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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:NatureOfOperations-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>1. Overview</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
ORBCOMM Inc. (“ORBCOMM” or the “Company”), a Delaware corporation, is a global
wireless data communications company focused on machine-to-machine (“M2M”)
communications. The Company’s services are designed to enable businesses and
government agencies to track, monitor, control and communicate with fixed and
mobile assets. The Company operates a two-way global wireless data messaging
system optimized for narrowband data communication. The Company also provides
customers with technology to proactively monitor, manage and remotely control
refrigerated transportation assets. This recently acquired technology enables
the Company to expand its global technology platform by transferring capabilities
across new and existing vertical markets and deliver complementary products to
our channel partners and resellers worldwide. The Company provides these services
through a constellation of 27 owned and operated low-Earth orbit satellites and
accompanying ground infrastructure, and also provides terrestrial-based cellular
communication services through reseller agreements with major cellular wireless
providers. The Company’s satellite-based system uses small, low power, fixed or
mobile satellite subscriber communicators (“Communicators”) for connectivity,
and cellular wireless subscriber identity modules, or SIMS, are connected to the
cellular wireless providers’ networks, with data gathered over these systems is
capable of being connected to other public or private networks, including the
Internet (collectively, the “ORBCOMM System”).
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
<b>2. Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
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 (“GAAP”) have been condensed or
omitted pursuant to SEC rules. These financial statements should be read in conjunction with the
Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
In the opinion of management, the financial statements as of
June 30, 2011 and for the three and
six-month periods ended June 30, 2011 and 2010 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.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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 Company’s proportionate share of the net income
or loss of such investee is reflected in the Company’s consolidated results of operations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Although the Company owns interests in companies that it accounts for pursuant to the equity
method, the investments in those entities had no carrying value as of June 30, 2011 and December
31, 2010. The Company has no guarantees or other funding obligations to those entities. The
Company had no equity or losses of those investees for the three and six months ended June 30,
2011 and 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Noncontrolling interests in companies are accounted for by the cost method where the Company
does not exercise significant influence over the investee.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company has incurred losses from inception
including a net loss of $1,272 for the six months
ended June 30, 2011 and as of June 30, 2011 the Company has
an accumulated deficit of $77,856.
As of June 30, 2011, the Company’s primary source of liquidity consisted of cash, cash
equivalents, restricted cash and marketable securities totaling $82,726, which the Company
believes will be sufficient to provide working capital and milestone payments for its
next-generation satellites for the next twelve months.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
<b>Acquisition costs and loss on other investment</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
Acquisition-related costs directly relate to the acquisition of
substantially all of the assets of StarTrak Systems, LLC from Alanco
Technologies, Inc.,(“Alanco”). These costs include
professional services expenses. For the three and six months ended June 30, 2011
acquisition-related costs were $778 and $1,035, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
In connection with the acquisition of StarTrak, the Company recognized a loss of $305
on the disposition of its investment in Alanco for the difference between the fair value and the carrying value. The
amount of the loss was recorded in other income (expense) in the
statement of operations for the three and six months ended June 30,
2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Fair Value of Financial instruments</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company has no financial assets or liabilities that are measured at fair value on a
recurring basis. However, if certain triggering events occur the Company is required to evaluate
the non-financial assets for impairment and any resulting asset impairment would require that a
non-financial asset be recorded at the fair value. FASB Topic ASC 820 “ <i>Fair Value Measurement
Disclosures </i>”, prioritizes inputs used in measuring fair value into a hierarchy of three
levels: Level 1- unadjusted quoted prices for identical assets or liabilities traded in active
markets, Level 2- inputs other than quoted prices included within Level 1 that are either
directly or indirectly observable; and Level 3- unobservable inputs in which little or no market
activity exists, therefore requiring an entity to develop its own assumptions that market
participants would use in pricing.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The carrying value of the Company’s financial instruments, including cash, accounts receivable,
note 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. The carrying value of the 6% secured promissory note
approximates the fair value (See Note 3).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Marketable securities</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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 Company’s marketable securities
approximate their carrying value (See Note 8).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Concentration of credit risk</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company’s customers are primarily commercial organizations. Accounts receivable are
generally unsecured.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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 customer’s 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.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The following table presents customers with revenues greater than 10% of the Company’s
consolidated total revenues for the periods shown:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Caterpillar Inc.
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">22.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">13.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">23.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">13.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Komatsu Ltd.
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">16.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">13.7</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Hitachi Construction
Machinery Co., Ltd.
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">11.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">10.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">12.8</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">
Asset Intelligence
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">11.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">11.5</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The following table presents customers with accounts receivable greater than 10% of the
Company’s consolidated accounts receivable for the periods shown:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Caterpillar Inc.
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">30.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">19.9</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset Intelligence
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">12.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">20.3</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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 Company’s business.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Inventories</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Inventories
are stated at the lower of cost or market, determined on a first-in, first-out
basis. Inventory consists primarily of raw materials and purchased parts to be utilized by its
contract manufacturer. 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. Provision is made for potential losses on slow moving and obsolete inventories
when identified.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Warranty
Costs and deferred revenues</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company accrues for StarTrak’s
one-year warranty coverage on product sales estimated at the time of sale based on historical
costs to repair or replace products for customers compared to historical product revenues of
StarTrak. As the Company continues to gather additional information these accrual estimates may
differ from actual results and adjustments to the estimated warranty liability would be required.
The warranty accrual is included in accrued liabilities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The
Company also offers to its StarTrak customers extended warranty
service agreements beyond the initial warranty for a fee. These fees
are recorded as deferred revenue and recognized ratably into income
over the life of the extended warranty contract.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Income taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As part of the Company’s accounting for the acquisition
of StarTrak, a portion of the purchase price was allocated to goodwill. The acquired goodwill is deductible for tax purposes
and amortized over fifteen years for income tax purposes.
