United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33118

ORBCOMM INC.

(Exact name of registrant as specified in its charter)

Delaware		41-2118289
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

2115 Linwood Avenue, Fort Lee, New Jersey 07024
(Address of principal executive offices)

(201) 363-4900
(Registrant’s telephone number)

N/A
(Former name, former address and formal fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
			(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the registrant’s common stock as of November 3, 2011 is 45,668,527

 

 

ORBCOMM Inc.

Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)

		September 30,				December 31,
		2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	47,725			$	17,026
Restricted cash			1,000				1,000
Marketable securities			33,208				67,902
Accounts receivable, net of allowances for doubtful accounts of $270 and $557			8,196				4,536
Inventories			1,907				172
Prepaid expenses and other current assets			1,652				1,377
Deferred income taxes			90				117
Total current assets			93,778				92,130
Satellite network and other equipment, net			74,677				71,684
Goodwill			9,099				—
Intangible assets, net			7,315				1,114
Restricted cash			2,220				3,030
Deferred income taxes			55				141
Other assets			1,414				1,092
Other investment			—				2,278
Total assets		$	188,558			$	171,469
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	3,655			$	2,143
Accrued liabilities			6,938				6,043
Current portion of note payable			188				—
Current portion of deferred revenue			2,117				2,134
Total current liabilities			12,898				10,320
Note payable — related party			1,548				1,416
Note payable, net of current portion			3,433				—
Deferred revenue, net of current portion			1,437				1,239
Other liabilities			231				375
Total liabilities			19,547				13,350
Commitments and contingencies
Equity:
ORBCOMM Inc. stockholders’ equity
Preferred Stock Series A, par value $0.001; 1,000,000 shares authorized; 184,455 and 0 shares issued and outstanding			1,843				—
Common stock, par value $0.001; 250,000,000 shares authorized; 45,668,527 and 42,616,950 shares issued and outstanding			46				43
Additional paid-in capital			243,681				234,125
Accumulated other comprehensive income			1,445				1,126
Accumulated deficit			(77,310	)			(76,584	)
Total ORBCOMM Inc. stockholders’ equity			169,705				158,710
Noncontrolling interests			(694	)			(591	)
Total equity			169,011				158,119
Total liabilities and equity		$	188,558			$	171,469

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues:
Service revenues		$	10,315			$	12,975			$	26,692			$	27,134
Product sales			3,625				937				5,940				2,032
Total revenues			13,940				13,912				32,632				29,166
Costs and expenses (1):
Costs of services			4,483				3,081				11,721				9,277
Costs of product sales			2,659				601				4,315				1,273
Selling, general and administrative			5,146				3,986				14,216				12,168
Product development			361				163				816				486
Impairment charge-satellite network			—				6,509				—				6,509
Acquisition-related costs			391				—				1,426				—
Total costs and expenses			13,040				14,340				32,494				29,713
Income (loss) from operations			900				(428	)			138				(547	)
Other income (expense):
Interest income			31				68				129				160
Other income (expense)			(14	)			105				(220	)			24
Interest expense			(110	)			(48	)			(236	)			(144	)
Total other income (expense)			(93	)			125				(327	)			40
Income (loss) from continuing operations before income taxes			807				(303	)			(189	)			(507	)
Income taxes			272				—				578				—
Income (loss) from continuing operations			535				(303	)			(767	)			(507	)
Loss from discontinued operations			—				(113	)			—				(3,683	)
Net income (loss)			535				(416	)			(767	)			(4,190	)
Less: Net income (loss) attributable to the noncontrolling interests			(20	)			193				(50	)			450
Net income (loss) attributable to ORBCOMM Inc.		$	555			$	(609	)		$	(717	)		$	(4,640	)
Net income (loss) attributable to ORBCOMM Inc. common stockholders		$	546			$	(609	)		$	(726	)		$	(4,640	)
Net income (loss) attributable to ORBCOMM Inc.:
Income (loss) from continuing operations		$	555			$	(496	)		$	(717	)		$	(957	)
Loss from discontinued operations			—				(113	)			—				(3,683	)
Net income (loss) attributable to ORBCOMM Inc.		$	555			$	(609	)		$	(717	)		$	(4,640	)
Per share information-basic:
Income (loss) from continuing operations		$	0.01			$	(0.01	)		$	(0.02	)		$	(0.02	)
Loss from discontinued operations			—				(0.00	)			—				(0.09	)
Net income (loss) attributable to ORBCOMM Inc.		$	0.01			$	(0.01	)		$	(0.02	)		$	(0.11	)
Per share information-diluted:
Income (loss) from continuing operations		$	0.01			$	(0.01	)		$	(0.02	)		$	(0.02	)
Loss from discontinued operations			—				(0.00	)			—				(0.09	)
Net income (loss) attributable to ORBCOMM Inc.		$	0.01			$	(0.01	)		$	(0.02	)		$	(0.11	)
Weighted average common shares outstanding:
Basic			45,665				42,604				44,211				42,575
Diluted			45,788				42,604				44,211				42,575

