<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number: 333-11149
ORBCOMM GLOBAL, L.P.
ORBCOMM GLOBAL CAPITAL CORP.
(Exact name of Registrants as specified in their charters)
54-1698039
DELAWARE 54-1841164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization of Registrants) Identification Nos.)
2455 HORSE PEN ROAD, SUITE 100
HERNDON, VIRGINIA 20171
(Address of Registrants' principal executive offices)
(Zip Code)
(703) 406-6000
(Registrants' telephone number, including area code)
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 and 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the last 90 days.
YES X NO
--- ---
<PAGE> 2
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19,255 $ 16,106
Investments 12,780 22,756
Other assets 4,269 4,091
---------- ----------
Total Current Assets 36,304 42,953
ORBCOMM System, net 280,916 263,379
Other assets, net 5,317 5,527
Investments in and advances to affiliates 4,147 5,110
---------- ----------
TOTAL ASSETS $ 326,684 $ 316,969
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Current portion of long-term debt $ 1,095 $ 1,087
Accounts payable - Orbital Sciences Corporation 29,477 21,100
Other accounts payable and accrued liabilities 9,420 17,174
---------- ----------
Total Current Liabilities 39,992 39,361
Long-term debt 170,920 171,190
---------- ----------
Total Liabilities 210,912 210,551
Commitments and Contingencies
Partners' Capital:
Teleglobe Mobile Partners 62,511 57,834
Orbital Communications Corporation 53,261 48,584
---------- ----------
Total Partners' Capital 115,772 106,418
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 326,684 $ 316,969
========== ==========
</TABLE>
(See accompanying notes to condensed financial statements)
2
<PAGE> 3
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
---------------------------- MARCH 31,
1998 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
REVENUES:
Product sales $ 215 $ 133 $ 1,000
Distribution fees 0 0 1,000
Other 5 2 67
Total revenues 220 135 2,067
--------- -------- ---------
EXPENSES:
Cost of product sales 215 124 1,000
Depreciation 1,903 1,718 15,449
Engineering expenses 2,654 1,580 16,267
Marketing, administrative and other expenses 4,304 1,300 23,366
--------- -------- ---------
Total expenses 9,076 4,722 56,082
--------- -------- ---------
Loss from operations (8,856) (4,587) (54,015)
OTHER INCOME AND EXPENSES:
Interest income, net of interest expense
of $210 and $206, respectively 218 2,016 8,376
Equity in losses of affiliates (2,008) (1,823) (15,877)
--------- -------- ---------
NET LOSS $ (10,646) $ (4,394) $ (61,516)
========= ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
3
<PAGE> 4
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
-------------------------- MARCH 31,
1998 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (10,646) $ (4,394) $ (61,516)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation 1,903 1,718 15,449
Amortization of financing fees 210 206 1,350
Equity in losses of affiliates 2,008 1,823 15,877
Increase in other assets (178) (2,167) (4,269)
Increase in accounts payable - Orbital Sciences Corporation 8,377 0 29,477
Increase (decrease) in other accounts
payable and accrued liabilities (7,754) (3,860) 9,420
--------- -------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,080) (6,674) 5,788
========= ======== =========
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (19,440) (20,593) (296,365)
Increase in amount due from affiliates (1,045) (3,721) (20,003)
Purchase of investments (4,313) (23,533) (187,970)
Proceeds from sale of investments 14,289 44,051 175,189
--------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (10,509) (3,796) (329,149)
--------- -------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt 0 0 169,475
Repayment of long-term debt (262) (240) (2,984)
Partners' contributions 20,000 0 179,800
Financing fees paid 0 (215) (3,675)
--------- -------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 19,738 (455) 342,616
--------- -------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 3,149 (10,925) 19,255
CASH AND CASH EQUIVALENTS:
Beginning of period 16,106 56,870 0
--------- -------- ---------
CASH AND CASH EQUIVALENTS:
End of period $ 19,255 $ 45,945 $ 19,255
========= ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
4
<PAGE> 5
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. (the "Company"),
a Delaware limited partnership. OCC and Teleglobe Mobile also formed
two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM
International Partners, L.P. ("ORBCOMM International"), to market services using
the ORBCOMM low-Earth orbit satellite-based communications system (the "ORBCOMM
System") in the United States and internationally, respectively. In 1995, the
Company became a 98% general partner in ORBCOMM USA, reducing OCC's direct
partnership interest to 2% and eliminating Teleglobe Mobile's direct partnership
interest entirely. Simultaneously, the Company became a 98% general partner in
ORBCOMM International, reducing Teleglobe Mobile's direct partnership interest
to 2% and eliminating OCC's direct partnership interest entirely.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the financial position
of the Company as of March 31, 1998, the results of its operations and cash
flows for the three-month periods ended March 31, 1998 and 1997, and the period
from June 30, 1993 (date of inception) through March 31, 1998. These condensed
financial statements are unaudited and do not include all related footnote
disclosures and, therefore, should be read in conjunction with the audited
financial statements and the footnotes thereto for the year ended December 31,
1997 filed with the Securities and Exchange Commission (the "Commission").
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results of operations expected in the future, although the
Company will continue to be a development stage enterprise and anticipates a net
loss for the year 1998.
3. RELATED PARTY TRANSACTIONS
The Company paid Orbital $777,000 and $6,332,000 for the three months
ended March 31, 1998 and 1997, respectively, and approximately $195,000,000 for
the period June 30, 1993 (date of inception) through December 31, 1997. Payments
were made for work performed pursuant to the ORBCOMM System Design, Development
and Operations Agreement, the ORBCOMM System Procurement Agreement (the
"Procurement Agreement") and the Administrative Services Agreement (for
provision of ongoing administrative support to the Company). Additionally,
Orbital has deferred and has indicated that it will continue to defer invoicing
of certain amounts otherwise due under the Procurement Agreement until
consummation of the Offering (as defined below). The Company expects to pay such
amounts in full with a portion of the net proceeds of the Offering.
5
<PAGE> 6
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. COMMITMENTS AND CONTINGENCIES
In August 1996, the Company and ORBCOMM Global Capital Corp. issued
$170,000,000 of Senior Notes due 2004 with Revenue Participation Interest (the
"Old Notes"). All of the Old Notes were exchanged for an equal principal
amount of registered 14% Series B Senior Notes due 2004 with Revenue
Participation Interest (the "Notes"). The Notes are fully and unconditionally
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA
and ORBCOMM International, except that the guarantees are non-recourse to the
shareholders and/or partners of the guarantors, limited only to the extent
necessary for each such guarantee not to constitute a fraudulent conveyance
under applicable law.
On the closing of the Old Notes, the Company used $44,800,000 of the
net proceeds from the sale of the Old Notes to purchase a portfolio of U.S.
Government securities to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998. Of this investment portfolio, a total
of $34,240,000 has been used to pay interest that was due on the Notes on
February 15, 1997, August 15, 1997 and February 15, 1998.
The Company also has a $5,000,000 secured note with a financial
institution of which $2,015,000 is outstanding. The note bears interest at 9.2%
per annum and is due in monthly principal and interest installments of $104,000
through December 1999. The note is secured by equipment located at certain of
the U.S. gateway Earth stations and the network control center, and is
guaranteed by Orbital.
5. SUBSEQUENT EVENTS
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Commission for a proposed offering of shares of its common
stock (the "Offering"). On consummation of the Offering, ORBCOMM Corporation
will use the net proceeds of the Offering to purchase partnership units in the
Company and will be admitted as a general partner of the Company. In addition,
on consummation of the Offering, OCC and Teleglobe Mobile will contribute to the
Company their respective 2% partnership interests in ORBCOMM USA and ORBCOMM
International (together, the "Marketing Partnerships") and each of the Marketing
Partnerships will be dissolved.