Under GAAP, the acquired goodwill is not amortized in the Company’s financial statements, as such, a deferred income tax expense and a deferred tax liability arise as
a result of the tax deductibility for this amount for tax purposes but not for financial statement purposes. The resulting deferred tax liability, which is expected to continue to increase over
time will remain on the Company’s balance sheet indefinitely unless there is an impairment of the asset (See Note 3).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
For the three and six months ended June 30, 2011, the Company recorded an income tax provision
of $195 and $306, respectively, consisting of income generated by ORBCOMM Japan and
a deferred income tax expense related to the acquired goodwill from
the acquisition of StarTrak. As of June 30, 2011, the Company maintained a valuation allowance against all of its
net deferred tax assets, excluding goodwill, attributable to operations in the United States and all other foreign
jurisdictions, except for Japan, as the realization of such assets was not considered more
likely than not.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
As of June 30, 2010, the Company maintained a valuation allowance against all net deferred tax
assets attributable to all operations in the United States and all foreign jurisdictions as the
realization of such assets was not considered more likely than not.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of June 30, 2011, the Company had unrecognized tax benefits of $775. There were no changes to
the Company’s unrecognized tax benefits during the six months ended June 30, 2011. The Company
is subject to U.S. federal and state examinations by tax authorities from 2007. The Company does
not expect any significant changes to its unrecognized tax positions during the next twelve
months.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. No interest and penalties related to uncertain tax positions were recognized during the
three and six months ended June 30, 2011.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:BusinessCombinationDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>3. Acquisition of StarTrak</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Effective on the close of business on May 16, 2011, the Company completed the acquisition of
substantially all of the assets of StarTrak including but not limited to cash, accounts receivable, inventory, equipment,
intellectual property, all of StarTrak’s rights to customer contracts, supplier lists and assumed
certain liabilities pursuant to an Asset Purchase Agreement dated as of February 23, 2011. The
results of operations of StarTrak have been included in the condensed consolidated results for the
period subsequent to the acquisition date of May 16, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
The consideration paid to acquire StarTrak was valued at $18,242 consisting of: (i) cash subject
to a final working capital adjustment, (ii) forgiveness of the 6% secured promissory note advanced by the Company to Alanco on
February 23, 2011, (iii) note payable issued to a lender and stockholder of Alanco, (iv) common stock, (v) Series A
convertible preferred stock and (vi) delivery of the Company’s investment in preferred stock and common stock of Alanco back to Alanco.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In addition to the consideration paid, up to an additional gross amount of $1,500 (subject to certain
reductions) in contingent payments is payable by the Company if certain revenue milestones of
StarTrak are achieved for the 2011 calendar year. Any potential earn-out amount can be paid in
common stock, cash or a combination at the Company’s option. Any shares of common stock issued will
be based on the 20-day average closing price of the common stock ending March 31, 2012 subject to
certain reductions set forth in the Asset Purchase Agreement. The potential earn-out amount will be
paid to Alanco stockholders and to two selling stockholders of Alanco. The earn-out amount is based
on StarTrak achieving certain revenue milestones for calendar year ending December 31, 2011 payable
on or before April 30, 2012. If StarTrak does not achieve the revenue milestone of at least
$20,000 neither Alanco stockholders nor the two selling stockholders are entitled to an
earn-out amount. The potential earn-out is calculated as follows:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">$250 if StarTrak achieves at least $20,000 in total revenues;
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">plus an additional $750 such additional amount to be pro-rated on a straight line
basis, if StarTrak achieves between $20,000 and $22,000 in total revenues;
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">plus an additional $250 if StarTrak achieves at least $23,000 in total revenues;
and
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="8%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">plus an additional $250 if StarTrak achieves at least $24,000 in total revenues.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company accounted for the acquisition pursuant to FASB Topic ASC 805, <i>“Business Combinations”</i>.
In accordance with ASC 805, the estimated purchase price was allocated to intangible assets and
identifiable assets acquired and liabilities assumed based on their relative fair values. The
excess of the purchase price over the net assets and liabilities assumed
was recorded as goodwill.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The preliminary estimated fair values of the purchase price are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash consideration
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,893</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forgiveness of 6% secured promissory note advanced to Alanco on February 23, 2011 including interest of $4
</div></td>
<td> </td>
<td align="left"> </td>
<td align="right">304</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Contingent earn-out consideration
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">The Company’s investment in preferred stock and common stock of Alanco delivered back to Alanco
</div></td>
<td> </td>
<td> </td>
<td align="right">2,050</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">$3,900 6%
secured promissory note payable issued to a
lender and stockholder of Alanco
</div></td>
<td> </td>
<td> </td>
<td align="right">3,812</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Issuance of 183,550 shares of Series A convertible preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">1,834</td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px; font-size: 10pt"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Issuance of 2,869,172 shares of common stock (valued at $2.91 per
share, which reflects the Company’s common stock closing price
on May 16, 2011)
</div></td>
<td> </td>
<td> </td>
<td align="right">8,349</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">18,242</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Contingent earn-out consideration</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
As of the acquisition date, the fair value of the contingent earn-out amount was estimated to be
nil. The estimated fair value of the earn-out was determined using
weighted probabilities to achieve the revenue milestones. The Company estimated the fair value of the contingent consideration using
a probability-weighted discounted cash flow model discounted at 19.0%. The fair value measurement is based on significant inputs not
observed in the market and thus represents a Level 3 measurement. Any change in the
fair value of the contingent earn-out subsequent to the acquisition date, including changes from
events after the acquisition date, will be recognized in earnings in the period the estimated fair
value changes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Investment in Alanco</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company accounted for the investment in Alanco at cost, or $2,356. The investment consisted of
an initial purchase of 500,000 shares of Alanco’s Series E convertible preferred stock for $2,250,
and 73,737 shares of common stock received as payment of dividends on the Series E convertible
preferred stock totaling $106. The fair value of the Series E convertible preferred stock was
estimated using a combination of an income approach for the debt component and the Black-Scholes
option pricing model for the option component. The rate utilized to discount the net cash flows to
the present value for the debt component was 20.0% based on a private-equity rate of return for
this security. The fair value of the option component was de minimis. The fair value of the common
stock dividends was based on Alanco’s closing stock price as of May 16, 2011. The Company recorded a
loss of $305 on the revaluation of its investment in Alanco, triggered by the acquisition, for the difference
between the fair value and the carrying value at the date of acquisition. Such loss was recorded prior to tendering the shares to Alanco.
