United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

OR

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

For the transition period from                      to                     

Commission File Number 001-33118

ORBCOMM INC.

(Exact name of registrant as specified in its charter)

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

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

(201) 363-4900
(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 August 3, 2010 is 42,601,950.

 

 

Index

Part I — Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Equity			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures about Market Risks			26
Item 4. Controls and Procedures			27
Part II — Other Information
Item 1. Legal Proceedings			27
Item 1A. Risk Factors			27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3. Defaults Upon Senior Securities			27
Item 5. Other Information			27
Item 6. Exhibits			27
Signatures			28
Exhibit Index			28
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

ORBCOMM Inc.

(in thousands, except share data)
(Unaudited)

		June 30,				December 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	15,629			$	65,292
Restricted cash			1,000				1,000
Marketable securities			72,491				26,145
Accounts receivable, net of allowances for doubtful accounts of $602 and $835			3,945				3,742
Inventories			69				78
Prepaid expenses and other current assets			1,449				1,253
Current assets held for sale			77				575
Total current assets			94,660				98,085
Satellite network and other equipment, net			74,662				73,208
Intangible assets, net			1,857				2,600
Restricted cash			3,030				2,980
Other investment			2,250				—
Other assets			1,086				1,354
Long term assets held for sale			—				2,832
Total assets		$	177,545			$	181,059
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	2,767			$	2,696
Accrued liabilities			4,914				5,889
Current portion of deferred revenue			4,143				3,849
Current liabilities related to assets held for sale			33				79
Total current liabilities			11,857				12,513
Note payable — related party			1,225				1,398
Deferred revenue, net of current portion			5,833				6,230
Total liabilities			18,915				20,141
Commitments and contingencies
Equity:
ORBCOMM Inc. stockholders’ equity
Common stock, par value $0.001; 250,000,000 shares authorized; 42,563,617 and 42,455,531 shares issued and outstanding			43				42
Additional paid-in capital			231,550				230,512
Accumulated other comprehensive income			448				76
Accumulated deficit			(75,446	)			(71,415	)
Total ORBCOMM Inc. stockholders’ equity			156,595				159,215
Noncontrolling interests in ORBCOMM Japan			2,035				1,703
Total equity			158,630				160,918
Total liabilities and equity		$	177,545			$	181,059

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

		Three months ended								Six months ended
		June 30,								June 30,
		2010				2009				2010				2009
Revenues:
Service revenues		$	7,277			$	6,720			$	14,159			$	13,342
Product sales			560				50				1,095				155
Total revenues			7,837				6,770				15,254				13,497
Costs and expenses (1):
Costs of services			3,060				3,292				6,196				6,513
Costs of product sales			349				36				672				96
Selling, general and administrative			4,020				4,398				8,182				9,201
Product development			159				152				323				341
Impairment charge-satellite network			—				—				—				7,045
Total costs and expenses			7,588				7,878				15,373				23,196
Income (loss) from operations			249				(1,108	)			(119	)			(9,699	)
Other income (expense):
Interest income			55				23				92				64
Other income			39				388				(81	)			339
Interest expense			(48	)			(48	)			(96	)			(96	)
Total other income (expense)			46				363				(85	)			307
Income (loss) from continuing operations			295				(745	)			(204	)			(9,392	)
Income (loss) from discontinued operations			(3,479	)			412				(3,570	)			(40	)
Net loss			(3,184	)			(333	)			(3,774	)			(9,432	)
Less: Net income attributable to the noncontrolling interests			112				29				257				65
Net loss attributable to ORBCOMM Inc.		$	(3,296	)		$	(362	)		$	(4,031	)		$	(9,497	)
Net loss attributable to ORBCOMM Inc.:
Income (loss) from continuing operations		$	183			$	(774	)		$	(461	)		$	(9,457	)
Income (loss) from discontinued operations			(3,479	)			412				(3,570	)			(40	)
Net loss attributable to ORBCOMM Inc.		$	(3,296	)		$	(362	)		$	(4,031	)		$	(9,497	)
Per share information-basic:
Income (loss) from continuing operations		$	0.00			$	(0.02	)		$	(0.01	)		$	(0.22	)
Income (loss) from discontinued operations			(0.08	)			0.01				(0.08	)			(0.00	)
Net loss attributable to ORBCOMM Inc.		$	(0.08	)		$	(0.01	)		$	(0.09	)		$	(0.22	)
Per share information-diluted:
Income (loss) from continuing operations		$	0.00			$	(0.02	)		$	(0.01	)		$	(0.22	)
Income (loss) from discontinued operations			(0.08	)			0.01				(0.08	)			(0.00	)
Net loss attributable to ORBCOMM Inc.		$	(0.08	)		$	(0.01	)		$	(0.09	)		$	(0.22	)
Weighted average common shares outstanding:
Basic			42,563				42,407				42,561				42,358
Diluted			42,613				42,407				42,561				42,358
(1) Stock-based compensation included in costs and expenses:
Costs of services		$	29			$	14			$	43			$	34
Selling, general and administrative			557				330				973				757
Product development			6				—				8				8
		$	592			$	344			$	1,024			$	799

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

		Six months ended
		June 30,
		2010				2009
Cash flows from operating activities:
Net loss		$	(3,774	)		$	(9,432	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Change in allowance for doubtful accounts			(232	)			452
Depreciation and amortization			2,301				2,580
Accretion on note payable — related party			66				66
Stock-based compensation			1,024				799
Foreign exchange losses (gains)			83				(337	)
Amortization of premium on marketable securities			384				—
Gain on settlement of vendor liabilities			(220	)			—
Impairment charge-net assets held for sale			3,261				—
Impairment charge-satellite network			—				7,045
Changes in operating assets and liabilities:
Accounts receivable			(621	)			(360	)
Inventories			11				35
Prepaid expenses and other assets			(50	)			876
Accounts payable and accrued liabilities			(803	)			(8	)
Deferred revenue			(359	)			(188	)
Net cash provided by operating activities of continuing operations			1,071				1,528
Net cash provided by operating activities of discontinued operations			23				464
Net cash provided by operating activities			1,094				1,992
Cash flows from investing activities:
Capital expenditures			(2,655	)			(14,051	)
Purchases of marketable securities			(91,800	)			—
Proceeds from maturities of marketable securities			45,070				—
Purchase of other investment			(1,356	)			—
Increase in restricted cash			(50	)			—
Net cash used in investing activities of continuing operations			(50,791	)			(14,051	)
Net cash used in investing activities of discontinued operations			—				(3	)
Net cash used in investing activities			(50,791	)			(14,054	)
Cash flows from financing activities			—				—
Effect of exchange rate changes on cash and cash equivalents			34				(374	)
Net decrease in cash and cash equivalents			(49,663	)			(12,436	)
Cash and cash equivalents:
Beginning of period			65,292				75,370
End of period		$	15,629			$	62,934
Supplemental cash flow disclosures:
Noncash investing activities:
Capital expenditures incurred not yet paid		$	1,260			$	1,126
Stock-based compensation included in capital expenditures		$	14			$	—
Accounts receivable exchanged and deferred credit issued as part of consideration for other investment		$	894			$	—
Gateway and components recorded in inventory in prior years which were used for construction under satellite network and other equipment in 2010		$	129			$	—

See notes to condensed consolidated financial statements.

ORBCOMM Inc.

Condensed Consolidated Statements of Equity

														Accumulated								Noncontrolling
										Additional				other								interests
		Common stock								paid-in				comprehensive				Accumulated				in ORBCOMM				Total
		Shares				Amount				capital				income				deficit				Japan				equity
Balances, January 1, 2010			42,455,531			$	42			$	230,512			$	76			$	(71,415	)		$	1,703			$	160,918
Vesting of restricted stock units			108,086				1				—				—				—				—				1
Stock-based compensation			—				—				1,038				—				—				—				1,038
Net income (loss)			—				—				—				—				(4,031	)			257				(3,774	)
Cumulative translation adjustment			—				—				—				372								75				447
Balances, June 30, 2010			42,563,617			$	43			$	231,550			$	448			$	(75,446	)		$	2,035			$	158,630
Balances, January 1, 2009			42,101,834			$	42			$	229,001			$	381			$	(67,976	)		$	1,603			$	163,051
Vesting of restricted stock units			321,539				—				—				—				—				—				—
Stock-based compensation			—				—				799				—				—				—				799
Net income (loss)			—				—				—				—				(9,497	)			65				(9,432	)
Cumulative translation adjustment			—				—				—				(464	)			—				(85	)			(549	)
Balances, June 30, 2009			42,423,373			$	42			$	229,800			$	(83	)		$	(77,473	)		$	1,583			$	153,869

See notes to condensed consolidated financial statements.

1. Overview

ORBCOMM Inc. (“ORBCOMM” or the “Company”), a Delaware corporation, is a satellite-based data communications company that operates a two-way global wireless data messaging system optimized for narrowband data communication. The Company also provides terrestrial-based cellular communication services through reseller agreements with major cellular wireless providers. The Company provides services through a constellation of 28 owned and operated low-Earth orbit satellites and accompanying ground infrastructure through which small, low power, fixed or mobile satellite subscriber communicators (“Communicators”) and cellular wireless subscriber identity modules, or SIMS, connected to the cellular wireless provider’s network, that can be connected to other public or private networks, including the Internet (collectively, the “ORBCOMM System”). The ORBCOMM System is designed to enable businesses and government agencies to track, monitor, control and communicate with fixed and mobile assets.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to SEC rules. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

In the opinion of management, the financial statements as of June 30, 2010 and for the three and six-month periods ended June 30, 2010 and 2009 include all adjustments (including normal recurring accruals) necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

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

Investments in entities over which the Company has the ability to exercise significant influence but does not have a controlling interest are accounted for under the equity method of accounting. The Company considers several factors in determining whether it has the ability to exercise significant influence with respect to investments, including, but not limited to, direct and indirect ownership level in the voting securities, active participation on the board of directors, approval of operating and budgeting decisions and other participatory and protective rights. Under the equity method, the 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 June 30, 2010 and December 31, 2009. The Company has no guarantees or other funding obligations to those entities. The Company had no equity or losses of those investees for the three and six months ended June 30, 2010 and June 30, 2009.

Noncontrolling interests in companies are accounted for by the cost method where the Company does not exercise significant influence over the investee. The Company’s cost basis investment is carried at cost (See Note 7).

Certain prior year amounts have been reclassified to conform to the current period presentation.

The Company has incurred losses from inception and through June 30, 2010, the Company has an accumulated deficit of $75,446. As of June 30, 2010, the Company’s primary source of liquidity consisted of cash, cash equivalents, restricted cash and marketable securities totaling $92,150 which the Company believes will be sufficient to provide working capital and milestone payments for its next-generation satellites for the next twelve months.

Fair Value of Financial instruments

The Company has no financial assets or liabilities that are measured at fair value on a recurring basis. However, if certain triggering events occur the Company is required to evaluate the non-financial assets for impairment, a resulting asset impairment would require that a non-financial asset be recorded at the fair value. FASB Topic ASC 820 “Fair Value Measurement Disclosures”, prioritizes inputs used in measuring fair value into a hierarchy of three levels: Level 1- unadjusted quoted prices for identical assets or liabilities traded in active markets, Level 2- inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and Level 3- unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions that market participants would use in pricing (See Note 3).

The carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses approximated their fair value due to the short-term nature of these items. The fair value of the Note payable-related party is de minimis.

Marketable securities

Marketable securities consist of debt securities including U.S. government and agency obligations, corporate obligations and FDIC-insured certificates of deposit, which have stated maturities ranging from three months to less than one year. The Company classifies these securities as held-to-maturity since it has the positive intent and ability to hold until maturity. These securities are carried at amortized cost. The changes in the value of these marketable securities, other than impairment charges, are not reported in the condensed consolidated financial statements (See Note 7).

Concentration of credit risk

The Company’s customers are primarily commercial organizations headquartered in the United States. Accounts receivable are generally unsecured.

Accounts receivable are due in accordance with payment terms included in contracts negotiated with customers. Amounts due from customers are stated net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts are past due, the 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								Six Months ended
		June 30,								June 30,
		2010				2009				2010				2009
Caterpillar Inc.			13.8	%			16.7	%			13.5	%			16.1	%
Komatsu Ltd.			15.4	%			11.2	%			13.7	%			11.0	%
AI, formerly a division of General Electric			14.6	%			14.6	%			14.6	%			14.9	%
Hitachi Construction Machinery Co., Ltd.			11.8	%			—				12.8	%			—

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

		June 30,				December 31,
		2010				2009
Caterpillar Inc.			11.3	%			13.9	%
AI, formerly a division of General Electric			10.5	%			10.9	%
Hitachi Construction Machinery Co., Ltd.			10.7	%			—
Komatsu Ltd.			12.1	%			—

Inventories

Inventories are stated at the lower of fair value or market, determined on a first-in, first-out basis. Inventory consists primarily of finished goods available for sale to customers. The Company reviews inventory quantities on hand and evaluates the realizability of inventories and adjusts the carrying value as necessary based on forecasted product demand. Inventories in excess of one year’s supply are classified as long-term.

Income taxes

As of June 30, 2010, the Company had unrecognized tax benefits of $775. There were no changes to the Company’s unrecognized tax benefits during the three and six months ended June 30, 2010. The Company is subject to U.S. federal and state examinations by tax authorities from 2006. The Company does not expect any significant changes to its unrecognized tax positions during the next twelve months.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were recognized during the three and six months ended June 30, 2010.

A valuation allowance has been provided for all of the Company’s deferred tax assets because it is more likely than not that the Company will not recognize the tax benefits of these deferred tax assets.

Accounting Pronouncements

In October 2009, FASB issued ASU No. 2009-13, Revenue Recognition FASB Topic ASC 605-25 (“ASC 605-25”), Multiple Deliverable Revenue Arrangements. ASU No. 2009-13 requires an entity to allocate the revenue at the inception of an arrangement to all of its deliverables based on their relative selling prices. This guidance eliminates the residual method of allocation of revenue in multiple deliverable arrangements and requires the allocation of revenue based on the relative-selling-price method. The determination of the selling price for each deliverable requires the use of a hierarchy designed to maximize the use of available objective evidence including, vendor-specific objective evidence of fair value (VSOE), third party evidence of selling price (TPE), or estimated selling price (ESP). ASU No. 2009-13 will be effective for the Company on January 1, 2011 and early adoption is allowed and may be adopted either under the prospective method, whereby all revenue arrangements entered into, or materially modified after the effective date or under the retrospective application to all revenue arrangements for all periods presented. The Company may elect to adopt ASU No. 2009-13 prior to January 1, 2011 under the prospective method but must adjust the revenue of prior reported periods such that all new revenue arrangements entered into, or materially modified, during the fiscal year of adoption are accounted for under this guidance. The Company is currently evaluating the impact of adopting ASC No. 2009-13 on its consolidated financial statements.

3. Discontinued Operations

The Company is focused on continuing the growth and expansion of its network services business and, in 2009, began discussing with interested parties about a sale of its subsidiary, Stellar Satellite Communications, Ltd. (“Stellar”). In 2009, as a result, the Company classified the assets and liabilities of Stellar as assets held for sale in its condensed consolidated balance sheets and Stellar’s results of operations as discontinued operations in its condensed consolidated statements of operations for the periods presented.

During the three and six months ended June 30, 2010, the Company recorded an impairment charge of $3,261 to write down the net assets held for sale in anticipation of selling Stellar as discussed below.

On August 5, 2010, Stellar entered into an Asset Purchase Agreement with Quake Global, Inc. (“Quake”), a manufacturer of satellite communicators. Under the terms of the Asset Purchase Agreement, Quake purchased inventory, equipment, intellectual property and assumed certain liabilities. The Company received a cash payment of $48 at closing. In addition, the Company will receive royalty payments contingent on future product sales of inventory as defined in the Asset Purchase Agreement. The Company will recognize the future royalty payments when they are received and the contingency is resolved in accordance with FASB Topic ASC 450 “Contingencies”.

The table below summarizes the fair value measurements of the Company's net assets held for sale at June 30, 2010 and losses for the six months ended June 30, 2010.

4. Comprehensive Loss

The components of comprehensive loss are as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2010				2009				2010				2009
Net loss		$	(3,184	)		$	(333	)		$	(3,774	)		$	(9,432	)
Foreign currency translation adjustment			281				(411	)			447				(549	)
Comprehensive loss			(2,903	)			(744	)			(3,327	)			(9,981	)
Comprehensive income (loss) attributable to noncontrolling interests			200				(19	)			332				(20	)
Comprehensive loss attributable to ORBCOMM Inc.		$	(3,103	)		$	(725	)		$	(3,659	)		$	(9,961	)

5. Stock-based Compensation

The Company’s share-based compensation plans consist of its 2006 Long-Term Incentives Plan (the “2006 LTIP”) and its 2004 Stock Option Plan. As of June 30, 2010, there were 823,471 shares available for grant under the 2006 LTIP and no shares available for grant under the 2004 Stock Option Plan.

For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $592 and $344 respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $1,024 and $799, respectively. The Company’s stock-based compensation expense in discontinued operations for the three and six months ended June 30, 2010 and 2009 was nil. For the three months ended June 30, 2010 and 2009, the Company capitalized stock-based compensation of $11 and nil, respectively. For the six months ended June 30, 2010 and 2009, the Company capitalized stock-based compensation of $14 and nil, respectively. The components of the Company’s stock-based compensation expense are presented below:

		Three months ended								Six months ended
		June 30,								June 30,
		2010				2009				2010				2009
Stock appreciation rights		$	454			$	226			$	766			$	476
Restricted stock units			138				118				258				299
Stock options			—				—				—				24
Total		$	592			$	344			$	1,024			$	799

As of June 30, 2010, the Company had an aggregate of $2,465 of unrecognized compensation costs for all share-based payment arrangements.

Time-Based Stock Appreciation Rights

During the six months ended June 30, 2010, the Company granted 828,000 time-based SARs. These SARs vest in three equal installments on December 31, 2010, 2011 and 2012. The weighted-average grant date fair value of these SARs was $1.77 per share.

A summary of the Company’s time-based SARs for the six months ended June 30, 2010 is as follows:

										Weighted-Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2010			1,166,667			$	5.23
Granted			828,000				2.46
Forfeited or expired			—				—
Outstanding at June 30, 2010			1,994,667			$	4.08				8.51			$	3
Exercisable at June 30, 2010			755,000			$	5.46				7.63			$	1
Vested and expected to vest at June 30, 2010			1,994,667			$	4.08				8.51			$	3

For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $360 and $226 relating to the time-based SARs, respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $627 and $448 relating to the time-based SARs, respectively. As of June 30, 2010, $1,737 of total unrecognized compensation cost related to the time-based SARs is expected to be recognized through December 2012.

Performance-Based Stock Appreciation Rights

During the six months ended June 30, 2010, 306,000 performance-based SARs were granted when the Compensation Committee established financial and operational performance targets for fiscal 2010. These SARs are expected to vest in the first quarter of 2011. The weighted-average grant date fair value of these SARs was $1.72 per share. As of June 30, 2010, the Company estimates that 83% of the performance targets will be achieved.

A summary of the Company’s performance-based SARs for the six months ended June 30, 2010 is as follows:

										Weighted-Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2010			280,146			$	9.59
Granted			306,000				2.46
Forfeited or expired			(21,000	)			1.86
Outstanding at June 30, 2010			565,146			$	6.02				8.45			$	—
Exercisable at June 30, 2010			259,146			$	10.22				7.01			$	—
Vested and expected to vest at June 30, 2010			513,783			$	6.37				8.33			$	—

For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $94 and nil relating to the performance-based SARs, respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $139 and $28 relating to the performance-based SARs, respectively. As of June 30, 2010, $301 of total unrecognized compensation cost related to the performance-based SARs is expected to be recognized through the first quarter of 2011.

The fair value of each time and performance-based SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions described below for the periods indicated. For the six months ended June 30, 2010, the expected volatility was based on an average of the Company’s historical volatility over the expected terms of the SAR awards and the comparable publicly traded companies historical volatility. For the six months ended June 30, 2009, the expected volatility was based on the historical volatility for comparable publicly traded companies, due to the Company’s own insufficient trading history. The Company uses the “simplified” method to determine the expected terms of SARs due to insufficient history of exercises. Estimated forfeitures were based on voluntary and involuntary termination behavior as well as analysis of actual forfeitures. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR grants.

		Six months ended
		June 30,
		2010				2009
Risk-free interest rate		2.27% and 2.65%				2.34%
Expected life (years)		5.50 and 6				6
Estimated volatility		85.95% and 83.67%				55.03%
Expected dividends		None				None

Time-Based Restricted Stock Units

During the six months ended June 30, 2010, the Company granted 79,290 time-based RSUs. These RSUs vest in January 2011.

A summary of the Company’s time-based RSUs for the six months ended June 30, 2010 is as follows:

						Weighted-Average
		Shares				Grant Date Fair Value
Balance at January 1, 2010			238,753			$	3.18
Granted			79,290				2.27
Vested			(78,086	)			1.59
Forfeited or expired			—				—
Balance at June 30, 2010			239,957			$	3.40

For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $138 and $113 related to the time-based RSUs, respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of $258 and $214 related to the time-based RSUs, respectively. As of June 30, 2010, $427 of total unrecognized compensation cost related to the time-based RSUs is expected to be recognized through September 2011.

The fair value of the time-based RSU awards is based upon the closing stock price of the Company’s common stock on the date of grant.

Performance-Based Restricted Stock Units

As of June 30, 2010, the Company has no outstanding performance-based RSUs.

For the three months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of nil and $5 related to the performance-based RSUs, respectively. For the six months ended June 30, 2010 and 2009, the Company recorded stock-based compensation expense in continuing operations of nil and $85 related to the performance-based RSUs, respectively.

2004 Stock Option Plan

A summary of the status of the Company’s stock options as of June 30, 2010 is as follows:

										Weighted-Average
										Remaining				Aggregate
		Number of				Weighted-Average				Contractual				Intrinsic Value
		Shares				Exercise Price				Term (years)				(In thousands)
Outstanding at January 1, 2010			782,079			$	2.98
Granted			—				—
Exercised			—				—
Forfeited or expired			—				—
Outstanding at June 30, 2010			782,079			$	2.98				3.68			$	—
Exercisable at June 30, 2010			782,079			$	2.98				3.68			$	—
Vested and expected to vest at June 30, 2010			782,079			$	2.98				3.68			$	—

6. Net Income (Loss) per Common Share

Basic net loss per common share is calculated by dividing net loss attributable to ORBCOMM Inc. by the weighted-average number of common shares outstanding for the period. Diluted net loss per common share is the same as basic net loss per common share, because potentially dilutive securities such as RSUs, SARs, stock options and stock warrants would have an antidilutive effect as the Company incurred a net loss from continuing operations for the three months ended June 30, 2009 and for the six months ended June 30, 2010 and 2009. For the three months ended June 30 2010, the Company reported income from continuing operations and included the effect of 1,035 SARs and 48,462 RSUs in its diluted weighted average common shares outstanding.

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

		Six Months ended
		June 30,
		2010				2009
SARs			2,559,813				1,416,813
RSUs			239,957				232,411
Stock options			782,079				782,079
Common stock warrants			—				56,724
			3,581,849				2,488,027

7. Investments

The Company’ investments consist of marketable securities and a cost method investment.

Marketable securities

As of June 30, 2010 and December 31, 2009, the marketable securities are recorded at amortized cost which approximates fair value. As of June 30, 2010 all marketable securities mature in one year or less.

		June 30, 2010												December 31, 2009
						Gross				Gross								Gross				Gross
		Fair				Unrealized				Unrealized				Fair				Unrealized				Unrealized
		Value				Losses				Gains				Value				Losses				Gains
U.S. government and agency obligations		$	42,121			$	2			$	6			$	13,009			$	—			$	1
Corporate obligations			25,039				55				—				11,211				7				—
FDIC-insured certificates of deposit			5,274				6				—				1,919				—				—
		$	72,434			$	63			$	6			$	26,139			$	7			$	1

The Company would recognize an impairment loss when the decline in the estimated fair value of a marketable security below the amortized cost is determined to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than the amortized cost, any adverse changes in the 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.

