,
including data intensive messaging from the cellular providers wireless networks.
On June 22, 2010, one of the two remaining quick-launch satellites experienced a power system
anomaly which resulted in loss of contact with the satellite by our
ground control systems. This
satellite was fully depreciated as of December 31, 2009 and its loss had no effect on our results of operations during
the three and six months ended June 30, 2010. This satellite was covered as a
part of our insurance settlement received in December 2009 as it was
considered a constructive total loss under our insurance policy. The remaining quick-launch satellite is currently providing worldwide AIS and no ORBCOMM messaging services.
Our products and services enable our customers and end-users to enhance productivity, reduce
costs and improve security through a variety of commercial, government, and emerging homeland
security applications. We enable our customers and end-users to achieve these benefits using a
single global satellite technology standard for machine-to-machine and telematic, or M2M, data
communications. Our customers have made significant investments in developing ORBCOMM-based
applications. Examples of assets that are connected through our M2M data communications system
include trucks, trailers, railcars, containers, heavy equipment, fluid tanks, utility meters,
pipeline monitoring equipment, marine vessels, and oil wells. Our customers include original
equipment manufacturers, or OEMs, such as Caterpillar Inc., (Caterpillar), Doosan Infracore
America, Hitachi Construction Machinery Co., Ltd., (Hitachi), Hyundai Heavy Industries, Komatsu
Ltd., (Komatsu), The Manitowoc Company and Volvo Construction Equipment, IVARs, such as AI,
VARs, such as XATA Corporation and American Innovations, Ltd., and government agencies, such as
the U.S. Coast Guard.
We currently offer AIS data to the U.S. Coast Guard, and to other government and commercial customers. Further, we are working with system
integrators and maritime information service providers for value-added service and to facilitate the sales and distribution of our AIS data. On August 6, 2010, our AIS data
service and maintenance contract with the U.S. Coast Guard expired. We are
pursuing a new agreement, and await a decision from the U.S. Coast Guard.
We entered into an
AIS data license distribution agreement for commercial purposes with Lloyds Register-Fairplay
Ltd (Lloyds). As a result, Lloyds has entered into agreements with several government
agencies and corporate customers. We will continue to work with additional candidates to address
the various market sectors for AIS data. We believe we are the only commercially available
satellite-based AIS data provider with capability beyond terrestrial-based systems into the open
seas.
20
Through our M2M data communications system, our customers and end-users can send and receive
information to and from any place in the world using low-cost subscriber communicators and paying
airtime costs that we believe are the lowest in the industry for global connectivity. Our
customers can also use cellular terrestrial units, or wireless subscriber identity modules
(SIMS), for use with devices or equipment that enable the use of a cellular providers wireless
network, singularly or in conjunction with satellite services, to send and receive information
from these devices. We believe that there is no other satellite or terrestrial network currently
in operation that can offer global two-way wireless narrowband data service including coverage at
comparable cost using a single technology standard worldwide, that also provides a parallel
terrestrial network for data intensive applications.
The recent global economic conditions, including concerns about a global economic recession,
along with unprecedented credit and capital constraints in the capital markets and deteriorations
of financial institutions have created a challenging economic environment leading to a lack of
customer confidence. Our worldwide operations and performance depend significantly on global
economic conditions and their impact on our customers decisions to purchase our services and
products. Economic conditions have worsened significantly in many parts of the world, and may
remain weak or even deteriorate further in the foreseeable future. The worldwide economic turmoil
may have a material adverse effect on our operations and financial results, and we may be unable
to predict the scope and magnitude of its effects on our business. VARs and end users in any of
our target markets, including in commercial transportation and heavy equipment, have and may
experience unexpected fluctuations in demand for their products, as our end users alter
purchasing activities in response to this economic volatility. Our customers may change or scale
back product development efforts, the roll-out of service applications, product purchases or
other sales activities that affect purchases of our products and services, and this could
adversely affect the amount and timing of revenue for the long-term future, leaving us with
limited visibility in the revenue we can anticipate in any given period. These economic
conditions also affect our third party manufacturers, and if they are unable to obtain the
necessary capital to operate their business, this may also impact their ability to provide the
subscriber communicators that our end-users need, or may adversely affect their ability to
provide timely services or to make timely deliveries of products or services to our end-users. It
is currently unclear as to what overall effect these economic conditions and uncertainties will
have on our existing customers and core markets, and future business with existing and new
customers in our current and future markets.