The loss is recorded in other income (expense) in the statement of
operations for the three and six months ended June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>$3,900
6% secured promissory note payable issued to a lender and stockholder of Alanco</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The fair value of the note payable was estimated using an income approach-yield analysis based on
the contractual interest and principal payments. The rate utilized to discount the net cash flows
to the present value was 6.85%, which was based on: (i) comparable loan indices with similar
structure and credit and (ii) comparable companies. As a result, the Company recognized a fair
value adjustment of $88, which reduced the carrying value of the note. This amount will be
amortized to interest expense using the effective interest method which will increase the carrying
value of the note through the maturity date (See Note 15).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Series A convertible preferred stock</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
The face value of the Series A convertible preferred stock is $1,836 and the estimated fair value is $1,834.
As a result, the face value will be accreted up to the fair value using the effective interest method through the date of redemption (See Note 16).
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Preliminary Estimated Purchase Price Allocation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The total preliminary estimated purchase price was allocated to the net assets based upon their preliminary estimated fair values as of the close of business on May 16,
2011 as set forth below. The excess of the preliminary purchase price over the preliminary net
assets was recorded as goodwill. The preliminary allocation of the
purchase price was based upon a preliminary valuation and the estimates and assumptions are subject
to change, and the revisions may materially affect the presentation
in the Company’s consolidated balance sheet. Any change to the
initial estimates of the assets and liabilities acquired will be
recorded as adjustments to goodwill throughout the measurement
period. The areas of the preliminary purchase price allocation that are not yet finalized relate
to the fair values of certain net assets and liabilities, including
deferred warranty revenues and warranty liabilities, in tangible assets, goodwill and the final
working capital adjustment. The Company anticipates finalizing the
purchase price allocation by the end of 2011. The
preliminary estimated purchase price allocation is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">322</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts receivable
</div></td>
<td> </td>
<td> </td>
<td align="right">1,535</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Inventory
</div></td>
<td> </td>
<td> </td>
<td align="right">2,085</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other current and noncurrent assets
</div></td>
<td> </td>
<td> </td>
<td align="right">279</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Indemnification
assets
</div></td>
<td> </td>
<td> </td>
<td align="right">379</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">303</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right">7,600</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total identifiable assets acquired
</div></td>
<td> </td>
<td> </td>
<td align="right">12,503</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts payable and accrued expenses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,755</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred warranty revenues
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(400</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">(1,050</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Patent infringement claim
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(155</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities assumed
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,360</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net identifiable assets acquired
</div></td>
<td> </td>
<td> </td>
<td align="right">9,143</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right">9,099</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total preliminary purchase price
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">18,242</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Intangible Assets</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The fair values of the trademarks and the technology, and patents were estimated using a relief
from royalty method under the income approach based on discounted cash flows. The fair value of customer relationships were estimated based on
an income approach using the excess earnings method. A discount rate of 19% was selected to reflect
risk characteristics of these tangible assets. The discount rate was applied to the projected cash flows
associated with the assets in order to value these intangible assets. The remaining useful lives of
the technology and patents and trademarks were based on historical product development cycles, the
projected rate of technology migration and the pattern of projected
economic benefit of these intangible assets.
The remaining useful lives of customer relationships were based on customer attrition and the
future economic benefit (See Note 11).
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom" style="background: #cceeff">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>useful life (in</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Technology and patents
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,900</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relationships
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,900</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademarks
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">800</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,600</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Goodwill</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Goodwill represents the excess of the preliminary estimated purchase consideration over the
preliminary estimated fair values of the underlying net tangible and intangible assets. In
accordance FASB Topic 350, “<i>Intangibles-Goodwill and Other</i>”, goodwill will not be amortized, but
instead will be tested for impairment at least annually and whenever events or circumstances have
occurred, that may indicate a possible impairment. In the event the Company determines the fair
value of goodwill has become impaired, the Company will incur an accounting charge for the amount
of impairment during the fiscal period in which the determination is
made (See Note 11).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The acquisition of StarTrak enables the Company to create a global technology platform to transfer
capabilities across new and existing vertical markets and deliver complementary products to the
Company’s channel partners and resellers worldwide. In addition, the acquisition provides an
opportunity to drive new subscribers to the Company’s global communications network while accelerating the
growth of StarTrak’s suite of products by adding scale and providing subscriber management tools.
These factors contributed to a preliminary purchase price resulting in the recognition of goodwill.
The acquired goodwill is deductible for income tax purposes over fifteen years.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Deferred
warranty revenues</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In connection with the preliminary estimated purchase price allocation, the Company estimated the
fair value of the service obligations assumed from StarTrak. The estimated fair value of the
service obligations was determined using a version of the income approach, known as the build-up
method to estimate the cost necessary to fulfill the obligations plus a normal profit margin on the
fulfillment effort. The estimated costs to fulfill the service obligations were based on StarTrak’s
historical direct costs and indirect costs related to StarTrak’s service agreements with its
customers. Direct costs include personnel directly engaged in providing service and support
activities, while indirect costs consist of estimated general and administrative expenses based on
an overall margin of StarTrak’s business (See Note 13).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Warranty liabilities and Escrow Agreement</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
As a result of the acquisition of StarTrak on May 16, 2011, the
Company acquired warranty
obligations on StarTrak’s product sales, which provide for costs to replace or fix the product.