The registration statement relating to the securities of ORBCOMM
Corporation referred to above has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time that the
registration statement becomes effective.
In addition, in connection with the Offering, the Company is seeking
from the registered holders of the Notes amendments to certain provisions of
the indenture governing the Notes. The purpose of the proposed amendments is to
permit the Offering and to facilitate other business objectives.
6
<PAGE> 7
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Accounts receivable $ 106 $ 65
Prepaid contract costs 214 123
-------- ---------
TOTAL ASSETS $ 320 $ 188
======== =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and other accrued liabilities $ 783 $ 803
-------- ---------
Total Current Liabilities 783 803
Amount due to ORBCOMM Global, L.P. 10,352 8,635
-------- ---------
Total Liabilities 11,135 9,438
Commitments and Contingencies
Partners' Capital:
ORBCOMM Global, L.P. (10,599) (9,065)
Orbital Communications Corporation (216) (185)
-------- ---------
Total Partners' Capital (10,815) (9,250)
-------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 320 $ 188
======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
7
<PAGE> 8
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
------------------------ MARCH 31,
1998 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
REVENUES:
Product sales $ 42 $ 50 $ 398
Contract revenues 0 0 4,203
Service revenues 22 8 78
-------- -------- ---------
Total revenues 64 58 4,679
EXPENSES:
Cost of product sales 66 72 711
Marketing expenses 1,563 1,253 14,793
-------- -------- ---------
Total expenses 1,629 1,325 15,504
-------- -------- ---------
NET LOSS $ (1,565) $ (1,267) $ (10,825)
======== ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
8
<PAGE> 9
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
-------------------------- MARCH 31,
1998 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (1,565) $ (1,267) $ (10,825)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING ACTIVITIES
Increase in accounts receivable (41) (13) (106)
Increase in prepaid contract costs (91) 0 (214)
Increase (decrease) in accounts payable and
other accrued liabilities (20) 68 783
-------- -------- ---------
NET CASH USED IN OPERATING ACTIVITIES (1,717) (1,212) (10,362)
-------- -------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase in amount due to ORBCOMM Global, L.P. 1,717 1,212 10,352
Partners' contributions 0 0 10
-------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,717 1,212 10,362
-------- -------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 0 0 0
CASH AND CASH EQUIVALENTS:
Beginning of period 0 0 0
-------- -------- ---------
CASH AND CASH EQUIVALENTS:
End of period $ 0 $ 0 $ 0
======== ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
9
<PAGE> 10
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. (the "Company"),
a Delaware limited partnership. OCC and Teleglobe Mobile also formed
two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM
International Partners, L.P. ("ORBCOMM International"), to market services using
the ORBCOMM low-Earth orbit satellite-based communications system (the "ORBCOMM
System") in the United States and internationally, respectively. In 1995, the
Company became a 98% general partner in ORBCOMM USA, reducing OCC's direct
partnership interest to 2% and eliminating Teleglobe Mobile's direct partnership
interest entirely. Simultaneously, the Company became a 98% general partner in
ORBCOMM International, reducing Teleglobe Mobile's direct partnership interest
to 2% and eliminating OCC's direct partnership interest entirely.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the financial position
of ORBCOMM USA as of March 31, 1998, the results of its operations and cash
flows for the three-month periods ended March 31, 1998 and 1997, and the period
from June 30, 1993 (date of inception) through March 31, 1998. These condensed
financial statements are unaudited and do not include all related footnote
disclosures and, therefore, should be read in conjunction with the audited
financial statements and the footnotes thereto for the year ended December 31,
1997 filed with the Securities and Exchange Commission (the "Commission").
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results of operations expected in the future.
3. RELATED PARTY TRANSACTIONS
As of March 31, 1998, ORBCOMM USA had a payable of $10,352,000 to the
Company for amounts advanced to support ORBCOMM USA's efforts in establishing
commercial and government markets in the United States ($8,635,000 as of
December 31, 1997). ORBCOMM USA is currently in development stage and obtains
funds to support its operations through non-interest bearing advances from the
Company.
4. COMMITMENTS AND CONTINGENCIES
In August 1996, the Company and ORBCOMM Global Capital Corp. issued
$170,000,000 of Senior Notes due 2004 with Revenue Participation Interest (the
"Old Notes"). All of the Old Notes were exchanged for an equal principal amount
of registered 14% Series B Senior Notes due 2004 with Revenue Participation
Interest (the "Notes"). The Notes are fully and unconditionally guaranteed on a
joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International, except that the guarantees are non-recourse to the shareholders
and/or partners of the guarantors, limited only to the extent necessary for each
such guarantee not to constitute a fraudulent conveyance under applicable law.
10
<PAGE> 11
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. SUBSEQUENT EVENTS
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Commission for a proposed offering of shares of its common
stock (the "Offering"). On consummation of the Offering, ORBCOMM Corporation
will use the net proceeds of the Offering to purchase partnership units in the
Company and will be admitted as a general partner of the Company. In addition,
on consummation of the Offering, OCC and Teleglobe Mobile will contribute to the
Company their respective 2% partnership interests in ORBCOMM USA and ORBCOMM
International (together, the "Marketing Partnerships") and each of the Marketing
Partnerships will be dissolved.
The registration statement relating to the securities of ORBCOMM
Corporation referred to above has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time that the
registration statement becomes effective.
In addition, in connection with the Offering, the Company is seeking
from the registered holders of the Notes amendments to certain provisions of
the indenture governing the Notes. The purpose of the proposed amendments is to
permit the Offering and to facilitate other business objectives.
11
<PAGE> 12
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Inventory-gateway Earth stations $ 22,609 $ 19,580
-------- --------
TOTAL ASSETS $ 22,609 $ 19,580
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and other accrued liabilities $ 1,009 $ 1,200
Deferred revenue 17,646 13,270
-------- --------
Total Current Liabilities 18,655 14,470
Amount due to ORBCOMM Global, L.P. 9,319 9,990
-------- --------
Total Liabilities 27,974 24,460
Commitments and Contingencies
Partners' Capital:
Teleglobe Mobile Partners (107) (98)
ORBCOMM Global, L.P. (5,258) (4,782)
-------- --------
Total Partners' Capital (5,365) (4,880)
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 22,609 $ 19,580
======== ========
</TABLE>
(See accompanying notes to condensed financial statements)
12
<PAGE> 13
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
-------------------------- MARCH 31,
1998 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
REVENUES:
Product sales $ 105 $ 28 $ 169
EXPENSES:
Cost of product sales 89 22 199
Marketing expenses 501 599 5,345
--------- -------- ---------
Total expenses 590 621 5,544
--------- -------- ---------
NET LOSS $ (485) $ (593) $ (5,375)
========= ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
13
<PAGE> 14
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
--------------------------- MARCH 31,
1998 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (485) $ (593) $ (5,375)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Increase in inventory-gateway Earth stations (3,029) (3,000) (22,609)
Increase (decrease) in accounts payable
and other accrued liabilities (191) 1,083 1,009
Increase in deferred revenue 4,376 0 17,646
--------- -------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 671 (2,510) (9,329)
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in amount due from ORBCOMM Global, L.P. 0 1,309 0
--------- -------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 1,309 0
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in amount due to ORBCOMM Global, L.P. (671) 1,201 9,319
Partners' contributions 0 0 10
--------- -------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (671) 1,201 9,329
--------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 0 0 0
CASH AND CASH EQUIVALENTS:
Beginning of period 0 0 0
--------- -------- ---------
CASH AND CASH EQUIVALENTS:
End of period $ 0 $ 0 $ 0
========= ======== =========
</TABLE>
(See accompanying notes to condensed financial statements)
14
<PAGE> 15
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. (the "Company"),
a Delaware limited partnership. OCC and Teleglobe Mobile also formed
two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM
International Partners, L.P. ("ORBCOMM International"), to market services using
the ORBCOMM low-Earth orbit satellite-based communications system (the "ORBCOMM
System") in the United States and internationally, respectively. In 1995, the
Company became a 98% general partner in ORBCOMM USA, reducing OCC's direct
partnership interest to 2% and eliminating Teleglobe Mobile's direct partnership
interest entirely. Simultaneously, the Company became a 98% general partner in
ORBCOMM International, reducing Teleglobe Mobile's direct partnership interest
to 2% and eliminating OCC's direct partnership interest entirely.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the financial position
of ORBCOMM International as of March 31, 1998, the results of its operations and
cash flows for the three-month periods ended March 31, 1998 and 1997, and the
period from June 30, 1993 (date of inception) through March 31, 1998. These
condensed financial statements are unaudited and do not include all related
footnote disclosures and, therefore, should be read in conjunction with the
audited financial statements and the footnotes thereto for the year ended
December 31, 1997 filed with the Securities and Exchange Commission (the
"Commission"). Operating results for the three months ended March 31, 1998 are
not necessarily indicative of the results of operations expected in the future.