Discontinued Operations
We are focused on continuing the growth and expansion of our network business, and in 2009 began
discussing with interested parties about a sale of our subsidiary, Stellar Satellite
Communications, Ltd. (Stellar). In 2009, as a result, we classified Stellars certain assets
and liabilities as held for sale on our condensed consolidated balance sheets and presented
Stellars results of operations as discontinued operations in our condensed consolidated
statements of operations for the periods presented. During the three and six months ended June
30, 2010, we recorded an impairment charge of $3.3 million to write down the net assets held for
sale in anticipation of selling Stellar. See Note 3 to the condensed consolidated financial statements for further
discussion.
Cost Method Investment
On April 5, 2010, we entered into a stock purchase agreement with Alanco Technologies, Inc.,
(Alanco), the parent company of a terrestrial VAR, StarTrak Systems, LLC (StarTrak). Under
the terms of the stock purchase agreement, we purchased 500,000 shares of Series E Convertible
Preferred Stock from Alanco for $2.3 million. In connection with this investment, we entered into a product/software
development cooperation agreement with StarTrak to develop, manufacture and market new products
featuring dual-mode cellular and ORBCOMM satellite communications capabilities to operate over
the ORBCOMM System. See Note 7 to the condensed consolidated financial statements for further
discussion.
Critical Accounting Policies
Our discussion and analysis of our results of operations, liquidity and capital resources are
based on our consolidated financial statements which have been prepared in conformity with
accounting principles generally accepted in the United States of America. The preparation of
these consolidated financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including
those related to revenue recognition, costs of revenues, accounts receivable, satellite network
and other equipment, investments, capitalized development costs, intangible assets,
valuation of deferred tax assets, uncertain tax positions and the value of securities underlying
stock-based compensation. We base our estimates on historical and anticipated results and trends
and on various other assumptions that we believe are reasonable under the circumstances,
including assumptions as to future events. These estimates form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other
sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual
results may differ from our estimates and could have a significant adverse effect on our results
of operations and financial position. For a discussion of our critical accounting policies see
Part II, Item 7. Managements 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. There have been no material changes to our
critical accounting policies during 2010.
21
EBITDA
EBITDA is defined as earnings attributable to ORBCOMM Inc., before interest income (expense),
provision for income taxes and depreciation and amortization. We believe EBITDA is useful to our
management and investors in evaluating our operating performance because it is one of the primary
measures we use to evaluate the economic productivity of our operations, including our ability to
obtain and maintain our customers, our ability to operate our business effectively, the
efficiency of our employees and the profitability associated with their performance. It also
helps our management and investors to meaningfully evaluate and compare the results of our
operations from period to period on a consistent basis by removing the impact of our financing
transactions and the depreciation and amortization impact of capital investments from our
operating results. In addition, our management uses EBITDA in presentations to our board of
directors to enable it to have the same measurement of operating performance used by management
and for planning purposes, including the preparation of our annual operating budget.
EBITDA is not a performance measure calculated in accordance with accounting principles generally
accepted in the United States, or GAAP. While we consider EBITDA to be an important measure of
operating performance, it should be considered in addition to, and not as a substitute for, or
superior to, net loss or other measures of financial performance prepared in accordance with GAAP
and may be different than EBITDA measures presented by other companies.