One-year warranty coverage is accrued on product sales which provide for costs to replace or fix
the product. The Company’s analysis of the warranty liabilities associated with the one-year warranty coverage are estimated
based on the historical costs of StarTrak to replace or fix products for
customers, and additional liability for warranty coverage for
other specific claims that are expected to be incurred within the next twelve months, for which it
is estimated that customers may have a warranty claim. As the Company continues to gather additional information, these
accrual estimates may differ from actual results and adjustments to the estimated warranty
liability would be required. The Company will continue to evaluate warranty liabilities relating
to the acquisition of StarTrak throughout the measurement period. If the Company determines that
adjustments to these amounts are required during the remainder of the measurement period such
amounts will be recorded as an adjustment to goodwill.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company is estimating additional warranty obligations
of $1,050 related to warranty claims the Company is investigating. These claims vary in nature, and the range of additional warranty
obligations is estimated between $1,050 and $1,700. This amount has not
yet been fair valued. The Company is currently in the process of determining the extent of the additional
warranty obligations and any changes during the remainder of the measurement period to the estimate will be an adjustment to goodwill.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In
connection with the acquisition, the Company entered into an escrow agreement with Alanco. Under the terms of the escrow agreement, 166,611 shares of common stock were issued to Alanco and
placed in an escrow account to cover 50% of certain costs relating to fuel sensor warranty
obligations incurred by the Company. In the event that the sum of (i) aggregate warranty expenses
(other than for fuel sensors) and (ii) any fuel sensor damages directly expended or accrued on the
StarTrak balance sheet from March 1, 2011 through March 1, 2012 exceeds $600, the Company shall
have the right to provide written notice to the escrow agent and Alanco setting forth a description
of the fuel sensor distribution event and the number of shares of the Company’s common stock to be
distributed to the Company from the escrow account. The number of shares of common stock that the
Company will direct the escrow agent to release to the Company from the escrow account will equal
50% of the fuel sensor damages (excluding the amount of damages that when added to the non-fuel
sensor damages equals $600) incurred or suffered from June 1, 2011 through March 1, 2012, valued at
$3.001 per share. As of June 30, 2011, the Company has recorded
$304 relating to the escrow agreement as an indemnification asset,
which is included in other assets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Patent infringement liability and Escrow Agreement</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">StarTrak is a named defendant in a patent infringement action filed by Innovative Global Systems
LLC (“Innovative Global Systems”) in the United States District Court for the Eastern District of
Texas. In July 2011, a settlement agreement was reached under which Innovative Global Systems will
dismiss the patent infringement action and grant StarTrak and StarTrak Information Technologies,
LLC, a wholly owned subsidiary of ORBCOMM holding the acquired StarTrak assets, a license in the
patents-in-suit and certain other patents. Under the settlement agreement Innovative Global Systems will receive
the amount of $155, which amount was agreed in principle in May 2011. Accordingly, the Company recognized a liability relating to
the patent infringement action for $155 on the date of acquisition.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In
connection with the acquisition, the Company entered
into an escrow agreement with Alanco. Under the terms of the escrow agreement, 249,917 shares of common stock were issued to Alanco and placed
in an escrow account to cover 50% of any damages relating to the Innovative Global Systems patent
infringement action incurred or suffered by the Company. Upon a final disposition of the action by
the courts, the Company will direct the escrow agent to release to the Company from the escrow
account shares of common stock valued at $3.001 per share equal to 50% of the damages incurred or
suffered by the Company. As a result of the settlement agreement, the Company has recorded $75 relating to this escrow
agreement as an indemnification asset, which is included in prepaid
expenses and other current assets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Pre-Acquisition Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company has evaluated and continues to evaluate
pre-acquisition contingencies related to StarTrak that existed as of the acquisition date. If these pre-acquisition contingencies that
existed as of the acquisition date become probable of occurring and can be estimated during the remainder of the measurement period,
amounts recorded for such matters will be made in the measurement period and, subsequent to the measurement period, in the Company’s
results of operations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>Pro
Forma Results for StarTrak Acquisition</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The following table presents the unaudited pro forma results (including StarTrak) for the three
and six months ended June 30, 2011 and 2010 as though the companies had been combined as of the
beginning of each of the periods presented. The pro forma information is presented for informational
purposes only and is not indicative of the results of operations that would have been achieved
if the acquisition had taken place at the beginning of each period
presented.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The
amount of StarTrak’s revenues and net loss included in the Company’s condensed
consolidated statements of operations from the acquisition date to
June 30, 2011 and the revenues, net income (loss) attributable to ORBCOMM Inc.
and the net income (loss)
available to common stockholders of the combined entity had the acquisition date been January 1, 2010, are as follows:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The supplemental
pro forma revenues, net income (loss) attributable to ORBCOMM Inc. and the net income (loss) available to common
stockholders for the periods presented in the table below were adjusted to include the amortization
of the intangible assets, interest expense on the 6% secured promissory note, income tax
expense and record dividends on the Series A convertible preferred stock calculated from
January 1, 2010 to the acquisition date. Also the supplemental pro forma information
was adjusted to exclude acquisition costs and elimination of intercompany transactions.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="center"><b>Net Income (loss) Attributable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="center"><b>Net Income (loss) Available</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Revenues</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>ORBCOMM Inc.</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>to Common Stockholders</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual from May 17, 2011 to June 30, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,181</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">(253</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">(253</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplemental pro forma for the three months ended June 30, 2011
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">12,619</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">183</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">165</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplemental pro forma for the three months ended June 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">11,802</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">(3,989</td>
<td>)</td>
<td> </td>
<td align="left">$</td>
<td align="right">(4,007</td>
<td>)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplemental pro forma for the six months ended June 30, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,232</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(639</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(675</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplemental pro forma for the six months ended June 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">22,840</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,831</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,867</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>4. Discontinued Operations</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On August 5, 2010, Stellar Satellite Communications, Ltd. (“Stellar”) entered into an Asset
Purchase Agreement with Quake Global, Inc., a manufacturer of satellite communicators to
purchase Stellar. Under the terms of the Asset Purchase Agreement, the Company will receive
royalty payments contingent on future product sales of inventory as defined in the Asset
Purchase Agreement. The Company will recognize the future royalty payments when they are
received and the contingency is resolved in accordance with FASB Topic ASC 450 “Contingencies”.
