6. Satellite Network and Other Equipment

Satellite network and other equipment consisted of the following:

	Useful life	September 30,			December 31,
	(years)	2016			2015
Land		$	381		$	381
Satellite network	1-10		231,741			104,088
Capitalized software	3-7		24,706			13,201
Computer hardware	3		4,568			4,027
Other	2-7		7,335			6,853
Assets under construction			12,491			147,288
			281,222			275,838
Less: accumulated depreciation and amortization			(62,717	)		(45,868	)
		$	218,505		$	229,970

During the quarters ended September 30, 2016 and 2015, the Company capitalized costs attributable to the design and development of internal-use software in the amount of $803 and $847, respectively. During the nine months ended September 30, 2016 and 2015, the Company capitalized costs attributable to the design and development of internal-use software in the amount of $2,991 and $2,617, respectively.

Depreciation and amortization expense for the quarters ended September 30, 2016 and 2015 was $8,048 and $3,703, respectively, including amortization of internal-use software of $889 and $452, respectively. Depreciation and amortization expense for the nine months ended September 30, 2016 and 2015 was $22,429 and $11,554, respectively, including amortization of internal-use software of $2,534 and $1,236, respectively.

For the quarters ended September 30, 2016 and 2015, 72% and 66% of depreciation and amortization expense, respectively, relate to cost of services and 7% and 11%, respectively, relate to cost of product sales, as these assets support the Company’s revenue generating activities. For the nine months ended September 30, 2016 and 2015, 69% of depreciation and amortization expense relate to cost of services and 10% and 11%, respectively, relate to cost of product sales, as these assets support the Company’s revenue generating activities.

As of September 30, 2016, assets under construction primarily consist of costs associated with acquiring, developing and testing software and hardware for internal and external use that have not yet been placed into service. As of December 31, 2015, assets under construction primarily consist of milestone payments pursuant to procurement agreements, which includes the design, development, launch and other direct costs relating to the construction of the OG2 satellites and upgrades to the Company’s infrastructure and ground segment.

In August 2016 the Company lost communication with one of its OG2 satellites, launched on July 14, 2014. The Company is conducting an on-going investigation with support from the satellite prime contractor Sierra Nevada Corporation (“SNC”) and the payload subcontractor Boeing. On October 31, 2016, due to the extended period of no communication with the satellite, the Company’s Audit Committee of the Board of Directors concluded, based on management’s recommendation, that a non-cash impairment charge of $10,680 should be recorded as a recognized subsequent event in accordance with FASB ASC Topic 855 “Subsequent Events” to write-off the net book value of the satellite for the quarter ended September 30, 2016 and decreased satellite network and other equipment by $13,474 and associated accumulated depreciation by $2,794 to remove the asset as of September 30, 2016. The impairment charge is reflected in the accompanying condensed consolidated financial statements. No amount of the impairment charge represents a cash expenditure and the Company does not expect that this impairment will result in any future cash expenditure.

The Company has notified its in-orbit insurers that the loss of this OG2 satellite may result in a constructive total loss of that satellite. Under the insurance terms described in “Note 15 – Commitments and Contingencies”, the Company expects this satellite to qualify as the one satellite deductible applicable to the five mission one OG2 satellites, under which no claim is payable.

During the quarter ended March 31, 2016, the Company recorded an impairment loss on one of its leased AIS satellites. Upon abandonment of the satellite, the Company no longer expects future cash flows to be generated from this asset. The impairment loss of $466 was determined based on the net carrying value of the asset at the time of the impairment and was recorded in depreciation and amortization in the condensed consolidated statement of operations for the quarter ended March 31, 2016. In addition, the Company decreased satellite network and other equipment, net and the associated accumulated depreciation on the condensed consolidated balance sheet by $2,374 and $1,908, respectively, as of September 30, 2016.

On December 21, 2015, the Company launched the remaining 11 of its OG2 satellites aboard a Space Exploration Technologies Corp. (“SpaceX”) Falcon 9 launch vehicle. On March 1, 2016, following an in-orbit testing period, the Company initiated commercial service for the 11 OG2 satellites. As a result of the 11 OG2 satellites being placed into service, the Company reclassified $137,772 of costs out of assets under construction and into satellite network on March 1, 2016, and began depreciating the satellites over an estimated 10-year life. During the nine months ended September 30, 2016 and 2015, the Company recorded $14,208 and $6,176 of depreciation, respectively, in connection with its OG2 satellite constellation.

In June 2015, the Company lost communication with one of its in-orbit OG2 satellites. The Company recorded a non-cash impairment charge of $12,748 on the condensed consolidated statement of operations in the quarter ended June 30, 2015 to write off the net book value of the satellite. In addition, the Company decreased satellite network and other equipment, net and the associated accumulated depreciation on the condensed consolidated balance sheet by $13,788 and $1,040, respectively, as of December 31, 2015.

In January 2015, the Company lost communication with one of its OG1 Plane B satellites. In the quarter ended March 31, 2015, the Company removed $137 from satellite network and accumulated depreciation, respectively, representing the fully depreciated value of the satellite. In September 2015, the satellite re-established communication with the Company’s ground stations. There was no impact on the condensed consolidated balance sheet for the re-establishment of communications with this satellite.