The following table (in thousands) reconciles our net loss to EBITDA for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net loss |
|
$ |
(3,296 |
) |
|
$ |
(362 |
) |
|
$ |
(4,031 |
) |
|
$ |
(9,497 |
) |
Interest income |
|
|
(55 |
) |
|
|
(23 |
) |
|
|
(92 |
) |
|
|
(64 |
) |
Interest expense |
|
|
48 |
|
|
|
48 |
|
|
|
96 |
|
|
|
96 |
|
Depreciation and
amortization |
|
|
904 |
|
|
|
1,297 |
|
|
|
2,301 |
|
|
|
2,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,399 |
) |
|
$ |
960 |
|
|
$ |
(1,726 |
) |
|
$ |
(6,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA during the three months ended June 30, 2010 decreased by $3.4 million over the three
months ended June 30, 2009. The decrease was primarily due to
the impairment charge of $3.3 million in discontinued operations
to write down the net assets held for sale.
EBITDA during the six months ended June 30, 2010 improved by $5.1 million over the six months
ended June 30, 2009. This improvement was primarily due to higher net service revenues of
$0.8 million and a decrease in operating expenses of $8.1 million. The decrease in operating
expenses was primarily due to a non-cash impairment charge during the six months ended June 30,
2009 of $7.0 million for one of our quick-launch satellites and a decrease of $1.0 million in
professional fees. These decreases were offset due to
the impairment charge of $3.3 million in discontinued operations
to write down the net assets held for sale.
Results of Operations
Revenues
We derive service revenues from our resellers and direct customers from utilization of satellite
subscriber communicators on our communications system and the reselling of airtime from the
utilization of terrestrial-based subscriber communicators using SIMS on the cellular providers
wireless networks. These service revenues generally consist of a one-time activation fee for each
subscriber communicator and SIMS activated for use on our communications system and monthly usage
fees. Usage fees that we charge our customers are based upon the number, size and frequency of
data transmitted by the customer and the overall number of subscriber communicators and SIMS
activated by each customer. Revenues for usage fees from currently billing subscriber
communicators and SIMS are recognized on an accrual basis, as services are rendered, or on a cash
basis, if collection from the customer is not reasonably assured at the time the service is
provided. Usage fees charged to our resellers and direct customers are charged primarily at
wholesale rates based on the overall number of subscriber communicators activated by them and the
total amount of data transmitted. Service revenues also includes AIS data transmissions, services to
the United States Coast Guard for the Concept Validation Project, royalty fees from third parties
for the use of our proprietary communications protocol charged on a one-time basis for each
satellite subscriber communicator connected to our M2M data communications system and fees from
providing engineering, technical and management support services to customers.
We derive product revenues primarily from sales of subscriber communicators and cellular wireless
subscriber identity modules, or SIMS, (for our terrestrial-communication services) to our
resellers (i.e., our VARs, IVARs, international licensees and country representatives) and direct
customers.
22
The table below presents our revenues for the three months and six months ended June 30, 2010 and
2009, together with the percentage of total revenue represented by each revenue category (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
Service revenues |
|
$ |
7,277 |
|
|
|
92.9 |
% |
|
$ |
6,720 |
|
|
|
99.3 |
% |
|
$ |
14,159 |
|
|
|
92.8 |
% |
|
$ |
13,342 |
|
|
|
98.9 |
% |
Product sales |
|
|
560 |
|
|
|
7.1 |
% |
|
|
50 |
|
|
|
0.7 |
% |
|
|
1,095 |
|
|
|
7.2 |
% |
|
|
155 |
|
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,837 |
|
|
|
100.0 |
% |
|
$ |
6,770 |
|
|
|
100.0 |
% |
|
$ |
15,254 |
|
|
|
100.0 |
% |
|
$ |
13,497 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months: Total revenues for the three months ended June 30, 2010 increased $1.1 million, or
15.8%, to $7.8 million from $6.8 million for the three months ended June 30, 2009.
Six Months: Total revenues for the six months ended June 30, 2010 increased $1.8 million, or
13.0%, to $15.3 million from $13.5 million for the six months ended June 30, 2009.
Service revenues
Three Months: Service revenues increased $0.6 million for the three months ended June 30, 2010,
or 8.3%, to $7.3 million, or approximately 92.9% of total revenues, from $6.7 million, or
approximately 99.3% of total revenues for the three months ended June 30, 2009.
Six Months: Service revenues increased $0.8 million for the six months ended June 30, 2010, or
6.1%, to $14.2 million, or approximately 92.8% of total revenues, from $13.3 million, or
approximately 98.9% of total revenues for the six months ended June 30, 2009.