For the three and six months ended June 30, 2011, the Company received royalty payments
totaling $29 and $99, respectively, which are included in continuing operations in its condensed
consolidated statements of operations. For the three-month and six-month periods ended June 30,
2011, the Company had no discontinued operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">A summary of discontinued operations for the three and six months ended June 30, 2010 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three</b> <b>months ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Six</b> <b>months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30,</b> <b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>June 30,</b> <b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues- Product sales
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">184</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">429</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,479</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,570</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>5. Comprehensive Loss</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The components of comprehensive loss are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three months ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(576</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,184</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,302</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,774</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment
</div></td>
<td> </td>
<td> </td>
<td align="right">89</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">280</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(112</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">447</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(487</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,904</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,414</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,327</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive income (loss) attributable to noncontrolling interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(77</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">200</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(222</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">332</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive loss attributable to ORBCOMM Inc.
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(410</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,104</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,192</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,659</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>6. Stock-based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company’s share-based compensation plans consist of its 2006 Long-Term Incentives Plan (the
“2006 LTIP”) and its 2004 Stock Option Plan. On April 28, 2011, the Company’s stockholders
approved an amendment to the 2006 LTIP to increase the maximum number of shares available for
grant by 5,000,000 shares to 9,641,374. As of June 30, 2011, there were 5,362,902 shares
available for grant under the 2006 LTIP and no shares available for grant under the 2004 Stock
Option Plan.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">For the three months ended June 30, 2011 and 2010, the Company recorded stock-based compensation
expense in continuing operations of $396 and $592, respectively. For the three months ended June 30, 2011 and 2010, the Company capitalized stock-based
compensation of $15 and $11, respectively. For the six months ended June 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing
operations of $659 and $1,024, respectively. For the six months ended June 30, 2011 and 2010, the
Company capitalized stock-based compensation of $29 and $14,
respectively. The components of the Company’s stock-based compensation expense are presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three months ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px; font-size: 10pt"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock
appreciation rights
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">276</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">454</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">766</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Restricted stock units
</div></td>
<td> </td>
<td> </td>
<td align="right">120</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">138</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">258</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">396</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">592</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">659</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,024</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of June 30, 2011, the Company had unrecognized compensation costs for all share-based payment
arrangements totaling $1,770.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Time-Based Stock Appreciation Rights</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">During the six months ended June 30, 2011, the Company granted 178,000
time-based SARs, which
vest through May 2014. The weighted-average grant date fair value of
these SARs was $1.89 per share.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">A summary of the Company’s time-based SARs for the six months ended June 30, 2011 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(In thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at
January 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">2,000,667</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4.07</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">178,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.91</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2.46</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">2,174,667</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.98</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.70</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">635</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">1,426,334</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4.73</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.05</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">204</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested and expected to vest
at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">2,174,667</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.98</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.70</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">635</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">For the three months ended June 30, 2011 and 2010, the Company recorded stock-based compensation
expense in continuing operations of $130 and $360 relating to these SARs, respectively. For the
six months ended June 30, 2011 and 2010, the Company recorded stock-based compensation expense
in continuing operations of $247 and $627 relating to these SARs, respectively. As of June 30,
2011, $1,049 of total unrecognized compensation cost related to these SARs is expected to be
recognized
through May 2014.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
The intrinsic value of the SARs exercised was $4 for the six months ended June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Performance-Based Stock Appreciation Rights</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">During the six months ended June 30, 2011, the Company granted 291,333 performance-based SARs
for 2011 financial and operational targets, which are expected to vest in the first quarter of
2012. As of June 30, 2011, the Company estimates that 100% of the performance targets will be
achieved. The weighted-average grant date fair value of these SARs was $2.14 per share.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">A summary of the Company’s performance-based SARs for the six months ended June 30, 2011 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(In thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at
January 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">567,146</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.00</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">291,333</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.39</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(19,500</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2.30</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited or expired
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(89,013</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2.45</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">749,966</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.50</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8.17</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">147</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">458,634</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.85</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.18</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested and expected to vest
at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">749,966</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.50</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8.17</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">147</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">For the three months ended June 30, 2011 and 2010, the Company recorded stock-based compensation
expense in continuing operations of $146 and $94 relating to these SARs, respectively. For the
six months ended June 30, 2011 and 2010, the Company recorded stock-based compensation expense
in continuing operations of $238 and $139 relating to these SARs, respectively. As of June 30,
2011, $441 of total unrecognized compensation cost related to these SARs is expected to be
recognized through the first quarter of 2012.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">
The intrinsic value of the SARs exercised was $20 for the six months ended June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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. The expected volatility was based on an average of the Company’s historical
volatility over the expected terms of the SAR awards and the comparable publicly traded
companies historical volatility. The Company uses the “simplified” method to determine the
expected terms of SARs due to no 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.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="46%"> </td>
<td width="5%"> </td>
<td width="21%"> </td>
<td width="5%"> </td>
<td width="23%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Six months ended</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Risk-free interest rate
</div></td>
<td> </td>
<td align="center" valign="top">2.14% to 2.34%
</td>
<td> </td>
<td align="center" valign="top">2.27% and 2.65%</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Expected life (years)
</div></td>
<td> </td>
<td align="center" valign="top">5.50 and 6.0
</td>
<td> </td>
<td align="center" valign="top">5.50 and 6.0</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Estimated volatility
</div></td>
<td> </td>
