Issuer | ORBCOMM Inc. | |
Common stock offered by us | 9,230,800 shares | |
Underwriters option to purchase additional shares from us | 1,384,620 shares | |
Common stock outstanding immediately after this offering | 36,304,118 shares | |
Use of proceeds | We estimate that the net proceeds to us from this offering will be approximately $90.9 million. We intend to use the net proceeds from this offering as follows: | |
At least $65.0 million to fund capital expenditures (including the deployment of our quick-launch and next-generation satellites); | ||
Approximately $4.4 million to pay accumulated and unpaid dividends as of June 30, 2006 (increasing by approximately $726,000 per month to approximately $6.6 million as of September 30, 2006) on our Series B convertible redeemable preferred stock; | ||
Approximately $3.6 million to pay the contingent purchase price amount relating to our purchase of an interest in Satcom International Group plc. (with the valuation based on the initial public offering price of $11.00 per share); | ||
Approximately $10.1 million to make a contingent payment to all holders of our Series B preferred stock (see Use of proceeds); and | ||
The remainder to provide additional working capital and for other general corporate purposes. | ||
Nasdaq Global Market symbol | ORBC | |
Dividend Policy | We have never declared or paid cash dividends on shares of our common stock. Pursuant to the terms of our Series A convertible redeemable preferred stock, we paid all accumulated and unpaid dividends on such preferred stock, in an amount of $8.0 million, on January 6, 2006. Our Series A preferred stock is no longer entitled to any accumulated dividends. Pursuant to the terms of our Series B convertible redeemable preferred stock, all accumulated and unpaid dividends on our Series B preferred stock, in an amount of approximately $4.4 million as of June 30, 2006 become payable in cash upon the conversion of the Series B preferred stock into common stock upon completion of this offering. The accumulated Series B preferred stock dividends will |
increase by approximately $726,000 per month until conversion. We intend to retain all available funds and any future earnings after this offering for use in the operation of our business and do not anticipate paying any further cash dividends in the foreseeable future. Our board of directors may, from time to time, examine our dividend policy and may, in their absolute discretion, change such policy. |
Ø | assumes the conversion of all outstanding shares of our Series A and Series B convertible redeemable preferred stock into 21,383,301 shares of common stock based on a conversion ratio of two shares of common stock for every three shares of preferred stock, upon the closing of this offering; |
Ø | excludes 1,464,374 shares of common stock subject to outstanding stock options with a weighted average exercise price of $3.09 per share; |
Ø | excludes 1,917,998 shares of common stock subject to outstanding warrants (including shares issued upon exercise of such warrants subsequent to June 30, 2006) with a weighted average exercise price of $2.57 per share; |
Ø | excludes 318,928 shares of common stock subject to outstanding warrants to purchase Series A preferred stock, which will become warrants to purchase common stock upon conversion of the Series A preferred stock into shares of common stock in connection with this offering, with a weighted average exercise price of $4.26 per share of common stock; |
Ø | excludes 1,058,293 and 413,333 shares of common stock deliverable upon vesting of restricted stock units, or RSUs, and exercise of stock appreciation rights, or SARs, with a weighted average issuance price per share equal to the initial public offering price in this offering, respectively, awarded in October 2006; |