3. RELATED PARTY TRANSACTIONS
As of March 31, 1998, ORBCOMM International had a payable of $9,319,000
to the Company for amounts advanced to support ORBCOMM International's efforts
in establishing commercial markets outside the United States ($9,990,000 as of
December 31, 1997). ORBCOMM International is currently in development stage and
obtains funds to support its operations through non-interest bearing advances
from the Company.
4. COMMITMENTS AND CONTINGENCIES
Long-Term Debt
In August 1996, the Company and ORBCOMM Global Capital Corp. issued
$170,000,000 of Senior Notes due 2004 with Revenue Participation Interest (the
"Old Notes"). All of the Old Notes were exchanged for an equal principal amount
of registered 14% Series B Senior Notes due 2004 with Revenue Participation
Interest (the "Notes"). The Notes are fully and unconditionally guaranteed on a
joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International, except that the guarantees are non-recourse to the shareholders
and/or partners of the guarantors, limited only to the extent necessary for each
such guarantee not to constitute a fraudulent conveyance under applicable law.
15
<PAGE> 16
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Construction of Gateway Earth Stations
In October 1996, ORBCOMM International entered into agreements with
certain manufacturers for the construction of twenty gateway Earth stations
scheduled for delivery over the next two years, with the first installations
occurring during the first quarter of 1998. As of March 31, 1998, ORBCOMM
International had $22,609,000 of prepaid contract costs ($19,580,000 as of
December 31, 1997) of which $12,245,000 represent advance payments to those
manufacturers ($11,016,000 as of December 31, 1997). Total commitments under
these manufacturing agreements approximate $18,000,000. Included in inventory -
gateway Earth stations is a portion of the engineering direct labor costs that
are specifically related to the construction of gateway Earth stations. As of
March 31, 1998, $2,368,000 of such costs had been included in inventory -
gateway Earth stations ($1,609,000 as of December 31, 1997).
5. SERVICE LICENSE OR SIMILAR AGREEMENTS
ORBCOMM International has signed thirteen service license or similar
agreements ("SLAs") with international licensees, ten of which have associated
gateway procurement contracts and software license agreements. The SLAs
authorize the international licensees to use the ORBCOMM System to provide
two-way data and messaging communications services. As of March 31, 1998,
$17,646,000 had been received under these agreements and recorded as deferred
revenue ($13,270,000 as of December 31, 1997). ORBCOMM International is
obligated to ship ten gateway Earth stations under certain of these agreements
(see note 4).
6. SUBSEQUENT EVENTS
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Commission for a proposed offering of shares of its common
stock (the "Offering"). On consummation of the Offering, ORBCOMM Corporation
will use the net proceeds of the Offering to purchase partnership units in the
Company and will be admitted as a general partner of the Company. In addition,
on consummation of the Offering, OCC and Teleglobe Mobile will contribute to the
Company their respective 2% partnership interests in ORBCOMM USA and ORBCOMM
International (together, the "Marketing Partnerships") and each of the Marketing
Partnerships will be dissolved.
The registration statement relating to the securities of ORBCOMM
Corporation referred to above has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time that the
registration statement becomes effective.
In addition, in connection with the Offering, the Company is seeking
from the registered holders of the Notes amendments to certain provisions of
the indenture governing the Notes. The purpose of the proposed amendments is to
permit the Offering and to facilitate other business objectives.
16
<PAGE> 17
ORBITAL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 34 $ 34
Other assets 320 188
--------- ------------
Total Current Assets 354 222
Investments in affiliates, net 57,607 54,663
--------- ------------
TOTAL ASSETS $ 57,961 $ 54,885
========= ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities $ 1,127 $ 1,137
Due to affiliates 93,274 84,160
--------- ------------
Total Liabilities 94,401 85,297
Non-controlling interest in net assets of consolidated subsidiaries (5,300) (4,533)
Commitments and Contingencies
Stockholders' Deficit:
Common stock, par value $0.01;
8,000,000 shares authorized;
4,783,717 and 4,751,292 shares issued;
4,689,145 and 4,656,720 shares outstanding; 48 48
Additional paid-in capital 452 350
Treasury stock, at cost, 94,572 shares (730) (730)
Accumulated deficit (30,910) (25,547)
--------- ------------
Total Stockholders' Deficit (31,140) (25,879)
--------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 57,961 $ 54,885
========= ============
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
17
<PAGE> 18
ORBITAL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1998 1997
----------- ------------
<S> <C> <C>
REVENUES:
Product sales and service revenues $ 64 $ 58
EXPENSES:
Cost of product sales 66 72
Marketing, administrative and other expenses 1,573 682
----------- ------------
Total expenses (1,639) 754
----------- ------------
Loss from operations (1,575) (696)
OTHER INCOME AND EXPENSES:
Equity in losses of affiliates (4,556) (1,576)
Non-controlling interest in net losses of consolidated subsidiary 767 621
----------- ------------
NET LOSS $ (5,364) $ (1,651)
=========== ============
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
18
<PAGE> 19
ORBITAL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (5,364) $ (1,651)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
Equity in losses of affiliates 4,556 1,576
Non-controlling interest in net losses of consolidated subsidiary (767) (621)
Increase in other assets (132) (37)
Increase (decrease) in accounts payable and accrued liabilities (10) 75
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (1,717) (658)
---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Investments in affiliates (7,500) 0
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (7,500) 0
---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from sales of common stock to employees 103 76
Purchases of treasury stock, net of reimbursement from
ORBCOMM Global, L.P. 0 (581)
Net borrowings from affiliates 9,114 1,105
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,217 600
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS 0 (58)
CASH AND CASH EQUIVALENTS:
Beginning of period 34 142
---------- ----------
CASH AND CASH EQUIVALENTS:
End of period $ 34 $ 84
========== ==========
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
19
<PAGE> 20
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Orbital Communications Corporation ("OCC") is a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital") and is included in
Orbital's consolidated financial statements. In 1993, OCC and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. (the "Company"), a
Delaware limited partnership, and two marketing partnerships, ORBCOMM USA, L.P.
("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"). OCC and Teleglobe Mobile are each 50% general partners in
ORBCOMM, and ORBCOMM is a 98% general partner in each of the two marketing
partnerships. Additionally, OCC is a 2% direct general partner in ORBCOMM USA,
and Teleglobe Mobile is a 2% direct general partner in ORBCOMM International.