<td align="center" valign="top">71.48% to 74.34%
</td>
<td> </td>
<td align="center" valign="top">85.95% and 83.67%</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Expected dividends
</div></td>
<td> </td>
<td align="center" valign="top">None
</td>
<td> </td>
<td align="center" valign="top">None
</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 0pt; margin-left: 4%">
<b><i>Time-based Restricted Stock Units</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">During the six months ended June 30, 2011, the Company granted 120,000 time-based RSUs, which vest
in January 2012.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">A summary of the Company’s time-based RSUs for the six months ended June 30, 2011 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average Grant</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Date Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at January 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">156,624</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.90</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">120,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.97</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(79,957</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2.30</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">196,667</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.19</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">For the three months ended June 30, 2011 and 2010, the Company recorded stock-based compensation
expense in continuing operations of $120 and $138 related to these RSUs, respectively. For the
six months ended June 30, 2011 and 2010, the Company recorded stock-based compensation expense
in continuing operations of $174 and $258 related to these RSUs, respectively. As of June 30,
2011, $280 of total unrecognized compensation cost related to these RSUs is expected to be
recognized through July 2012.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The fair value of the time-based RSU awards is based upon the closing stock price of the
Company’s common stock on the date of grant.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>2004 Stock Option Plan</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">A summary of the status of the Company’s stock options as of June 30, 2011 is as follows:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(In thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at
January 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">757,828</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.97</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited or expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">757,828</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.71</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">357</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">757,828</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.71</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">357</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested and expected to vest
at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">757,828</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.71</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">357</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>7. Net Loss per Common Share</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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 Series A convertible preferred stock, SARs, RSUs and stock options would have an antidilutive effect as the Company
incurred a net loss for the three and six months ended June 30, 2011 and 2010.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The potentially dilutive securities excluded from the determination of diluted loss per share,
as their effect is antidilutive, are as follows:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Series A convertible preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">305,814</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">SARs
</div></td>
<td> </td>
<td> </td>
<td align="right">2,924,633</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,559,813</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">RSUs
</div></td>
<td> </td>
<td> </td>
<td align="right">196,667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">239,957</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock options
</div></td>
<td> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td align="right" style="border-bottom: 1px solid #000000">757,828</td>
<td> </td>
<td> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td align="right" style="border-bottom: 1px solid #000000">782,079</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td style="border-bottom: 3px double #000000"> </td>
<td align="right" style="border-bottom: 3px double #000000">4,184,942</td>
<td> </td>
<td> </td>
<td style="border-bottom: 3px double #000000"> </td>
<td align="right" style="border-bottom: 3px double #000000">3,581,849</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:MarketableSecuritiesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>8. Marketable Securities</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011 and December 31, 2010, the marketable securities are recorded at amortized
cost which approximates fair market value which was based on Level 1 inputs. All investments
mature in one year or less.
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>June 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Unrealized</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. government and agency
obligations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">28,147</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">39,926</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">16,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,108</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">FDIC-insured certificates of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">9,880</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,837</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">54,766</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">67,871</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">39</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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 issuer’s financial conditions and the Company’s
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.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011 and December 31, 2010, the gross unrealized
losses of $30 and $39, respectively, were primarily due to changes in interest rates and not credit quality of the
issuer. Accordingly, the Company has determined that the gross unrealized losses are not
other-than-temporary at June 30, 2011 and there has been no recognition of impairment losses in
its condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - orbc:SatelliteNetworkAndOtherEquipmentTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>9. Satellite Network and Other Equipment</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Satellite network and other equipment consisted of the following:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Useful life</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">381</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">381</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Satellite network
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">1-10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,505</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,560</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Capitalized software
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">3-5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,725</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,646</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Computer hardware
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,339</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,247</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">5-7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,517</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,311</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets under construction
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">64,445</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,374</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">102,912</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">99,519</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29,426</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(27,835</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">73,486
</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">71,684</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">During the six months ended June 30, 2011 and 2010, the Company capitalized costs
attributable to the design and development of internal-use software in the amount of $149 and
$107, respectively. Depreciation and amortization expense for the three months ended June 30,
2011 and 2010 was $925 and $533, respectively. This includes amortization of internal-use
software of $85 and $72 for the three months ended June 30, 2011 and 2010, respectively.
Depreciation and amortization expense for the six months ended June 30, 2011 and 2010 was $1,712
and $1,558, respectively. This includes amortization of internal-use software of $176 and $183
for the six months ended June 30, 2011 and 2010, respectively.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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 18) and upgrades to its
infrastructure and ground segment.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:ScheduleOfRestrictedCashAndCashEquivalentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>10. Restricted Cash</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Restricted cash consists of the remaining cash collateral of $3,000 for a performance bond
required by the FCC in connection with the construction, launch and operation of the 18
next-generation satellites that was authorized in the March 21, 2008 FCC Space Segment License
modification. 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 and the remaining $2,000 as a non-current asset at June 30, 2011 and December 31,
2010.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">At December 31, 2010, restricted cash also included $680 deposited into an escrow account under
the terms of a procurement agreement for the quick-launch satellites. During the six months
ended June 30, 2011, $500 was paid to the supplier and the balance of $180 was returned to the
Company.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">At December 31, 2010, restricted cash also included $350 placed into certificates of deposit to
collateralize a letter of credit with a cellular wireless provider to secure terrestrial
communications services and to secure a credit card facility. During the six months ended June
30, 2011, the cellular wireless provider reduced the amount of the letter of credit by $130
which was refunded to the Company.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The interest income earned on the restricted cash balances is unrestricted and included in
interest income in the consolidated statements of operations.