Ø | excludes 4,658,207 shares of common stock available for future issuance (3,186,581 shares after giving effect to the RSU and SAR issuances described above) under our 2006 long-term incentives plan, or 2006 LTIP, which replaces our 2006 stock option plan in its entirety and includes any shares available for future issuance under the 2004 stock option plan; and |
Ø | excludes the 1,384,620 shares of common stock subject to the option granted to the underwriters to purchase additional shares of common stock in this offering to cover over-allotments. |
Ø | At least $65.0 million to fund capital expenditures (including the deployment of our quick-launch and next-generation satellites); |
Ø | Approximately $4.4 million to pay accumulated and unpaid dividends as of June 30, 2006 (increasing by approximately $726,000 per month to approximately $6.6 million as of September 30, 2006) on our Series B convertible redeemable preferred stock; |
Ø | Approximately $3.6 million to pay the contingent purchase price amount relating to our purchase of an interest in Satcom International Group plc. to certain affiliates of ours, or the Satcom contingent purchase price amount (with the valuation based on the initial public offering price of $11.00 per share) (see Certain relationships and related party transactions Satcom International Group plc. in the Preliminary Prospectus); |
Ø | Approximately $10.1 million to make a contingent payment to all holders of our Series B preferred stock (see Certain relationships and related party transactions Series B Preferred Stock Financing in the Preliminary Prospectus); and |
Ø | The remainder to provide additional working capital and for other general corporate purposes. |
Ø | on a historical basis; |
Ø | on a pro forma basis to reflect (1) the conversion of 14,053,611 shares of our Series A preferred stock and 18,021,341 shares of our Series B preferred stock into an aggregate of 21,383,301 shares of common stock based on the conversion ratio of two shares of common stock for every three shares of preferred stock in connection with this offering pursuant to the terms of our Series A and Series B preferred stock and (2) the amendment to our certificate of incorporation increasing our authorized shares of common stock to 250 million; and |
Ø | on a pro forma as adjusted basis to reflect the pro forma capitalization as adjusted to give effect to the sale by us of 9,230,800 shares of common stock offered hereby at the initial public offering price of $11.00 per share, after deducting estimated underwriting discounts and commissions and the estimated offering expenses payable by us and the application of the net proceeds from the offering, including the payment of (1) approximately $4.4 million, representing accumulated and unpaid dividends as of June 30, 2006 (increasing by approximately $726,000 per month to approximately $6.6 million as of September 30, 2006) on our Series B preferred stock upon conversion of the Series B preferred stock in connection with this offering, (2) approximately $3.6 million, representing the Satcom contingent purchase price amount (with the valuation based on the initial public offering price of $11.00 per share) (see Certain relationships and related party transactions in the Preliminary Prospectus) and (3) approximately $10.1 million, representing the contingent payment to holders of our Series B preferred stock (see Certain relationships and related party transactions Series B Preferred Stock Financing in the Preliminary Prospectus). |
Ø | an aggregate of 1,464,374 shares of common stock subject to outstanding options at a weighted average exercise price of $3.09 per share as of June 30, 2006; |
Ø | an aggregate of 1,917,998 shares of common stock subject to outstanding warrants (including shares issued upon exercise of such warrants subsequent to June 30, 2006) at a weighted average exercise price of $2.57 per share as of June 30, 2006; |