The increase in service revenues for the three and six months ended June 30, 2010 over the
corresponding 2009 periods were primarily due to an increase in the number of billable
subscriber communicators activated on our communications system and an increase in AIS revenue
of $0.3 million and $0.6 million, respectively. As of June 30, 2010, we had approximately
539,000 billable subscriber communicators on the ORBCOMM System compared to approximately 483,000
billable subscriber communicators as of June 30, 2009, an increase of approximately 11.6%.
Service revenue growth can be impacted by the customary lag between subscriber communicator
activations and recognition of service revenue from these units.
Product sales
Three Months: Revenue from product sales increased $0.5 million for the three months ended June
30, 2010, or 1,003.4%, to $0.6 million, or approximately 7.1% of total revenues, from
$0.1 million, or approximately 0.7% of total revenues for the three months ended June 30, 2009.
Six Months: Revenue from product sales increased $0.9 million for the six months ended June 30,
2010, or 604.9%, to $1.1 million, or approximately 7.2% of total revenues, from $0.2 million, or
approximately 1.1% of total revenues for the six months ended June 30, 2009.
The increase in product revenues for the three and six months ended June 30, 2010 over
corresponding 2009 periods were primarily due to an increase in sales to the heavy equipment
sector by our Japanese subsidiary.
Costs of services
Costs of services is comprised of payroll and related costs, including stock-based compensation,
materials and supplies, depreciation and amortization of assets, used
to provide services, and
usage fees to cellular wireless providers for the data transmitted by the resellers on our
network.
Three Months: Costs of services for the three months ended June 30, 2010 and June 30, 2009 were
$3.1 million and $3.3 million, respectively, decreasing 7.0% in the current year period over the
same period in the prior year. As a percentage of service revenues, cost of services were 42.1%
for the three months ended June 30, 2010 compared to 49.0% for the three months ended June 30,
2009.
Six Months: Costs of services for the six months ended June 30, 2010 and June 30, 2009 were
$6.2 million and $6.5 million, respectively, decreasing 4.9% in the current year period over the
same period in the prior year. As a percentage of service revenues, cost of services were 43.8%
for the six months ended June 30, 2010 compared to 48.8% for the six months ended June 30, 2009.
The decrease in cost of services as a percentage of service revenues for the three and six months
ended June 30, 2010 over the corresponding 2009 periods was primarily due to an increase in
service revenues.
23
Costs of product sales
Costs of products includes the purchase price of subscriber communicators and SIMS sold and
shipping charges.
Three Months: Costs of product sales increased by $0.3 million, or 839.3%, to $0.3 million for
the three months ended June 30, 2010 from less than $0.1 million for the three months ended June
30, 2009. We had a gross profit from product sales (revenues from product sales minus costs of
product sales) of $0.2 million and less than $0.1 million for the three months ended June 30,
2010 and June 30, 2009, respectively.
Six Months: Costs of product sales increased by $0.6 million, or 599.0%, to $0.7 million for the
six months ended June 30, 2010 from $0.1 million for the six months ended June 30, 2009. We had a
gross profit from product sales (revenues from product sales minus costs of product sales) of
$0.4 million and $0.1 million for the six months ended June 30, 2010 and June 30, 2009,
respectively.
The increase in gross profit from product sales for the three and six months ended June 30, 2010
and 2009 over the corresponding 2009 periods were primarily due to an increase in product sales
by our Japanese subsidiary.
Selling, general and administrative expenses
Selling, general and administrative expenses relate primarily to compensation and associated
expenses for employees in general management, sales and marketing, and finance, professional fees
and general operating expenses.
Three Months: Selling, general and administrative expenses decreased by $0.4 million, or 8.6%, to
$4.0 million for the three months ended June 30, 2010 from $4.4 million for the three months
ended June 30, 2009. This decrease is primarily due to a decrease of $0.5 million in professional
fees.