</div></td>
</tr>
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - us-gaap:ScheduleOfAcquiredFiniteLivedIntangibleAssetsByMajorClassTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>11. Goodwill and Intangible Assets</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The Company’s intangible assets consisted of the following:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>June 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Useful life</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Acquired licenses
</div></td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,115</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,744</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">371</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,115</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,001</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">1,114</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Patents and
technology
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">(49</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,851</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademarks
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">800</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">790</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer lists
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">(36</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,864</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,715</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">(7,839</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">7,876</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,115</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">(7,001</td>
<td>)</td>
<td> </td>
<td align="left">$</td>
<td align="right">1,114</td>
<td> </td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Amortization expense was $467 and $372 for the three months ended June 30, 2011 and 2010,
respectively. Amortization expense was $838 and $743 for the six months ended June 30, 2011 and 2010,
respectively.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Goodwill</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Goodwill allocated to the Company’s one business segment relates to the acquisition of StarTrak
(See Note 3).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Intangible Assets</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The
acquired licenses have a remaining useful lives of three months. The
patents and the technology, trademarks and customer lists relate to the
acquisition of StarTrak (See Note 3).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Estimated amortization expense for intangible assets subsequent to June 30, 2011 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Years ending December 31,
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Remainder of 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">751</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">760</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">760</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">760</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">760</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">4,085</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,876</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>12. Accrued Liabilities</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The Company’s accrued liabilities consisted of the following:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued compensation and benefits
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,661</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,151</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued interest
</div></td>
<td> </td>
<td> </td>
<td align="right">915</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred rent payable
</div></td>
<td> </td>
<td> </td>
<td align="right">126</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty
</div></td>
<td> </td>
<td> </td>
<td align="right">1,066</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other accrued expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">3,093</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,923</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,861</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,043</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011, accrued
warranty obligations consisted of the following:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at January 1, 2011
</div></td>
<td> </td>
<td align="left"> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty
liabilities assumed from the acquisition of StarTrak (See Note 3)
</div></td>
<td> </td>
<td> </td>
<td align="right">1,050</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty expense
</div></td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty charges
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,066</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 13 - us-gaap:DeferredRevenueDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>13. Deferred Revenues</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Deferred revenues consisted of the following:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Service activation fees
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,223</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,277</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Prepaid services
</div></td>
<td> </td>
<td> </td>
<td align="right">1,134</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,067</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">307</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Manufacturing license fees
</div></td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">3,686</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,373</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less current portion
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,286</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,134</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term portion
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,400</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,239</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 14 - us-gaap:RelatedPartyTransactionsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>14. Note Payable-Related Party</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">In connection with the acquisition of a majority interest in Satcom in 2005, the Company
recorded an indebtedness to OHB Technology A.G. (formerly known as OHB Teledata A.G.), a
stockholder of the Company. At June 30, 2011, the principal balance of the note payable was
€1,138 ($1,639) and it had a carrying value of $1,606. At December 31, 2010, the principal
balance of the note payable was €1,138 ($1,514) and it had a carrying value of $1,416. The
carrying value was based on the note’s 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 and six months ended June 30, 2011 and 2010 was $33 and
$66, respectively. This note does not bear interest and has no fixed repayment term. Repayment
will be made from the distribution profits (as defined in the note agreement) of ORBCOMM Europe
LLC. The note has been classified as long-term and the Company does not expect any repayments to
be required prior to June 30, 2012.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 15 - us-gaap:LongTermDebtTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>15. Note Payable</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">On May 16, 2011, the
Company issued a $3,900 6% secured promissory note to a existing
lender and stockholder of Alanco. The note bears interest at 6.00% per annum. The note is
secured by substantially all of the assets of StarTrak and guaranteed by ORBCOMM Inc. The
Company made a $200 principal payment on May 16, 2011 in accordance with the terms of note
agreement. As of June 30, 2011, the note payable balance is presented
net of the unamortized debt discount of $85 (See <font style="white-space: nowrap">Note 3).</font>
For the three and six months ended June 30, 2011, the Company recognized
debt discount of $3, which is included in interest expense. The remaining principal payments are due in quarterly installments beginning on
March 31, 2012 with a balloon payment due on December 31, 2015 is as follows:
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Years ending December 31,
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Remainder of 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">250</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">300</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">2,750</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,700</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 16 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>16. Stockholders’ Equity</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Series A convertible preferred stock</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As part of the purchase price to acquire StarTrak, the Company issued 183,550 shares of
Series A convertible preferred stock.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Key terms of the Series A convertible preferred stock are as follows:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Dividends</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Holders of the Series A convertible preferred stock are entitled to receive a cumulative 4%
dividend annually (calculated on the basis of the redemption price of $10.00 per share) payable quarterly
in additional shares of the Series A convertible preferred stock.
As of June 30, 2011, dividends in arrears was $9.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Conversion</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Shares of the Series A convertible preferred stock are convertible into 1.66611 shares of
common stock: (i) at the option of the holder at any time up to two years from the issuance date
or (ii) at the option of the Company beginning six months from the issuance date and if the
average closing market price for the Company’s common stock for the preceding twenty
consecutive trading days equals or exceeds $11.20 per share.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Voting</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">Each share of the Series A convertible preferred stock is entitled to one vote for each share
of common stock into which the preferred stock is convertible.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Liquidation</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">In the event of any liquidation, sale or merger of the Company the holders of the Series A
convertible preferred stock are entitled to receive prior to and in preference over the common
stock, an amount equal to $10.00 per share plus unpaid dividends.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Redemption</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The Series A convertible preferred stock may be redeemed by the Company for an amount
equal to the issuance price of $10.00 per share plus all unpaid dividends at any time after
two years from the issuance date.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Common Stock</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">During the six months ended June 30, 2011, the Company issued 34,115 shares of its common stock
as a form of payment for bonuses.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011, the Company has reserved 9,242,030 shares of common stock for future
issuances related to employee stock compensation plans.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 17 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>17. Geographic Information</b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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.
