Our competitors or potential competitors with greater resources than ours could in the future offer satellite-based imagery or other products having more attractive features than our products. The emergence of new remote imaging technologies, even if not ultimately successful, could negatively affect our marketing efforts. More importantly, if competitors continue to develop and launch satellites with more advanced capabilities and technologies than ours, our business and results of operations could be harmed.
Failure to obtain or maintain regulatory approvals could result in service interruptions or could impede us from executing our business plan.
FCC Approvals. Our operation of satellites and earth stations requires licenses from the U.S. Federal Communications Commission (the "FCC"). The FCC regulates the construction, launch and operation of our satellites, the use of satellite spectrum, and the licensing of our earth station terminals located within the United States. We currently operate OrbView-2 pursuant to experimental authority. Our experimental FCC license expires in 2007. The FCC granted authority to launch and operate OrbView-3 and to operate the associated earth station systems in 1999. The license to operate OrbView-3 will expire in 2014, and the licenses to operate the earth stations will expire in 2009. The FCC generally renews licenses routinely, but there can be no assurance that our licenses will be renewed at their expiration dates for full terms or without adverse conditions. Failure to renew these licenses could have a material adverse affect on our ability to generate revenue and conduct our business as currently planned.
We are currently in the process of preparing an application requesting an FCC license for OrbView-5. Failure to obtain such license on a timely basis or imposition of conditions on such authorization could impair our ability to meet the launch schedule or to satisfy our obligations under the NextView contract.
Other Domestic Approvals. Our business also requires licenses from the U.S. Department of Commerce (the "DoC") and the U.S. Department of State. The DoC licenses provide that the U.S. government may interrupt service or otherwise limit our ability to distribute satellite images to certain parties in order to address national security or foreign policy concerns. Actual or threatened interruptions or limitations on our service could adversely affect our ability to market our products abroad. In addition, the DoC has the right to review and approve our agreements with international customers for high- resolution optical imagery. We have received such approval for our current international customer agreements. However, such reviews could delay or prohibit us from executing new international distributor agreements or amending our existing agreements.
In connection with distributor agreements, we have in the past and may in the future supply our international customers with earth stations that enable these customers to downlink data directly from our satellites. Exporting these earth stations and technical information relating to these stations may require us to obtain export licenses from the DoC or the U.S. Department of State. We have obtained the licenses we currently need in order to export the equipment and information required by our existing contracts and by our current operations, and we believe that the terms of these licenses are sufficient given the scope and duration of the contracts to which they pertain. If the DoC or the Department of State does not issue these export licenses in connection with future exports, or if these licenses are significantly delayed or contain restrictions, or if the DoC or the Department of State revokes, suspends or denies a request for renewal of existing licenses, our financial condition and results of operations could be materially adversely affected.
International Registration and Approvals. The use of satellite spectrum is subject to the requirements of the International Telecommunication Union (the "ITU"). Additionally, satellite operators must abide by the specific laws of the countries in which downlink services are provided from the satellite to earth station terminals within such countries.
The FCC has coordinated the operations of OrbView-2 and OrbView-3 pursuant to ITU requirements, and we expect the FCC to do so for OrbView-5. Coordination with other satellite systems helps to prevent interference from or into existing or planned satellite operations. We do not expect significant issues relating to the coordination of our satellites due to the nature of satellite imaging operations; however, if the FCC fails to obtain the necessary coordination for OrbView-5 in a timely manner, it could have a material adverse effect on our business, financial condition and results of operations.
Our customers or distributors are responsible for obtaining local regulatory approval from the governments in the countries in which they do business to receive imagery downlinked directly from OrbView-2 and OrbView-3 to earth stations within such countries. If these regional distributors are not successful in obtaining the necessary approvals, we will not be able to distribute real time OrbView imagery in those regions. Our inability to offer real time service in a significant number of foreign countries could negatively affect our business. In addition, regulatory provisions in countries where we wish to operate may impose unduly burdensome restrictions on our operations. Our business may also be adversely affected if the national authorities where we plan to operate adopt treaties, regulations or legislation unfavorable to foreign companies.
Foreign distributors and domestic value-added resellers may not expand commercial markets.
We rely on foreign regional distributors to market and sell internationally a significant portion of our imagery from OrbView-3. We also intend to rely on foreign regional distributors for OrbView-5 and have intensified our efforts to further develop our operations in overseas markets. We expect our existing and future foreign regional distributors to act on behalf of, or contract directly with, foreign governments to sell imagery for national security and related purposes. These regional distributors may not have the skill or experience to develop regional commercial markets for our products and services. If we fail to enter into regional distribution agreements on a timely basis or if our foreign regional distributors fail to market and sell our imagery products and services successfully, these failures would negatively impact our business, financial condition and results of operations, and our ability to service our debt.
We intend to rely on value-added resellers to develop, market and sell our products and services to address certain target markets, including domestic markets. If our value-added resellers fail to develop, market and sell our products and services successfully, this failure would negatively affect our business, financial condition and results of operations, and our ability to service our debt.
Our international business exposes us to risks relating to increased regulation and political or economic instability in foreign markets.
In 2004, approximately 47% of our revenues were derived from international sales, and we intend to continue to pursue international contracts. We expect to derive substantial revenues from international sales of our products and services. International operations are subject to certain risks, such as:
-- changes in domestic and foreign governmental regulations and
licensing requirements
-- deterioration of relations between the United States and a particular
foreign country
-- increases in tariffs and taxes and other trade barriers
-- changes in political and economic stability, including fluctuations
in the value of foreign currencies, which may make payment in U.S.
dollars, as provided for under our existing contracts, more expensive
for foreign customers
-- difficulties in obtaining or enforcing judgments in foreign
jurisdictions.
These risks are beyond our control and could have a material adverse effect on our business.
CONTACT: William L. Warren, ORBIMAGE Inc., +1-703-480-5672, Email Contact
Web site: http://www.orbimage.com/