Six Months: Selling, general and administrative expenses decreased by $1.0 million, or 11.1%, to
$8.2 million for the six months ended June 30, 2010 from $9.2 million for the six months ended
June 30, 2009. This decrease is primarily due to a decrease of $1.0 million in professional fees.
Product development expenses
Product development expenses consist primarily of the expenses associated with the staff of our
engineering team, along with the cost of third parties that are contracted to support our current
applications.
Three Months: Product development expenses for the three months ended June 30, 2010 and 2009 were
$0.2 million.
Six Months: Product development expenses for the six months ended June 30, 2010 and 2009 were
$0.3 million.
Impairment Charge Satellite Network
In February 2009, one quick-launch satellite experienced a power system anomaly that subsequently
resulted in a loss of contact with the satellite. The satellite was not recovered and we recorded
a non-cash impairment charge to write off the cost of the satellite of $7.0 million during the
six months ended June 30, 2009.
Other income (expense)
Other income is comprised primarily of interest income from our cash and cash equivalents, which
consists of U.S. Treasuries, interest bearing instruments, and our investments in marketable securities consisting of U.S.
government and agency obligations, corporate obligations and FDIC-insured certificates of deposit
classified as held to maturity, foreign exchange gains and losses and interest expense.
Three Months: Other income was less than $0.1 million for the three months ended June 30, 2010
compared to $0.4 million for the three months ended June 30, 2009.
Six Months: Other expense was $0.1 million for the six months ended June 30, 2010 compared to
other income of $0.3 million for the six months ended June 30, 2009.
Income
(loss) from continuing operations
Three Months: As a result of the items described above, we have income from continuing
operations of $0.3 million for the three months ended June 30, 2010 compared to a loss from
continuing operations of $0.7 million for the three months ended June 30, 2009.
Six Months: As a result of the items described above, we have a loss from continuing operations
of $0.2 million for the six months ended June 30, 2010 compared to a loss from continuing
operations of $9.4 million for the six months ended June 30, 2009.
24
Income
(loss) from discontinued operations
Three Months: Loss from discontinued operations for the three months ended June 30, 2010 was $3.5
million compared to income from discontinued operations of $0.4 million for the three months
ended June 30, 2009.
Six Months: Loss from discontinued operations for the six months ended June 30, 2010 was $3.6
million compared to a loss from discontinued operations of less than $0.1 million for the six
months ended June 30, 2009.
The decrease in income (loss) from discontinued operations for the three and six months ended
June 30, 2010 over the corresponding 2009 periods was primarily due to a non-cash impairment
charge of $3.3 million to write down the net assets held for sale to their estimated fair
values.
Noncontrolling interests
Noncontrolling interests relate to earnings of ORBCOMM Japan that are attributable to its
minority shareholders.
Net loss attributable to ORBCOMM Inc.
Three Months: As a result of the items described above, the net loss attributable to our Company
was $3.3 million for the three months ended June 30, 2010 compared to a net loss attributable to
our Company of $0.4 million for the three months ended June 30, 2009.
Six Months: As a result of the items described above, the net loss attributable to our Company
was $4.0 million for the six months ended June 30, 2010 compared to a net loss attributable to
our Company of $9.5 million for the six months ended June 30, 2009.
Liquidity and Capital Resources
Overview
Our liquidity requirements arise from our working capital needs and to fund capital expenditures
to support our current operations, and facilitate growth and expansion. Since our inception, we
have financed our operations from sales of our common stock through public offerings and private
placements of debt, convertible redeemable preferred stock, membership interests and common
stock. We have incurred losses from operations since inception and through June 30, 2010 we have an
accumulated deficit of $75.4 million. As of June 30, 2010, our primary source of liquidity
consisted of cash, cash equivalents, restricted cash and marketable securities totaling
$92.2 million, which we believe will be sufficient to provide working capital and milestone
payments for our next-generation satellites for the next twelve months.
Operating activities
Cash provided by our operating activities of continuing operations for the six months ended June
30, 2010 was $1.1 million resulting from a net loss of $3.8 million, offset by non-cash items
including a $3.3 million impairment charge to write down the net assets held for sale to their
estimated fair values, $2.3 million for depreciation and amortization and $1.0 million for
stock-based compensation. Working capital activities consisted of net uses of cash of
$0.6 million for an increase in accounts receivable primarily due to the increase in revenues and
$0.8 million from a decrease in accounts payable and accrued expenses primarily related to timing
of payments.