</div></td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three months ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six months ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">United States
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">85</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">79</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">84</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">79</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Japan
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">14</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">16</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 18 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b>18. Commitments and Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Procurement agreements in connection with next-generation satellites</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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 Company’s 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 had the option, which
expired on May 5, 2011, to order up to thirty additional satellites substantially identical to
the Initial Satellites (the “Optional Satellites”) at
specified firm fixed prices. The Company and SNC are in discussions
regarding extending the date by which the Optional Satellites are exercisable, as well as the
price for the Optional Satellites.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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. SNC has not completed any of the pre-ship reviews of
the Initial Satellites within the original required periods. The Company and SNC are in
discussions regarding the impact of such delay, which may lead to a delay in commencing the SpaceX Launch
Services schedule as described below. Payments under the agreement began upon the execution of
the agreement and continue upon SNC’s successful completion of each payment milestone.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">On August 31, 2010, the Company entered into two additional task order agreements with SNC in
connection with the procurement agreement discussed above. Under the terms of the launch vehicle
changes task order agreement, SNC will perform the activities to launch eighteen of the
Company’s next-generation satellites on a SpaceX Falcon 1E or Falcon 9 launch vehicle. The total
price for the launch activities is cost reimbursable up to $4,110 that is cancelable by the
Company, less a credit of $1,528. Any unused credit can be applied to other activities under the
task order agreement, or the original procurement agreement if application to the task order
agreement becomes impossible or impracticable. Under the terms of the engineering change
requests and enhancements task order agreement, SNC will design and make changes to each of the
next-generation satellites in order to accommodate an additional payload-to-bus interface. The
total price for the engineering changes requests is cost reimbursable up to $317. Both task
order agreements are payable monthly as the services are performed, provided that with respect
to the launch vehicle changes task order agreement, the credit in the amount of $1,528 will
first be deducted against amounts accrued thereunder until the entire balance is expended.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011, the Company has made milestone payments of $42,120 under the
agreement. The Company anticipates making payments under the agreement of $15,000 during the
remainder of 2011. 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.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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 Company’s 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 Company and SpaceX are in discussions to provide launch
services on Falcon 9 launch vehicles instead of the Falcon 1e launch
vehicle.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The Company anticipates that
the Launch Services will be performed between the end of
2011 and 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.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">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.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011, the Company has made milestone payments of $10,080 under the SpaceX
Agreement. The Company does not anticipate making payments under the agreement during the
remainder of 2011.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>AIS Satellite Deployment and License Agreement</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">On September 28, 2010, the Company and OHB entered into an AIS Satellite Deployment and License
Agreement (the “AIS Satellite Agreement”) pursuant to which OHB, through its affiliate Luxspace
Sarl (“LXS”), will (1) design, construct, launch and in-orbit test two AIS microsatellites and
(2) design and construct the required ground support equipment. Under the AIS Satellite
Agreement, the Company will receive exclusive licenses for all data (with certain exceptions as
defined in the AIS Satellite Agreement) collected or transmitted by the two AIS microsatellites
(including all AIS data) during the term of the AIS Satellite Agreement and nonexclusive
licenses for all AIS data collected or transmitted by another microsatellite expected to be
launched by LXS.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">The AIS Satellite Agreement provides for milestone payments totaling $2,000 (inclusive of
in-orbit testing) subject to certain adjustments. Payments under the AIS Satellite Agreement
began upon the execution of the agreement and successful completion of each milestone through to
the launch of the two AIS microsatellites, with the first scheduled for third quarter of 2011
and the second anticipated in early 2012. In addition, to the extent that both AIS
microsatellites are successfully operating after launch, the Company will pay OHB lease payments
of up to $546, subject to certain adjustments, over thirty-six months. At the Company’s option
after thirty-six months it can continue the exclusive licenses for the data with a continuing
payment of up to $6 per month. In addition, OHB will also be entitled to credits of up to $500
to be used solely for the microsatellites AIS data license fees payable to the Company under a
separate AIS data resale agreement.
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">As of June 30, 2011, the Company has made milestone payments of $1,000 under the AIS Satellite
Agreement. The Company anticipates making the remaining milestone payments under the agreement
of $1,000 during the remainder of 2011.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Airtime credits</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">In 2001, in connection with the organization of ORBCOMM Europe LLC and the reorganization of the
ORBCOMM business in Europe, the Company agreed to grant certain country representatives in
Europe approximately $3,736 in airtime credits. The Company has not recorded the airtime credits
as a liability for the following reasons: (i) the Company has no obligation to pay the unused
airtime credits if they are not utilized; and (ii) the airtime credits are earned by the country
representatives only when the Company generates revenue from the country representatives. The
airtime credits have no expiration date. Accordingly, the Company is recording airtime credits
as services are rendered and these airtime credits are recorded net of revenues from the country
representatives. For the three months ended June 30, 2011 and 2010, airtime credits used totaled
approximately $8 and $11, respectively. For the six months ended June 30, 2011 and 2010,
airtime credits used totaled approximately $16 and $23, respectively. As of June 30, 2011 and
December 31, 2010, unused credits granted by the Company were approximately $2,175 and $2,191,
respectively
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><b><i>Litigation</i></b>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" nowrap="nowrap" align="left"> </td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">From time to time, the Company is involved in various litigation matters involving ordinary and
routine claims incidental to its business. Management currently believes that the outcome of
these proceedings, either individually or in the aggregate, will not have a material adverse
effect on the Company’s business, results of operations or financial condition.
</div></td>
</tr>
</table>
</div>
</div>
false
--12-31
Q2
2011
2011-06-30
10-Q
0001361983
45668525
Yes
Accelerated Filer
63322130
ORBCOMM Inc.
No
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231550000
158119000
-76584000
-591000
43000
234125000
1126000
167677000
243260000
1834000
-813000
1206000
46000
-77856000
108086
109957
1000
1000
323000
8000
159000
6000
455000
10000
281000
7000
42561000
42613000
43472000
44211000
42561000
42563000
43472000
44211000
Stock-based compensation included in costs and expenses: