10-Q
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
OR
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o |
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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)
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Delaware
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41-2118289 |
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(State or other jurisdiction
of incorporation or organization)
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(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):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
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 May 5, 2010 is
42,562,951.
ORBCOMM Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
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March 31, |
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December 31, |
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2010 |
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2009 |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
23,436 |
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$ |
65,292 |
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Restricted cash |
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1,000 |
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|
1,000 |
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Marketable securities |
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66,366 |
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26,145 |
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Accounts receivable, net of allowances for doubtful accounts of $602 and $803 |
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4,571 |
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3,574 |
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Inventories |
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84 |
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78 |
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Prepaid expenses and other current assets |
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1,389 |
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1,218 |
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Current assets held for sale |
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847 |
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778 |
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Total current assets |
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97,693 |
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98,085 |
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Satellite network and other equipment, net |
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73,197 |
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73,208 |
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Intangible assets, net |
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2,228 |
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2,600 |
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Restricted cash |
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2,980 |
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2,980 |
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Other assets |
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1,229 |
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1,354 |
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Long term assets held for sale |
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2,724 |
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2,832 |
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Total assets |
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$ |
180,051 |
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$ |
181,059 |
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LIABILITIES AND EQUITY
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Current liabilities: |
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Accounts payable |
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$ |
2,596 |
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$ |
2,642 |
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Accrued liabilities |
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5,178 |
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5,610 |
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Current portion of deferred revenue |
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3,902 |
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3,849 |
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Current liabilities related to assets held for sale |
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196 |
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412 |
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Total current liabilities |
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11,872 |
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12,513 |
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Note payable related party |
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1,335 |
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1,398 |
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Deferred revenue, net of current portion |
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5,913 |
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6,230 |
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Total liabilities |
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19,120 |
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20,141 |
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Commitments and contingencies |
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Equity: |
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ORBCOMM Inc. stockholders equity |
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Common stock, par value $0.001; 250,000,000 shares authorized; 42,562,951 and
42,455,531 shares issued and outstanding |
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43 |
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42 |
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Additional paid-in capital |
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230,947 |
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230,512 |
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Accumulated other comprehensive income |
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256 |
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|
76 |
|
Accumulated deficit |
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|
(72,150 |
) |
|
|
(71,415 |
) |
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Total ORBCOMM Inc. stockholders equity |
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159,096 |
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159,215 |
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Noncontrolling interests in ORBCOMM Japan |
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1,835 |
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1,703 |
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Total equity |
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160,931 |
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160,918 |
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Total liabilities and equity |
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$ |
180,051 |
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$ |
181,059 |
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See notes to condensed consolidated financial statements.
3
ORBCOMM Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
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Three months ended |
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March 31, |
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2010 |
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2009 |
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Revenues: |
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Service revenues |
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$ |
6,882 |
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$ |
6,622 |
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Product sales |
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535 |
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105 |
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Total revenues |
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7,417 |
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6,727 |
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Costs and expenses (1): |
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Costs of services |
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3,136 |
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3,221 |
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Costs of product sales |
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323 |
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60 |
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Selling, general and administrative |
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4,162 |
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4,803 |
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Product development |
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164 |
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189 |
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Impairment charge-satellite network |
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7,045 |
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Total costs and expenses |
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7,785 |
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15,318 |
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Loss from operations |
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(368 |
) |
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(8,591 |
) |
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Other income (expense): |
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Interest income |
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37 |
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41 |
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Other expense |
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(120 |
) |
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(49 |
) |
Interest expense |
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(48 |
) |
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(48 |
) |
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Total other income (expense) |
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(131 |
) |
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(56 |
) |
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Loss from continuing operations |
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(499 |
) |
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(8,647 |
) |
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Loss from discontinued operations |
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(91 |
) |
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(452 |
) |
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Net loss |
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(590 |
) |
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(9,099 |
) |
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Less: Net income attributable to the noncontrolling interests |
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145 |
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36 |
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Net loss attributable to ORBCOMM Inc. |
|
$ |
(735 |
) |
|
$ |
(9,135 |
) |
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Net loss attributable to ORBCOMM Inc.: |
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Loss from continuing operations |
|
$ |
(644 |
) |
|
$ |
(8,683 |
) |
Loss from discontinued operations |
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(91 |
) |
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|
(452 |
) |
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Net loss attributable to ORBCOMM Inc. |
|
$ |
(735 |
) |
|
$ |
(9,135 |
) |
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Per share information-basic and diluted: |
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Loss from continuing operations |
|
$ |
(0.02 |
) |
|
$ |
(0.21 |
) |
Loss from discontinued operations |
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|
(0.00 |
) |
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|
(0.01 |
) |
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|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(0.02 |
) |
|
$ |
(0.22 |
) |
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Weighted average common shares outstanding: |
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Basic and diluted |
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42,559 |
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42,308 |
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(1) Stock-based compensation included in costs and expenses: |
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Costs of services |
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$ |
14 |
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|
$ |
20 |
|
Selling, general and administrative |
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|
416 |
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|
427 |
|
Product development |
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2 |
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8 |
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|
|
|
|
|
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|
$ |
432 |
|
|
$ |
455 |
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|
|
|
|
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|
See notes to condensed consolidated financial statements.
4
ORBCOMM Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
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Three months ended |
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March 31, |
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2010 |
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2009 |
|
Cash flows from operating activities: |
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|
Net loss |
|
$ |
(590 |
) |
|
$ |
(9,099 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
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Change in allowance for doubtful accounts |
|
|
(201 |
) |
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|
285 |
|
Depreciation and amortization |
|
|
1,397 |
|
|
|
1,284 |
|
Accretion on note payable related party |
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|
33 |
|
|
|
33 |
|
Stock-based compensation |
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|
432 |
|
|
|
455 |
|
Foreign exchange losses |
|
|
121 |
|
|
|
51 |
|
Amortization
of premium on marketable securities |
|
|
131 |
|
|
|
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|
Impairment charge-satellite network |
|
|
|
|
|
|
7,045 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
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|
Accounts receivable |
|
|
(813 |
) |
|
|
(516 |
) |
Inventories |
|
|
(6 |
) |
|
|
55 |
|
Prepaid expenses and other assets |
|
|
(44 |
) |
|
|
249 |
|
Accounts payable and accrued liabilities |
|
|
(528 |
) |
|
|
(967 |
) |
Deferred revenue |
|
|
(262 |
) |
|
|
(220 |
) |
|
|
|
|
|
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|
Net cash used in operating activities of continuing operations |
|
|
(330 |
) |
|
|
(1,345 |
) |
Net cash (used in) provided by operating activities of discontinued operations |
|
|
(177 |
) |
|
|
85 |
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(507 |
) |
|
|
(1,260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
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|
Capital expenditures |
|
|
(984 |
) |
|
|
(6,921 |
) |
Purchases of marketable securities |
|
|
(66,422 |
) |
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|
|
Proceeds from maturities of marketable securities |
|
|
26,070 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations |
|
|
(41,336 |
) |
|
|
(6,921 |
) |
Net cash used in investing activities of discontinued operations |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
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|
Net cash used in investing activities |
|
|
(41,336 |
) |
|
|
(6,924 |
) |
|
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|
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|
|
|
|
|
|
|
|
|
|
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|
Cash flows from financing activities |
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
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|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(13 |
) |
|
|
(240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net decrease in cash and cash equivalents |
|
|
(41,856 |
) |
|
|
(8,424 |
) |
|
|
|
|
|
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|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
65,292 |
|
|
|
75,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
23,436 |
|
|
$ |
66,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
Noncash investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures incurred not yet paid |
|
$ |
1,073 |
|
|
$ |
1,025 |
|
|
|
|
|
|
|
|
Stock-based compensation included in capital expenditures |
|
$ |
3 |
|
|
$ |
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
5
ORBCOMM Inc.
