4. Stock-Based Compensation

The Company’s stock-based compensation plan consists of its 2016 Long-Term Incentives Plan (the “2016 LTIP”). As of September 30, 2018, there were 3,860,397 shares available for grant under the 2016 LTIP.

Total stock-based compensation recorded by the Company for the quarters ended September 30, 2018 and 2017 was $2,312 and $1,345, respectively, and for the nine months ended September 30, 2018 and 2017 was $5,747 and $4,314, respectively. Total capitalized stock-based compensation for the quarters ended September 30, 2018 and 2017 was $166 and $114, respectively, and for the nine months ended September 30, 2018 and 2017 was $410 and $357, respectively.

The following table summarizes the components of stock-based compensation expense on the Company’s condensed consolidated statements of operations for the quarters and nine months ended September 30, 2018 and 2017:

	Quarters Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of services	$	167	$	130	$	475	$	403
Cost of product sales		45		19		108		61
Selling, general and administrative		1,750		1,104		4,396		3,606
Product development		350		92		768		244
Total	$	2,312	$	1,345	$	5,747	$	4,314

As of September 30, 2018, the Company had unrecognized compensation costs for all share-based payment arrangements totaling $5,449.

Time-Based Stock Appreciation Rights

A summary of the Company’s time-based stock appreciation rights (“SARs”) for the nine months ended September 30, 2018 is as follows:

						Weighted-
						Average		Aggregate
				Weighted-		Remaining		Intrinsic
	Number of			Average		Contractual		Value
	Shares			Exercise Price		Term (years)		(in thousands)
Outstanding at January 1, 2018		2,564,394		$	5.38
Granted		—			—
Exercised		(238,955	)		4.77
Forfeited or expired		(20,000	)		8.58
Outstanding at September 30, 2018		2,305,439		$	5.33		4.00	$	11,626
Exercisable at September 30, 2018		2,245,439		$	5.38		3.89	$	12,111
Vested and expected to vest at September 30, 2018		2,305,439		$	5.33		4.00	$	11,626

For the quarters ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense relating to these time-based SARs of $43 and $133, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense relating to these time-based SARs of $151 and $428, respectively. As of September 30, 2018, $182 of total unrecognized compensation cost related to the SARs is expected to be recognized through December 2019.

The intrinsic value of the time-based SARs exercised during the nine months ended September 30, 2018 was $521.

Performance-Based Stock Appreciation Rights

A summary of the Company’s performance-based SARs for the nine months ended September 30, 2018 is as follows:

						Weighted-
						Average		Aggregate
				Weighted-		Remaining		Intrinsic
	Number of			Average		Contractual		Value
	Shares			Exercise Price		Term (years)		(in thousands)
Outstanding at January 1, 2018		504,473		$	5.80
Granted		—			—
Exercised		(144,940	)		2.84
Forfeited or expired		—			—
Outstanding at September 30, 2018		359,533		$	5.96		3.25	$	2,538
Exercisable at September 30, 2018		359,533		$	5.96		3.25	$	2,538
Vested and expected to vest at September 30, 2018		359,533		$	5.96		3.25	$	2,538

For the quarters and nine months ended September 30, 2018 and 2017, the Company did not record any stock-based compensation expense relating to the performance-based SARs. As of September 30, 2018, there was no unrecognized compensation cost related to these SARs expected to be recognized.

The intrinsic value of the performance-based SARs exercised during the nine months ended September 30, 2018 was $70.

The fair value of each time-based and performance-based SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions described below. For the period indicated, the expected volatility was based on the Company’s historical volatility over the expected terms of the SAR awards. Estimated forfeitures were based on voluntary and involuntary termination behavior, as well as an analysis of actual forfeitures. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR grants. The Company did not grant time-based or performance-based SARs during the nine months ended September 30, 2018.

		Nine Months Ended September 30,
		2017
Risk-free interest rate		2.10%
Expected life (years)		6.0
Estimated volatility factor		59.85%
Expected dividends		None

Time-Based Restricted Stock Units

A summary of the Company’s time-based restricted stock units (“RSUs”) for the nine months ended September 30, 2018 is as follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
Balance at January 1, 2018		818,480		$	9.95
Granted		269,181			9.94
Vested		(388,138	)		9.17
Forfeited or expired		(44,004	)		10.37
Balance at September 30, 2018		655,519		$	10.04

For the quarters ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense related to the time-based RSUs of $1,392 and $717, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense related to the time-based RSUs of $3,166 and $2,096, respectively. As of September 30, 2018, $4,038 of total unrecognized compensation cost related to the RSUs is expected to be recognized through June 2022.

Performance-Based Restricted Stock Units

A summary of the Company’s performance-based RSUs for the nine months ended September 30, 2018 is as follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
Balance at January 1, 2018		444,734		$	9.48
Granted		62,151			9.65
Vested		(168,068	)		9.16
Forfeited or expired		(45,801	)		7.50
Balance at September 30, 2018		293,016		$	9.91

For the quarters ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense related to the performance-based RSUs of $597 and $274, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense related to the performance-based RSUs of $1,694 and $1,016, respectively. As of September 30, 2018, $1,229 of total unrecognized compensation cost related to these RSUs is expected to be recognized through March 2019.

The fair values of the time-based and performance-based RSU awards are based upon the closing stock price of the Company’s common stock on the date of grant.

Market Performance Units

The Company grants Market Performance Units (“MPUs”) to its senior executives based on stock price performance over a three-year period measured on December 31 of each year in the performance period. The MPUs will vest in equal installments at the end of each year in the performance period only if the Company satisfies the stock price performance targets and continued employment by the senior executives through the dates the Compensation Committee has determined that the targets have been achieved. The value of the MPUs that will be earned each year ranges up to 15% of each of the senior executives’ base salaries in the year of the grant, depending on the Company’s stock price performance target for that year. The value of the MPUs can be paid in either cash, common stock or a combination of cash and stock, at the Company’s discretion. The MPUs are classified as a liability on the condensed consolidated balance sheets and are revalued at the end of each reporting period based on the awards’ fair value over a three-year period.

As the MPUs contain both performance and service conditions, they have been treated as a series of three separate awards, or tranches, for purposes of recognizing stock-based compensation expense. The Company recognizes stock-based compensation expense on a tranche-by-tranche basis over the requisite service period for that specific tranche. The Company estimated the fair value of the MPUs using a Monte Carlo Simulation Model based on the following assumptions:

	Nine Months Ended September 30,
	2018	2017
Risk-free interest rate	2.19% to 2.84%	1.06% to 1.51%
Estimated volatility factor	25.0% to 28.0%	23.0% to 31.0%
Expected dividends	None	None

For the quarters ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense relating to these MPUs of $197 and $175, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense relating to these MPUs of $501 and $639, respectively.

As of September 30, 2018, the Company recorded $395 and $407 in accrued liabilities and other non-current liabilities related to these MPUs, respectively, on the condensed consolidated balance sheet. As of December 31, 2017, the Company recorded $895 and $301 in accrued liabilities and other non-current liabilities related to these MPUs, respectively, on the consolidated balance sheet.

In January 2018, the Company issued 81,277 shares of common stock as a form of payment in connection with MPUs for achieving the fiscal year 2015, 2016 and 2017 stock performance target with respect to the 2017 performance year.

Employee Stock Purchase Plan

On February 16, 2016, the Company’s Board of Directors adopted the ORBCOMM Inc. Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s shareholders on April 20, 2016. Under the terms of the ESPP, 5,000,000 shares of the Company’s common stock are available for issuance and eligible employees may have up to 10% of their gross pay deducted from their payroll, up to a maximum of twenty five thousand dollars per year, to purchase shares of ORBCOMM common stock at a discount of up to 15% of its fair market value, subject to certain conditions and limitations. For the quarters ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $83 and $46, respectively, relating to the ESPP. For the nine months ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $235 and $135, respectively, relating to the ESPP. During the nine months ended September 30, 2018, 81,525 shares of the Company’s common stock were purchased under the ESPP at a price of $8.21 per share.