Cash provided by our operating activities of continuing operations for the six months ended June
30, 2009 was $1.5 million resulting from a net loss of $9.4 million, offset by non-cash items including a $7.0 million
impairment charge for one of our quick-launch satellites, $2.6 million for depreciation and
amortization and $0.8 million for stock-based compensation. Working capital activities primarily
consisted of a net source of cash of $0.9 million for a decrease in prepaid expenses and other
assets primarily related to timing of expenses, offset by a net use of cash for an increase of
$0.4 million in accounts receivable primarily related to an increase in our revenues and the
timing of collections.
Cash provided by our operating activities of discontinued operations for the six months ended
June 30, 2010 and June 30, 2009 was less than $0.1 million and $0.5 million, respectively.
Investing activities
Cash used in our investing activities of continuing operations for the six months ended June 30,
2010 was $50.8 million, resulting from capital expenditures of $2.7 million, purchases of
marketable securities of $91.8 million and the purchase of a cost method investment of $1.4
million. These uses were offset by proceeds received from the
maturities of marketable securities totaling $45.1 million.
Cash used in our investing activities of continuing operations for the six months ended June 30,
2009 was $14.1 million, resulting from capital expenditures of $0.9 million for the Coast Guard
demonstration satellite and quick-launch satellites and $12.2 million for next-generation
satellites and $1.0 million of improvements to our internal infrastructure and ground segment.
Cash used in our investing activities of discontinued operations for the six months ended June
30, 2010 and June 30, 2009 was nil and less than $0.1 million, respectively.
25
Financing activities
For the six months ended June 30, 2010 and June 30, 2009, we did not have any cash flows from
financing activities of continuing operations.
Future Liquidity and Capital Resource Requirements
We expect cash flows from continuing operating activities, along with our existing cash, cash
equivalents, restricted cash and marketable securities will be sufficient to provide working
capital and fund capital expenditures, which primarily includes milestone payments under the
procurement agreements for the next-generation satellites for the next twelve months. For the
remainder of 2010, we expect to incur approximately $9.7 million of capital expenditures
primarily for our next-generation satellites.
Contractual Obligations
There have been no material changes in our contractual obligations as of June 30, 2010, as
previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K.
Recent accounting pronouncements
In October 2009, FASB issued ASU No. 2009-13, Revenue Recognition FASB Topic ASC 605-25 (ASC
605-25), Multiple Deliverable Revenue Arrangements. ASU No. 2009-13 requires an entity to
allocate the revenue at the inception of an arrangement to all of its deliverables based on their
relative selling prices. This guidance eliminates the residual method of allocation of revenue in
multiple deliverable arrangements and requires the allocation of revenue based on the
relative-selling-price method. The determination of the selling price for each deliverable
requires the use of a hierarchy designed to maximize the use of available objective evidence
including, vendor-specific objective evidence of fair value (VSOE), third party evidence of
selling price (TPE), or estimated selling price (ESP). ASU No. 2009-13 will be effective for us
on January 1, 2011 and early adoption is allowed and may be adopted either under the prospective
method, whereby all revenue arrangements entered into, or materially modified after the effective
date or under the retrospective application to all revenue arrangements for all periods
presented. We may elect to adopt ASU No. 2009-13 prior to January 1, 2011 under the prospective
method but must adjust the revenue of prior reported periods such that all new revenue
arrangements entered into, or materially modified, during the fiscal year of adoption are
accounted for under this guidance. We are currently evaluating the impact of adopting ASC
No. 2009-13 on our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
There has been no material changes in our assessment of our sensitivity to market risk as of June
30, 2010, as previously disclosed in Part II, Item 7A Quantitative and Qualitative Disclosures
about Market Risks in our Annual Report on Form 10-K for the year ended December 31, 2009.