Condensed Consolidated Statements of Equity
Three months ended March 31, 2010 and 2009
(in thousands, except share data)
(Unaudited)
|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
107,420 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
435 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(735 |
) |
|
|
145 |
|
|
|
(590 |
) |
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180 |
|
|
|
|
|
|
|
(13 |
) |
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010 |
|
|
42,562,951 |
|
|
$ |
43 |
|
|
$ |
230,947 |
|
|
$ |
256 |
|
|
$ |
(72,150 |
) |
|
$ |
1,835 |
|
|
$ |
160,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2009 |
|
|
42,101,834 |
|
|
$ |
42 |
|
|
$ |
229,001 |
|
|
$ |
381 |
|
|
$ |
(67,976 |
) |
|
$ |
1,603 |
|
|
$ |
163,051 |
|
Vesting of restricted stock units |
|
|
294,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
455 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,135 |
) |
|
|
36 |
|
|
|
(9,099 |
) |
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101 |
) |
|
|
|
|
|
|
(37 |
) |
|
|
(138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2009 |
|
|
42,396,031 |
|
|
$ |
42 |
|
|
$ |
229,456 |
|
|
$ |
280 |
|
|
$ |
(77,111 |
) |
|
$ |
1,602 |
|
|
$ |
154,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 29 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 networks, 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 March 31, 2010 and for the three
month periods ended March 31, 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 March 31, 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 months ended
March 31, 2010 and March 31, 2009.
Non-controlling 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 investments
had no carrying value as of March 31, 2010 and December 31, 2009.
7
The Company has incurred losses from inception including a net loss of $735 for the three
months ended March 31, 2010 and as of March 31, 2010 the Company has an accumulated deficit of
$72,150.
As of March 31, 2010, the Companys primary source of
liquidity consisted of cash, cash
equivalents, restricted cash and marketable securities totaling
$93,782, 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 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. The fair value of
the Companys marketable securities approximate their carrying value (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 |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Caterpillar Inc. |
|
|
13.2 |
% |
|
|
15.5 |
% |
Komatsu Ltd. |
|
|
11.9 |
% |
|
|
10.8 |
% |
Hitachi Construction Machinery Co., Ltd. |
|
|
13.8 |
% |
|
|
10.4 |
% |
AI, formerly a division of General Electric |
|
|
11.6 |
% |
|
|
15.3 |
% |
8
The following table presents customers with accounts receivable greater than 10% of the Companys
consolidated accounts receivable for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
AI, formerly a division of General Electric |
|
|
17.6 |
% |
|
|
10.9 |
% |
Caterpillar, Inc. |
|
|
|
|
|
|
13.9 |
% |
The Company does not currently maintain in-orbit insurance coverage for its satellites to address
the risk of potential systemic anomalies, failures or catastrophic events affecting its satellite
constellation. If the Company experiences significant uninsured losses, such events could have a
material adverse impact on the Companys business.
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.
At March 31, 2010 and
December 31, 2009 assets held for sale include $2,017 and $2,125,
respectively, of long-term inventory of which $332 are component parts held at the manufacturing
facility of Stellar Satellite Communications, Ltd (Stellar) principal supplier.
Income taxes
As of March 31, 2010, the Company had unrecognized tax benefits of $775. There were no changes to
the Companys unrecognized tax benefits during the three months ended March 31, 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 months ended March 31, 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.
9
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.
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.
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 Stellars results of operations as
discontinued operations in its condensed consolidated statements of operations for the periods
presented. The Company expects to complete a sale of Stellar during
2010.
A summary of discontinued operations for the three months ended March 31, 2010 and 2009 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Revenues - Product sales |
|
$ |
245 |
|
|
$ |
634 |
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
$ |
(91 |
) |
|
$ |
(452 |
) |
|
|
|
|
|
|
|
As of March 31, 2010 and December 31, 2009, the major classes of assets and liabilities of Stellar
held for sale were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
180 |
|
|
$ |
168 |
|
|
|
|
|
|
|
|
Inventories, current |
|
|
647 |
|
|
|
575 |
|
|
|
|
|
|
|
|
Current assets |
|
|
847 |
|
|
|
778 |
|
|
|
|
|
|
|
|
Other equipment, net |
|
|
707 |
|
|
|
707 |
|
|
|
|
|
|
|
|
Inventories, long term |
|
|
2,017 |
|
|
|
2,125 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
196 |
|
|
|
412 |
|
|
|
|
|
|
|
|
As of March 31, 2010, the assets held for sale are reported at the lower of cost or estimated fair
value less costs to sell and are no longer being depreciated.
10
4. Comprehensive Loss
The components of comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net loss,
attributable to ORBCOMM Inc. |
|
$ |
(735 |
) |
|
$ |
(9,135 |
) |
Foreign currency translation adjustment |
|
|
167 |
|
|
|
(138 |
) |
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(568 |
) |
|
$ |
(9,273 |
) |
Comprehensive loss attributable to noncontrolling interests |
|
|
(13 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
Comprehensive loss attributable to ORBCOMM Inc. |
|
$ |
(555 |
) |
|
$ |
(9,236 |
) |
|
|
|
|
|
|
|
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 March 31, 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 March 31, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $432 and $455, respectively. The Companys stock-based
compensation in discontinued operations for the three months ended March 31, 2010 and 2009 was nil.
For the three months ended March 31, 2010 and 2009, the Company capitalized stock-based
compensation of $3 and nil, respectively. The components of the Companys stock-based compensation
expense are presented below:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Stock appreciation rights |
|
$ |
312 |
|
|
$ |
250 |
|
Restricted stock units |
|
|
120 |
|
|
|
181 |
|
Stock options |
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
Total |
|
$ |
432 |
|
|
$ |
455 |
|
|
|
|
|
|
|
|
As of March 31, 2010, the Company had unrecognized compensation costs for all share-based payment
arrangements totaling $3,186.
Time-Based Stock Appreciation Rights
During the three months ended March 31, 2010, the Company granted 828,000 time-based SARs. These
time-based SARs vest in three equal installments on December 31, 2010, 2011 and 2012. The
weighted-average grant date fair value of these time-based SARs was $1.79 per share.
11
A summary of the Companys time-based SARs for the three months ended March 31, 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 March 31, 2010 |
|
|
1,994,667 |
|
|
$ |
4.08 |
|
|
|
8.76 |
|
|
$ |
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2010 |
|
|
755,000 |
|
|
$ |
5.46 |
|
|
|
7.88 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at
March 31, 2010 |
|
|
1,994,667 |
|
|
$ |
4.08 |
|
|
|
8.76 |
|
|
$ |
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $267 and $222 relating to the time-based SARs, respectively. As
of March 31, 2010, $2,125 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 three months ended March 31, 2010, 306,000 performance-based SARs were granted when the
Compensation Committee established financial and operational performance targets for fiscal 2010.
These performance-based SARs are expected to vest in the first quarter of 2011. As of March 31,
2010, the Company estimates that 100% of the performance targets will be achieved. The
weighted-average grant date fair value of these performance-based SARs was $1.76 per share.
A summary of the Companys performance-based SARs for the three months ended March 31, 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 March 31, 2010 |
|
|
565,146 |
|
|
$ |
6.02 |
|
|
|
8.70 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2010 |
|
|
259,146 |
|
|
$ |
10.22 |
|
|
|
7.26 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at
March 31, 2010 |
|
|
565,146 |
|
|
$ |
6.02 |
|
|
|
8.70 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of $45 and $28 relating to the performance-based SARs,
respectively. As of March 31, 2010, $496 of total unrecognized compensation cost related to the
performance-based SARs is expected to be recognized through the first quarter of 2011.
The
fair value of each time and performance 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 three months
ended March 31, 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 three months ended March 31, 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.
12
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
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 three months ended March 31, 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 three months ended March 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Grant |
|
|
|
Shares |
|
|
Date Fair Value |
|
Balance at January 1, 2010 |
|
|
238,753 |
|
|
$ |
3.18 |
|
Granted |
|
|
79,290 |
|
|
|
2.27 |
|
Vested |
|
|
(77,420 |
) |
|
|
1.55 |
|
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
|
240,623 |
|
|
$ |
3.40 |
|
|
|
|
|
|
|
|
For the three months ended March 31, 2010 and 2009, the Company recorded stock-based compensation
expense of $120 and $101 related to the time-based RSUs, respectively. As of March 31, 2010, $565
of total unrecognized compensation cost related to the time-based RSUs is expected to be recognized
through July 2012.
The fair value of the time-based RSU awards granted during the three months ended March 31, 2010 is
based upon the closing stock price of the Companys common stock on the date of grant.
Performance-Based Restricted Stock Units
As of March 31, 2010, the Company has no outstanding performance-based RSUs.
For the three months ended March 31, 2010 and 2009, the Company recorded stock-based compensation
expense in continuing operations of nil and $80 related to the performance-based RSUs,
respectively.
2004 Stock Option Plan
A summary of the status of the Companys stock options as of March 31, 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 March 31, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.93 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.93 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at March 31, 2010 |
|
|
782,079 |
|
|
$ |
2.98 |
|
|
|
3.93 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
6. Net 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 for the three months ended March 31, 2010 and 2009.
The potentially dilutive securities excluded from the determination of diluted loss per share, as
their effect is antidilutive, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
SARs |
|
|
2,559,813 |
|
|
|
1,416,813 |
|
RSUs |
|
|
240,623 |
|
|
|
259,753 |
|
Stock options |
|
|
782,079 |
|
|
|
782,079 |
|
Common stock warrants |
|
|
|
|
|
|
56,924 |
|
|
|
|
|
|
|
|
|
|
|
3,582,515 |
|
|
|
2,515,569 |
|
|
|
|
|
|
|
|
7. Marketable Securities
As of
March 31, 2010 and December 31, 2009, the marketable securities are recorded at amortized cost which
approximates fair market value. As of March 31, 2010 all investments mature in one year or less.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 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 |
|
$ |
41,542 |
|
|
$ |
22 |
|
|
$ |
|
|
|
$ |
13,009 |
|
|
$ |
|
|
|
$ |
1 |
|
Corporate obligations |
|
|
21,642 |
|
|
|
41 |
|
|
|
|
|
|
|
11,211 |
|
|
|
7 |
|
|
|
|
|
FDIC-insured certificates of deposit |
|
|
3,112 |
|
|
|
7 |
|
|
|
|
|
|
|
1,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
66,296 |
|
|
$ |
70 |
|
|
$ |
|
|
|
$ |
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 March 31, 2010, the gross unrealized losses of $70 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 March 31, 2010 and there has been no
recognition of impairment losses in its condensed consolidated statements of operations.
14
8. Satellite Network and Other Equipment
Satellite network and other equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful life |
|
|
March 31, |
|
|
December 31, |
|
|
|
|
(years) |
|
|
2010 |
|
|
2009 |
|
Land |
|
|
|
|
|
$ |
381 |
|
|
$ |
381 |
|
Satellite network |
|
|
3-10 |
|
|
|
28,104 |
|
|
|
27,814 |
|
Capitalized software |
|
|
3-5 |
|
|
|
1,324 |
|
|
|
1,318 |
|
Computer hardware |
|
|
5 |
|
|
|
1,183 |
|
|
|
1,144 |
|
Other |
|
|
5-7 |
|
|
|
1,125 |
|
|
|
1,105 |
|
Assets under construction |
|
|
|
|
|
|
67,109 |
|
|
|
66,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,226 |
|
|
|
98,212 |
|
Less: accumulated depreciation and amortization |
|
|
|
|
|
|
(26,029 |
) |
|
|
(25,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
73,197 |
|
|
$ |
73,208 |
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2010 and 2009, the Company capitalized costs
attributable to the design and development of internal-use software in the amount of $48 and $65,
respectively. Depreciation and amortization expense for the three months ended March 31, 2010 and
2009 was $1,025 and $912, respectively. This includes amortization of internal-use software of $110
and $72 for the three months ended March 31, 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.
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 March 31, 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 $300 placed into certificate of deposit to secure a letter of
credit with a cellular wireless provider to secure terrestrial communications services.
The interest income earned on the restricted cash balances is unrestricted and included in
interest income in the consolidated statements of operations.
15
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 |
|
|
$ |
(5,887 |
) |
|
$ |
2,228 |
|
|
$ |
8,115 |
|
|
$ |
(5,515 |
) |
|
$ |
2,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense was $372 for the three months ended March 31, 2010 and 2009.
Estimated amortization expense for intangible assets subsequent to March 31, 2010 is as
follows:
|
|
|
|
|
Years ending December 31, |
|
|
|
|
Remainder of 2010 |
|
$ |
1,114 |
|
2011 |
|
|
1,114 |
|
|
|
|
|
|
|
$ |
2,228 |
|
|
|
|
|
11. Accrued Liabilities
The Companys accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Accrued compensation and benefits |
|
|
1,272 |
|
|
|
1,738 |
|
Accrued interest |
|
|
811 |
|
|
|
797 |
|
Accrued professional services |
|
|
405 |
|
|
|
327 |
|
Deferred rent payable |
|
|
435 |
|
|
|
919 |
|
Other accrued expenses |
|
|
2,255 |
|
|
|
1,829 |
|
|
|
|
|
|
|
|
|
|
$ |
5,178 |
|
|
$ |
5,610 |
|
|
|
|
|
|
|
|
12. Deferred Revenues
Deferred revenues consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Professional services |
|
$ |
6,216 |
|
|
$ |
6,437 |
|
Service activation fees |
|
|
2,472 |
|
|
|
2,563 |
|
Manufacturing license fees |
|
|
41 |
|
|
|
44 |
|
Prepaid services |
|
|
1,086 |
|
|
|
1,035 |
|
|
|
|
|
|
|
|
|
|
|
9,815 |
|
|
|
10,079 |
|
Less current portion |
|
|
(3,902 |
) |
|
|
(3,849 |
) |
|
|
|
|
|
|
|
Long-term portion |
|
$ |
5,913 |
|
|
$ |
6,230 |
|
|
|
|
|
|
|
|
Deferred professional services revenues at March 31, 2010, represent amounts related to the
United States Coast Guard Concept Validation Project.
16
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 March 31, 2010, the principal balance of the note
payable was 1,138 ($1,532) and it
had a carrying value of $1,334. 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. The amortization to interest expense related to the note for the three months ended March 31, 2010
and 2009 was $33. 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 March 31, 2011.
14. Stockholders Equity
As of March 31, 2010, the Company had no outstanding warrants to purchase shares of common stock.
As of March 31, 2010, the
Company has reserved 4,405,986 shares of common stock for future issuances
related to employee stock compensation plans.
15. Geographic Information
The Company operates in one
reportable segment, M2M 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 |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
United States |
|
|
79 |
% |
|
|
85 |
% |
Japan |
|
|
16 |
% |
|
|
11 |
% |
Other |
|
|
5 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
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 may contract separately with
other providers for launch services and launch insurance for the satellites. 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.
17
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 March 31, 2010, the Company has made milestone payments
of $42,120 under the agreement. The Company anticipates making payments under the agreement of
$22,230 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.
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 March 31, 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.
18
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 March 31, 2010 and 2009, airtime credits used totaled
approximately $12 and $33, respectively. As of March 31, 2010
and December 31, 2009, unused credits
granted by the Company were approximately $2,219 and $2,231, 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.
17. Subsequent Event-Investment in Alanco Technologies, Inc.
On April 5, 2010, the Company
made a strategic investment in Alanco Technologies, Inc.,
(Alanco),
parent company of a terrestrial VAR, StarTrak Systems, LLC (StarTrak). The Company purchased
500,000 shares of Series E Convertible Preferred Stock from Alanco for $2,250. In conjunction
with this strategic investment, the Company 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.
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 two quick-launch satellites; 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 29 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.
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 have a contract to provide AIS data to the U.S. Coast Guard and offer the AIS data
service 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. 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 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. We
expect to complete a sale of Stellar during 2010. See Note 3 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, 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.
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.
21
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 |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
|
$ |
(735 |
) |
|
$ |
(9,135 |
) |
Interest income |
|
|
(37 |
) |
|
|
(41 |
) |
Interest expense |
|
|
48 |
|
|
|
48 |
|
Depreciation and amortization |
|
|
1,397 |
|
|
|
1,302 |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
673 |
|
|
$ |
(7,826 |
) |
|
|
|
|
|
|
|
EBITDA during the three months ended March 31, 2010 improved by $8.5 million over the three
months ended March 31, 2009. This improvement was primarily due to higher net service revenues
of $0.3 million and a decrease in operating expenses of $7.9 million. The decrease in operating
expenses was primarily due to a non-cash impairment charge during the three months ended March
31, 2009 of $7.0 million for one of our quick-launch satellites and a decrease of $0.5 million
in professional fees and bad debt reserves.
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.
The table below presents our revenues for the three months ended March 31, 2010 and 2009,
together with the percentage of total revenue represented by each revenue category in (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Total |
|
Service revenues |
|
$ |
6,882 |
|
|
|
92.8 |
% |
|
$ |
6,622 |
|
|
|
98.4 |
% |
Product sales |
|
|
535 |
|
|
|
7.2 |
% |
|
|
105 |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,417 |
|
|
|
100.0 |
% |
|
$ |
6,727 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Total revenues for the three months ended March 31, 2010 increased $0.7 million, or 10.3%, to
$7.4 million from $6.7 million for
the three months ended March 31, 2009.
Service revenues
Service revenues increased $0.3 million for the three months ended March 31, 2010, or 3.9%, to
$6.9 million, or approximately 92.8% of total revenues, from $6.6 million, or approximately 98.4%
of total revenues for the three months ended March 31, 2009. The increase in service revenues
were primarily due to an increase in AIS revenue of $0.3 million and an increase in satellite
and terrestrial revenue of $0.3 million from an increase in the
number of billable subscriber communicators activated on our communications system, less
customer credits of $0.3 million. As of March 31, 2010, we had
approximately 525,000 billable subscriber communicators on the ORBCOMM System compared to
approximately 477,000 billable subscriber communicators as of March 31, 2009, an increase of
approximately 10.2%.
Service revenue growth can be impacted by the customary lag between subscriber communicator
activations and recognition of service revenue from these units.
Product sales
Revenue from product sales increased $0.4 million for the three months ended March 31, 2010, or
411.7%, to $0.5 million, or approximately 7.2% of total revenues, from $0.1 million, or
approximately 1.6% of total revenues for the three months ended March 31, 2009. The increase in
product revenues for the three months ended March 31, 2010 over the three months ended March 31,
2009 was 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.
Costs of services for the three months ended March 31, 2010 and March 31, 2009 were $3.1 million
and $3.2 million, respectively, decreasing 2.7% in the current year period over the same period
in the prior year. As a percentage of service revenues, cost of services were 45.6% for the
three months ended March 31, 2010 compared to 48.6% for the three months ended March 31, 2009.
Costs of product sales
Costs of products includes the purchase price of subscriber communicators and SIMS sold and
shipping charges.
Costs of product sales increased by $0.2 million, or 447.5%, to $0.3 million for the three months
ended March 31, 2010 from $0.1 million for the three months ended March 31, 2009. We had a gross
profit from product sales (revenues from product sales minus costs of product sales including
distribution costs) of $0.2 million and less than $0.1 million for the three months ended
March 31, 2010 and March 31, 2009, respectively. The increase in gross profit from product sales
was 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.
Selling, general and administrative expenses decreased by $0.6 million, or 13.3%, to $4.2 million
for the three months ended March 31, 2010 from $4.8 million for the three months ended March 31,
2009. This decrease is primarily due to a decrease of $0.5 million for professional fees and bad debt reserves.
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.
Product development expenses for the three months ended March 31, 2010 and 2009 were
$0.2 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
three months ended March 31, 2009.
23
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.
Other expense for the three months ended March 31, 2010 and March 31, 2009 was $0.1
million.
Loss from continuing operations
As a result of the items described above, the loss from continuing
operations decreased by $8.1 million, or 94.2%, to $0.5
million for the three months ended March 31, 2010 compared to a loss from continuing operations
of $8.6 million for the three months ended March 31, 2009.
Loss from discontinued operations
Loss from discontinued operations was $0.1 million for the three
months ended March 31, 2010 improving 79.9%
compared to a loss from discontinued operations of $0.5 million for the three months ended March
31, 2009.
Noncontrolling interests
Noncontrolling interests relate to earnings of ORBCOMM Japan that are attributable to its
minority shareholders.
Net loss attributable to ORBCOMM Inc.
As a result of the items described above, the net loss attributable
to our Company decreased by $8.4 million, or 92.0%, to
$0.7 million for the three months ended March 31, 2010 compared to a net loss of $9.1 million
for the three months ended March 31, 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, including a
net loss of $0.7 million for the three months ended March 31, 2010 and as of March 31, 2010 we
have an accumulated deficit of $72.2 million. As of March 31, 2010, our primary source of
liquidity consisted of cash, cash equivalents, restricted cash and marketable securities totaling
$93.8 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 used in our operating activities of continuing operations for the three months ended March
31, 2010, was $0.3 million resulting from a net loss of $0.6 million, offset by non-cash items
including $1.4 million for depreciation and amortization and $0.4 million for stock-based
compensation. Working capital activities consisted of net uses of cash of $0.8 million for an
increase in accounts receivable primarily due to the increase in revenues and $0.5 million from a
decrease in accounts payable and accrued expenses primarily related to timing of payments made to
vendors.
Cash used in our operating activities of continuing operations for the three months ended
March 31, 2009 was $1.3 million resulting from a net loss of $9.1 million, offset by non-cash
items including $7.0 million impairment charge for one of our quick-launch satellites,
$1.3 million for depreciation and amortization and $0.5 million for stock-based compensation.
Working capital activities primarily consisted of a net uses of cash of $0.5 million for an
increase in accounts receivable primarily related to the increase in our service revenues and
$1.0 million for a decrease in accounts payable and accrued expenses primarily related to timing
of payments made to vendors.
Cash used in our operating activities of discontinued operations for the three months ended March
31, 2010 was $0.2 million compared to cash provided by our operating activities of discontinued
operations of $0.1 million for the three months ended March 31, 2009.
24
Investing activities
Cash used in our investing activities of continuing operations for the three months ended
March 31, 2010 was $41.3 million, resulting from capital expenditures of $1.0 million and
purchases of marketable securities of $66.4 million. These uses were offset by proceeds received from the
maturities of marketable securities totaling $26.1 million.
Cash used in our investing activities of continuing operations for the three months ended
March 31, 2009 was $6.9 million, resulting from capital expenditures of $0.4 million for the
Coast Guard demonstration satellite and quick-launch satellites and $6.0 million for
next-generation satellites and $0.5 million of improvements to our internal infrastructure and
ground segment.
Cash used in our investing activities of discontinued operations for the three months ended March
31, 2010 and March 31, 2009 was nil and less than $0.1 million, respectively.
Financing activities
For the three months ended March 31, 2010 and March 31, 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 $22.2 million of capital expenditures primarily for our next-generation
satellites.
Contractual Obligations
There have been no material changes in our contractual obligations as of March 31, 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
March 31, 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.
25
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 |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Caterpillar Inc. |
|
|
13.2 |
% |
|
|
15.5 |
% |
Komatsu Ltd. |
|
|
11.9 |
% |
|
|
10.8 |
% |
Hitachi Construction Machinery Co., Ltd. |
|
|
13.8 |
% |
|
|
10.4 |
% |
AI, formerly a division of General Electric |
|
|
11.6 |
% |
|
|
15.3 |
% |
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
March 31, 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 March 31, 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 March 31, 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
None.
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. |
26
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: May 10, 2010 |
/s/ Marc J. Eisenberg
|
|
|
Marc J. Eisenberg, |
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
Date: May 10, 2010 |
/s/ Robert G. Costantini
|
|
|
Robert G. Costantini, |
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
27
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