(1) Stock-based compensation included in costs and expenses:
Costs of services		$	34			$	40			$	94			$	83
Costs of product sales			2				—				2				—
Selling, general and administrative			362				561				951				1,534
Product development			8				5				18				13
		$	406			$	606			$	1,065			$	1,630

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

		Nine months ended
		September 30,
		2011				2010
Cash flows from operating activities:
Net loss		$	(767	)		$	(4,190	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Change in allowance for doubtful accounts			(291	)			(249	)
Depreciation and amortization			3,953				3,232
Accretion on note payable — related party			98				98
Amortization of debt discount for the 6% secured promissory note issued
in connection with the acquisition of StarTrak			9				—
Loss on dispostion of other investment in Alanco			305				—
Stock-based compensation			1,065				1,630
Foreign exchange losses			17				7
Amortization of premium on marketable securities			1,041				759
Decrease in fair value of indemnification assets			47				—
Deferred income taxes			121				—
Dividend received in common stock from other investment			(84	)			(28	)
Gain on settlement of vendor liabilities			—				(220	)
Impairment charge-net assets held for sale			—				3,306
Impairment charge-satellite network			—				6,509
Changes in operating assets and liabilities:
Accounts receivable			(1,756	)			(1,091	)
Inventories			359				(91	)
Prepaid expenses and other assets			(51	)			161
Accounts payable and accrued liabilities			266				(1,025	)
Deferred revenue			(269	)			(6,564	)
Other liabilities			(88	)			347
Net cash provided by operating activities of continuing operations			3,975				2,591
Net cash used in operating activities of discontinued operations			—				(26	)
Net cash provided by operating activities			3,975				2,565
Cash flows from investing activities:
Capital expenditures			(5,937	)			(5,056	)
Purchases of marketable securities			(47,497	)			(114,301	)
Proceeds from maturities of marketable securities			81,146				82,013
Purchase of other investment			—				(1,356	)
Acquisition of net assets of StarTrak, net of cash acquired of $322			(1,876	)			—
Change in restricted cash			810				(50	)
Net cash provided by (used in) investing activities of continuing operations			26,646				(38,750	)
Net cash provided by investing activities of discontinued operations			—				48
Net cash provided by (used in) investing activities			26,646				(38,702	)
Cash flows from financing activities
Principal payment of note payable			(200	)			—
Payment upon exercise of SARs			(24	)			—
Net cash used in financing activities			(224	)			—
Effect of exchange rate changes on cash and cash equivalents			302				413
Net increase (decrease) in cash and cash equivalents			30,699				(35,724	)
Cash and cash equivalents:
Beginning of period			17,026				65,292
End of period		$	47,725			$	29,568
Supplemental disclosures of cash flow information:
Cash paid for
Interest		$	83			$	—
Income taxes		$	25			$	—
Supplemental schedule of noncash investing and financing activities
Capital expenditures incurred not yet paid		$	701			$	1,545
Stock-based compensation included in capital expenditures		$	44			$	25
Accounts receivable exchanged and deferred credit issued as part of consideration for other investment		$	—			$	894
Gateway and components recorded in inventory in prior years and used for construction under satellite network and other equipment		$	84			$	129
Common stock issued as a form of payment for bonus		$	125			$	—
6% secured promissory note issued in connection with the acquisition of StarTrak		$	3,812			$	—
Series A convertible preferred stock issued in connection with the acquisition of StarTrak		$	1,834			$	—
Common stock issued in connection with the acquisition of StarTrak		$	8,349			$	—
Cost method investment in Alanco delivered back to Alanco in connection with the acquisition of StarTrak		$	2,050			$	—
Series A convertible preferred stock dividend paid in-kind		$	9			$	—

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

Condensed Consolidated Statements of Changes in Equity
Nine months ended September 30, 2011 and 2010
(in thousands, except share data)
(Unaudited)

																						Accumulated
		Series A convertible																Additional				other
		Preferred stock								Common stock								paid-in				comprehensive				Accumulated				Noncontrolling				Total
		Shares				Amount				Shares				Amount				capital				income				deficit				interests				equity
Balances, January 1, 2011			—			$	—				42,616,950			$	43			$	234,125			$	1,126			$	(76,584	)		$	(591	)		$	158,119
Vesting of restricted stock units			—				—				148,290				—				—				—				—				—				—
Stock-based compensation			—				—				—				—				1,109				—				—				—				1,109
Common stock issued for payment of bonus			—				—				34,115				—				125				—				—				—				125
Issuance of Series A convertible preferred stock in connection with the acquisition of StarTrak			183,550				1,834																—				—				—				1,834
Issuance of common stock in connection with the acquisition of StarTrak											2,869,172				3				8,346				—				—				—				8,349
Series A convertible preferred stock dividend			905				9																—				(9	)							—
Payment upon exercise of SARs			—				—				—				—				(24	)			—				—				—				(24	)
Net loss			—				—				—				—				—				—				(717	)			(50	)			(767	)
Cumulative translation adjustment			—				—				—				—				—				319				—				(53	)			266
Balances, September 30, 2011			184,455			$	1,843				45,668,527			$	46			$	243,681			$	1,445			$	(77,310	)		$	(694	)		$	169,011
Balances, January 1, 2010			—			$	—				42,455,531			$	42			$	230,512			$	76			$	(71,415	)		$	1,703			$	160,918
Vesting of restricted stock units			—				—				161,419				1				—				—				—				—				1
Stock-based compensation			—				—				—				—				1,655				—				—				—				1,655
Net income (loss)			—				—				—				—				—				—				(4,640	)			450				(4,190	)
Cumulative translation adjustment			—				—				—				—				—				332								201				533
Balances, September 30, 2010			—			$	—				42,616,950			$	43			$	232,167			$	408			$	(76,055	)		$	2,354			$	158,917

See notes to condensed consolidated financial statements.

1. Overview

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 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”).

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“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.

In the opinion of management, the financial statements as of September 30, 2011 and for the three and nine-month periods ended September 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.

The financial statements include the accounts of the Company, its wholly-owned and majority-owned subsidiaries, and investments in variable interest entities in which the Company is determined to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation. The portions of majority-owned subsidiaries that the Company does not own are reflected as noncontrolling interests in the condensed consolidated balance sheets.

Investments in entities over which the Company has the ability to exercise significant influence but does not have a controlling interest are accounted for under the equity method of accounting. The Company considers several factors in determining whether it has the ability to exercise significant influence with respect to investments, including, but not limited to, direct and indirect ownership level in the voting securities, active participation on the board of directors, approval of operating and budgeting decisions and other participatory and protective rights. Under the equity method, the Company’s proportionate share of the net income or loss of such investee is reflected in the Company’s consolidated results of operations.

Although the Company owns interests in companies that it accounts for pursuant to the equity method, the investments in those entities had no carrying value as of September 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 nine months ended September 30, 2011 and 2010.