Directly and indirectly, OCC currently holds 51% and 49% of ORBCOMM USA and
ORBCOMM International, respectively. Consequently, OCC consolidates the
financial results of ORBCOMM USA.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of OCC as of March 31, 1998, the results of its operations and cash
flows for the three-month periods ended March 31, 1998 and 1997. These condensed
consolidated financial statements are unaudited and do not include all related
footnote disclosures and, therefore, should be read in conjunction with the
audited consolidated financial statements and the footnotes thereto for the year
ended December 31, 1997 filed with the Securities and Exchange Commission (the
"Commission"). Operating results for the three months ended March 31, 1998 are
not necessarily indicative of the results of operations expected in the future.
3. RELATED PARTY TRANSACTIONS
OCC obtains virtually all of its funding for its operations and for its
capital investments in the Company from Orbital via a non-interest bearing
intercompany borrowing agreement. As of March 31 1998 and December 31, 1997, OCC
owed Orbital $82,910,000 and $75,513,000, respectively, none of which is
currently payable.
ORBCOMM USA currently obtains all of its funding from the Company via
a non-interest bearing intercompany borrowing agreement. As of March 31, 1998
and December 31, 1997, ORBCOMM USA owed the Company $10,352,000 and $8,635,000,
respectively, none of which is currently payable.
4. COMMITMENTS AND CONTINGENCIES
On August 7, 1996, the Company and ORBCOMM Global Capital Corp. issued
$170,000,000 senior unsecured notes due in 2004 (the "Notes") to institutional
investors. The Notes bear interest at a fixed rate of 14% and provide for
noteholder participation in future service revenues of the Commpany. The Notes
are fully and unconditionally guaranteed on a joint and several basis by OCC,
Teleglobe Mobile, ORBCOMM USA and ORBCOMM International. The guarantees are
non-recourse to OCC's shareholders (including Orbital) and Teleglobe Mobile's
partners (including Teleglobe and Technology Resources Industries Bhd.), limited
only to the extent necessary for each such guarantee not to constitute a
fraudulent conveyance under applicable law.
20
<PAGE> 21
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. SUBSEQUENT EVENTS
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Commission for a proposed offering of shares of its common
stock (the "Offering"). On consummation of the Offering, ORBCOMM Corporation
will use the net proceeds of the Offering to purchase partnership units in the
Company and will be admitted as a general partner of the Company. In addition,
on consummation of the Offering, OCC and Teleglobe Mobile will contribute to
the Company their respective 2% partnership interests in ORBCOMM USA and
ORBCOMM International (together, the "Marketing Partnerships") and each of the
Marketing Partnerships will be dissolved.
The registration statement relating to the securities of ORBCOMM
Corporation referred to above has not yet become effective. These securities
may not be sold nor may offers to buy be accepted prior to the time that the
registration statement becomes effective.
In addition, in connection with the Offering, the Company is seeking
from the registered holders of the Notes amendments to certain provisions of
the indenture governing the Notes. The purpose of the proposed amendments is to
permit the Offering and to facilitate other business objectives.
21
<PAGE> 22
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,119 $ 1,439
Accounts receivable 42 40
Inventory-gateway Earth stations 22,609 19,580
-------- --------
Total Current Assets 23,770 21,059
Investments in affiliates 64,443 59,645
-------- --------
TOTAL ASSETS $ 88,213 $ 80,704
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and other accrued liabilities $ 1,067 $ 1,565
Deferred revenue 17,646 13,270
-------- --------
Total Current Liabilities 18,713 14,835
Amount due to ORBCOMM Global, L.P. 9,319 9,990
-------- --------
Total Liabilities 28,032 24,825
Non-controlling interest in net assets
of ORBCOMM International Partners, L.P. (2,629) (2,391)
Commitments and Contingencies
Partners' Capital:
Teleglobe Mobile, L.P. 43,527 40,381
TR (U.S.A.) Ltd. 18,843 17,481
Teleglobe Mobile Investment Inc. 440 408
-------- --------
Total Partners' Capital 62,810 58,270
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 88,213 $ 80,704
======== ========
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
22
<PAGE> 23
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
------------------------------ MARCH 31,
1998 1997 1998
------------- ------------- --------------
<S> <C> <C> <C>
REVENUES:
Product sales $ 105 $ 28 $ 169
EXPENSES:
Cost of product sales 89 22 199
Marketing, administrative and other
expenses 532 624 7,745
------------- ------------- --------------
Total expenses 621 646 7,944
------------- ------------- --------------
Loss from operations (516) (618) (7,775)
OTHER INCOME AND EXPENSES:
Interest income (expense), net 20 19 1,968
Equity in losses of ORBCOMM Global, L.P. (5,202) (2,078) (29,068)
Non-controlling interest in losses
of ORBCOMM International Partners, L.P. 238 291 2,634
------------- ------------- --------------
NET LOSS $ (5,460) $ (2,386) $ (32,241)
============= ============= ==============
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
23
<PAGE> 24
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
CASH FLOWS
DURING
DEVELOPMENT
THREE MONTHS ENDED STAGE
MARCH 31, THROUGH
------------------------------ MARCH 31,
1998 1997 1998
------------ ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (5,460) $ (2,386) $ (32,241)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Equity in losses of ORBCOMM Global, L.P. 5,202 2,078 29,068
Non-controlling interest in losses of
ORBCOMM International Partners, L.P. (238) (291) (2,634)
Increase in accounts receivable (2) (2) (42)
Increase in inventory-gateway Earth stations (3,029) (3,000) (22,609)
Increase (decrease) in accounts payable
and accrued liabilities (498) 951 1,067
Increase in deferred revenue 4,376 0 17,646
------------ ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 351 (2,650) (9,745)
------------ ---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Investments in affiliates (10,000) 0 (94,525)
Decrease in amount due from ORBCOMM Global, L.P. 0 1,309 0
------------ ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (10,000) 1,309 (94,525)
------------ ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase (decrease) in amount due to ORBCOMM Global, L.P. (671) 1,201 9,319
Partners' contributions 10,000 0 96,065
Non-controlling interest in net assets
of ORBCOMM International Partners, L.P. 0 0 5
------------ ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,329 1,201 105,389
------------ ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (320) (140) 1,119
CASH AND CASH EQUIVALENTS:
Beginning of period 1,439 1,618 0
------------ ----------- ---------
CASH AND CASH EQUIVALENTS:
End of period $ 1,119 $ 1,478 $ 1,119
============ =========== =========
</TABLE>
(See accompanying notes to condensed consolidated financial statements)
24
<PAGE> 25
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Teleglobe Mobile Partners, a Delaware general partnership (the
"Partnership"), was formed in 1993 for purposes of acting as a general and a
limited partner in ORBCOMM Global, L.P. (the "Company"), a Delaware limited
partnership providing data and messaging communications services using a
low-Earth orbit satellite-based communications system (the "ORBCOMM System").
The Partnership holds a 50% participation percentage ("Participation
Percentage") in the Company, which in turn holds a 98% Participation Percentage
in each of ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International
Partners, L.P. ("ORBCOMM International"), two other partnerships formed to
market the ORBCOMM System. The Partnership also holds directly a 2%
Participation Percentage in ORBCOMM International, bringing its direct and
indirect Participation Percentage in ORBCOMM International to 51%. Consequently
the Partnership consolidates the financial results of ORBCOMM International.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of the Partnership as of March 31, 1998, the results of its operations
and cash flows for the three-month periods ended March 31, 1998 and 1997, and
the period from July 21, 1993 (date of inception) through March 31, 1998. These
condensed consolidated financial statements are unaudited and do not include all
related footnote disclosures and, therefore, should be read in conjunction with
the audited consolidated financial statements and the footnotes thereto for the
year ended December 31, 1997 filed with the Securities and Exchange Commission
(the "Commission"). Operating results for the three months ended March 31, 1998
are not necessarily indicative of the results of operations expected in the
future.