At June 30, 2010, the gross unrealized losses of $63 were primarily due to changes in interest rates and not credit quality of the issuer. Accordingly, the Company has determined that the gross unrealized losses are not other-than-temporary at June 30, 2010 and there has been no recognition of impairment losses in its condensed consolidated statements of operations for the three and six months ended June 30, 2010.

Cost method investment

On April 5, 2010, the Company entered into a stock purchase agreement with Alanco Technologies, Inc., (“Alanco”), the parent company of a terrestrial VAR, StarTrak Systems, LLC (“StarTrak”). Under the terms of the stock purchase agreement, the Company purchased 500,000 shares of Series E Convertible Preferred Stock (“Series E preferred stock”) from Alanco for consideration totaling $2,250. The consideration consists of: (1) $1,356 cash payment, (2) exchange of outstanding accounts receivable balance of $644 in lieu of receiving payment from StarTrak and (3) a $250 credit against future accounts receivable for satellite usage fees. The Series E preferred stock is an equity security that does not have a readily determinable fair value. The Company periodically assesses whether the investment is other-than-temporary impaired. If the Company determines that an other-than temporary impairment has occurred, the Company will write down the investment to its fair value. The fair value of cost method investment is not evaluated if there are no identified events or changes in circumstances that may have a significant adverse effect on the investment’s fair value. As of June 30, 2010, the carrying amount of the Company’s cost method investment was $2,250.

8. Satellite Network and Other Equipment

Satellite network and other equipment consisted of the following:

		Useful life				June 30,				December 31,
		(years)				2010				2009
Land						$	381			$	381
Satellite network			3-10				28,249				27,814
Capitalized software			3-5				1,355				1,318
Computer hardware			5				1,208				1,144
Other			5-7				1,259				1,105
Assets under construction							68,772				66,450
							101,224				98,212
Less: accumulated depreciation and amortization							(26,562	)			(25,004	)
						$	74,662			$	73,208

During the six months ended June 30, 2010 and 2009, the Company capitalized costs attributable to the design and development of internal-use software in the amount of $107 and $112, respectively. Depreciation and amortization expense for the three months ended June 30, 2010 and 2009 was $533 and $925, respectively. This includes amortization of internal-use software of $72 and $74 for the three months ended June 30, 2010 and 2009, respectively. Depreciation and amortization expense for the six months ended June 30, 2010 and 2009 was $1,558 and $1,837, respectively. This includes amortization of internal-use software of $183 and $146 for the six months ended June 30, 2010 and 2009, respectively.

Assets under construction primarily consist of milestone payments pursuant to procurement agreements which includes, the design, development, launch and other direct costs relating to the construction of the next-generation satellites (See Note 16) and upgrades to its infrastructure and ground segment.

On June 22, 2010, one of the two remaining quick-launch satellites experienced a power system anomaly which resulted in loss of contact with the satellite by the Company’s ground control systems. This satellite was fully depreciated as of December 31, 2009 and its loss had no effect on the results of operations during the three and six months ended June 30, 2010. This satellite was covered as a part of the Company’s insurance settlement received in December 2009 as it was considered a constructive total loss under the Company’s insurance policy. The remaining quick-launch satellite is currently providing worldwide AIS and no ORBCOMM messaging services.

9. Restricted Cash

Restricted cash consists of the remaining cash collateral of $3,000 for a performance bond required by the FCC in connection with the Company obtaining expanded FCC authorization to construct, launch and operate an additional 24 next-generation satellites. Under the terms of the performance bond, the cash collateral will be reduced in increments of $1,000 upon completion of specified milestones. The Company certified completion of a third milestone. The FCC has not yet issued a ruling on the certification of the third milestone. The Company has classified $1,000 of restricted cash for the third milestone as a current asset at June 30, 2010 and December 31, 2009.

Restricted cash also includes $680 deposited into an escrow account under the terms of a procurement agreement for the quick-launch satellites.

Restricted cash also includes $350 placed into certificates of deposit to secure a letter of credit with a cellular wireless provider to secure terrestrial communications services and to secure a credit card facility. The interest income earned on the restricted cash balances is unrestricted and included in interest income in the condensed consolidated statements of operations.

10. Intangible Assets

The Company’s intangible assets consisted of the following:

						March 31, 2010												December 31, 2009
		Useful life								Accumulated												Accumulated
		(years)				Cost				amortization				Net				Cost				amortization				Net
Acquired licenses			6			$	8,115			$	(6,258	)		$	1,857			$	8,115			$	(5,515	)		$	2,600

Amortization expense was $372 for the three months ended June 30, 2010 and 2009 and was $743 for the six months ended June 30, 2010 and 2009.

Estimated amortization expense for intangible assets subsequent to June 30, 2010 is as follows:

Years ending December 31,
Remainder of 2010		$	743
2011			1,114
		$	1,857

11. Accrued Liabilities

The Company’s accrued liabilities consisted of the following:

		June 30,				December 31,
		2010				2009
Accrued compensation and benefits		$	1,527			$	1,812
Accrued interest			827				797
Deferred rent payable			447				919
Other accrued expenses			2,113				2,361
		$	4,914			$	5,889

12. Deferred Revenues

Deferred revenues consisted of the following:

		June 30,				December 31,
		2010				2009
Professional services		$	5,995			$	6,437
Service activation fees			2,450				2,563
Manufacturing license fees			37				44
Prepaid services			1,494				1,035
			9,976				10,079
Less current portion			(4,143	)			(3,849	)
Long-term portion		$	5,833			$	6,230

Deferred professional services represent amounts related to the USCG Concept Validation Project. On August 6, 2010, the Company’s AIS data service and maintenance contract with the U.S. Coast Guard expired. The Company is pursuing a new agreement, and awaits a decision from the U.S. Coast Guard. The Company is currently evaluating the accounting impact on the deferred revenue from the expiration of the contract.

13. Note Payable

In connection with the acquisition of a majority interest in Satcom in 2005, the Company recorded an indebtedness to OHB Technology A.G. (formerly known as OHB Teledata A.G.), a stockholder of the Company. At June 30, 2010, the principal balance of the note payable was €1,138 ($1,389) and it had a carrying value of $1,225. At December 31, 2009, the principal balance of the note payable was €1,138 ($1,628) and it had a carrying value of $1,398. The carrying value was based on the 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. Interest expense related to the note for the three and six months ended June 30, 2010 and 2009 was $33 and $66, respectively. This note does not bear interest and has no fixed repayment term. Repayment will be made from the distribution profits (as defined in the note agreement) of ORBCOMM Europe LLC. The note has been classified as long-term and the Company does not expect any repayments to be required prior to June 30, 2011.

14. Stockholders’ Equity

As of June 30, 2010, the Company has reserved 4,405,320 shares of common stock for future issuances related to employee stock compensation plans.

15. Geographic Information

The Company operates in one reportable segment, satellite data communications. Other than satellites in orbit, long-lived assets outside of the United States are not significant. The following table summarizes revenues on a percentage basis by geographic regions, based on the country in which the customer is located.

		Three months ended								Six months ended
		June 30,								June 30,
		2010				2009				2010				2009
United States			79	%			87	%			79	%			86	%
Japan			15	%			10	%			16	%			10	%
Other			6	%			3	%			5	%			4	%
			100	%			100	%			100	%			100	%

16. Commitments and Contingencies

Procurement agreements in connection with next-generation satellites

On May 5, 2008, the Company entered into a procurement agreement with Sierra Nevada Corporation (“SNC”) pursuant to which SNC will construct eighteen low-earth-orbit satellites in three sets of six satellites (“shipsets”) for the 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 has the option, exercisable at any time until the third anniversary of the execution of the agreement, to order up to thirty additional satellites substantially identical to the Initial Satellites (the “Optional Satellites”).

The total contract price for the Initial Satellites is $117,000, subject to reduction upon failure to achieve certain in-orbit operational milestones with respect to the Initial Satellites or if the pre-ship reviews of each shipset are delayed more than 60 days after the specified time periods described below.

The Company has agreed to pay SNC up to $1,500 in incentive payments for the successful operation of the Initial Satellites five years following the successful completion of in-orbit testing for the third shipset of six satellites. The price for the Optional Satellites ranges from $5,000 to $7,700 per satellite depending on the number of satellites ordered and the timing of the exercise of the option.

The agreement also requires SNC to complete the pre-ship review of the Initial Satellites (i) no later than 24 months after the execution of the agreement for the first shipset of six satellites, (ii) no later than 31 months after the execution of the agreement for the second shipset of six satellites and (iii) no later than 36 months after the execution of the agreement for the third shipset of six satellites. Payments under the agreement will begin upon the execution of the agreement and will extend into the second quarter of 2012, subject to SNC’s successful completion of each payment milestone. As of June 30, 2010, the Company has made milestone payments of $42,120 under the agreement. The Company anticipates making payments under the agreement of $9,690 during the remainder of 2010. Under the agreement, SNC has agreed to provide the Company with an optional secured credit facility for up to $20,000 commencing 24 months after the execution of the agreement and maturing 44 months after the effective date. If the Company elects to establish and use the credit facility it and SNC will enter into a formal credit facility on terms established in the agreement.

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 Agreement anticipates that the Launch Services will be performed between the first quarter of 2011 and first quarter of 2014, subject to certain rights of the Company and SpaceX to reschedule any of the particular Launch Services as needed. The Agreement also provides the Company the option to procure, prior to each Launch Service, reflight launch services whereby in the event the applicable Launch Service results in a failure due to the SpaceX launch vehicle, SpaceX will provide comparable reflight launch services at no additional cost to the Company beyond the initial option price for such reflight launch services.

The total price under the Agreement (excluding any options or additional launch services) is $46,600, subject to certain adjustments. The amounts due under the Agreement are payable in periodic installments from the date of execution of the Agreement through the performance of each Launch Service. The Company may postpone and reschedule the Launch Services for any reason at its sole discretion, following 12 months of delay for any particular Launch Services. The Company also has the right to terminate any of the Launch Services subject to the payment of a termination fee in an amount that would be based on the date the Company exercises its termination right.

As of June 30, 2010, the Company has made milestone payments of $10,080 under the Agreement. The Company anticipates making the next milestone payment during the first quarter of 2011.

Airtime credits

In 2001, in connection with the organization of ORBCOMM Europe LLC and the reorganization of the ORBCOMM business in Europe, the Company agreed to grant certain country representatives in Europe approximately $3,736 in airtime credits. The Company has not recorded the airtime credits as a liability for the following reasons: (i) the Company has no obligation to pay the unused airtime credits if they are not utilized; and (ii) the airtime credits are earned by the country representatives only when the Company generates revenue from the country representatives. The airtime credits have no expiration date. Accordingly, the Company is recording airtime credits as services are rendered and these airtime credits are recorded net of revenues from the country representatives. For the three months ended June 30, 2010 and 2009, airtime credits used totaled approximately $10 and $15, respectively. For the six months ended June 30, 2010 and 2009, airtime credits used totaled approximately $22 and $48, respectively. As of June 30, 2010 and December 31, 2009, unused credits granted by the Company were approximately $2,230 and $2,208, respectively.

Litigation

From time to time, the Company is involved in various litigation matters involving ordinary and routine claims incidental to its business. Management currently believes that the outcome of these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s business, results of operations or financial condition.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor Statement Under the Private Securities Litigation Reform of Act 1995.

Certain statements discussed in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to our plans, objectives and expectations for future events and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Such forward-looking statements, including those concerning the Company’s expectations, are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from the results, projected, expected or implied by the forward-looking statements, some of which are beyond the Company’s control, that may cause the Company’s actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include but are not limited to: the impact of global recession and continued worldwide credit and capital constraints; substantial losses we have incurred and expect to continue to incur; demand for and market acceptance of our products and services and the applications developed by our resellers; loss or decline or slowdown in the growth in business from Asset Intelligence, a subsidiary of I.D. Systems, Inc. (“AI”) (formerly a division of General Electric Company (“GE” or “General Electric”)), other value-added resellers or VARs and international value-added resellers or IVARs; loss or decline or slowdown in growth in business of any of the specific industry sectors the Company serves, such as transportation, heavy equipment, fixed assets and maritime; litigation proceedings; technological changes, pricing pressures and other competitive factors; the inability of our international resellers to develop markets outside the United States; market acceptance and success of our Automatic Identification System (“AIS”) business; the inability to provide AIS service due to the in-orbit satellite failure of the remaining quick-launch satellite; satellite launch and construction delays and cost overruns of our next-generation satellites; in-orbit satellite failures or reduced performance of our existing satellites; the failure of our system or reductions in levels of service due to technological malfunctions or deficiencies or other events; our inability to renew or expand our satellite constellation; political, legal regulatory, government administrative and economic conditions and developments in the United States and other countries and territories in which we operate; and changes in our business strategy. In addition, specific consideration should be given to various factors described in more detail in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009. The Company undertakes no obligation to publicly revise any forward-looking statements or cautionary factors, except as required by law.

Overview

We operate a global commercial wireless messaging system optimized for narrowband communications. Our system consists of a global network of 28 low-Earth orbit, or LEO, satellites and accompanying ground infrastructure. Our two-way communications system enables our customers and end-users, which include large and established multinational businesses and government agencies, to track, monitor, control and communicate cost-effectively with fixed and mobile assets located anywhere in the world. We also provide terrestrial-based cellular communication services through reseller agreements with major cellular wireless providers. Currently, our agreements with major cellular providers include GSM and CDMA offerings in the United States and GSM services with significant coverage worldwide. These terrestrial-based communication services enable our customers who have higher bandwidth requirements to receive and send messages from communication devices based on terrestrial-based technologies using the cellular providers’ wireless networks as well as from dual-mode devices combining our satellite subscriber communicators with devices for terrestrial-based technologies. As a result, our customers are now able to integrate into their applications a terrestrial communications device that will allow them to add messages, including data intensive messaging from the cellular providers’ wireless networks.

On June 22, 2010, one of the two remaining quick-launch satellites experienced a power system anomaly which resulted in loss of contact with the satellite by our ground control systems. This satellite was fully depreciated as of December 31, 2009 and its loss had no effect on our results of operations during the three and six months ended June 30, 2010. This satellite was covered as a part of our insurance settlement received in December 2009 as it was considered a constructive total loss under our insurance policy. The remaining quick-launch satellite is currently providing worldwide AIS and no ORBCOMM messaging services.

Our products and services enable our customers and end-users to enhance productivity, reduce costs and improve security through a variety of commercial, government, and emerging homeland security applications. We enable our customers and end-users to achieve these benefits using a single global satellite technology standard for machine-to-machine and telematic, or M2M, data communications. Our customers have made significant investments in developing ORBCOMM-based applications. Examples of assets that are connected through our M2M data communications system include trucks, trailers, railcars, containers, heavy equipment, fluid tanks, utility meters, pipeline monitoring equipment, marine vessels, and oil wells. Our customers include original equipment manufacturers, or OEMs, such as Caterpillar Inc., (“Caterpillar”), Doosan Infracore America, Hitachi Construction Machinery Co., Ltd., (“Hitachi”), Hyundai Heavy Industries, Komatsu Ltd., (“Komatsu”), The Manitowoc Company and Volvo Construction Equipment, IVARs, such as AI, VARs, such as XATA Corporation and American Innovations, Ltd., and government agencies, such as the U.S. Coast Guard.

We currently offer AIS data to the U.S. Coast Guard, and to other government and commercial customers. Further, we are working with system integrators and maritime information service providers for value-added service and to facilitate the sales and distribution of our AIS data. On August 6, 2010, our AIS data service and maintenance contract with the U.S. Coast Guard expired. We are pursuing a new agreement, and await a decision from the U.S. Coast Guard. We entered into an AIS data license distribution agreement for commercial purposes with Lloyd’s Register-Fairplay Ltd (“Lloyd’s”). As a result, Lloyd’s has entered into agreements with several government agencies and corporate customers. We will continue to work with additional candidates to address the various market sectors for AIS data. We believe we are the only commercially available satellite-based AIS data provider with capability beyond terrestrial-based systems into the open seas.

Through our M2M data communications system, our customers and end-users can send and receive information to and from any place in the world using low-cost subscriber communicators and paying airtime costs that we believe are the lowest in the industry for global connectivity. Our customers can also use cellular terrestrial units, or wireless subscriber identity modules (“SIMS”), for use with devices or equipment that enable the use of a cellular provider’s wireless network, singularly or in conjunction with satellite services, to send and receive information from these devices. We believe that there is no other satellite or terrestrial network currently in operation that can offer global two-way wireless narrowband data service including coverage at comparable cost using a single technology standard worldwide, that also provides a parallel terrestrial network for data intensive applications.

The recent global economic conditions, including concerns about a global economic recession, along with unprecedented credit and capital constraints in the capital markets and deteriorations of financial institutions have created a challenging economic environment leading to a lack of customer confidence. Our worldwide operations and performance depend significantly on global economic conditions and their impact on our customers’ decisions to purchase our services and products. Economic conditions have worsened significantly in many parts of the world, and may remain weak or even deteriorate further in the foreseeable future. The worldwide economic turmoil may have a material adverse effect on our operations and financial results, and we may be unable to predict the scope and magnitude of its effects on our business. VARs and end users in any of our target markets, including in commercial transportation and heavy equipment, have and may experience unexpected fluctuations in demand for their products, as our end users alter purchasing activities in response to this economic volatility. Our customers may change or scale back product development efforts, the roll-out of service applications, product purchases or other sales activities that affect purchases of our products and services, and this could adversely affect the amount and timing of revenue for the long-term future, leaving us with limited visibility in the revenue we can anticipate in any given period. These economic conditions also affect our third party manufacturers, and if they are unable to obtain the necessary capital to operate their business, this may also impact their ability to provide the subscriber communicators that our end-users need, or may adversely affect their ability to provide timely services or to make timely deliveries of products or services to our end-users. It is currently unclear as to what overall effect these economic conditions and uncertainties will have on our existing customers and core markets, and future business with existing and new customers in our current and future markets.

Discontinued Operations

We are focused on continuing the growth and expansion of our network business, and in 2009 began discussing with interested parties about a sale of our subsidiary, Stellar Satellite Communications, Ltd. (“Stellar”). In 2009, as a result, we classified Stellar’s certain assets and liabilities as held for sale on our condensed consolidated balance sheets and presented Stellar’s results of operations as discontinued operations in our condensed consolidated statements of operations for the periods presented. During the three and six months ended June 30, 2010, we recorded an impairment charge of $3.3 million to write down the net assets held for sale in anticipation of selling Stellar. See Note 3 to the condensed consolidated financial statements for further discussion.

Cost Method Investment

On April 5, 2010, we entered into a stock purchase agreement with Alanco Technologies, Inc., (“Alanco”), the parent company of a terrestrial VAR, StarTrak Systems, LLC (“StarTrak”). Under the terms of the stock purchase agreement, we purchased 500,000 shares of Series E Convertible Preferred Stock from Alanco for $2.3 million. In connection with this investment, we entered into a product/software development cooperation agreement with StarTrak to develop, manufacture and market new products featuring dual-mode cellular and ORBCOMM satellite communications capabilities to operate over the ORBCOMM System. See Note 7 to the condensed consolidated financial statements for further discussion.

Critical Accounting Policies

Our discussion and analysis of our results of operations, liquidity and capital resources are based on our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, costs of revenues, accounts receivable, satellite network and other equipment, investments, capitalized development costs, intangible assets, valuation of deferred tax assets, uncertain tax positions and the value of securities underlying stock-based compensation. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our results of operations and financial position. For a discussion of our critical accounting policies see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2009. There have been no material changes to our critical accounting policies during 2010.

EBITDA

EBITDA is defined as earnings attributable to ORBCOMM Inc., before interest income (expense), provision for income taxes and depreciation and amortization. We believe EBITDA is useful to our management and investors in evaluating our operating performance because it is one of the primary measures we use to evaluate the economic productivity of our operations, including our ability to obtain and maintain our customers, our ability to operate our business effectively, the efficiency of our employees and the profitability associated with their performance. It also helps our management and investors to meaningfully evaluate and compare the results of our operations from period to period on a consistent basis by removing the impact of our financing transactions and the depreciation and amortization impact of capital investments from our operating results. In addition, our management uses EBITDA in presentations to our board of directors to enable it to have the same measurement of operating performance used by management and for planning purposes, including the preparation of our annual operating budget.

EBITDA is not a performance measure calculated in accordance with accounting principles generally accepted in the United States, or GAAP. While we consider EBITDA to be an important measure of operating performance, it should be considered in addition to, and not as a substitute for, or superior to, net loss or other measures of financial performance prepared in accordance with GAAP and may be different than EBITDA measures presented by other companies.

The following table (in thousands) reconciles our net loss to EBITDA for the periods shown:

		Three months ended June 30,								Six months ended June 30,
		2010				2009				2010				2009
Net loss		$	(3,296	)		$	(362	)		$	(4,031	)		$	(9,497	)
Interest income			(55	)			(23	)			(92	)			(64	)
Interest expense			48				48				96				96
Depreciation and amortization			904				1,297				2,301				2,598
		$	(2,399	)		$	960			$	(1,726	)		$	(6,867	)

EBITDA during the three months ended June 30, 2010 decreased by $3.4 million over the three months ended June 30, 2009. The decrease was primarily due to the impairment charge of $3.3 million in discontinued operations to write down the net assets held for sale.

EBITDA during the six months ended June 30, 2010 improved by $5.1 million over the six months ended June 30, 2009. This improvement was primarily due to higher net service revenues of $0.8 million and a decrease in operating expenses of $8.1 million. The decrease in operating expenses was primarily due to a non-cash impairment charge during the six months ended June 30, 2009 of $7.0 million for one of our quick-launch satellites and a decrease of $1.0 million in professional fees. These decreases were offset due to the impairment charge of $3.3 million in discontinued operations to write down the net assets held for sale.

Results of Operations

Revenues

We derive service revenues from our resellers and direct customers from utilization of satellite subscriber communicators on our communications system and the reselling of airtime from the utilization of terrestrial-based subscriber communicators using SIMS on the cellular providers’ wireless networks. These service revenues generally consist of a one-time activation fee for each subscriber communicator and SIMS activated for use on our communications system and monthly usage fees. Usage fees that we charge our customers are based upon the number, size and frequency of data transmitted by the customer and the overall number of subscriber communicators and SIMS activated by each customer. Revenues for usage fees from currently billing subscriber communicators and SIMS are recognized on an accrual basis, as services are rendered, or on a cash basis, if collection from the customer is not reasonably assured at the time the service is provided. Usage fees charged to our resellers and direct customers are charged primarily at wholesale rates based on the overall number of subscriber communicators activated by them and the total amount of data transmitted. Service revenues also includes AIS data transmissions, services to the United States Coast Guard for the Concept Validation Project, royalty fees from third parties for the use of our proprietary communications protocol charged on a one-time basis for each satellite subscriber communicator connected to our M2M data communications system and fees from providing engineering, technical and management support services to customers.

We derive product revenues primarily from sales of subscriber communicators and cellular wireless subscriber identity modules, or SIMS, (for our terrestrial-communication services) to our resellers (i.e., our VARs, IVARs, international licensees and country representatives) and direct customers.

The table below presents our revenues for the three months and six months ended June 30, 2010 and 2009, together with the percentage of total revenue represented by each revenue category (in thousands):

		Three months ended June 30,																Six months ended June 30,
		2010								2009								2010								2009
						% of								% of								% of								% of
						Total								Total								Total								Total
Service revenues		$	7,277				92.9	%		$	6,720				99.3	%		$	14,159				92.8	%		$	13,342				98.9	%
Product sales			560				7.1	%			50				0.7	%			1,095				7.2	%			155				1.1	%
		$	7,837				100.0	%		$	6,770				100.0	%		$	15,254				100.0	%		$	13,497				100.0	%