Noncontrolling interests in companies are accounted for by the cost method where the Company does not exercise significant influence over the investee.

The Company has incurred significant losses, and a net loss of $717 for the nine months ended September 30, 2011 and as of September 30, 2011 the Company has an accumulated deficit of $77,310. As of September 30, 2011, the Company’s primary source of liquidity consisted of cash, cash equivalents, restricted cash and marketable securities totaling $84,153, which the Company believes will be sufficient to provide working capital and milestone payments for its next-generation satellites for the next twelve months.

Acquisition costs and loss on other investment

Acquisition-related costs directly relate to the acquisition of substantially all of the assets of StarTrak Systems, (“StarTrak”) LLC from Alanco Technologies, Inc., (“Alanco”) on May 16, 2011. These costs include professional services expenses. For the three and nine months ended September 30, 2011 acquisition-related costs were $391 and $1,426, respectively.

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 nine months ended September 30, 2011.

Fair Value of Financial instruments

The Company has no financial assets or liabilities that are measured at fair value on a recurring basis. However, if certain triggering events occur the Company is required to evaluate the non-financial assets for impairment and any resulting asset impairment would require that a non-financial asset be recorded at the fair value. FASB Topic ASC 820 “ Fair Value Measurement Disclosure ”, 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.

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).

Marketable securities

Marketable securities consist of debt securities including U.S. government and agency obligations, corporate obligations and FDIC-insured certificates of deposit, which have stated maturities ranging from three months to less than one year. The Company classifies these securities as held-to-maturity since it has the positive intent and ability to hold until maturity. These securities are carried at amortized cost. The changes in the value of these marketable securities, other than impairment charges, are not reported in the condensed consolidated financial statements. The fair value of the Company’s marketable securities approximate their carrying value (See Note 8).

Concentration of credit risk

The Company’s customers are primarily commercial organizations. Accounts receivable are generally unsecured.

Accounts receivable are due in accordance with payment terms included in contracts negotiated with customers. Amounts due from customers are stated net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts are past due, the 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.

The following table presents customers with revenues greater than 10% of the Company’s consolidated total revenues for the periods shown:

		Three Months ended								Nine Months ended
		September 30,								September 30,
		2011				2010				2011				2010
Caterpillar Inc.			19.8	%			8.9	%			21.9	%			11.3	%
Komatsu Ltd.			14.6	%			9.9	%			15.9	%			11.9	%
Hitachi Construction Machinery Co., Ltd.			8.7	%			9.5	%			9.5	%			10.6	%
Asset Intelligence			6.1	%			6.1	%			7.7	%			11.2	%

The following table presents customers with accounts receivable greater than 10% of the Company’s consolidated accounts receivable for the periods shown:

		September 30,				December 31,
		2011				2010
Caterpillar Inc.			34.3	%			19.9	%
Asset Intelligence			10.8	%			20.3	%

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.

Inventories

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. A provision is made for potential losses on slow moving and obsolete inventories when identified.

Warranty costs and deferred revenues

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.

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.

Income taxes

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).

For the three and nine months ended September 30, 2011, the Company recorded an income tax provision of $272 and $578, 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 September 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.

As of September 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.

As of September 30, 2011, the Company had unrecognized tax benefits of $775. There were no changes to the Company’s unrecognized tax benefits during the nine months ended September 30, 2011. The Company is subject to U.S. federal and state examinations by tax authorities from 2008. The Company does not expect any significant changes to its unrecognized tax positions during the next twelve months.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were recognized during the three and nine months ended September 30, 2011.

Accounting Pronouncements

In May 2011, FASB issued ASU No. 2011-04, Amendment to Achieve Common Fair Value Measurement and Disclosure Requirements, in U.S. GAAP and International Financial Reporting Standards (IFRS), which amends FASB Topic ASC 820, Fair value measurement. ASU No. 2011-04 modifies the existing standard to include disclosure of all transfers between Level 1 and Level 2 asset and liability fair value categories. In addition, ASU No. 2011-04 provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. ASU No. 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. ASU No. 2011-04 will be effective for the Company on January 1, 2012. The Company does not expect adopting ASU No 2011-04 will have a material impact on the Company’s results of operations, financial condition or its disclosures.

In June 2011, FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. ASU 2011-05 eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. The guidance allows two presentation alternatives: (1) present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income; or (2) in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 will be effective for the Company on January 1, 2012. The Company is currently evaluating the impact of adopting ASU 2011-05 on its consolidated financial statements.

In September 2011, FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other: Testing Goodwill for Impairment, which amends FASB Topic ASC 350, Intangible Assets-Goodwill and Other. Under ASU No. 2011-08, an entity may elect the option to assess qualitative factors to determine whether it is necessary to perform the first step in the two-step impairment testing process. ASU No. 2011-08 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted. The Company has chosen to early adopt ASU No. 2011-08 and therefore, the new guidance will be effective for the year ended December 31, 2011. The Company does not expect such adoption will have a material impact on the Company’s results of operations, financial condition or its disclosures.

3. Acquisition of StarTrak

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.

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.

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 Company expects the contingent earn-out amount to be nil. The potential earn-out is calculated as follows:

	•		$250 if StarTrak achieves at least $20,000 in total revenues;
	•		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;
	•		plus an additional $250 if StarTrak achieves at least $23,000 in total revenues; and
	•		plus an additional $250 if StarTrak achieves at least $24,000 in total revenues.

The Company accounted for the acquisition pursuant to FASB Topic ASC 805, “Business Combinations”. 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.

The preliminary estimated fair values of the purchase price are as follows:

Cash consideration		$	1,893
Forgiveness of 6% secured promissory note advanced to Alanco on February 23, 2011 including interest of $4			304
Contingent earn-out consideration			—
The Company’s investment in preferred stock and common stock of Alanco delivered back to Alanco			2,050
$3,900 secured 6% promissory note payable issued to a lender and stockholder of Alanco			3,812
Issuance of 183,550 shares of Series A convertible preferred stock			1,834
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)			8,349
Total		$	18,242

Contingent earn-out consideration

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. For the three months ended September 30, 2011, there were no changes to the fair value of the contingent earn-out amount.

Investment in Alanco

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 nine months ended September 30, 2011.

$3,900 secured 6% promissory note payable issued to a lender and stockholder of Alanco

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).

Series A convertible preferred stock

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).

Preliminary Estimated Purchase Price Allocation

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, intangible 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:

Cash and cash equivalents		$	322
Accounts receivable			1,535
Inventory			2,085
Other current and noncurrent assets			279
Indemnification assets			379
Property, plant and equipment			303
Intangible assets			7,600
Total identifiable assets acquired			12,503
Accounts payable and accrued expenses			(1,755	)
Deferred warranty revenues			(400	)
Warranty liabilities			(1,050	)
Patent infringement claim			(155	)
Total liabilities assumed			(3,360	)
Net identifiable assets acquired			9,143
Goodwill			9,099
Total preliminary purchase price		$	18,242

Intangible Assets

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 intangible 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).

		Estimated
		useful life (in
		years)				Amount
Technology and patents			10			$	3,900
Customer relationships			10				2,900
Trademarks			10				800
						$	7,600

Goodwill

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, “ Intangibles-Goodwill and Other ”, 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). The Company will perform the goodwill impairment test during the fourth quarter of 2011.

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.

Deferred warranty revenues

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).

Warranty liabilities and Escrow Agreement

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.

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. For the three months ended September 30, 2011, there were no changes to the amount of the initial warranty obligations recorded at the date of acquisition.

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 a result, the Company has recorded $304 relating to the escrow agreement as an indemnification asset, which is included in other assets. As of September 30, 2011, there were no changes to the contractual amount of the indemnification asset. For the three months ended September 30, 2011, the Company recorded a loss of $38 on the fair value of the common stock held in escrow. The loss is recorded in selling, general and administrative expenses in the condensed consolidated statements of operations.

Patent infringement liability and Escrow Agreement

StarTrak was 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 dismissed 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 received 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. As of September 30, 2011, there were no changes to the patent infringement liability.

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. The Company and Alanco are in discussions regarding the extent to which legal fees incurred by the Company relating to this patent infringement action will, in addition to the settlement payment, be covered by the escrow agreement. Upon final agreement between the Company and Alanco regarding these additional costs, 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. As of September 30, 2011, there were no changes to the contractual amount of the indemnification asset. For the three months ended September 30, 2011, the Company recorded a loss of $9 on the fair value of the common stock held in escrow. The loss is recorded in selling, general and administrative expenses in the condensed consolidated statements of operations.

Pre-Acquisition Contingencies

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 to goodwill in the measurement period and, subsequent to the measurement period, in the Company’s results of operations.

Pro Forma Results for StarTrak Acquisition

The following table presents the unaudited pro forma results (including StarTrak) for the three and nine months ended September 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.

The supplemental pro forma revenues, net income (loss) attributable to ORBCOMM Inc. and the net income (loss) attributable 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.

The amount of StarTrak’s revenues and net loss included in the Company’s condensed consolidated statements of operations from the acquisition date to September 30, 2011 and the revenues, net income (loss) attributable to ORBCOMM Inc. and the net income (loss)  attributable to common stockholders of the combined entity had the acquisition date been January 1, 2010, are as follows:

						Net Income (loss) Attributable				Net Income (loss) Attributable
		Revenues				ORBCOMM Inc.				to Common Stockholders
Actual from May 17, 2011 to September 30, 2011		$	6,894			$	(352	)		$	(352	)
Supplemental pro forma for the three months ended September 30, 2011		$	13,940			$	946			$	928
Supplemental pro forma for the three months ended September 30, 2010		$	16,586			$	(849	)		$	(867	)
Supplemental pro forma for the nine months ended September 30, 2011		$	38,140			$	316			$	262
Supplemental pro forma for the nine months ended September 30, 2010		$	39,426			$	(5,488	)		$	(5,542	)

4. Discontinued Operations

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 nine months ended September 30, 2011, the Company received royalty payments totaling $12 and $111, respectively, which are included in continuing operations in its condensed consolidated statements of operations. For the three months ended September 30, 2010, the Company did not recognize any royalty payments in its condensed consolidated statements of operations. For the three and nine months ended September 30, 2011, the Company had no discontinued operations.

A summary of discontinued operations for the three and nine months ended September 30, 2010 is as follows:

		Three months ended				Nine months ended
		September 30, 2010				September 30, 2010
Revenues- Product sales		$	119			$	548
Loss from discontinued operations		$	(113	)		$	(3,683	)

5. Comprehensive Loss

The components of comprehensive loss are as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
Net income (loss)		$	535			$	(416	)		$	(767	)		$	(4,190	)
Foreign currency translation adjustment			378				86				266				533
Comprehensive income (loss)			913				(330	)			(501	)			(3,657	)
Comprehensive income (loss) attributable to noncontrolling interests			119				319				(103	)			651
Comprehensive income (loss) attributable to ORBCOMM Inc.		$	794			$	(649	)		$	(398	)		$	(4,308	)

6. Stock-based Compensation

The Company’s stock-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 September 30, 2011, there were 5,043,569 shares available for grant under the 2006 LTIP and no shares available for grant under the 2004 Stock Option Plan.

For the three months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $406 and $606, respectively. For the three months ended September 30, 2011 and 2010, the Company capitalized stock-based compensation of $15 and $11, respectively. For the nine months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $1,065 and $1,630, respectively. For the nine months ended September 30, 2011 and 2010, the Company capitalized stock-based compensation of $44 and $25, respectively. The components of the Company’s stock-based compensation expense are presented below:

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
Stock appreciation rights		$	277			$	466			$	762			$	1,232
Restricted stock units			129				140				303				398
Total		$	406			$	606			$	1,065			$	1,630

As of September 30, 2011, the Company had unrecognized compensation costs for all share-based payment arrangements totaling $1,733.

Time-Based Stock Appreciation Rights

During the nine months ended September 30, 2011, the Company granted 395,000 time-based SARs, which vest through May 2014. The weighted-average grant date fair value of these SARs was $1.73 per share.

A summary of the Company’s time-based SARs for the nine months ended September 30, 2011 is as follows:

										Weighted-Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2011			2,000,667			$	4.07
Granted			395,000				2.81
Exercised			(4,000	)			2.46
Forfeited or expired			—				—
Outstanding at September 30, 2011			2,391,667			$	3.86				7.67			$	119
Exercisable at September 30, 2011			1,432,334			$	4.72				6.81			$	40
Vested and expected to vest at September 30, 2011			2,391,667			$	3.86				7.67			$	119

For the three months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $167 and $359 relating to these SARs, respectively. For the nine months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $414 and $986 relating to these SARs, respectively. As of September 30, 2011, $1,214 of total unrecognized compensation cost related to these SARs is expected to be recognized through May 2014.

The intrinsic value of the SARs exercised was $4 for the nine months ended September 30, 2011.

Performance-Based Stock Appreciation Rights

During the nine months ended September 30, 2011, the Company granted 393,666 performance-based SARs for 2011 financial and operational targets, which are expected to vest in the first quarter of 2012. As of September 30, 2011, the Company estimates that 85% of the performance targets will be achieved. The weighted-average grant date fair value of these SARs was $2.00 per share.

A summary of the Company’s performance-based SARs for the nine months ended September 30, 2011 is as follows:

										Weighted- Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2011			567,146			$	6.00
Granted			393,666				3.25
Exercised			(19,500	)			2.30
Forfeited or expired			(89,013	)			2.45
Outstanding at September 30, 2011			852,299			$	5.18				8.16			$	18
Exercisable at September 30, 2011			458,634			$	6.85				6.93			$	18
Vested and expected to vest at September 30, 2011			794,324			$	5.31				8.06			$	23

For the three months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $110 and $107 relating to these SARs, respectively. For the nine months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $348 and $246 relating to these SARs, respectively. As of September 30, 2011, $369 of total unrecognized compensation cost related to these SARs is expected to be recognized through the first quarter of 2012.

The intrinsic value of the SARs exercised was $20 for the nine months ended September 30, 2011.

The fair value of each time and performance SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions described below for the periods indicated. 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 an insufficient history of exercises. Estimated forfeitures were based on voluntary and involuntary termination behavior as well as analysis of actual forfeitures. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR grants.

		Nine months ended
		September 30,
		2011		2010
Risk-free interest rate		1.00% to 2.34%		2.27% and 2.65%
Expected life (years)		5.50 and 6.0		5.5 and 6.0
Estimated volatility factor		64.15% to 74.34%		85.95% and 83.67%
Expected dividends		None		None

Time-based Restricted Stock Units

During the nine months ended September 30, 2011, the Company granted 120,000 time-based RSUs, which vest in January 2012.

A summary of the Company’s time-based RSUs for the nine months ended September 30, 2011 is as follows:

						Weighted-Average Grant
		Shares				Date Fair Value
Balance at January 1, 2011			156,624			$	2.90
Granted			120,000				2.97
Vested			(118,290	)			3.09
Forfeited or expired			—				—
Balance at September 30, 2011			158,334			$	2.81

For the three months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $129 and $140 related to these RSUs, respectively. For the nine months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense in continuing operations of $303 and $398 related to these RSUs, respectively. As of September 30, 2011, $150 of total unrecognized compensation cost related to these RSUs is expected to be recognized through July 2012.

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.

2004 Stock Option Plan

A summary of the status of the Company’s stock options as of September 30, 2011 is as follows:

										Weighted- Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2011			757,828			$	2.97
Granted			—				—
Exercised			—				—
Forfeited or expired			—				—
Outstanding at September 30, 2011			757,828			$	2.97				2.46			$	89
Exercisable at September 30, 2011			757,828			$	2.97				2.46			$	89
Vested and expected to vest at September 30, 2011			757,828			$	2.97				2.46			$	89

7. Net Income (loss) Attributable to ORBCOMM Inc. Common Stockholders

Basic net income (loss) per common share is calculated by dividing net income (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 months ended September 30, 2010 and for the nine months ended September 30, 2011 and 2010. For the three months ended September 30, 2011, the Company reported net income attributable to ORBCOMM Inc. and included the effect of 122,831 SARs, RSUs and stock options in its diluted weighted average common shares outstanding.

For the three months ended September 30, 2011, 307,322 shares of Series A convertible preferred stock, 3,222,706 SARs, 96,700 RSUs and 716,991 stock options were not included in the calculation of diluted income per share as their effect was antidilutive.

The potentially dilutive securities excluded from the determination of diluted loss per share, as their effect is antidilutive, are as follows:

		Nine months ended
		September 30,
		2011				2010
Series A convertible preferred stock			307,322				—
SARs			3,243,966				2,543,813
RSUs			158,334				186,624
Stock options			757,828				780,829
			4,467,450				3,511,266

The computation of net income (loss) attributable to ORBCOMM Inc. common stockholders are as follows for the three and nine months ended September 30, 2011.

		Three months ended September 30, 2011				Nine months ended September 30, 2011
Net income (loss) attributable to ORBCOMM Inc.		$	555			$	(717	)
Preferred stock dividends on Series A convertible preferred stock (See Note 16)			(9	)			(9	)
Net income (loss) attributable to ORBCOMM Inc. common stockholders		$	546			$	(726	)

8. Marketable Securities

As of September 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.

		September 30, 2011												December 31, 2010
						Gross				Gross								Gross				Gross
		Fair				Unrealized				Unrealized				Fair				Unrealized				Unrealized
		Value				Losses				Gains				Value				Losses				Gains
U.S. government and agency obligations		$	13,758			$	14			$	2			$	39,926			$	18			$	5
Corporate obligations			14,986				5				—				24,108				18				3
FDIC-insured certificates of deposit			4,446				1				—				3,837				3				—
		$	33,190			$	20			$	2			$	67,871			$	39			$	8

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.

As of September 30, 2011 and December 31, 2010, the gross unrealized losses of $20 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 September 30, 2011 and there has been no recognition of impairment losses in its condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010.

9. Satellite Network and Other Equipment

Satellite network and other equipment consisted of the following:

		Useful life				September 30,				December 31,
		(years)				2011				2010
Land						$	381			$	381
Satellite network			1-10				33,823				32,560
Capitalized software			3-5				1,759				1,646
Computer hardware			5				1,380				1,247
Other			5-7				1,585				1,311
Assets under construction							66,018				62,374
							104,946				99,519
Less: accumulated depreciation and amortization							(30,269	)			(27,835	)
						$	74,677			$	71,684

During the nine months ended September 30, 2011 and 2010, the Company capitalized costs attributable to the design and development of internal-use software in the amount of $197 and $160, respectively. Depreciation and amortization expense for the three months ended September 30, 2011 and 2010 was $844 and $560, respectively. This includes amortization of internal-use software of $83 and $96 for the three months ended September 30, 2011 and 2010, respectively. Depreciation and amortization expense for the nine months ended September 30, 2011 and 2010 was $2,554 and $2,118, respectively. This includes amortization of internal-use software of $259 and $241 for the nine months ended September 30, 2011 and 2010, respectively.

Assets under construction primarily consist of milestone payments pursuant to procurement agreements which includes, the design, development, launch and other direct costs relating to the construction of the next-generation satellites (See Note 18) and upgrades to its infrastructure and ground segment.

10. Restricted Cash

Restricted cash consists of the remaining cash collateral of $3,000 for a performance bond required by the FCC in connection with the 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 September 30, 2011 and December 31, 2010.

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 nine months ended September 30, 2011, $500 was paid to the supplier and the balance of $180 was returned to the Company.

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 nine months ended September 30, 2011, the cellular wireless provider reduced the amount of the letter of credit by $130 which was refunded to the Company.