6. Satellite Network and Other Equipment

Satellite network and other equipment consisted of the following:

	June 30,			December 31,
	2017			2016
Land	$	381		$	381
Satellite network		232,928			231,782
Capitalized software		39,215			30,758
Computer hardware		5,044			4,707
Other		7,902			7,522
Assets under construction		13,557			11,284
		299,027			286,434
Less: accumulated depreciation and amortization		(87,361	)		(70,593	)
	$	211,666		$	215,841

During the quarters ended June 30, 2017 and 2016, the Company capitalized internal costs attributable to the design, development and enhancements of the Company’s products and services in the amount of $3,374 and $2,544, respectively. During the six months ended June 30, 2017 and 2016, the Company capitalized internal costs attributable to the design, development and enhancements of the Company’s products and services in the amount of $6,610 and $4,732, respectively.

Depreciation expense for the quarters ended June 30, 2017 and 2016 was $8,710 and $8,483, respectively, including depreciation of internal-use software of $1,485 and $794, respectively. Depreciation expense for the six months ended June 30, 2017 and 2016 was $17,040 and $14,380, respectively, including depreciation of internal-use software of $2,835 and $1,645, respectively.

For the quarters ended June 30, 2017 and 2016, 62% and 68% of depreciation and amortization expense, respectively, relate to cost of services and 8% and 13%, respectively, relate to cost of product sales, as these assets support the Company’s revenue generating activities. For the six months ended June 30, 2017 and 2016, 64% and 67% of depreciation and amortization expense, respectively, relate to cost of services and 8% and 12%, respectively, relate to cost of product sales, as these assets support the Company’s revenue generating activities.

As of June 30, 2017 and December 31, 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.

During the three months ended March 31, 2016, the Company recorded an impairment loss on one of its leased AIS satellites. 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 three months 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.

In August 2016, the Company lost communication with one of its OG2 satellites launched in July 2014. The Company recorded a non-cash impairment charge of $10,680 to write-off the net book value of the satellite. In addition, the Company 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.

In December 2016, the Company lost communication with one of its OG1 Plane D satellites. In the year ended December 31, 2016, the Company decreased each of satellite network and other equipment, net and associated accumulated depreciation by $137, representing the fully depreciated value of the satellite.

One OG2 satellite experienced a solar array anomaly in 2016 that resulted in the satellite entering a safe mode and being taken out of commercial service. This satellite had been intermittently providing AIS service and regularly communicating with the ground infrastructure. In April 2017, communication was lost with this OG2 satellite and recovery attempts are continuing. The Company’s satellite engineering team has developed and uploaded new software designed to prevent a similar solar array anomaly from occurring on other OG2 satellites.

In June 2017, there was a loss of communication with the prototype OG2 satellite that was launched in December 2015, and in July 2017 there was a loss of communication with an OG2 satellite that was launched in July 2014. The Company has established a comprehensive investigative team that includes outside independent consultants, internal engineering and OG2 contractors to determine the root cause and associated corrective measures. Satellite network capacity remains multiple times more capable than current demand but there has been a small effect on message delivery times. As of June 30, 2017, these three satellites have a carrying value of $31,917 in the aggregate. Based on the information provided by the investigative team, if it is determined by management that one or more of these three OG2 satellites are not recoverable, the resulting impairment loss would be charged to expense in the period it is determined that the satellite is not recoverable.