Ø | an aggregate of 318,928 shares of common stock subject to outstanding warrants to purchase Series A preferred stock, which will become warrants to purchase common stock upon conversion of the Series A preferred stock into shares of common stock in connection with this offering, with a weighted average exercise price of $4.26 per share of common stock as of June 30, 2006; |
Ø | 1,058,293 and 413,333 shares of common stock deliverable upon vesting of RSUs and exercise of SARs with a weighted average issuance price per share equal to the initial public offering price in this offering, respectively, awarded in October 2006; |
Ø | 4,658,207 shares of common stock available for future issuance (3,186,581 shares after giving effect to the RSU and SAR issuances described above) at June 30, 2006 under our 2006 LTIP, which replaces our 2006 stock option plan in its entirety and includes any shares available for future issuance under the 2004 stock option plan. See Management Stock option and other compensation plans and Note 17 of Notes to condensed consolidated financial statements in the Preliminary Prospectus; and |
Ø | 1,384,620 shares of common stock subject to the option granted to the underwriters to purchase additional shares of common stock in this offering to cover over-allotments. |
As of June 30, 2006 | |||||||||||||
Pro Forma | |||||||||||||
Actual | Pro Forma | As Adjusted | |||||||||||
(in thousands, except par values) | |||||||||||||
Cash and cash
equivalents(1)(2)
|
$ | 25,327 | $ | 25,327 | $ | 98,133 | |||||||
Marketable securities
|
$ | 24,250 | $ | 24,250 | $ | 24,250 | |||||||
Preferred stock, $.001 par value; 50,000 shares
authorized, no shares issued and outstanding, pro forma and pro
forma as adjusted
|
$ | | $ | | $ | | |||||||
Series A convertible redeemable preferred stock,
$.001 par value; 15,000 shares authorized and
14,054 shares issued and outstanding, actual; no shares
authorized, issued and outstanding, pro forma and pro forma as
adjusted
|
37,718 | | | ||||||||||
Series B convertible redeemable preferred stock,
$.001 par value; 30,000 shares authorized and
18,021 shares issued and outstanding, actual; no shares
authorized, issued and outstanding, pro forma and pro forma as
adjusted
|
72,804 | | | ||||||||||
Stockholders (deficit) equity:
|
|||||||||||||
Common stock, $.001 par value; 105,000 shares
authorized and 5,690 shares issued and outstanding, actual;
250,000 shares authorized and 27,073 shares issued and
outstanding, pro forma and 36,304 shares issued and
outstanding pro forma as adjusted
|
6 | 27 | 36 | ||||||||||
Additional paid-in
capital(1)(2)(3)
|
1,446 | 97,478 | 187,170 | ||||||||||
Accumulated other comprehensive loss
|
(149 | ) | (149 | ) | (149 | ) | |||||||
Accumulated deficit
|
(54,023 | ) | (54,023 | ) | (54,023 | ) | |||||||
Total stockholders
(deficit) equity(1)(2)
|
(52,720 | ) | 43,333 | 133,034 | |||||||||
Total capitalization
|
$ | 57,802 | $ | 43,333 | $ | 133,034 | |||||||
(1) | The pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders equity and total capitalization include a contingent purchase price payment of $3.6 million relating to our purchase of an interest in Satcom International Group plc. (with the valuation based on the initial public offering price of $11.00 per share). |
(2) | The pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders equity and total capitalization include a contingent payment to holders of our Series B preferred stock in an aggregate amount of approximately $10.1 million. |
(3) | Pro forma as adjusted additional paid-in capital includes $1.2 million of expenses relating to this offering, which have been paid by us prior to the completion of this offering and are included in prepaid expenses and other current assets on our June 30, 2006 balance sheet. |
Initial public offering price per share
|
$ | 11.00 | |||||||
Pro forma net tangible book value per share before the offering
|
$ | 1.32 | |||||||
Increase in pro forma net tangible book value per share
attributable to new investors
|
2.14 | ||||||||
Pro forma as adjusted net tangible book value per share after
the offering
|
3.46 | ||||||||
Dilution per share to new investors
|
$ | 7.54 | |||||||
Total shares | Total consideration | ||||||||||||||||||||
Average price | |||||||||||||||||||||
Number | % | Amount | % | per share | |||||||||||||||||
Existing stockholders, pro forma
|
27,073,318 | 74.6 | $ | 97,504,937 | 49.0 | $ | 3.60 | ||||||||||||||
New investors
|
9,230,800 | 25.4 | 101,538,800 | 51.0 | 11.00 | ||||||||||||||||
Total
|
36,304,118 | 100.0 | % | $ | 199,043,737 | $ | 100.0 | % | |||||||||||||
Ø | the as adjusted percentage of shares of our common stock held by existing stockholders will decrease to approximately 71.8% of the total number of as adjusted shares of our common stock outstanding after this offering; and |
Ø | the number of shares of our common stock held by new investors will increase to 10,615,420, or approximately 28.2% of the total number of shares of our common stock outstanding after this offering. |
Ø | an aggregate of 1,464,374 shares of common stock subject to outstanding options at a weighted average exercise price of $3.09 per share as of June 30, 2006; |
Ø | an aggregate of 1,917,998 shares of common stock subject to outstanding warrants (including shares issued upon exercise of such warrants subsequent to June 30, 2006) at a weighted average exercise price of $2.57 per share as of June 30, 2006; |
Ø | an aggregate of 318,928 shares of common stock subject to outstanding warrants to purchase Series A preferred stock, which will become warrants to purchase common stock upon conversion of the Series A preferred stock into shares of common stock in connection with this offering, with a weighted average exercise price of $4.26 per share of common stock as of June 30, 2006; |
Ø | 1,058,293 and 413,333 shares of common stock deliverable upon vesting of RSUs and exercise of SARs with a weighted average issuance price per share equal to the initial public offering price in this offering, respectively, awarded in October 2006; and |
Ø | 4,658,207 shares of common stock available for future issuance (3,186,581 shares after giving effect to the RSU and SAR issuances described above) at June 30, 2006 under our 2006 LTIP, which replaces our 2006 stock option plan in its entirety and includes any shares available for future issuance under the 2004 stock option plan. See Management Stock option and other compensation plans and Note 17 of Notes to condensed consolidated financial statements in the Preliminary Prospectus. |
Ø | the as adjusted percentage of shares of our common stock held by existing shareholders will increase to approximately 76.9% of the total number of as adjusted shares of our common stock outstanding after this offering; |
Ø | the number of shares of our common stock held by new investors will decrease to approximately 23.1% of the total number of shares of our common stock outstanding after this offering; and |
Ø | the dilution per share to new investors will be $7.59. |
Number of securities | ||||||||||||||||
underlying unexercised | Value of unexercised | |||||||||||||||
options at | in-the-money options at | |||||||||||||||
December 31, 2005 | December 31, 2005(1) | |||||||||||||||
Name | ||||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||
Jerome B. Eisenberg
|
275,000 | 25,000 | $2,312,100 | $ | 175,900 | |||||||||||
John P. Brady
|
41,667 | 41,667 | 280,800 | 280,800 | ||||||||||||
Marc Eisenberg
|
275,000 | 25,000 | 2,312,100 | 175,900 | ||||||||||||
Emmett Hume
|
37,500 | 45,833 | 252,800 | 309,000 | ||||||||||||
John J. Stolte, Jr.
|
41,000 | 10,000 | 326,600 | 70,400 |
(1) | There was no public trading market for our common stock as of December 31, 2005. Accordingly, these values have been calculated on the basis of the initial public offering price of $11.00 per share, less the applicable exercise price per share, multiplied by the number of shares underlying the options. |
Years ended December 31, | |||||||||||||||
2003 | 2004 | 2005 | |||||||||||||
(in thousands, except per share data) | |||||||||||||||
Revenues:
|
|||||||||||||||
Service revenues (including related party amounts of $734, $517
and $566 in 2003, 2004 and 2005)
|
$ | 5,143 | $ | 6,479 | $ | 7,804 | |||||||||
Product sales (including related party amounts of $17, $123 and
$66 in 2003, 2004 and 2005)
|
1,938 | 4,387 | 7,723 | ||||||||||||
Total revenues
|
7,081 | 10,866 | 15,527 | ||||||||||||
Costs and
expenses(1):
|
|||||||||||||||
Costs of services
|
6,102 | 5,884 | 6,223 | ||||||||||||
Costs of product sales
|
1,833 | 4,921 | 6,459 | ||||||||||||
Selling, general and administrative
|
6,577 | 8,646 | 9,344 | ||||||||||||
Product development
|
546 | 778 | 1,341 | ||||||||||||
Total cost and expenses
|
15,058 | 20,229 | 23,367 | ||||||||||||
Loss from operations
|
(7,977 | ) | (9,363 | ) | (7,840 | ) | |||||||||
Other income (expense):
|
|||||||||||||||
Interest income
|
| 49 | 66 | ||||||||||||
Interest expense, including amortization of deferred debt
issuance costs and debt discount of $3,527, $722 and $31 in
2003, 2004 and 2005
|
(5,340 | ) | (1,318 | ) | (308 | ) | |||||||||
Loss on extinguishment of debt
|
| (1,757 | ) | (1,016 | ) | ||||||||||
Total other expense
|
(5,340 | ) | (3,026 | ) | (1,258 | ) | |||||||||
Net loss
|
$ | (13,317 | ) | $ | (12,389 | ) | $ | (9,098 | ) | ||||||
Net loss applicable to common shares (Note 3)
|
$ | (14,535 | ) | $ | (14,248 | ) | |||||||||
Net loss per common share:
|
|||||||||||||||
Basic and diluted
|
$ | (2.57 | ) | $ | (2.51 | ) | |||||||||
Basic and diluted pro forma (unaudited)
|
$ | (0.89 | ) | ||||||||||||
Weighted average common shares outstanding:
|
|||||||||||||||
Basic and diluted
|
5,658 | 5,683 | |||||||||||||
Basic and diluted pro forma (unaudited)
|
16,028 | ||||||||||||||
(1) Stock-based compensation included in costs and
expenses:
|
|||||||||||||||
Costs of services
|
$ | 31 | $ | 7 | |||||||||||
Selling, general and administrative
|
1,436 | 183 | |||||||||||||
Product development
|
49 | 11 | |||||||||||||
$ | 1,516 | $ | 201 | ||||||||||||
Note 21. | Initial Public Offering and Pro Forma Presentation (unaudited) |
Pro forma | ||||||||||||||
December 31, | June 30, | June 30, | ||||||||||||
2005 | 2006 | 2006 | ||||||||||||
(See note 2) | ||||||||||||||
(in thousands, except share data) | ||||||||||||||
ASSETS
|
||||||||||||||
Current assets:
|
||||||||||||||
Cash and cash equivalents
|
$ | 68,663 | $ | 25,327 | $ | 25,327 | ||||||||
Marketable securities
|
| 24,250 | 24,250 | |||||||||||
Accounts receivable, net of allowances for doubtful accounts of
$671 and $615 as of December 31, 2005 and June 30,
2006, respectively (includes amounts due from related parties of
$543 and $575 as of December 31, 2005 and June 30,
2006, respectively)
|
3,550 | 4,922 | 4,922 | |||||||||||
Inventories
|
2,747 | 2,959 | 2,959 | |||||||||||
Advances to contract manufacturer
|
701 | 234 | 234 | |||||||||||
Prepaid expenses and other current assets
|
727 | 1,803 | 1,803 | |||||||||||
Total current assets
|
76,388 | 59,495 | 59,495 | |||||||||||
Long-term receivable related party
|
472 | 472 | 472 | |||||||||||
Satellite network and other equipment, net
|
7,787 | 12,621 | 12,621 | |||||||||||
Intangible assets, net
|
4,375 | 3,924 | 7,538 | |||||||||||
Other assets
|
294 | 304 | 304 | |||||||||||
Total assets
|
$ | 89,316 | $ | 76,816 | $ | 80,430 | ||||||||
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS (DEFICIT) EQUITY | ||||||||||||||
Current liabilities:
|
||||||||||||||
Accounts payable
|
$ | 2,330 | $ | 4,187 | $ | 4,187 | ||||||||
Accrued liabilities
|
8,198 | 4,563 | 22,646 | |||||||||||
Current portion of deferred revenue
|
575 | 946 | 946 | |||||||||||
Total current liabilities
|
11,103 | 9,696 | 27,779 | |||||||||||
Note payable related party
|
594 | 743 | 743 | |||||||||||
Deferred revenue, net of current portion
|
8,052 | 8,575 | 8,575 | |||||||||||
Total liabilities
|
19,749 | 19,014 | 37,097 | |||||||||||
Commitments and contingencies
|
||||||||||||||
Convertible redeemable preferred stock:
|
||||||||||||||
Series A, par value $0.001; 15,000,000 shares
authorized; 14,053,611 shares issued and outstanding as of
December 31, 2005 and June 30, 2006 (liquidation
preference values of $8,027 and $0 as of December 31, 2005
and June 30, 2006, respectively). None issued and
outstanding pro forma
|
45,500 | 37,718 | | |||||||||||
Series B, par value $0.001; 30,000,000 shares
authorized; 17,629,999 and 18,021,341 shares issued and
outstanding as of December 31, 2005 and June 30, 2006,
respectively (liquidation preference values of $71,049 and
$76,984 as of December 31, 2005 and June 30, 2006,
respectively). None issued and outstanding pro forma
|
66,721 | 72,804 | | |||||||||||
Stockholders (deficit) equity:
|
||||||||||||||
Common stock, par value $0.001; 105,000,000 shares
authorized; 5,690,017 shares issued and outstanding as of
December 31, 2005 and June 30, 2006; 27,073,318 issued
and outstanding pro forma
|
6 | 6 | 27 | |||||||||||
Additional paid-in capital
|
5,882 | 1,446 | 97,478 | |||||||||||
Accumulated other comprehensive income (loss)
|
90 | (149 | ) | (149 | ) | |||||||||
Accumulated deficit
|
(48,632 | ) | (54,023 | ) | (54,023 | ) | ||||||||
Total stockholders (deficit) equity
|
(42,654 | ) | (52,720 | ) | 43,333 | |||||||||
Total liabilities, convertible redeemable preferred stock and
stockholders (deficit) equity
|
$ | 89,316 | $ | 76,816 | $ | 80,430 | ||||||||
Six months ended | |||||||||||
June 30, | |||||||||||
2005 | 2006 | ||||||||||
(in thousands, except | |||||||||||
per share data) | |||||||||||
Revenues:
|
|||||||||||
Service revenues (including related party amounts of $299 and
$207 in 2005 and 2006)
|
$ | 3,594 | $ | 4,945 | |||||||
Product sales (including related party amounts of $35 and $36 in
2005 and 2006)
|
2,814 | 7,696 | |||||||||
Total revenues
|
6,408 | 12,641 | |||||||||
Costs and
expenses(1):
|
|||||||||||
Costs of services
|
2,699 | 4,166 | |||||||||
Costs of product sales
|
3,078 | 7,330 | |||||||||
Selling, general and administrative
|
4,017 | 6,548 | |||||||||
Product development
|
382 | 1,042 | |||||||||
Total cost and expenses
|
10,176 | 19,086 | |||||||||
Loss from operations
|
(3,768 | ) | (6,445 | ) | |||||||
Other income (expense):
|
|||||||||||
Interest income
|
15 | 1,041 | |||||||||
Other income
|
9 | 140 | |||||||||
Interest expense
|
| (127 | ) | ||||||||
Total other income
|
24 | 1,054 | |||||||||
Net loss
|
$ | (3,744 | ) | $ | (5,391 | ) | |||||
Net loss applicable to common shares (Note 5)
|
$ | (6,313 | ) | $ | (10,254 | ) | |||||
Net loss per common share:
|
|||||||||||
Basic and diluted
|
$ | (1.11 | ) | $ | (1.80 | ) | |||||
Basic and diluted pro forma
|
$ | (0.36 | ) | ||||||||
Weighted average common shares outstanding:
|
|||||||||||
Basic and diluted
|
5,675 | 5,690 | |||||||||
Basic and diluted pro forma
|
28,701 | ||||||||||
(1) Stock-based compensation included in costs and
expenses:
|
|||||||||||
Costs of services
|
$ | 4 | $ | 17 | |||||||
Selling, general and administrative
|
130 | 400 | |||||||||
Product development
|
7 | 10 | |||||||||
$ | 141 | $ | 427 | ||||||||