##### Table of Contents



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 March 31, 2008
 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.
  Delaware
    
    41-2118289(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    Smaller reporting company o
 o þ




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##### 



ORBCOMM Inc.
Index
 Part I  Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited):Condensed Consolidated Balance SheetsCondensed Consolidated Statements of OperationsCondensed Consolidated Statements of Cash FlowsNotes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RisksItem 4. Controls and ProceduresPart II  Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesExhibit IndexExhibit 10.27Exhibit 10.28Exhibit 10.29Exhibit 10.30Exhibit 10.31Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 
 ORBCOMM Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    114,400
    
    
    $
    115,587Accounts receivable, net of allowances for
doubtful accounts of $203 and $388
    
    
    4,110
    
    
    
    5,284Inventories
    
    
    3,538
    
    
    
    2,722Advances to contract manufacturer
    
    
    158
    
    
    
    158Prepaid expenses and other current assets
    
    
    994
    
    
    
    1,078Total current assets
    
    
    123,200
    
    
    
    124,829Long-term receivable
    
    
    230
    
    
    
    542Satellite network and other equipment, net
    
    
    51,322
    
    
    
    49,704Investment in affiliates
    
    
    640
    
    
    
    Intangible assets, net
    
    
    5,200
    
    
    
    5,572Other assets
    
    
    991
    
    
    
    992Deferred tax assets
    
    
    184
    
    
    
    184Total assets
    
    $
    181,767
    
    
    $
    181,823LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,340
    
    
    $
    4,373Accrued liabilities
    
    
    12,498
    
    
    
    12,305Current portion of deferred revenue
    
    
    1,590
    
    
    
    1,435Total current liabilities
    
    
    17,428
    
    
    
    18,113Note payable  related party
    
    
    1,296
    
    
    
    1,170Deferred revenue, net of current portion
    
    
    1,656
    
    
    
    1,507Other liability
    
    
    184
    
    
    
    184Total liabilities
    
    
    20,564
    
    
    
    20,974Commitments and contingenciesStockholders equity:Common stock, par value $0.001; 250,000,000
shares authorized; 41,872,329 and 41,658,066 shares
issued and outstanding
    
    
    42
    
    
    
    42Additional paid-in capital
    
    
    225,842
    
    
    
    224,899Accumulated other comprehensive loss
    
    
    (711
    )
    
    
    (656
    )Accumulated deficit
    
    
    (63,970
    )
    
    
    (63,436
    )Total stockholders equity
    
    
    161,203
    
    
    
    160,849Total liabilities and stockholders equity
    
    $
    181,767
    
    
    $
    181,823
 See notes to condensed consolidated financial statements.
  2




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ORBCOMM Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 Three months endedMarch 31,2008
    
    
    2007Revenues:Service revenues
    
    $
    4,855
    
    
    $
    3,950Product sales
    
    
    1,024
    
    
    
    2,011Total revenues
    
    
    5,879
    
    
    
    5,961Costs and expenses (1):Costs of services
    
    
    2,034
    
    
    
    2,353Costs of product sales
    
    
    1,281
    
    
    
    2,106Selling, general and administrative
    
    
    4,445
    
    
    
    5,311Product development
    
    
    256
    
    
    
    360Gain on customer claims settlement
    
    
    (876
    )
    
    
    Total costs and expenses
    
    
    7,140
    
    
    
    10,130Loss from operations
    
    
    (1,261
    )
    
    
    (4,169
    )Other income (expense):Interest income
    
    
    766
    
    
    
    1,279Other income
    
    
    11
    
    
    
    3Interest expense
    
    
    (50
    )
    
    
    (52
    )Total other income
    
    
    727
    
    
    
    1,230Net loss
    
    $
    (534
    )
    
    $
    (2,939
    )Net loss per common share:Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.08
    )Weighted average common shares outstanding:Basic and diluted
    
    
    41,803
    
    
    
    37,036(1) Stock-based compensation included in costs and expenses:Costs of services
    
    $
    48
    
    
    $
    220Costs of product sales
    
    
    20
    
    
    