3. RELATED PARTY TRANSACTIONS
As of March 31, 1998, ORBCOMM International had a payable of $9,319,000
to the Company for amounts advanced to support ORBCOMM International's efforts
in establishing commercial markets outside the United States ($9,990,000 as of
December 31, 1997). ORBCOMM International is currently in development stage and
obtains funds to support its operations through non-interest bearing advances
from the Company.
4. COMMITMENTS AND CONTINGENCIES
Long-Term Debt
In August 1996, the Company and ORBCOMM Global Capital Corp. issued
$170,000,000 of Senior Notes due 2004 with Revenue Participation Interest (the
"Old Notes"). All of the Old Notes were exchanged for an equal principal amount
of registered 14% Series B Senior Notes due 2004 with Revenue Participation
Interest (the "Notes"). The Notes are fully and unconditionally guaranteed on a
joint and several basis by the Partnership, Orbital Communications Corporation
("OCC"), ORBCOMM USA and ORBCOMM International, except that the
25
<PAGE> 26
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
guarantees are non-recourse to the shareholders and/or partners of the
guarantors, limited only to the extent necessary for each such guarantee not to
constitute a fraudulent conveyance under applicable law.
Construction of Gateway Earth Stations
In October 1996, ORBCOMM International entered into agreements with
certain manufacturers for the construction of twenty gateway Earth stations
scheduled for delivery over the next two years, with the first installations
occuring during the first quarter of 1998. As of March 31, 1998, ORBCOMM
International had $22,481,000 of prepaid contract costs ($19,580,000 as of
December 31, 1997) of which $12,245,000 represent advance payments to those
manufacturers ($11,016,000 as of December 31, 1997). Total commitments under
these manufacturing agreements approximate $18,000,000. Included in inventory -
gateway Earth stations is a portion of the engineering direct labor costs that
are specifically related to the construction of gateway Earth stations. As of
March 31, 1998, $2,368,000 of such costs had been included in inventory -
gateway Earth stations ($1,609,000 as of December 31, 1997).
5. SERVICE LICENSE OR SIMILAR AGREEMENTS
ORBCOMM International has signed thirteen service license or similar
agreements ("SLAs") with international licensees, ten of which have associated
gateway procurement contracts and software license agreements. The SLAs
authorize the international licensees to use the ORBCOMM System to provide
two-way data and messaging communications services. As of March 31, 1998,
$17,646,000 had been received under these agreements and recorded as deferred
revenue ($13,270,000 as of December 31, 1997). ORBCOMM International is
obligated to ship ten gateway Earth stations under certain of these agreements
(see note 4).
6. SUBSEQUENT EVENTS
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Commission for a proposed offering of shares of its common
stock (the "Offering"). On consummation of the Offering, ORBCOMM Corporation
will use the net proceeds of the Offering to purchase partnership units in the
Company and will be admitted as a general partner of the Company. In addition,
on consummation of the Offering, OCC and the Partnership will contribute to the
Company their respective 2% partnership interests in ORBCOMM USA and ORBCOMM
International (together, the "Marketing Partnerships") and each of the
Marketing Partnerships will be dissolved. On dissolution of the Marketing
Partnerships, the Partnership will account for the Company using the equity
method of accounting.
The registration statement relating to the securities of ORBCOMM
Corporation referred to above has not yet become effective. These securities may
not be sold nor may offers to buy be accepted prior to the time that the
registration statement becomes effective.
In addition, in connection with the Offering, the Company is seeking
from the registered holders of the Notes amendments to certain provisions of
the indenture governing the Notes. The purpose of the proposed amendments is to
permit the Offering and to facilitate other business objectives.
26
<PAGE> 27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In 1993, ORBCOMM Global, L.P. ("ORBCOMM" or the "Company") was formed
by Orbital Sciences Corporation ("Orbital"), acting through Orbital
Communications Corporation ("OCC"), and Teleglobe Inc. ("Teleglobe"), acting
through Teleglobe Mobile Partners ("Teleglobe Mobile"). Each of OCC and
Teleglobe Mobile acquired and currently owns a 50% partnership interest in the
Company, with Technology Resources Industries Bhd. ("TRI"), through TR (U.S.A.)
Ltd., now holding a 30% interest in Teleglobe Mobile. Concurrently with the
formation of the Company, OCC and Teleglobe Mobile formed two partnerships,
ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International Partners, L.P.
("ORBCOMM International" and, together with ORBCOMM USA, the "Marketing
Partnerships"), to market services using the Company's low-Earth orbit
satellite-based data and messaging communications system (the "ORBCOMM System")
in the United States and internationally, respectively. The Company is a 98%
general partner in each of the Marketing Partnerships, while OCC and Teleglobe
Mobile control the remaining 2% of ORBCOMM USA and ORBCOMM International,
respectively. OCC retains control over the licenses granted to it by the
Federal Communications Commission (the "FCC") for the ORBCOMM System (the "FCC
Licenses") and the ORBCOMM System, consistent with FCC regulations.
As of March 31, 1998, Orbital, through OCC, and Teleglobe and TRI,
through Teleglobe Mobile, had invested in the aggregate approximately $180
million in ORBCOMM. In addition, on August 7, 1996, the Company and ORBCOMM
Global Capital Corp. completed a private placement (the "Old Notes Offering")
of $170.0 million 14% Senior Notes due 2004 with Revenue Participation Interest
(the "Old Notes"). In January 1997, all of the Old Notes were exchanged for
notes that are substantially similar to the Old Notes, except that the new
notes (the "Notes") are registered under the Securities Act of 1933, as
amended. The Notes are fully and unconditionally guaranteed on a joint and
several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM International,
except that the guarantees are non-recourse to the shareholders and/or partners
of the guarantors, limited only to the extent necessary for each such guarantee
not to constitute a fraudulent conveyance under applicable law.
The Company provides two-way data and messaging communications
services through the ORBCOMM System. The Company's current primary target
markets include: (i) fixed asset monitoring services for electric utility
meters, oil and gas storage tanks, wells and pipelines and environmental
projects; (ii) mobile asset tracking services for commercial vehicles,
trailers, containers, rail cars, heavy equipment, fishing vessels, barges and
government assets; and (iii) messaging services for consumers and commercial
and government entities. Future target markets are expected to include: (i)
tracking, messaging and security services for automobiles; (ii) monitoring
applications for home security systems; and (iii) additional U.S. and foreign
government applications. The Company has entered into agreements with over 40
value-added resellers ("VARs"), each of which is authorized to market and
distribute ORBCOMM services within specific regions and to targeted industries
or markets. The Company also has established two internal VARs ("Internal
VARs") to market and distribute monitoring and tracking services to the oil and
gas and transportation industries. In addition, the Company has entered into
service license or similar agreements ("SLAs") with 13 international service
licensees ("International Licensees") that are expected to market and
distribute ORBCOMM services in over 95 countries following completion of the
necessary ground infrastructure and receipt of the necessary regulatory and
other approvals in their respective regions. The Company has also entered into
agreements with six subscriber unit manufacturers, Kyushu Matsushita Electric
Company, Ltd., Scientific-Atlanta, Inc., Magellan Corporation ("Magellan"),
Stellar Electronics Ltd., Torrey Science Corporation and Communications
Technology Inc., and has type approved ten subscriber unit models for
commercial use with the ORBCOMM System. Four subscriber unit manufacturers
have commenced production of subscriber units that can be used for electric
utility meter, oil and gas storage tank, well and pipeline and environmental
monitoring and commercial vehicle, trailer, container, rail car, heavy
equipment, fishing vessel and government asset tracking applications.
27
<PAGE> 28
ORGANIZATIONAL STRUCTURE; FINANCIAL REPORTING
Pursuant to the terms of the partnership agreements for the Company
and the Marketing Partnerships: (i) OCC and Teleglobe Mobile share equal
responsibility for the operational and financial affairs of the Company; (ii)
OCC controls the operational and financial affairs of ORBCOMM USA; and (iii)
Teleglobe Mobile controls the operational and financial affairs of ORBCOMM
International. Since OCC and Teleglobe Mobile have effective control over
ORBCOMM USA and ORBCOMM International, respectively, the Company accounts for
the Marketing Partnerships using the equity method of accounting. The Company
does not consolidate, and therefore does not report in its financial
statements, ORBCOMM USA's and ORBCOMM International's assets, liabilities and
operating revenues and expenses. Instead, the Company's proportionate share of
the net income and losses of the Marketing Partnerships is recorded under the
caption "Equity in losses of affiliates" in the Company's financial statements.
Correspondingly, the Company's investment in the Marketing Partnerships is
carried at cost, subsequently adjusted for the proportionate share of net
income and losses, additional capital contributions and distributions under the
caption "Investments in and advances to affiliates." Investors are encouraged
to refer to the financial statements of both ORBCOMM USA and ORBCOMM
International included elsewhere in this report.
ORBCOMM USA pays to OCC an output capacity charge (the "Output
Capacity Charge") that is a quarterly fee equal to 23% of ORBCOMM USA's total
service revenues for such calendar quarter in exchange for the exclusive right
to market, sell, lease and franchise all ORBCOMM System output capacity in the
United States and exclusive use of the tangible assets (including software)
located in the United States to be delivered to the Company pursuant to certain
procurement agreements (the "System Assets"). In consideration of the
construction and financing of the System Assets by the Company, OCC, in turn,
pays to the Company a system charge that is a quarterly fee equal to the Output
Capacity Charge less 1.15% of total aggregate revenues, defined as the
aggregate of ORBCOMM USA's and ORBCOMM International's total system service
revenues ("Total Aggregate Revenues"). If the Output Capacity Charge as
described above is less than 1.15% of Total Aggregate Revenues, then OCC is not
required to pay any portion of the system charge to the Company.
ORBCOMM International pays to Teleglobe Mobile an international output
capacity charge (the "International Output Capacity Charge") that is a
quarterly fee equal to 23% of ORBCOMM International's total service revenues
for such calendar quarter in exchange for the exclusive right to market, sell,
lease and franchise all ORBCOMM System output capacity outside the United
States. In consideration of the grant by the Company to Teleglobe Mobile of
the exclusive right to market, sell, lease and franchise all ORBCOMM System
output capacity outside the United States, Teleglobe Mobile, in turn, pays to
the Company a system charge that is a quarterly fee equal to the International
Output Capacity Charge less 1.15% of Total Aggregate Revenues. If the
International Output Capacity Charge as described above is less than 1.15% of
Total Aggregate Revenues, Teleglobe Mobile is not required to pay any portion
of the system charge to the Company.
SERVICE ROLL-OUT
The Company believes that it will provide a reliable, cost-effective
method of providing fixed asset monitoring, mobile asset tracking and messaging
services to a broad range of customers around the world, enabling such
customers to collect data from multiple locations, track assets on a global
basis and transmit and receive short text messages outside the coverage area of
other systems. The Company has launched 12 satellites to date and expects to
launch 16 additional satellites by mid-1998, which will complete its planned
28-satellite constellation. An additional eight satellites that will create a
planned 36-satellite enhanced constellation with increased capacity and
improved service in equatorial regions are expected to be launched in the third
quarter of 1999.
Since early 1996, the Company has been providing limited commercial
services in the United States through two satellites. The Company has begun to
place in commercial service satellites that were launched in late 1997 and
early 1998 and, as a result, the Company expects to offer commercial service on
a broader basis in the near future. The Company expects to significantly
expand its commercial services later in 1998 in the United States and other
temperate regions, when 16 additional satellites are expected to be placed in
commercial service. Service outside the United States will be expanded as the
necessary ground infrastructure is completed and the necessary regulatory
approvals are received. Enhanced service in equatorial regions is expected to
be available by the fall of
28
<PAGE> 29
1999, when the final eight satellites of the planned 36-satellite enhanced
constellation are scheduled to be placed in commercial service.
The U.S. ground segment, including the network control center and four
gateway Earth stations (the "U.S. Ground Segment"), is operational. In March
1998, a gateway located in Italy successfully completed acceptance testing. In
each of South Korea and Japan, a gateway is under construction and is expected
to be completed by mid-1998. During 1998, the Company expects that certain of
its International Licensees will be able to offer ORBCOMM services in portions
of Europe, Japan, Brazil, South Korea and Morocco, subject to completion of the
necessary ground infrastructure and receipt of the necessary regulatory and
other approvals.
REVENUES
Domestically, the Company generates revenues from the direct sale of
satellite capacity to the VARs, which sales to date have been primarily for
resale to beta test customers. The pricing of satellite capacity is based on
many variables, including the availability and cost of substitute services, the
cost of providing service and the nature of the customer application. Pricing
generally is based on a wholesale pricing structure that incorporates an
initial activation charge, a recurring monthly charge for access to the ORBCOMM
System and charges based on the customer's usage.
The Company expects that beginning in 1998 it will also generate
revenues from the sale of data and messaging communications services and
applications developed and distributed by the Internal VARs. The pricing of
services provided by the Internal VARs will be based on a pricing structure
similar to the VAR pricing structure except that the Internal VAR pricing
structure will generate additional revenues from value-added software, hardware
and services provided to the customer.
The Company has on occasion purchased and recently entered into
agreements, and may enter into additional agreements in the future, to purchase
subscriber units for resale. In the past, the Company has not generated
substantial revenues from the sale of subscriber units. The Company recently
committed to purchase $6.2 million of subscriber units from certain
manufacturers to accelerate initial customer sales by the VARs and
International Licensees. The Company expects to sell these subscriber units at
prices equal to or greater than cost, although there can be no assurance that
the Company will be able to do so.
Internationally, the Company generates revenues through license fees
paid by, and through the sale of gateways to, International Licensees. In
addition, all International Licensees will pay a monthly satellite usage fee
based on the greater of a percentage of gross operating revenues and a data
throughput fee. International Licensees' gross operating revenues are based on
a wholesale pricing structure similar to the prices charged to the VARs, which
include an activation charge, a recurring monthly access charge and a usage
charge. On execution of an SLA, an International Licensee purchases a gateway
or gateway components from the Company pursuant to a gateway procurement
contract or arranges to share a gateway with an International Licensee that is
in close proximity. Cash received under the gateway procurement contracts is
accounted for as deferred revenues and generally recognized when the gateway
has successfully completed acceptance testing. Distribution fees and license
fees from SLAs are generally accounted for as deferred revenues and recognized
over the term of the agreements or when the Company's obligations under the
agreements are substantially complete.
OPERATING EXPENSES
The Company owns and operates the assets that comprise the ORBCOMM
System other than the FCC Licenses (which are held by OCC, with certain
contractual rights relating thereto granted to the Company). Satellite-based
communications systems are characterized by high initial capital expenditures
and relatively low marginal costs for providing service. The Company has been
depreciating certain of its assets beginning in 1996, when commercial operation
of the ORBCOMM System began. Cost of products sold consists of the sale of
subscriber units. The Company recently agreed to pay to Magellan a subsidy for
each Magellan subscriber unit sold, through March 1999, up to an aggregate of
$2.4 million. Additionally, the Company incurs engineering expenses related to
the development and operation of the ORBCOMM System and marketing,
administrative and other expenses related to the operation of the ORBCOMM
System. The Company also has incurred nominal expenses related to the
29
<PAGE> 30
development of the Internal VARs, which are included in marketing expenses.
The Company anticipates that its expenses related to the continued development
and operation of the Internal VARs (including the development of applications
for customers) will increase substantially as the Company expands the marketing
and distribution efforts of the Internal VARs.
RESULTS OF OPERATIONS -- ORBCOMM
The Company commenced limited commercial service in the United States
in February 1996 and has generated nominal revenues and substantial negative
cash flows to date. The Company's activities have focused primarily on the
acquisition of U.S. regulatory approvals for the operation of the ORBCOMM
System, the design, construction and launch of satellites, the design and
construction of associated ground network and operating systems (including
associated software), the development of subscriber unit manufacturing sources,
the negotiation of agreements with VARs and International Licensees, the
development of Internal VARs, the development of customer software and hardware
applications, preliminary marketing and sales activities associated with the
Company's limited commercial operations to date and the hiring of key
personnel.
Income. In 1995, the Company received a nonrefundable distribution
fee from a potential International Licensee. The Company recognized this
nonrefundable distribution fee over the term of the relevant agreement. No
such fees were received in earlier periods or during the three-months
ended March 31, 1998 and 1997, respectively.
In late 1994, the Company borrowed $5.0 million, at an interest rate
of 9.2% per annum, from MetLife Capital Corporation ("MetLife") pursuant to a
Loan and Security Agreement dated December 22, 1994 between MetLife and the
Company (the "MetLife Note") to help finance a portion of the ORBCOMM System.
In addition, in August 1996, the Company closed the Old Notes Offering. The
proceeds from the sale of the Old Notes are invested primarily in short-term
government securities, with certain restrictions attached to all of the
investment portfolio. A portion of the net proceeds of the Old Notes
Offering, sufficient to pay when due all remaining interest and principal
payments on the MetLife Note, was deposited into a segregated account. In
January 1997, all of the Old Notes were exchanged for the Notes. The Company
recognized interest income (excluding interest expenses of $210,000 and
$206,000) on the invested portion of the MetLife Note and the proceeds of the
Old Notes Offering of $428,000 and $2.2 million for the three months ended
March 31, 1998 and 1997, respectively.
Expenses. As discussed above, the Company is in development stage and
does not anticipate emerging from development stage until the fall of 1998.
During the construction phase of the ORBCOMM System, the Company has
capitalized all construction costs, consisting primarily of satellites, launch
vehicles and the U.S. Ground Segment acquired from Orbital. Research and
development expenses and selling, general and administrative costs have been
expensed in the period incurred. Interest expense, where appropriate, related
to the MetLife Note, the Old Notes and the Notes has been capitalized as part
of the historical cost of the ORBCOMM System.
The Company incurred $4.3 million and $1.3 million of marketing,
administrative and other expenses for the three months ended March 31, 1998 and
1997, respectively. The Company incurred $2.7 million and $1.6 million of
ORBCOMM System engineering expenses for the three months ended March 31, 1998
and 1997, respectively. The Company is capitalizing the portion of engineering
direct labor costs that relates to hardware and system design development and
coding of the software products that enhance the operation of the ORBCOMM
System. The Company also incurred $1.9 million and $1.7 million in ORBCOMM
System depreciation expense for the three months ended March 31, 1998 and 1997,
respectively, as the ORBCOMM System became available for commercial service in
early 1996.
Equity in Losses of Affiliates. The Company recognized its share of
ORBCOMM USA's and ORBCOMM International's losses, consisting primarily of
marketing expenses, of $2.0 million and $1.8 million for the three months ended
March 31, 1998 and 1997, respectively. Each of ORBCOMM USA and ORBCOMM
International formally began their marketing efforts in 1995 in anticipation of
commercial service beginning in 1996.
30
<PAGE> 31
RESULTS OF OPERATIONS -- ORBCOMM USA
Income. During the first three months of 1998 and 1997, ORBCOMM USA
recognized revenues relating to the provision of products and services of
$64,000 and $58,000, respectively. The cost of product sales associated with
revenues was $66,000 and $72,000, respectively.
Expenses. ORBCOMM USA incurred $1.6 million and $1.3 million of
marketing expenses for the three months ended March 31, 1998 and 1997,
respectively.
RESULTS OF OPERATIONS -- ORBCOMM INTERNATIONAL
Expenses. ORBCOMM International incurred $501,000 and $599,000 of
marketing expenses for the three months ended March 31, 1998 and 1997,
respectively.
Service License or Similar Agreements. ORBCOMM International has
signed 13 SLAs with International Licensees, ten of which have associated
gateway procurement contracts and software license agreements. The SLAs
authorize the International Licensees to use the ORBCOMM System to provide
two-way data and messaging communications services outside the United States.
As of March 31, 1998 and 1997, $17.6 million and $6.1 million, respectively,
had been received under these agreements and the associated gateway procurement
agreements and recorded as deferred revenue. ORBCOMM International is
obligated to ship ten gateways to certain International Licensees under certain
of these agreements.
SUPPLEMENTAL DATA
Set forth below is certain supplemental data for the ORBCOMM System
comprising data of the Company, ORBCOMM USA and ORBCOMM International for the
three months ended March 31, 1998. Such supplemental data should be read in
conjunction with the financial statements of the Company, ORBCOMM USA and
ORBCOMM International and the notes thereto located elsewhere in this report.
.
SUPPLEMENTAL DATA
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ORBCOMM ORBCOMM ELIMINATION
ORBCOMM USA INTERNATIONAL ENTRIES TOTAL
------- ------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Total revenue(1) $ 220 $ 64 $ 105 $ (84) $ 305
Interest income (expense), net 218 (2) 0 0 218
Expenses 9,076 (3) 1,629 590 84 11,211
Earnings (loss) before interest and
taxes (8,856) (4) (1,565) (485) (10,906)
Net income (loss) (8,638) (4) (1,565) (485) (10,688)
Capital expenditures 19,440 (5) 0 0 19,440
</TABLE>
31
<PAGE> 32
SUPPLEMENTAL DATA
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
ORBCOMM ORBCOMM
ORBCOMM USA INTERNATIONAL TOTAL
--------- ------- ------------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 19,255 $ 0 $ 0 $ 19,255
ORBCOMM System, net 280,916 0 0 280,916
Total debt 172,015 0 0 172,015
Subscriber units (6) 0 686 412 1,098
</TABLE>
- ---------------------------------
(1) As development-stage companies, none of the Company, ORBCOMM USA and
ORBCOMM International had any significant operating revenues for the
three months ended March 31, 1998.
(2) Net of $210,000 of amortization of deferred financing fees.
(3) Includes depreciation expense of $1.9 million. Interest expense of
$6.0 million was capitalized for the three months ended March 31,
1998.
(4) Excludes equity in losses of affiliates of $2.0 million.
(5) Represents capital expenditures, principally for the construction of
the space and ground network system elements.
(6) Represents units that either generate revenues or are used in beta
testing. These units do not include units that are used for
demonstration purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a development stage enterprise and has incurred
cumulative net losses from inception. The Company has financed its operations
to date primarily with capital contributions from its current partners and
through financing activities. For the three months ended March 31, 1998, net
cash used in operating activities was $6.1 million primarily as a result of a
net loss, excluding non-cash charges for depreciation, amortization and equity
in losses of affiliates, of $6.5 million and a decrease in accounts payable and
accrued liabilities of $7.8 million. This was offset by an increase in
accounts payable to Orbital of $8.4 million.
Cash flows used in investing activities for the three months ended
March 31, 1998 were $10.5 million primarily as a result of additional capital
expenditures, advances to affiliates and purchases and sales of securities.
For the three months ended March 31, 1998, the Company invested $19.4 million,
including $6.0 million of capitalized interest, for satellite constellation
design, construction and launch services and design and construction of the
U.S. Ground Segment. In addition, the Company advanced an additional $1.0
million, net of cash receipts for international operations, to ORBCOMM USA and
ORBCOMM International to support their marketing activities. This use of cash
was partially offset by $10.0 million of net proceeds from the sale of
securities.
Cash flows provided by financing activities for the three months ended
March 31, 1998 were $19.7 million. This amount principally reflects additional
capital contributions of the Company's current partners of $20.0 million.
Expected future uses of cash include continued hiring of employees,
capital expenditures related to the completion of the satellite constellation,
debt servicing and working capital requirements. In addition, the Company
intends to continue to increase marketing and product development expenditures
in anticipation of expanded commercial operations. The total cost of the
36-satellite enhanced constellation is expected to be approximately $332.0
million through the third quarter of 1999. Of this amount, $244.0 million is
for the design, development and construction of the satellite constellation and
launch services, $39.0 million is for the design and construction of the U.S.
Ground Segment, $17.0 million is for insurance and approximately $32.0 million
is for other system costs such as engineering and billing system costs. As of
March 31, 1998, $255.9 million had been expended for the ORBCOMM System,
excluding a total of $40.5 million of interest expenses that have been
capitalized. The foregoing information reflects the Company's current estimate
of its funding requirements for the ORBCOMM System through the third quarter of
1999. Actual amounts may vary from such estimates for a variety of reasons,
including delays or launch or satellite failures.
The Company expects to continue to generate negative cash flows
through all of 1998 and at least a portion of 1999. The Company expects that a
portion of its cash requirements will be met through cash expected to be
generated from operations. The Company's ability to generate significant
revenues is subject to numerous uncertainties. In 1998, the Company expects to
receive additional cash payments related to certain milestones under agreements
with International Licensees. The Company's service and equipment contracts
are U.S. dollar-based and do not generate foreign currency risk. The Company
believes that the capital contributions of the Company's current
32
<PAGE> 33
partners and the net proceeds of the Old Notes Offering and the MetLife Note
will be sufficient to fund the Company's anticipated net cash loss from
operations and capital expenditures through mid-1998. During the first quarter
of 1998, OCC and Teleglobe Mobile provided the Company with an additional $20.0
million in capital contributions and, during the second quarter of 1998, OCC
and Teleglobe Mobile are expected to provide the Company with an additional
$10.0 million in capital contributions. In addition, Orbital has deferred and
has indicated that it will continue to defer invoicing of certain amounts
otherwise due under the ORBCOMM System Procurement Agreement until consummation
of the Offering (as defined below).
The Company expects to require additional capital in 1998 and may seek
to raise such additional capital through additional contributions or loans from
its current partners, other equity or debt financings or operating lease
arrangements or the Company may seek to enter into strategic arrangements.
On April 21, 1998, ORBCOMM Corporation, a Delaware corporation and
currently a wholly owned subsidiary of the Company, filed a registration
statement with the Securities and Exchange Commission for a proposed offering
of shares of its common stock (the "Offering"). On consummation of the
Offering, ORBCOMM Corporation will use the net proceeds of the Offering to
purchase partnership units in the Company and will be admitted as a general
partner of the Company. Should the Offering be consummated, the Company
believes that the net proceeds of the Offering, the capital contributions of
its current partners and the net proceeds of the Old Notes Offering and the
Metlife Note will be sufficient to fund the Company's anticipated net cash loss
from operations and capital expenditures though the third quarter of 1999.
There can be no assurance, however, that the Offering will be
consummated or that other equity or debt financing or operating lease
arrangements will be available and, if so, that they will be available on terms
acceptable to the Company or that strategic arrangements will be possible and,
if so, that they will be possible on terms acceptable to the Company.
The Company has made a preliminary assessment of potential "Year 2000"
issues with respect to various computer-related systems. The Company has
developed an initial corrective action plan that includes reprogramming
impacted software when appropriate and feasible, obtaining vendor-provided
software upgrades when available and completely replacing impacted systems when
necessary. The Company currently expects that identified "Year 2000" impacted
systems will be corrected by the end of 1998, although there can be no
assurance that the Company has identified all "Year 2000" impacted systems or
that its corrective action plan will be timely and successful. The Company
believes that the costs to correct its systems will not materially affect its
financial condition or results of operations. In addition, the Company has not
received any indication to date that the impact of "Year 2000" issues on its
customers and suppliers will have a material adverse effect on the Company.
The Company is a development stage enterprise. Many statements in
this report are not historical and are forward-looking in nature. Examples of
such forward-looking statements include statements concerning the Company's
operations, prospects, markets, technical capabilities, funding needs,
financing sources, pricing, launch and commercial service schedules and cash
flows, as well as information concerning future regulatory approvals and
expected actions of third parties such as equipment suppliers, International
Licensees and VARs. These forward-looking statements are inherently predictive
and speculative and no assurance can be given that any of such statements will
prove to be correct. Actual results and developments may be materially
different from those expressed or implied by such statements.
33
<PAGE> 34
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) A complete list of the exhibits required to be filed with
this Report on Form 10-Q is provided in the Exhibit Index
that precedes the exhibits filed with this report.
(b) Neither the Company nor Capital has previously been
required to file a Report on Form 8-K under the Act.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
ORBCOMM GLOBAL, L.P.
Date: May 14, 1998 By: /s/ SCOTT L. WEBSTER
----------------------------------
Scott L. Webster
Chairman and
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1998 By: /s/ W. BARTLETT SNELL
----------------------------------
W. Bartlett Snell
Senior Vice President, Finance and
Administration and
Chief Financial Officer
(Principal Financial Officer)
ORBCOMM GLOBAL CAPITAL CORP.
Date: May 14, 1998 By: /s/ SCOTT L. WEBSTER
----------------------------------
Scott L. Webster
President
(Principal Executive Officer)
Date: May 14, 1998 By: /s/ W. BARTLETT SNELL
----------------------------------
W. Bartlett Snell
Vice President and Treasurer
(Principal Financial Officer)
35
<PAGE> 36
EXHIBIT INDEX
The following exhibits are filed as part of this report.
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule (such schedule is
furnished for the information of the Securities
and Exchange Commission and is not to be deemed
"filed" as part of the Form 10-Q, or otherwise
subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934.) (Transmitted
herewith.)
36
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 19,255
<SECURITIES> 12,780
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0
<INVENTORY> 4,269<F2>
<CURRENT-ASSETS> 36,304
<PP&E> 282,819
<DEPRECIATION> 1,903
<TOTAL-ASSETS> 326,684
<CURRENT-LIABILITIES> 39,992
<BONDS> 172,015
0
0
<COMMON> 0
<OTHER-SE> 115,772<F3>
<TOTAL-LIABILITY-AND-EQUITY> 326,684
<SALES> 215
<TOTAL-REVENUES> 220
<CGS> 215
<TOTAL-COSTS> 9,076
<OTHER-EXPENSES> 1,790
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0<F4>
<INCOME-PRETAX> (10,646)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,646)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,646)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The company has no trade accounts receivable.
<F2>Amount represents inventory and other current assets.
<F3>Represents total partners' capital.
<F4>$6,000 interest expense have been capitalized.
</FN>
</TABLE>