Concentration of credit risk
The following table presents customers with revenues greater than 10% of our consolidated total
revenues for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended |
|
|
Six Months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Caterpillar Inc. |
|
|
13.8 |
% |
|
|
16.7 |
% |
|
|
13.5 |
% |
|
|
16.1 |
% |
Komatsu Ltd. |
|
|
15.4 |
% |
|
|
11.2 |
% |
|
|
13.7 |
% |
|
|
11.0 |
% |
AI, formerly a division of General Electric |
|
|
14.6 |
% |
|
|
14.6 |
% |
|
|
14.6 |
% |
|
|
14.9 |
% |
Hitachi Construction Machinery Co., Ltd. |
|
|
11.8 |
% |
|
|
|
|
|
|
12.8 |
% |
|
|
|
|
26
Item 4. Disclosure Controls and Procedures
Evaluation of the Companys disclosure controls and procedures. The Companys management
evaluated, with the participation of the Companys President and Chief Executive Officer and
Executive Vice President and Chief Financial Officer, the effectiveness of the design and
operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of June
30, 2010. Based on their evaluation, the Companys President and Chief Executive Officer and
Executive Vice President and Chief Financial Officer concluded that the Companys disclosure
controls and procedures were effective as of June 30, 2010.
Internal Control over Financial Reporting. There were no changes in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
have materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in various 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 condition.
Item 1A. Risk Factors
Except as discussed under Overview in Part 1, Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations, there have been no material changes in the risk
factors as of June 30, 2010, as previously disclosed in Part I, Item 1A Risk Factors in our
Annual Report on Form 10-K for the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
On August 5, 2010, ORBCOMM Inc.
(the “Company”), through its wholly owned subsidiary, Stellar
Satellite Communications Ltd. (“Stellar”), sold substantially all
of the assets of Stellar to Quake Global, Inc. (“Quake”). Following
the closing of the transaction, all of the employees of Stellar were offered
employment with Quake. Under the asset purchase agreement, Stellar sold to
Quake all assets, properties and rights used exclusively or primarily in the
business of Stellar including (1) the existing inventories of Stellar,
(2) certain intellectual property including rights to the Stellar
Satellite Communications name and mark, (3) all property, machinery and
other equipment necessary for the operation of Stellar’s business, and
(4) certain contracts. The purchase price and consideration for the
transaction consists of (1) approximately $48,000 paid at closing,
(2) assumed liabilities consisting generally of all product warranty
obligations and all liabilities related to the acquired assets arising after
the closing, plus (3) contingent consideration in the form of per-unit
royalties payable when Quake sells the acquired inventory during a period of
three years after closing (and payable at a reduced royalty rate for specified
subscriber communicators thereafter) and per-unit royalties payable upon the
sale of specified future products currently in development during a period of
four years after closing. See Note 3 to the condensed consolidated financial
statements for further discussion.
The Company and Quake are parties to a
certain Subscriber Communicator Manufacturing Agreement dated May 11,
2007, whereby Quake has agreed to manufacture subscriber communicators for use
on the Company’s communications network system.
Item 6. Exhibits
|
|
|
|
|
|
31.1 |
|
|
Certification of President and Chief Executive Officer required by Rule 13a-14(a). |
|
|
|
|
|
|
31.2 |
|
|
Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(a). |
|
|
|
|
|
|
32.1 |
|
|
Certification of President and Chief Executive Officer required by Rule 13a-14(b) and 18 U.S.C.
Section 1350. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(b)
and 18 U.S.C. Section 1350. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
ORBCOMM Inc.
(Registrant)
|
|
Date: August 9, 2010 |
/s/ Marc J. Eisenberg
|
|
|
Marc J. Eisenberg, |
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
Date: August 9, 2010 |
/s/ Robert G. Costantini
|
|
|
Robert G. Costantini, |
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
No. |
|
Description |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer and President required by Rule 13a-14(a). |
|
|
|
|
|
|
31.2 |
|
|
Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(a). |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer and President required by Rule 13a-14(b) and 18 U.S.C.
Section 1350. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(b)
and 18 U.S.C. Section 1350. |
28