    29Selling, general and administrative
    
    
    727
    
    
    
    1,637Product development
    
    
    15
    
    
    
    42$
    810
    
    
    $
    1,928
 See notes to condensed consolidated financial statements.
  3




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ORBCOMM Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 Three months endedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (534
    )
    
    $
    (2,939
    )Adjustments to reconcile net loss to net cash provided by operating activities:Change in allowance for doubtful accounts
    
    
    (185
    )
    
    
    (2
    )Depreciation and amortization
    
    
    648
    
    
    
    542Accretion on note payable  related party
    
    
    33
    
    
    
    33Stock-based compensation
    
    
    810
    
    
    
    1,928Noncash
portion of gain on customer claims settlement
    
    
    (640
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    1,359
    
    
    
    142Inventories
    
    
    (816
    )
    
    
    1,400Advances to contract manufacturer
    
    
    
    
    
    
    27Prepaid expenses and other assets
    
    
    396
    
    
    
    (514
    )Accounts payable and accrued liabilities
    
    
    (1,236
    )
    
    
    105Deferred revenue
    
    
    304
    
    
    
    13Net cash provided by operating activities
    
    
    139
    
    
    
    735Cash flows from investing activities:Capital expenditures
    
    
    (1,458
    )
    
    
    (3,007
    )Purchases of marketable securities
    
    
    
    
    
    
    (19,050
    )Sales of marketable securities
    
    
    
    
    
    
    6,800Net cash used in investing activities
    
    
    (1,458
    )
    
    
    (15,257
    )Cash flows from financing activities:Proceeds from exercise of warrants
    
    
    133
    
    
    
    Payment of offering costs in connection with initial public offering
    
    
    
    
    
    
    (599
    )Payment of offering costs in connection with secondary public offering
    
    
    (40
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    93
    
    
    
    (599
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    39
    
    
    
    (6
    )Net decrease in cash and cash equivalents
    
    
    (1,187
    )
    
    
    (15,127
    )Cash and cash equivalents:Beginning of period
    
    
    115,587
    
    
    
    62,139End of period
    
    $
    114,400
    
    
    $
    47,012Supplemental cash flow disclosures:Non cash investing activities Capital expenditures incurred not yet paid
    
    $
    1,895
    
    
    $
    5,630
 See notes to condensed consolidated financial statements.
  4




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ORBCOMM Inc.   (in thousands, except share and per share amounts)
 1. Business
  2. Basis of Presentation
     Concentration of credit risk
   Inventories
   5




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Income taxes
    Recent accounting pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial
Liabilities
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Business Combinations
 , Disclosures about Derivative Instruments and Hedging
Activities Disclosure About Fair Value of
Financial Instruments
 3. Comprehensive Loss
  Three months endedMarch 31,2008
    
    
    2007Net loss
    
    $
    (534
    )
    
    $
    (2,939
    )Foreign currency translation adjustment
    
    
    (55
    )
    
    
    (24
    )Comprehensive loss
    
    $
    (589
    )
    
    $
    (2,963
    )
 4. Stock-based Compensation
    Three months endedMarch 31,2008
    
    
    2007Stock options
    
    $
    24
    
    
    $
    57Restricted stock units
    
    
    697
    
    
    
    1,520Stock appreciation rights
    
    
    89
    
    
    
    351Total
    
    $
    810
    
    
    $
    1,928
   6




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Time-Based Restricted Stock Units
   Weighted-AverageShares
    
    
    Grant Date Fair ValueBalance at January 1, 2008
    
    
    356,538
    
    
    $
    11.20Granted
    
    
    121,052
    
    
    
    5.70Vested
    
    
    (129,370
    )
    
    
    11.17Forfeited or expired
    
    
    
    
    
    
    Balance at March 31, 2008
    
    
    348,220
    
    
    $
    9.30
  Performance-Based Restricted Stock Units
   Weighted-AverageShares
    
    
    Grant Date Fair ValueBalance at January 1, 2008
    
    
    179,404
    
    
    $
    12.58Granted
    
    
    129,784
    
    
    
    4.81Vested
    
    
    (1,500
    )
    
    
    12.89Forfeited or expired
    
    
    (108,770
    )
    
    
    12.50Balance at March 31, 2008
    
    
    198,918
    
    
    $
    7.55
   Time-Based Stock Appreciation Rights
   Weighted-AverageRemaining
    
    
    AggregateNumber of
    
    
    Weighted-Average
    
    
    Contractual
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    (In thousands)Outstanding at January 1, 2008
    
    
    66,667
    
    
    $
    11.00Granted
    
    
    1,075,000
    
    
    
    4.96Forfeited or expired
    
    
    
    
    
    
    Outstanding at March 31, 2008
    
    
    1,141,667
    
    
    $
    5.31
    
    
    
    9.91
    
    
    $
    Exercisable at March 31, 2008
    
    
    44,444
    
    
    $
    11.00
    
    
    
    8.50
    
    
    $
    Vested and expected to vest at March 31, 2008
    
    
    1,141,667
    
    
    $
    5.31
    
    
    
    9.91
    
    
    $
    
  7




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Performance-Based Stock Appreciation Rights
   Weighted-AverageRemaining
    
    
    AggregateNumber of
    
    
    Weighted-Average
    
    
    Contractual
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    (In thousands)Outstanding at January 1, 2008
    
    
    217,289
    
    
    $
    11.00Granted
    
    
    115,555
    
    
    
    11.00Forfeited or expired
    
    
    (70,945
    )
    
    
    11.00Outstanding at March 31, 2008
    
    
    261,899
    
    
    $
    11.00
    
    
    
    9.20
    
    
    $
    Exercisable at March 31, 2008
    
    
    146,344
    
    
    $
    11.00
    
    
    
    8.63
    
    
    $
    Vested and expected to vest at March 31, 2008
    
    
    261,899
    
    
    $
    11.00
    
    
    
    9.20
    
    
    $
    
    Three months endedMarch 31,2008
    
    2007Risk-free interest rate
    
    2.50% to 2.67%
    
    4.93%Expected life (years)
    
    5.50 to 6.00
    
    5.50Estimated volatility factor
    
    43.98%
    
    43.93%Expected dividends
    
    None
    
    None
 2004 Stock Option Plan
   8




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Weighted-AverageRemaining
    
    
    AggregateNumber of
    
    
    Weighted-Average
    
    
    Contractual
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    (In thousands)Outstanding at January 1, 2008
    
    
    832,957
    
    
    $
    3.02Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at March 31, 2008
    
    
    832,957
    
    
    $
    3.02
    
    
    
    5.90
    
    
    $
    1,613Exercisable at March 31, 2008
    
    
    824,621
    
    
    $
    3.01
    
    
    
    5.89
    
    
    $
    1,612Vested and expected to vest at
March 31, 2008
    
    
    832,957
    
    
    $
    3.02
    
    
    
    5.90
    
    
    $
    1,613
  5. Net Loss per Common Share
   Three months endedMarch 31,2008
    
    
    2007Common stock warrants
    
    
    371,850
    
    
    
    1,443,985Stock options
    
    
    832,957
    
    
    
    1,464,420RSUs
    
    
    547,138
    
    
    
    759,889SARs
    
    
    1,403,566
    
    
    
    297,7793,155,511
    
    
    
    3,966,073
 6. Satellite Network and Other Equipment
  Useful life
    
    
    March 31,
    
    
    December 31,(years)
    
    
    2008
    
    
    2007Land
    
    
    
    
    
    $
    381
    
    
    $
    381Satellite network
    
    
    5-10
    
    
    
    9,497
    
    
    
    9,463Capitalized software
    
    
    3-5
    
    
    
    908
    
    
    
    887Computer hardware
    
    
    5
    
    
    
    940
    
    
    
    920Other
    
    
    5-7
    
    
    
    665
    
    
    
    565Assets under construction
    
    
    
    
    
    
    47,425
    
    
    
    45,70659,816
    
    
    
    57,922Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (8,494
    )
    
    
    (8,218
    )$
    51,322
    
    
    $
    49,704
    9




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7. Investment in ORBCOMM Japan
    The Company’s aggregate claims
against ORBCOMM Japan totaled approximately $2,910 of which $2,410 related to
amounts owed to the Company pursuant to a change in control payment provision
in the service license agreement that was triggered by a change in control of
ORBCOMM Japan prior to the reorganization. The Company had not previously
recognized any amounts in its financial statements related to the change in
control provision because it believed that the collection of the change in
control payment was not reasonably assured.   Balance Sheet Data:Current assets
    
    $
    1,974Total assets
    
    
    2,077Current liabilities
    
    
    348Total liabilities
    
    
    348Stockholders equity
    
    
    1,729
 8. Intangible Assets
  March 31, 2008
    
    
    December 31, 2007Useful life
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    Accumulated(years)
    
    
    Cost
    
    
    amortization
    
    
    Net
    
    
    Cost
    
    
    amortization
    
    
    NetAcquired licenses
    
    
    6
    
    
    $
    8,115
    
    
    $
    (2,915
    )
    
    $
    5,200
    
    
    $
    8,115
    
    
    $
    (2,543
    )
    
    $
    5,572
   Years ending December 31,Remainder of 2008
    
    $
    1,1142009
    
    
    1,4862010
    
    
    1,4862011
    
    
    1,114$
    5,200
 9. Accrued Liabilities
  March 31,
    
    
    December 31,2008
    
    
    2007Advances from USCG (See Note 14)
    
    $
    7,228
    
    
    $
    7,228Gateway settlement obligation (see Note 14)
    
    
    644
    
    
    
    644Accrued compensation and benefits
    
    
    1,384
    
    
    
    1,821Accrued interest
    
    
    697
    
    
    
    712Accrued professional services
    
    
    436
    
    
    
    425Accrued inventory purchases
    
    
    562
    
    
    
    Other accrued expenses
    
    
    1,547
    
    
    
    1,475$
    12,498
    
    
    $
    12,305
   10. Deferred Revenues
  March 31,
    
    
    December 31,2008
    
    
    2007Service activation fees
    
    $
    2,144
    
    
    $
    1,796Manufacturing license fees
    
    
    71
    
    
    
    75Prepaid services
    
    
    1,031
    
    
    
    1,0713,246
    
    
    
    2,942Less current portion
    
    
    (1,590
    )
    
    
    (1,435
    )Long-term portion
    
    $
    1,656
    
    
    $
    1,507
  10




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11. Note Payable
  
 12. Stockholders Equity
  Shares subjecttoExercise price
    
    Warrants$2.33
    
    
    88,640$3.38
    
    
    25,224$4.26
    
    
    257,986371,850
    SharesEmployee stock compensation plans
    
    
    5,034,605Warrants to purchase common stock
    
    
    371,8505,406,455
 13. Geographic Information
  Three months endedMarch 31,2008
    
    
    2007United States
    
    
    91
    %
    
    
    89
    %Other(1)
    
    
    9
    %
    
    
    11
    %100
    %
    
    
    100
    %
 (1)
    
    No other single geographic areas are more than 10% of revenues for the three
months ended March 31, 2007.  11




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14. Commitments and Contingencies
 Procurement agreements in connection with quick-launch satellites
     Procurement agreements in connection with U.S. Coast Guard contract
       12




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Gateway settlement obligation
  Airtime credits
  Litigation
  Class Action Litigation
  15. Subsequent Event
 Procurement
agreement in connection with next-generation satellites
      
 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.
   13




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Overview
      i.e
  14




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Critical Accounting Policies
  EBITDA
   The following table (in thousands) reconciles our net loss to EBITDA for the periods shown:
 Three months ended March 31,2008
    
    
    2007Net loss
    
    $
    (534
    )
    
    $
    (2,939
    )Interest income
    
    
    (766
    )
    
    
    (1,279
    )Interest expense
    
    
    50
    
    
    
    52Depreciation and amortization
    
    
    648
    
    
    
    542EBITDA
    
    $
    (602
    )
    
    $
    (3,624
    )
  Results of Operations
 Revenues
   15




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Three months ended March 31,2008
    
    
    2007% of
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    TotalService revenues
    
    $
    4,855
    
    
    
    82.6
    %
    
    $
    3,950
    
    
    
    66.3
    %Product sales
    
    
    1,024
    
    
    
    17.4
    %
    
    
    2,011
    
    
    
    33.7
    %$
    5,879
    
    
    
    100.0
    %
    
    $
    5,961
    
    
    
    100.0
    %
  Service revenues
  Product sales
  Costs of services
   Costs of product sales
   Selling, general and administrative expenses
    16




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Product development expenses
   Gain on customer claims settlement
 On March 25, 2008, we received a
37% equity interest in ORBCOMM Japan and cash of $0.6 million in
satisfaction of claims against ORBCOMM Japan, pursuant to a voluntary
reorganization of ORBCOMM Japan in accordance with the rehabilitation plan
approved by the Tokyo district court on December 25, 2007. The fair value of the consideration we received for
settlement of claims against ORBCOMM Japan exceeded the $0.4 million
carrying value of current and long-term receivables from ORBCOMM Japan by
$0.9 million and we recognized a gain for the same amount. The estimated
fair value of our equity interest in ORBCOMM Japan in the amount of
$0.6 million has been recorded in investment in affiliates at
March 31, 2008. Other income (expense)
   Net loss and net loss applicable to common shares
  Liquidity and Capital Resources
 Overview
  Operating activities
   Investing activities
    17




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Financing activities
   Future Liquidity and Capital Resource Requirements
  Contractual Obligations
       Off-Balance Sheet Arrangements
  Recent accounting pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial
Liabilities
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Business Combinations
 In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activitiesan
amendment of FASB Statement No. 133 (SFAS 161). FAS 161 requires expanded qualitative, quantitative and credit-risk
disclosures of derivative instruments and hedging activities. These disclosures include more detailed information about
gains and losses, location of derivative instruments in financial statements, and credit-risk-related contingent
features in derivative instruments. SFAS 161 also clarifies that derivative instruments are subject to concentration of
credit risk disclosures under SFAS No. 107, Disclosure About
Fair Value of Financial Instruments, SFAS 161, which applies only to disclosures, is
effective for us on January 1, 2009. We are currently evaluating the impact of SFAS 161
will have on our consolidated financial statements. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risks
  Concentration of credit risk
  
 Item 4. Disclosure Controls and Procedures
 Evaluation of the Companys disclosure controls and procedures.
 Internal Control over Financial Reporting.
  18




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Use of Proceeds from Initial Public Offering
  Exercise of Warrants
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 10.27
    
    Employment Agreement between Jerome B. Eisenberg and the Company.10.28
    
    Employment Agreement between Marc J. Eisenberg and the Company.10.29
    
    Employment Agreement between Robert G. Costantini and the Company.10.30
    
    Employment Agreement between John J. Stolte Jr. and the Company.10.31
    
    Employment Agreement between
Christian G. Le Brun, Esq. and the Company.31.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(a).31.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(a).32.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
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##### Table of Contents



SIGNATURES
  ORBCOMM Inc.
(Registrant)Date: May 12, 2008
    /s/ Marc J.  EisenbergMarc J. Eisenberg,Chief Executive Officer
(Principal Executive Officer)Date: May 12, 2008
    /s/ Robert G. CostantiniRobert G. Costantini,Executive Vice President and Chief Financial Officer
(Principal Financial Officer)  20




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description10.27
    
    Employment Agreement between Jerome B. Eisenberg and the Company.10.28
    
    Employment Agreement between Marc J. Eisenberg and the Company.10.29
    
    Employment Agreement between Robert G. Costantini and the Company.10.30
    
    Employment Agreement between John J. Stolte Jr. and the Company.10.31
    
    Employment Agreement between Christian G. LeBrun, Esq. and the Company.31.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(a).31.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(a).32.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
  21